NOTE 18 — SHARE-BASED COMPENSATION

Total share-based compensation expense and associated tax benefits recognized were as follows:


	Successor				Predecessor
	Fiscal 2012		Twenty-Nine Weeks Ended January 31, 2011		Twenty-Four Weeks Ended July 12, 2010		Fiscal 2010
Share-based compensation expense related to restricted stock awards that contain market or performance conditions	$	—	$	—	$	717	$	2,163
Share-based compensation expense related to the acceleration of vesting of stock options and awards in connection with Merger		—		10,587		1,521		—
Share-based compensation expense related to Units that contain performance conditions		2,357		1,390		—		—
All other share-based compensation expense		2,236		1,269		2,472		5,993

Total share-based compensation expense	$	4,593	$	13,246	$	4,710	$	8,156

Associated tax benefits	$	—	$	—	$	1,804	$	2,681

Share-Based Compensation Arrangements

Successor

In connection with the Merger, certain affiliates of Apollo Management, certain members of our senior management team and our board of directors formed Apollo CKE Holdings, L.P., a limited partnership (the "Partnership") to fund the equity contribution to CKE Restaurants, Inc. The Partnership also granted 5,108,333 profit sharing interests in the Partnership to certain of our senior management team and directors in the form of time vesting and performance vesting Units. Under certain circumstances, a portion of the Units may become subject to both performance and market conditions.

The time vesting Units vest in four equal annual installments from the date of grant. The performance vesting Units vest or convert to a time vesting schedule upon achievement of certain financial or investment targets. Prior to a change in control or qualified initial public offering ("IPO"), our performance against such targets is determined based upon a specified formula driven by our earnings before interest, income taxes, depreciation and amortization ("EBITDA"), subject to adjustments by the general partner of the Partnership. These performance criteria will be assessed on a quarterly basis beginning with the quarter ending August 13, 2012. Upon a change in control event or IPO, our performance against the specified targets will be based upon a formula driven by the proceeds generated from such transaction. We recognize share-based compensation expense related to the performance vesting Units when we deem the achievement of performance goals to be probable.

The grant date fair value of the Units was estimated using the Black-Scholes option pricing model. The weighted-average assumptions used for Units granted in connection with the Merger were as follows:


	Successor
Annual dividend yield		—
Expected volatility		57.00	%
Risk-free interest rate (matched to the expected term of the Units)		1.69	%
Expected life (years)		4.56
Weighted-average grant date fair value (actual dollars per Unit)	$	3.52

The following presents the time vesting and performance vesting Unit activity for fiscal 2012 and the Units outstanding as of January 31, 2012:


	Time Vesting Units			Performance Vesting Units			Total Units			Weighted Average Grant Date Fair Value
Unvested Units outstanding as of January 31, 2011		2,604,167			2,504,166			5,108,333		$	3.52
Vested Units		(651,042	)		—			(651,042	)		3.52
Forfeited Units		(65,734	)		(87,645	)		(153,379	)		3.52

Unvested Units outstanding as of January 31, 2012		1,887,391			2,416,521			4,303,912			3.52

Vested Units as of January 31, 2012								651,042

We recorded $4,593 and $2,659 of share-based compensation expense related to the Units during fiscal 2012 and the Successor twenty-nine weeks ended January 31, 2011, respectively. The maximum unrecognized compensation cost for the time and performance vesting Units was $10,164 as of January 31, 2012.

In connection with the Merger, the vesting of all outstanding unvested Predecessor options and restricted stock awards was accelerated immediately prior to closing. As a result of the acceleration, we recorded $10,587 in share-based compensation expense during the Successor twenty-nine weeks ended January 31, 2011 within general and administrative expense in our accompanying Consolidated Statement of Operations related to the post-Merger service period for certain stock options and awards (see also Predecessor below).

Predecessor

In connection with the Merger, all outstanding options became fully vested and exercisable immediately prior to closing, under our then existing stock incentive plans, which included the 2005 Omnibus Incentive Compensation Plan, 2001 Stock Incentive Plan, and 1999 Stock Incentive Plan (collectively the "Predecessor Plans"). To the extent that such stock options had an exercise price less than $12.55 per share, the holders of such stock options were paid an amount in cash equal to $12.55 less the exercise price of the stock option. In addition, all outstanding restricted stock awards became fully vested immediately prior to the closing and were treated as a share of our common stock for all purposes under the Merger Agreement. We recorded $1,521 in stock compensation expense related to the acceleration of options and restricted stock awards from Predecessor Plans during the Predecessor twenty-four weeks ended July 12, 2010.

In general, options issued under the Predecessor Plans had a term of ten years and vested over a period of three years. We generally issued new shares of common stock for option exercises. The grant date fair value was calculated using a Black-Scholes option valuation model. There were no options issued during the Predecessor twenty-four weeks ended July 12, 2010. The weighted-average assumptions used for stock options granted during fiscal 2010 were as follows:


	Predecessor
	2010
Annual dividend yield		2.79	%
Expected volatility		46.17	%
Risk-free interest rate (matched to the expected term of the outstanding option)		3.01	%
Expected life (years)		6.29
Weighted-average grant date fair value	$	3.02

Excluding the options exercised in connection with the Merger, the total intrinsic value of stock options exercised during the Predecessor twenty-four weeks ended July 12, 2010 and fiscal 2010 was $809 and $878, respectively. The total intrinsic value of stock options accelerated and vested in connection with the Merger was $11,460.

During the Predecessor twenty-four weeks ended July 12, 2010, the employment agreements of certain key executives were amended, resulting in certain modifications to the restricted stock awards outstanding under the Predecessor Plans. These amendments reallocated certain restricted stock awards that contained performance conditions to time-based restricted stock awards. Additionally, the employment agreements amended the vesting criteria for restricted stock awards that contained market or performance conditions. The unvested restricted stock awards immediately preceding the Merger consisted of 579,730 restricted stock awards and 428,736 performance-based restricted stock awards. The total grant date fair value of restricted stock awards vested in connection with the Merger was $9,036. The total grant date fair value of restricted stock awards vested during fiscal 2010 was $5,532.

Employee Stock Purchase Plan

Under the terms of our Predecessor Employee Stock Purchase Plan ("ESPP"), eligible employees were able to voluntarily purchase, at current market prices, our common stock through payroll deductions. The ESPP was suspended on February 26, 2010 in connection with the Prior Merger Agreement and was subsequently terminated on July 12, 2010 in connection with the Merger. Pursuant to the ESPP, employees were able to contribute an amount between 3% and 15% of their base salaries. We contributed varying amounts, as specified in the ESPP. During the Predecessor twenty-four weeks ended July 12, 2010 and fiscal 2010, 16,039 and 359,414 shares, respectively, were purchased and allocated to employees, based upon their contributions, at an average price of $8.60 and $8.79 per share, respectively. During the Predecessor twenty-four weeks ended July 12, 2010 and fiscal 2010, we contributed $218 and $1,019, respectively, or an equivalent of 25,678 and 111,480 shares, respectively. Subsequent to the suspension of the ESPP, we made cash payments in lieu of ESPP matching contributions of $249, $379 and $515, during fiscal 2012, the Successor twenty-nine weeks ended January 31, 2011 and the Predecessor twenty-four weeks ended July 12, 2010, respectively.