Under the Checkers Management Incentive Plan, what is a Liquidity Event and how does it affect the vesting of service-based units?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
For the awards issued, 50% of the Class B Units are service-based and vest evenly over the first to fifth anniversaries of the grant date. The remaining 50% of the Class B units are performance-based which will vest upon a Liquidity Event. A Liquidity Event is defined within the Management Incentive Plan as the sale, or similar type transaction, of Topco. Upon the occurrence of a Liquidity Event, all unvested service-based units will become fully vested. The Management Incentive Plan further defines Specified Event(s), such as termination for cause, that will result in the automatic forfeiture of all vested and unvested shares without consideration.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the Management Incentive Plan includes awards for Class B Units, where 50% of these units are service-based and vest evenly over the first five anniversaries of the grant date. The remaining 50% are performance-based and vest upon a Liquidity Event.
Under the Checkers Management Incentive Plan, a Liquidity Event is defined as the sale, or similar type transaction, of Topco. If a Liquidity Event occurs, all unvested service-based units will become fully vested. This means that if Topco, the parent company, is sold or undergoes a similar transaction, Checkers managers and executives holding these units will immediately gain full ownership of the service-based units that were previously unvested.
However, the Management Incentive Plan also defines Specified Events, such as termination for cause, that will result in the automatic forfeiture of all vested and unvested shares without consideration. This implies that while a Liquidity Event accelerates vesting, certain negative events can lead to a complete loss of these units, regardless of their vesting status. This creates both an opportunity for accelerated vesting and a risk of forfeiture depending on the circumstances.