As compensation for services rendered to us under the Management Consulting Agreement, on October 6,
2015, the Operating LLC issued the Management Consultant 1,500,024 non-voting Class B Units representing an amount equal to 8.7% of the outstanding units of the Operating LLC. In addition, we agreed to
pay to the Management Consultant an annual fee equal to 3.0% of our Adjusted EBITDA for each fiscal year during the term of the Management Consulting Agreement. We also reimbursed the Management Consultant for its direct out-of-pocket costs incurred for management services provided to us. Under the Management Consulting Agreement, Adjusted EBITDA means our net income (loss) before
interest expense, income tax (expense) benefit, depreciation and amortization, and adding asset impairment charges and restaurant closing costs, loss on disposals of fixed assets, transaction and integration costs,
non-cash compensation, loss from discontinued operations, gain on debt extinguishment, pre-opening costs and certain unusual items.
Each Class B Unit represented a non-voting equity interest in the Operating LLC that entitled the holder thereof
to a percentage of the profits and appreciation in the equity value of the Operating LLC arising after the date of grant. The Management Consultant would only participate in distributions by the Operating LLC following such time as a specified
hurdle amount had been previously distributed to holders of Class A Units of the Operating LLC (i.e., the Company and its wholly-owned subsidiary, JAX Investments, Inc.). The hurdle amount with respect to the Class B Units issued to the
Management Consultant was equal to $151,052,366, which was determined based on the volume weighted average of the closing price of our Common Stock over the five trading days following the completion of the Spinoff. None of the Class B Units
were vested upon issuance. Instead, the Class B Units issued to the Management Consultant vested with respect to one-third of such Class B Units on each of the first, second and third anniversaries
of the date of grant.
The vesting of the Class B Units issued to the Management Consultant was subject to acceleration upon a change in control of
us, our termination of the Management Consulting Agreement without cause or the termination of the Management Consulting Agreement by the Management Consultant as a result of our breach of the Management Consulting Agreement.
On November 30, 2018, Management Consultant and the Operating LLC entered into a termination agreement (the Termination Agreement) whereby
the Management Consulting Agreement was terminated effective on that date (Termination Date). At the Termination Date all of the Class B Units held by Management Consultant had already previously vested, and there was no
acceleration of vesting as a result of the Termination Agreement. Pursuant to the provisions of the Termination Agreement and the Management Consulting Agreement, the Class B Units held by Management Consultant had to be exchanged for Common
Stock within ninety (90) days following the Termination Date or such units would be cancelled and forfeited for no consideration. As of February 28, 2019, the hurdle rate for the Management Consultant profit interest units had not been
met. Therefore, the profits interest units were not exercised, and were cancelled and forfeited for no consideration.
The Management Consulting Agreement
was to continue in effect for an initial term of seven years and be renewed for successive one-year periods thereafter unless earlier terminated (i) by the Operating LLC upon at least six months
prior notice to Management Consultant or (ii) by Management Consultant upon 30 days prior notice to us. Under the terms of the Management Consulting Agreement, in the event that it was terminated by the Operating LLC prior to the tenth
anniversary thereof, the Operating LLC would be obligated to pay to Management Consultant an early termination payment equal to the product of (i) the annual base fee for the most recent fiscal year and (ii) the difference between 10 and
the number of years that elapsed under the Management Consulting Agreement, provided that in the event of such a termination following a change of control event, the multiple of the annual base fee to be paid would not exceed three. The early
termination of the agreement by the Operating LLC required the cash payment of $4,560,000 to Management Consultant, which, per the Termination Agreement, was to be paid on January 31, 2019. On such date, the Company made this payment in
accordance with the Termination Agreement.
The principal member of the Management Consultant was William P. Foley, II,
non-Executive Chairman of the board of directors of FNF, Chairman of the board and Chief Executive Officer of Cannae, and a director of FNH. The other members of the Management Consultant consisted of other
current and former officers of FNF, Cannae and FNH, and Lonnie J. Stout II, at that time our President and Chief Executive Officer and current Executive Chairman.
Mr. Stout held an 11.76% interest in the Management Consultant and, as a result, may have been an indirect beneficiary of the management fees and
termination payment paid to the Management Consultant and may have been an indirect beneficiary of the Class B Units issued to the Management Consultant prior to the cancellation and forfeiture of such Class B Units for no consideration on
February 28, 2019.
On March 30, 2016, we paid the Management Consultant a management fee of approximately $207,000 with respect to the period
ended January 3, 2016. On March 3, 2017, we paid the Management Consultant a management fee of approximately $729,000 with respect to the period ended January 1, 2017. On March 7, 2018, we paid the Management Consultant a
management fee of approximately $749,000 with respect to the period ended December 31, 2017. As stated above, on January 31, 2019, we paid the
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