Stock-Based Compensation Arrangements:

Predecessor Restricted Stock Plans

Prior to the Merger, our stock-based compensation plans permitted us to grant awards of restricted stock to our employees and non-employee directors. Certain of these awards were subject to performance-based criteria. Our stock-based compensation plans had provisions allowing for the automatic vesting of awards granted under those plans following a change of control, as defined in the applicable plan. The fair value of all stock-based awards, less estimated forfeitures, if any, and portions capitalized as described below, was recognized as stock-based compensation expense in “General and administrative expenses” in the Consolidated Statements of Earnings over the period that services were required to be provided in exchange for the award.

In connection with the Merger, all unvested restricted stock awards to our employees and non-employee directors became fully vested, and at the effective time of the Merger, each such share of restricted stock was canceled and converted into the right to receive an amount equal to the offer price of $54.00 per share, plus an amount in cash equal to all accrued but unpaid dividends relating to such shares, without interest and less any withholding required by applicable tax laws. We recorded $11.1 million in stock-based compensation expense related to the acceleration of restricted stock awards in “Transaction and severance cost” in the Consolidated Statements of Earnings during the 47 day period ended February 14, 2014.

Successor Stock Options Plan

In the Successor period, the Board of Directors of Parent adopted the 2014 Equity Incentive Plan, whereby Parent may grant equity incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards or performance compensation awards to certain directors, officers or employees of the Company.

During the 317 day period ended December 28, 2014, Parent granted options to purchase 2,324,870 shares of its common stock to certain directors, officers and employees of the Company. The options are subject to certain service and performance based vesting criteria, and were split evenly between Tranches A, B and C, which have different vesting requirements. The options in Tranche A are service based and vest and become exercisable in equal installments on each of the first five anniversaries of February 14, 2014. The Black-Scholes model was used to estimate the fair value of Tranche A stock options. Tranche B and Tranche C options are performance based and vest and become exercisable when certain market conditions are met. The Monte Carlo simulation model was used to estimate the fair value of Tranche B and Tranche C stock options. The options are also subject to accelerated vesting in the event of certain terminations of employment upon or within 12 months following a change in control of Queso Holdings Inc. Compensation costs related to options in the Parent were recorded by CEC.



	Stock Options
Unvested stock options, February 14, 2014	—
Granted	2,324,870
Forfeited	(37,407	)
Unvested stock options, December 28, 2014	2,287,463
Stock options expected to vest, December 28, 2014	2,287,463
Exercisable stock options, December 28, 2014	—

As of December 28, 2014, we had $3.1 million of total unrecognized share-based compensation expense related to unvested options, net of expected forfeitures, which is expected to be amortized over the remaining weighted-average period of 4.2 years.



	Successor			Predecessor
	For the 317 Day Period Ended			For the 47 Day Period Ended		Fiscal Years
	December 28, 2014			February 14, 2014		2013			2012
	(in thousands)
Stock-based compensation costs	$	713		$	1,117	$	8,660		$	7,595
Portion capitalized as property and equipment ⁽¹⁾	(10		)	—		(179		)	(127		)
Stock-based compensation costs related to the accelerated vesting of restricted stock awards in connection with the Merger	—			11,108		—			—
Stock-based compensation expense recognized	$	703		$	12,225	$	8,481		$	7,468
Tax benefit recognized from stock-based compensation awards⁽²⁾	$	4,874		$	—	$	3,377		$	2,947

__________________

(1)

We capitalize the portion of stock-based compensation costs related to our design, construction, facilities and legal departments that are directly attributable to our store development projects, such as the design and construction of a new store and the remodeling and expansion of our existing stores. Capitalized stock-based compensation costs attributable to our store development projects are included in “Property and equipment, net” in the Consolidated Balance Sheets.


(2)	Included in tax benefit recognized is the $5.0 million tax benefit related to the accelerated vesting of restricted stock awards in the 317 day period ended December 28, 2014, as such tax benefit will be deductible for income tax purposes on the Successor tax return for fiscal year 2014.