What happens to unvested service-based units in the Checkersrallys Management Incentive Plan upon the occurrence of a Liquidity Event?
Checkersrallys 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 the 2025 Checkersrallys FDD, the Management Incentive Plan includes Class B Units, some of which are service-based and others performance-based. Specifically, 50% of the Class B Units are service-based, vesting evenly over the first five anniversaries of the grant date. The other 50% are performance-based and vest upon a Liquidity Event, which is defined as the sale, or similar transaction, of Topco.
Upon a Liquidity Event, all unvested service-based units within the Checkersrallys Management Incentive Plan will become fully vested. This means that if a sale or similar transaction of Topco occurs, any service-based units that have not yet reached their vesting date will immediately vest, granting the recipient full ownership of those units.
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. Therefore, even with the accelerated vesting upon a Liquidity Event, certain negative events could still lead to a loss of these units. Prospective franchisees should carefully review the terms of the Management Incentive Plan to understand all conditions and potential outcomes related to these Class B Units.