FIG Simplify Macro Strategy ETF

Policies and Procedures for Related Party Transactions

Prior to the completion of our initial public offering in February 2007, our Board adopted a Policy and Procedures with Respect to Related Person Transactions, which we refer to as our Related Person Policy (as amended in July 2016). Pursuant to the terms of the Related Person Policy, the Nominating, Corporate Governance and Conflicts Committee of our Board must review and approve in

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advance any related party transaction, other than those that are pre-approved pursuant to pre-approval guidelines or rules that may be established by such committee to cover specific categories of transactions, including the guidelines described below. All Related Persons (defined below) are required to report to our legal department any such related person transaction prior to its completion and the legal department will determine whether it should be submitted to the Nominating, Corporate Governance and Conflicts Committee for consideration.

Our Related Person Policy covers all transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships) in which the Company (including any of its consolidated subsidiaries (that is, not including the Fortress Funds)) was, is or will be a participant and the amount involved exceeds $120,000 and in which any Related Person had, has or will have a direct or indirect material interest.

Our Related Person Policy provides that the following transactions shall be deemed pre-approved by the Nominating, Corporate Governance and Conflicts Committee, even if the aggregate of any one or more of such transactions exceeds $120,000: (1) any investment by a Related Person in a private investment fund or other private collective investment vehicle managed by us or any of our subsidiaries or affiliates with respect to which management and incentive fees are waived (partially or in full), so long as it is not in violation of such fund’s organizational documents; (2) any investment by a Related Person in an offering of securities of an issuer (other than securities of an entity covered by clause (1) above) controlled or managed by us or any of our subsidiaries or affiliates; (3) any other investment by a Related Person or any other transaction arrangement or relationship in which a Related Person participates so long as such investment, transaction, arrangement or relationship is also generally available to our senior employees; and (4) any entry of investment funds or publicly traded permanent capital vehicles into management or similar or related agreements with the Company or any of its subsidiaries or affiliates, or amendments thereto, in which a Related Party may have a material interest.

A “Related Person,” as defined in our Related Person Policy, means any person who is, or at any time since the beginning of the Company’s last fiscal year was, a director or a named executive officer of the Company or a nominee to become a director of the Company, any person who is known to be the beneficial owner of more than 5% of any class of the Company’s voting securities, any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of the director, executive officer, nominee or more than 5% beneficial owner or any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee or more than 5% beneficial owner, and any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest.

Related Party Transactions

The following is a summary of material provisions of various transactions we have entered into with our executive officers, directors or 5% or greater shareholders. We believe the terms and conditions set forth in such agreements are reasonable and customary for transactions of this type.

Formation Transactions

Prior to December 31, 2009, our business was conducted by Fortress Operating Entity I LP and certain of its predecessors by merger (the “Operating Entities”) and Principal Holdings I LP (“Principal Holdings”) (the Operating Entities together with Principal Holdings, the limited partnerships through which we conduct our business and hold our principal investments, are referred to herein as the “Fortress Operating Group”), which collectively manage the Fortress Funds. Fortress Investment Group LLC was formed as a Delaware limited liability company for the purpose of completing the Nomura transaction, our initial public offering and the related transactions in order to carry on our business as a publicly-traded entity. As a result of the Nomura transaction and the transactions contemplated by our initial public offering, Fortress Investment Group LLC acquired control of the Fortress Operating Group and, as of December 31, 2016, held approximately 56.2% of the FOG units.

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On December 18, 2006, the Principals entered into a securities purchase agreement with Nomura Investment Managers U.S.A., Inc., a Delaware corporation (“Nomura”), whose ultimate parent is Nomura Holdings, Inc., a Japanese corporation. On January 17, 2007, Nomura completed the transaction by purchasing 55,071,450 Class A shares of the Company for $888 million and the Company in turn purchased 55,071,450 Fortress Operating Group limited partnership units, which represented 15% of Fortress Operating Group’s economic interests, from the Principals for $888 million (the foregoing transactions, collectively, the “Nomura transaction”).

In connection with the closing of the Nomura transaction, we formed FIG Corp., as a Delaware corporation, and FIG Asset Co. LLC, as a Delaware limited liability company, our two wholly-owned intermediate holding companies. In connection with the consummation of our initial public offering, we completed the following transactions:

We refer to the foregoing collectively as the “Transactions.”

As a result of the Transactions:

The remaining Transactions collectively comprise the reorganization pursuant to which the Principals, Nomura and the public acquired 100% of our outstanding Class A and Class B shares and our concurrent acquisition, through two intermediate holding companies, of the controlling general partner interest in the Fortress Operating Group and our FOG units.

Shareholders Agreement

Prior to the consummation of our initial public offering, we entered into the Shareholders Agreement with our Principals. The Shareholders Agreement, as amended, provides the Principals with certain rights with respect to the approval of certain matters and the designation of nominees to serve on our Board as well as registration rights for our securities that they own.

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Principals’ Approval

The Shareholders Agreement provides that, so long as the Principals and their permitted transferees collectively own securities representing more than 40% of the total combined voting power of all of our outstanding Class A and Class B shares, our Board shall not authorize, approve or ratify any action described below without the prior approval (which approval may be in the form of an action by written consent) of Principals that are employed by the Fortress Operating Group holding our outstanding shares representing greater than 50% of the total combined voting power of all of our outstanding Class A and Class B shares held by such Principals, collectively:

Board Representation

The Shareholders Agreement requires that we take all reasonably necessary action to effect the following:

Registration Rights

Demand Rights. We have granted to the Principals registration rights that allow them at any time to request that we register the resale, under the Securities Act, of an amount of shares that they own representing at least 2.5% of the total combined voting power of all our outstanding Class A and Class B shares, based on the aggregate amount of shares issued and outstanding immediately after the consummation of our initial public offering. Each Principal, together with his permitted transferees, shall be entitled to an aggregate of two demand registrations. We are not required to maintain the effectiveness of any resale registration statement for more than 90 days. We are also not required to effect any demand registration within six months of a “firm commitment” underwritten offering in which all Principals that held “piggyback” rights (as described below) were given the opportunity to sell shares and which offering included at least 50% of the shares collectively requested by the Principals with piggyback rights to be included. We are not obligated to grant a request for a demand registration within four months of any other demand registration and may refuse a request for demand registration if, in our reasonable judgment, it is not feasible for us to proceed with the registration because of the unavailability of audited financial statements, provided that we use our reasonable best efforts to obtain such financial statements as promptly as practicable.

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Piggyback Rights. For so long as a Principal, together with his permitted transferees and their respective permitted transferees, beneficially owns an amount of shares representing at least 1% of the total combined voting power of all our outstanding Class A and Class B shares, based on the aggregate amount of shares issued and outstanding immediately after the consummation of our initial public offering (a “Piggyback Registrable Amount”), the principal shall also have “piggyback” registration rights that allows him to include the shares that he owns in any public offering of equity securities initiated by us (other than those public offerings pursuant to registration statements on Forms S-4 or S-8 or any successor form thereto) or by any of our other holders of equity securities that have registration rights. The “piggyback” registration rights of these holders of equity securities are subject to proportional cutbacks based on the manner of such offering and the identity of the party initiating such offering.

Shelf Registration. We have granted each Principal, for so long as each Principal, together with his permitted transferees and their respective permitted transferees, beneficially owns an amount of shares representing at least 2.5% of the total combined voting power of all our outstanding Class A and Class B shares, based on the aggregate amount of shares issued and outstanding immediately after the consummation of our initial public offering, the right to request a shelf registration on Form S-3, providing for resales thereof to be made on a continuous basis, subject to a time limit on our efforts to keep the shelf registration statement continuously effective and our right to suspend the use of the shelf registration prospectus for a reasonable period of time (not exceeding 90 days in succession or 180 days in the aggregate in any 12 month period) if we determine that certain disclosures required by the shelf registration statement would be detrimental to us or our holders of equity securities. In addition, each Principal that, together with his permitted transferees and their respective permitted transferees, beneficially owns a Piggyback Registrable Amount and has not made a request for a shelf registration may elect to participate in such shelf registration within ten days after notice of the registration is given.

Indemnification; Expenses. We have agreed to indemnify each Principal against any losses or damages resulting from any untrue statement or omission of material fact in any registration statement or prospectus pursuant to which they sell our shares, unless such liability arose from such principal’s misstatement or omission, and each such Principal has agreed to indemnify us against all losses caused by his misstatements or omissions.

We will pay all expenses incident to our performance under the Shareholders Agreement, and the Principals will pay their respective portions of all underwriting discounts, commissions and transfer taxes relating to the sale of their shares under the Shareholders Agreement.

Clawback Guaranty Indemnity Agreement

Incentive income from certain of the private equity funds and credit private equity funds may be distributed to us on a current basis generally subject to the obligation of the subsidiary of the Fortress Operating Group that acts as general partner of the fund to repay the amounts so distributed in the event certain specified return thresholds are not ultimately achieved. The Principals have personally guaranteed, subject to certain limitations, the obligation of these subsidiaries in respect of this “clawback” obligation. The Shareholders Agreement contains our agreement to indemnify each of our Principals against all amounts that the Principal pays pursuant to any of these personal guaranties in favor of our private equity funds (including costs and expenses related to investigating the basis for or objecting to any claims made in respect of the guaranties).

Exchange Agreement

In connection with the completion of our initial public offering, the Principals entered into an exchange agreement (the “Exchange Agreement”) with us, under which, at any time and from time to time, each Principal (and each other party to the agreement) has the right to exchange a number of FOG units (i.e., a limited partner interest in each Fortress Operating Group entity) together with the corresponding Class B shares for an equal number of Class A shares. Upon an exchange of a Fortress Operating Group unit, the corresponding Class B share is cancelled and our interest in the Fortress Operating Group increases by the number of units exchanged. The Exchange Agreement was amended and restated in in March 2011 to add a former senior employee, who is not a principal and who then owned RPUs that were convertible into FOG units, as a party. The Exchange Agreement was further amended and restated in November 2016 to remove the former senior employee following the exchange of his remaining FOG units and corresponding Class B shares in September 2016 and to make similar updates.

Expense Allocation Agreement

We have entered into an expense allocation agreement with the Fortress Operating Group entities pursuant to which substantially all of Fortress’s expenses (other than (i) income tax expenses of Fortress Investment Group LLC, FIG Corp. and FIG Asset Co. LLC, (ii) obligations incurred under the tax receivable agreement and (iii) payments on indebtedness incurred by Fortress Investment Group LLC, FIG Corp. and FIG Asset Co. LLC), including substantially all expenses incurred by or attributable solely to Fortress Investment Group LLC, are accounted for as expenses of the Fortress Operating Group.

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Tax Receivable Agreement

As described above, at any time and from time to time, each owner of a Fortress Operating Group unit has the right to exchange each of his FOG units (together with a corresponding Class B share) for one of our Class A shares in a taxable transaction. Certain of the Fortress Operating Group entities have made and others may make an election under Section 754 of the Internal Revenue Code, which may result in an adjustment to the tax basis of the assets owned by the Fortress Operating Group at the time of the exchange. The taxable exchanges may result in increases in the tax depreciation and amortization deductions, as well as the increase in the tax basis of other assets, of the Fortress Operating Group that otherwise would not have been available. These increases in tax depreciation and amortization deductions, as well as the increase in the tax basis of other assets, would reduce the amount of tax that FIG Corp. or FIG Asset Co. LLC (on behalf of any affiliated corporation that holds an interest in a Fortress Operating Group entity), as applicable, would otherwise be required to pay in the future. Additionally, our acquisition of FOG units from the Principals, such as in the Nomura transaction, also resulted in increases in tax deductions and tax basis that reduces the amount of tax that the corporate taxpayers would otherwise be required to pay in the future.

In connection with the closing of the Nomura transaction, the corporate taxpayers entered into a tax receivable agreement with our Principals that provides for the payment by the corporate taxpayers to an exchanging or selling principal of 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income tax that the corporate taxpayers actually realize (or are deemed to realize in the case of an early termination payment by the corporate taxpayers or a change of control, as discussed below) as a result of these increases in tax deductions and tax basis, and certain other tax benefits, including imputed interest expense, related to entering into the tax receivable agreement. The corporate taxpayers expect to benefit from the remaining 15% of cash savings, if any, in income tax savings that they realize. The tax savings that the corporate taxpayers actually realize will equal the difference between (i) the income taxes that the corporate taxpayers would pay if the tax basis of the assets was as shown on the corporate taxpayers’ books at the time of a taxable exchange and (ii) the income taxes that the corporate taxpayers actually pay, taking into account payments made under the tax receivable agreement as well as depreciation and amortization deductions attributable to the fair market value basis in the assets of the Fortress Operating Group. For purposes of the tax receivable agreement, cash savings in income tax will be computed by comparing our actual income tax liability to the amount of such taxes that the corporate taxpayers would have been required to pay had there been no increase to the tax basis of the tangible and intangible assets of the applicable Fortress Operating Group entity as a result of the transaction and had the corporate taxpayers not entered into the tax receivable agreement. The term of the tax receivable agreement continues until all such tax benefits have been utilized or expired, unless the corporate taxpayers exercise the right to terminate the tax receivable agreement by paying an amount based on the present value of payments remaining to be made under the agreement with respect to units which have been exchanged or sold and units which have not yet been exchanged or sold. Such present value will be determined based on certain assumptions, including that the corporate taxpayers would have sufficient taxable income to fully utilize the deductions that would have arisen from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. No payments will be made if a principal elects to exchange his FOG units in a tax-free transaction.

Decisions made by the Principals in the course of running our business, in particular decisions made with respect to the sale or disposition of assets or change of control, may influence the timing and amount of payments that are received by an exchanging or selling principal under the tax receivable agreement. In general, earlier disposition of assets following an exchange or acquisition transaction will tend to accelerate such payments and increase the present value of the tax receivable agreement, and disposition of assets before an exchange or acquisition transaction will increase a principal’s tax liability without giving rise to any rights to receive payments under the tax receivable agreement.

Although we are not aware of any issue that would cause the Internal Revenue Service (the “IRS”) to challenge a tax basis increase, our Principals will not reimburse the corporate taxpayers for any payments made by them under the tax receivable agreement. As a result, in certain circumstances, payments could be made to our Principals under the tax receivable agreement in excess of the corporate taxpayers’ cash tax savings. The payments that the corporate taxpayers may make to our Principals could be material in amount. However, our Principals receive 85% of our cash tax savings, leaving the corporate taxpayers with 15% of the benefits of the tax savings. In general, estimating the amount of payments that may be made to the Principals under the tax receivable agreement is, by its nature, imprecise, in the absence of an actual transaction, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis and the amount and timing of any payments under the tax receivable agreement will vary depending upon a number of factors, including:

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In addition, the tax receivable agreement provides that, upon a merger, asset sale or other form of business combination or certain other changes of control, the corporate taxpayers’ (or their successors’) obligations with respect to exchanged or acquired units (whether exchanged or acquired before or after such change of control) would be based on certain assumptions, including that the corporate taxpayers would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. As noted above, no payments will be made if a principal elects to exchange his FOG units in a tax-free transaction.

Our purchase, through our intermediate holding companies, of a portion of the Principals’ FOG units as part of the Nomura and three other transactions resulted in an increase in the tax basis of the assets for which tax receivable payments could be made of approximately $914.7 million. As of March 31, 2017, we have made payments of principal and interest pursuant to the terms of the tax receivable agreement to the Principals in an aggregate amount of approximately $185.0 million. Any payments under the tax receivable agreement will give rise to additional tax benefits and additional potential payments under the tax receivable agreement. Any payments under the tax receivable agreement will depend upon whether FIG Corp. has taxable income to utilize the benefit of the increase in the tax basis of the assets owned by the Fortress Operating Group.

Nomura

Upon consummation of the sale of Class A shares in connection with the Nomura transaction, we entered into an investor shareholder agreement with Nomura. The investor shareholder agreement provided Nomura with certain rights with respect to the designation of a nominee to serve on our Board or an observer to attend meetings of our Board, as well as registration rights for our securities that it owns, and placed certain restrictions on actions that Nomura may take with respect to us and our securities. On February 13, 2014, pursuant to a purchase agreement, we acquired all of Nomura’s 60,568,275 Class A shares for an aggregate purchase price of $363.4 million (or $6.00 per share) paid in cash. All of the purchased Class A shares were cancelled and ceased to be outstanding. As part of the purchase agreement, we agreed for each year until the third anniversary of the agreement to engage Nomura and its affiliates to provide certain financial advisory and financing services or pay Nomura annual sums, in lieu thereof, equal to the difference, if any, between $12 million minus all fees earned or received by Nomura for services provided to Fortress and its affiliates during such year. Pursuant to this arrangement, the Company paid Nomura $9.7 million and $10.6 million in 2015 and 2016, respectively.

Affiliated Manager

On January 5, 2015 (the “transfer date”), Adam Levinson, Chief Investment Officer of the Graticule Asia Macro Funds (“GAMF”), formerly known as the Fortress Asia Macro Funds, transitioned GAMF and related managed accounts, including GAMF employees, into an autonomous asset management business called Graticule Asset Management Asia, L.P. (together with its affiliates, “Graticule”), with the Company as a non-control partner and provider of infrastructure services. The Company retained a minority interest in Graticule, including economics generated by Graticule and other funds introduced in the future. This economic interest will be approximately 30% of earnings in 2015 and 2016, and will decline to approximately 27% over time. The Company recorded the results of this transaction at fair value. During the year ended December 31, 2015, the Company recorded a non-cash gain of $134.4 million, non-cash expense of $101.0 million related to the fair value of the controlling interest in Graticule transferred to Graticule for no consideration and $33.4 million from its resulting retained interest as an equity method investment. For additional information, see Note 1 of our audited consolidated financial statements in the 2016 10-K.

Graticule reimbursed the Company a total of $15.5 million for expenses it incurred with respect to compensation or employment of GAMF employees for the period between January 1, 2014 and the transfer date. Graticule also reimbursed the Company $350,000 for third-party fees and expenses in connection with the transactions described above. On the transfer date, Mr. Levinson also received a $3.0 million payment from the Company.

So long as it is an equity owner of the Graticule business, the Company has the right to appoint one member to its board. In addition, the Company has certain tag along, right of first refusal and drag along rights with respect to transfers of interests in a Graticule business entity by Mr. Levinson or his affiliates, as well as certain veto rights relating to organizational documents and corporate actions. In addition, on the transfer date, the Company entered into an arrangement with Mr. Levinson pursuant to which he will continue to provide specified portfolio management services covering certain managed accounts and will be compensated based on a percentage of profits. In 2015, Mr. Levinson received $732,167 as compensation for providing portfolio management services to

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these managed accounts. With the closing of the Fortress Macro funds, such managed accounts were transferred to Graticule for no consideration and therefore the compensation arrangements with Mr. Levinson for these services were terminated effective December 31, 2015. The Company also entered into an infrastructure support agreement with Graticule pursuant to which the Company provides infrastructure support services, including technology and back office services, to Graticule for a reasonable and customary fee. In 2015, the Company received $16.3 million in fees for the provision of these services. In May 2015, Graticule notified the Company of its intention to terminate the infrastructure services agreement effective at the end of May 2016. The Company will continue to earn fees for providing services to Graticule through the effective date of termination.

In February 2016, the Company entered into an agreement with Graticule for the sale of certain software and technology assets for $1.7 million, payable in one initial installment of $1.1 million at closing and a second installment of $550,000 on the first anniversary of the closing.

Share and Unit Repurchase

Michael E. Novogratz, a principal, officer and director of the Company retired effective January 2016. In November 2015, the Company purchased from Mr. Novogratz 56.8 million FOG units and corresponding Class B shares at $4.50 per share, or an aggregate purchase price of $255.7 million. In connection with this purchase, the Company paid $100.0 million of cash in November 2015 and issued a $155.7 million promissory note, of which one half of the principal amount was repaid in August 2016 and the remainder in November 2017.

Other Related Party Transactions

Fortress generally bears overhead, administrative and other expenses for, and may provide certain other services to Fortress Funds for which they are not reimbursed. Fortress has also entered into cost sharing arrangements with certain Fortress Funds, including market data services and subleases of certain of its office space. Fortress pays these costs directly and is reimbursed by the related Fortress Funds. For the year ended December 31, 2016, other revenues in Fortress’ financial statements included approximately $5.5 million of revenues from affiliates, primarily interest and dividends. In addition, Fortress received $223.2 million of expense reimbursements from affiliates during the year ended December 31, 2016, including $13.5 million from a fund in which two of our Principals are the primary equity investors pending the third party capital raising process. As of December 31, 2016, amounts due from Fortress Funds recorded in due from affiliates in Fortress’s financial statements included $43.5 million of past due management fees and $11.0 million of private equity general and administrative expenses advanced on behalf of a certain Fortress Fund. As of December 31, 2016, the Company also has past due amounts of $12.2 million in management fees and $6.6 million in private equity general and administrative expenses due from another Fortress Fund which has been fully reserved by Fortress.

From time to time, we may advance amounts for short periods, or provide indemnification or guarantees to counterparties, on behalf of affiliates, typically in connection with the development and launch of new sponsored investment funds or vehicles or the financing of such funds or vehicles. In such cases, we may or may not charge interest to these affiliates. In 2016, we waived $1.9 million of interest owed from private equity funds related to management fees paid in arrears. One of our indirect subsidiaries acts as the loan origination platform for certain Fortress Funds. In this respect, it holds commercial lending licenses in various states and receives nominal fees for its loan origination duties.

Fortress Funds and/or their portfolio companies have engaged in a number of related party transactions. None of the Company, Fortress Operating Group or any of our investment management subsidiaries was a party to any of these transactions.

Our employees and directors, including the Principals and other senior employees, may also serve as directors and officers of the permanent capital vehicles and portfolio companies. Our employees and directors are permitted to participate in these entities as well as other Fortress Funds by investing in these funds alongside non-employee third party investors. Many of our employees and directors, including the Principals, other executive officers and senior employees, have invested in these funds. From time to time, Fortress may extend loans to non- executive officer employees, including in situations where employees serve as portfolio managers of Fortress Funds, to facilitate such employees’ investments in such funds and for other purposes. Outstanding advances

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(including principal and accrued interest) totaled $10.1 million as of December 31, 2016. In many cases, investment in Fortress Funds is limited by law to individuals who qualify under applicable legal regimes. These funds generally do not require employees or directors to pay management fees and do not deduct incentive fees or “carried interest” from the funds’ distributions to these employees. In order to facilitate investments by the Principals in Fortress Funds, our Board of Directors has agreed that such fees may not be charged or deducted on their investments after the termination of their employment. In addition, certain of our executive officers from time to time invest their personal funds directly in affiliates of our funds on the same terms and with the same conditions as the other investors in these affiliates, who are not our directors, executive officers or employees.

Distributions to our executive officers and one former senior employee who is the beneficial owner of more than 5% of our shares (or persons or entities affiliated with them) of profits earned on investments made by, and other income from, any Fortress Fund for which amounts that were distributed (including return of capital invested by such directors or officers) to or, in the case of hedge funds, that could have been withdrawn from the current year profits by such director or officer in 2016 were in aggregate, as follows: Mr. Bass — $262,227, Mr. Briger — $39,825,958, Mr. Brooks — $57,616, Mr. Edens — $14,711,256, Mr. Nardone — $12,727,474, Mr. Novogratz — $15,316,252 and Mr. Levinson — $10,025,909. In 2016, the return of capital invested by such persons in such Fortress Funds over several years was as follows: Mr. Bass — $160,585, Mr. Briger —$15,950,796, Mr. Brooks — $39,172, Mr. Edens — $11,751,674, Mr. Nardone — $10,276,897, Mr. Novogratz — $8,569,700 and Mr. Levinson — $914,331. In addition, during 2016, Messrs. Bass and Brooks transferred assets to the Company in satisfaction of certain clawback obligations on historic private equity fund incentive payouts in the amounts of $334,514 and $234,160, respectively.

Certain Fortress subsidiaries may, from time to time, be required to pay taxes to various tax jurisdictions on behalf of its members, which include the Principals and other senior employees. These taxes are subject to reimbursement from the members and are collected periodically. The amount subject to reimbursement aggregated $0.9 million as of December 31, 2016.

From time to time, employees of Fortress mutually agree with Fortress to terminate their employment in order to accept employment opportunities at the Fortress Funds, Portfolio Companies, or other affiliates. To the extent these former employees had been granted RSUs by Fortress, they are generally permitted to continue vesting in these RSUs pursuant to their original vesting terms as long as they remain employed by an affiliate.

In March 2012, as a result of the repeal of the exemption from registration under the Investment Advisers Act of 1940 for family offices, Fortress hired the personnel of the Principals’ family offices and entered into investment management agreements with the family offices. Pursuant to these agreements, these individuals work solely on the Principals’ personal financial matters, and the Principals reimburse Fortress for their compensation, benefits and other incremental expense attributable to them. The total amount of such expenses, along with reimbursements by a Principal for similar time spent by employees on affiliated businesses, was $2.4 million in 2016.

Two of the Principals indirectly owned aircraft that Fortress charters from a third-party aircraft operator for business purposes in the course of operations. Fortress and/or the Fortress Funds, depending on the purposes of the trip, pay market rates for the charters. These amounts totaled $2.2 million and $0.5 million in 2016 for each Principal. The operators remit a portion of these amounts to the Principals.

Please also see Note 7 of our audited consolidated financial statements in the 2016 10-K.

Fortress Operating Group Limited Partnership Agreements and Our Operating Agreement

Operating Agreement of Fortress Investment Group LLC

Organization and Duration

The Company was formed on November 6, 2006 as Fortress Investment Group Holdings LLC, was subsequently renamed Fortress Investment Group LLC on February 1, 2007 and will remain in existence until dissolved in accordance with our Operating Agreement.

Relationship with Fortress Operating Group Entities

Under our Operating Agreement, we must receive the consent of the Principals before engaging in the following actions:

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Duties of Officers and Directors

Our Operating Agreement does not expressly modify the duties and obligations owed by officers and directors under the Delaware General Corporation Law (the “DGCL”). However, there are certain provisions in our Operating Agreement regarding exculpation and indemnification of our officers and directors that differ from the DGCL. First, our Operating Agreement provides that to the fullest extent permitted by applicable law our directors or officers will not be liable to us. Under the DGCL, a director or officer would be liable to us for: (1) breach of duty of loyalty to us or our shareholders; (2) intentional misconduct, knowing violations of the law or acts or omissions that are not done in good faith; (3) improper redemption of stock or declaration of a dividend; or (4) a transaction from which the director derived an improper personal benefit.

Second, our Operating Agreement provides that we indemnify our directors and officers for acts or omissions to the fullest extent permitted by law. Under the DGCL, a corporation can only indemnify directors and officers for acts or omissions if the director or officer acted in good faith, in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in a criminal action, if the officer or director had no reasonable cause to believe his conduct was unlawful.

Third, our Operating Agreement provides that in the event a potential conflict of interest exists or arises between any of our Principals, our directors or their respective affiliates, on the one hand, and us, any of our subsidiaries or any of our shareholders, on the other hand, a resolution or course of action by our Board shall be deemed approved by all of our shareholders, and shall not constitute a breach of the fiduciary duties of members of the Board to us or our shareholders, if such resolution or course of action is (1) approved by our nominating, corporate governance and conflicts committee, which is composed of independent directors, (2) approved by shareholders holding a majority of our shares that are disinterested parties, (3) on terms no less favorable than those generally provided to or available from unrelated third parties, or (4) fair and reasonable to us. Under the DGCL, a corporation is not permitted to automatically exempt Board members from claims of breach of fiduciary duty under such circumstances.

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Expansion of Board of Directors

Our Operating Agreement provides that the number of directors which shall constitute the whole Board shall be determined from time to time by resolution adopted by a majority of the Board then in office, provided that, for so long as our Principals shall have the right to designate nominees to the Board under the Shareholders Agreement, the number of directors may not be increased without the consent of the Principals.

Investing in FIG Asset Co. LLC

Our Operating Agreement provides that we may not allow FIG Asset Co. LLC to make any investment, directly or indirectly, without the unanimous approval of all holders of Class B shares when such Class B shareholders would be required to contribute funds in order for such shareholders to maintain their respective ownership percentages in such entity.

Limitations on Liability and Indemnification of Our Directors and Officers

Pursuant to our Operating Agreement, we have agreed to indemnify each of our directors and officers, to the fullest extent permitted by law, against all expenses and liabilities (including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the Company and counsel fees and disbursements on a solicitor and client basis) arising from the performance of any of their obligations or duties in connection with their service to us or the Operating Agreement, including in connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which any such person may hereafter be made party by reason of being or having been one of our directors or officers.

Amendment of Our Operating Agreement

Amendments to our Operating Agreement may be proposed only by or with the consent of our Board. To adopt a proposed amendment, our Board is required to seek written approval of the holders of the number of shares required to approve the amendment or call a meeting of our shareholders to consider and vote upon the proposed amendment. Except as set forth below, an amendment must be approved by holders of a majority of the total combined voting power of our outstanding Class A and Class B shares and, to the extent that such amendment would have a material adverse effect on the holders of any class or series of shares, by the holders of a majority of such class or series.

Prohibited Amendments. No amendment may be made that would:

The provision of our Operating Agreement preventing the amendments having the effects described in any of the clauses above can be amended upon the approval of holders of at least two-thirds of the total combined voting power of our outstanding Class A and Class B shares, voting together as a single class.

No Shareholder Approval. Our Board may generally make amendments to our Operating Agreement without the approval of any shareholder or assignee to reflect:

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In addition, our Board may make amendments to our Operating Agreement without the approval of any shareholder or assignee if our Board determines that those amendments:

The IRS could challenge the Trust’s manner of reporting to investors (e.g., if the IRS asserts that the Trust constitutes a partnership or is ignored for U.S. federal income tax purposes). In addition, the Trust could be subject to penalties if it were determined that the Trust did not satisfy applicable reporting requirements.

Anti-Takeover Effects, Our Operating Agreement

Our Operating Agreement provides that our shareholders (with the exception of our Principals if they collectively own shares representing at least 50% of the total combined voting power of all of our Class A and Class B shares) are specifically denied the ability to call a special meeting of the shareholders. Advance notice must be provided by our shareholders to nominate persons for election to our Board as well as to propose actions to be taken at an annual meeting.

Amended and Restated Agreement of Limited Partnership of the Fortress Operating Group Entities

Each of the amended and restated partnership agreements for the Operating Entities was entered into by FIG Corp. as the general partner and the Principals as limited partners, and the amended and restated partnership agreement for Principal Holdings was entered into by FIG Asset Co. LLC as the general partner and the Principals as limited partners. The amended and restated partnership agreements are substantially similar in form and the following is a summary of certain of the material provisions of each of the amended and restated partnership agreements.

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Issuance of Equity Securities by Fortress

If Fortress issues any equity securities, it is expected that: (1) Fortress will immediately contribute the cash proceeds or other consideration received from such issuance, and from the exercise of any rights contained in any such securities, to FIG Corp. and FIG Asset Co. LLC (allocated between them in accordance with their relative values at the time such equity securities are issued); (2) FIG Corp. will immediately contribute its portion of such cash proceeds or other consideration to the Operating Entities and any other entities that FIG Corp. directly acquires an interest in, to the extent that as of the date of such acquisition FIG Corp. and the Principals and their respective permitted transferees own interests in such entity that are in proportion to their respective ownership interests in the other Operating Entities on such date (allocated among them in accordance with their relative values at the time such equity securities are issued); (3) FIG Asset Co. LLC will immediately contribute its portion of such cash proceeds or other consideration to Principal Holdings and any other entities that FIG Asset Co. LLC directly acquires an interest in, to the extent that as of the date of such acquisition FIG Asset Co. LLC and the Principals and their respective permitted transferees own interests in such entity that are in proportion to their respective ownership interests in Principal Holdings on such date (allocated among them in accordance with their relative value at the time such equity securities are issued); (4) in exchange for the portion of such cash proceeds or other consideration contributed to the limited partnership, the general partner will receive (i) in the case of an issuance of Class A shares, Class A common units, and (ii) in the case of an issuance of any other equity securities by Fortress, except for Class B shares, a new class or series of units or other equity securities of the limited partnership with designations, preferences and other rights, terms and provisions that are substantially the same as those of such Fortress equity securities (with any dollar amounts adjusted to reflect the portion of the total amount of cash proceeds or other consideration received by Fortress that is contributed to the limited partnership); and (5) in the event of any subsequent transaction involving such Fortress equity securities (including a share split, a combination, a distribution of additional Fortress equity securities, a conversion, redemption or exchange of such Fortress equity securities), the general partner will concurrently effect a similar transaction with respect to the units or other equity securities issued by the limited partnership in connection with the issuance of such Fortress equity securities.

In the event of any issuance of equity securities by Fortress, and the contribution of the cash proceeds or other consideration received from such issuance as described above, the limited partnership shall pay or reimburse Fortress (directly or indirectly by paying or reimbursing the general partner) for its pro rata portion (based on the portion of the total cash proceeds or other consideration contributed to the limited partnership) of the expenses incurred by Fortress in connection with such issuance, including any underwriting discounts or commissions.

If Fortress issues any equity securities and any of the transactions described above are not effected, then the general partner shall make such modifications to the amended and restated partnership agreement as the general partner reasonably determines to be necessary so that, to the greatest extent possible, subsequent distributions to the holders of Class B common units (including distributions upon liquidation) will be the same as would be the case if such transactions had been effected. Such modifications to the amended and restated partnership agreement may include changes in the rates of distributions or allocations of profit and loss among partners or a requirement that the general partner make future contributions to the limited partnership. The general partner may effect any such modifications without the consent or approval of any limited partner.

Transfer

A limited partner may not transfer all or any of such partner’s units without approval of the general partner, which approval may be granted or withheld in the general partner’s sole and complete discretion; provided, however, that without the general partner’s approval, a limited partner may (1) transfer units pursuant to the Exchange Agreement or exchange letter agreement among FIG Corp. and the Principals, (2) transfer units to a permitted transferee of such partner or (3) pledge or assign units to a non-affiliated lending institution. A limited partner may not, without the consent of the general partner, withdraw from the partnership prior to the partnership’s termination.

Limited partners holding a majority of the outstanding Class A common units have the right to remove the general partner at any time, with or without “cause.” Upon the withdrawal or removal of the general partner, limited partners holding a majority of the outstanding Class A common units shall have the right to appoint a successor general partner; provided, that any successor general partner must be a direct or indirect wholly owned subsidiary of Fortress.

Amendments

Except as may be otherwise required by law, the amended and restated partnership agreement may be amended by the general partner without the consent or approval of any partners, expect that (1) if an amendment adversely affects the rights of a unit holder other than on a pro rata basis with other unit holders of the same class, such unit holders must consent to the amendment, (2) no amendment may adversely affect the rights of a class of unit holders without the consent of a majority of the holders of the outstanding units of such class and (3) the consent rights of the Principals may not be amended without the written consent of the Principals that hold a majority of the Class B common units then owned by all Principals and their permitted transferees.

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Transaction with SoftBank Group Corp.

On February 14, 2017, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SB Foundation Holdings LP, a Cayman Islands exempted limited partnership (“Parent”), and Foundation Acquisition LLC, a Delaware limited liability company and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, among other things, Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). Our Board of Directors, acting on the unanimous recommendation of a special committee consisting entirely of independent and disinterested directors (the “Special Committee”), unanimously approved the terms of the Merger Agreement and unanimously recommended the approval of the Merger by the our shareholders.

Consummation of the Merger is subject to certain conditions. In connection with our entry into the Merger Agreement, we also entered into certain other agreements and / or amendments to existing agreements, as described more fully below.

Founders Agreement

On February 14, 2017, concurrently with the entry into the Merger Agreement, Parent entered into a Founders Agreement (the “Founders Agreement”) with the Company, FIG Corp., FIG Asset Co. LLC (together with FIG Corp., the “Buyers”), Randal Nardone, Wesley Edens, and Peter Briger (each, a “Founder”), and their related parties that own FOG units (collectively with the Founders, the “Sellers”), pursuant to which, among other things, the Buyers will purchase from the Sellers 100% of the FOG units that are not already owned by the Company and its subsidiaries.

At the closing of the transactions contemplated by the Founders Agreement (the “Founders Closing”), which is to occur substantially concurrently with the closing of the Merger, each FOG unit will be acquired from the Sellers in exchange for $8.08 in cash, subject to reduction for, among other things, certain tax distributions made to the Sellers with respect to their FOG units.

Each Seller will place 50% of the after-tax proceeds from the sale of its FOG units into escrow at the Founders Closing. Eighty percent (80%) of the escrowed amount will be released to the applicable Seller upon the fourth anniversary of the Founders Closing, and the remaining escrowed amount will be released to the applicable Seller upon the fifth anniversary of the Founders Closing. If, prior to the applicable release date, (i) the Founders employment is terminated by the Company for any reason, (ii) Founder resigns for “good reason” (as defined in the Founders Agreement) or (iii) the Founder’s employment is terminated due to death or disability (each, an “Early Release Event”), the escrowed proceeds will be released to the applicable Seller. If, prior to the applicable release date, the applicable Founder’s employment is terminated by the Founder for any reason other than due to a resignation with “good reason” or the Founder’s death or disability, the escrowed proceeds will be forfeited to Parent. Each Seller is also required to retain investments in Company vehicles and certain other agreed investments equal to 90% of its existing investments until the earlier of the fourth anniversary of the Founders Closing or upon an Early Release Event. These escrowed proceeds and retained investments will be invested in funds and investment vehicles of the Company or Sponsor, or in stock of Sponsor.

The Sellers have made customary representations and warranties in the Founders Agreement and have agreed to be personally liable to Parent or Merger Sub, in an amount up to the aggregate proceeds received by any Seller under the Founders Agreement, for certain losses. The Founders have also agreed to covenants regarding non-competition, non-solicitation of employees and non-solicitation of investors for a period of 24 months after termination of employment. From and after the Founders Closing, each Founder will have the right to sit on our post-closing Board of Directors so long as he is employed by the Company or its subsidiaries, and the Board’s compensation committee must include at least two Founders.

Consummation of the Founders Closing is subject to certain conditions, including, without limitation, (i) the satisfaction of the conditions to the Merger or the waiver of such conditions by the applicable parties thereto; (ii) the absence of a temporary order, preliminary or permanent injunction or other order or legal requirements preventing the consummation of the Founders Closing; (iii) the accuracy of the other party’s representations and warranties and the other party’s compliance with its covenants and agreements contained in the Founders Agreement (in each case, subject to certain qualifications); and (iv) the effectiveness of the Escrow Agreements (as defined in the Founders Agreement), the TRA Waiver (as defined below) and the amendment of the Principal Compensation Plan described below.

The Founders Agreement may not be amended without mutual written consent of the parties and, if prior to the Founders Closing, approval of the Special Committee. The Founders Agreement automatically terminates upon termination of the Merger Agreement or by mutual written consent of the parties and the Special Committee.

The foregoing summary of the Founders Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Founders Agreement filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 15, 2017, and incorporated herein by reference.

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Support Agreements

In connection with entering into the Merger Agreement, on February 14, 2017, Parent entered into a Voting and Support Agreement (each, a “Support Agreement”) with each Founder and his related parties that own voting shares of the Company (collectively, the “Supporting Members”). The Support Agreements generally require that the Supporting Members vote their Covered Securities (as defined in the Support Agreement) of the Company that represent, in the aggregate, 34.99% of the total voting power of the Company, in favor of the adoption of the Merger Agreement and against any competing acquisition proposals, and take certain other actions in furtherance of the transactions contemplated by the Merger Agreement, in each case subject to the limitations set forth in the Support Agreements.

Subject to certain exceptions, the Support Agreements prohibit transfers by the Supporting Members of any of their Covered Securities prior to the termination of the Support Agreement and other actions that would impair their ability to fulfill their obligations under the Support Agreements.

The foregoing summary of the Support Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the full text of each of the Support Agreements, respectively, filed as Exhibits 99.1, 99.2 and 99.3 to the Company’s Current Report on Form 8-K filed with the SEC on February 15, 2017, and incorporated herein by reference.

TRA Waiver

Under the existing Tax Receivable Agreement, the Founders are entitled to receive certain payments from FIG Corp. equal to a percentage of the future tax benefits that FIG Corp. realizes as a result of certain transactions, including the Founders’ exchange of FOG Units for Class A shares of the Company. In connection with entering into the Merger Agreement, on February 14, 2017, FIG Corp. entered into a Waiver Agreement (the “TRA Waiver”) with certain other subsidiaries of the Company and the Founders, effective as of and subject to the occurrence of the Founders Closing, pursuant to which the Founders waive their rights to receive any payments under the Tax Receivable Agreement arising out of the transactions contemplated by the Founders Agreement and other transactions occurring after February 14, 2017. Under the Tax Receivable Agreement, the Founders will also agree to amend certain key tax assumptions that affect the timing and amount of future payments to be received by the Founders with respect to transactions that occur prior to the Founders Closing (“Pre-Transaction Exchanges”). Subject to those amendments, future payments under the Tax Receivable Agreement attributable to Pre-Transaction Exchanges will generally continue to be contingent on FIG Corp. having sufficient future operating income to utilize the applicable tax benefits. In addition, under the TRA Waiver, the aggregate amount of a Founder’s future payments under the Tax Receivable Agreement will be capped at such Founder’s pro rata share of the liability for such payments recorded on the Company’s audited consolidated financial statements for the year ending December 31, 2016. The waivers and amendments provided for in the TRA Waiver will generally have the effect of reducing and/or deferring the payments to which the Founders would otherwise have been entitled under the Tax Receivable Agreement.

The foregoing summary of the TRA Waiver does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the TRA Waiver, filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 15, 2017, and incorporated herein by reference.

Amended and Restated Employment, Non-Competition, and Non-Solicitation Agreements

In connection with their execution of the Founders Agreement, each of the Founders entered into an Amended and Restatement Employment, Non-Competition, and Non-Solicitation Agreement (the “Employment Agreements”) with FIG LLC, an operating subsidiary of the Company (the “Employer”). The Employment Agreements will become effective on and subject to the Founders Closing and will have an initial five-year term and provide that each Founder will serve as a Principal of the Employer, with duties consistent with those he presently has, and as a director and officer of the Company, FIG LLC and their subsidiaries.

The Employment Agreements provide each Founder with an annual base salary of $200,000. The Employment Agreements also provide that the Founders will generally continue to receive certain benefits on a basis consistent with those provided to them immediately prior to the Founders Closing. Upon a Founder’s termination of employment by the Employer without “cause” or a Founder’s resignation for “good reason” (each as defined in the Founders Agreement), the Founder is entitled to receive a lump sum severance benefit equal to three times the Founder’s then-current base salary, subject to execution of a release of claims. The Founders are also subject to post-termination restrictive covenants including the non-competition and non-solicitation obligations set forth in the Founders Agreement (as described above).

The foregoing summary of the Employment Agreements does not purport to be complete and is subject to, and qualified in its entirety by, the full text of each of the Employment Agreements, respectively, filed as Exhibits 10.2, 10.3 and 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on February 15, 2017, and incorporated herein by reference.

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Second Amended and Restated Fortress Investment Group LLC Principal Compensation Plan

In connection with entering into the Founders Agreement, the Second Amended and Restated Fortress Investment Group LLC Principal Compensation Plan was further amended and restated, effective as of and subject to the Founders Closing, to make certain clarifying and conforming changes.

Under the amended Principal Compensation Plan, the Founders will continue to receive annual payments based on their respective success in raising and investing new and existing funds and the performance of the Fortress funds during a given fiscal year and, for the credit hedge fund business, on the performance of the existing AUM of Fortress’s flagship hedge funds during a given year (“Performance Payments”). Performance Payments will be calculated using existing formulas (e.g., 20% of the fund management distributable earnings of new assets under management in new businesses) and payable as cash distributions in respect of equity interests that the Founders hold in the Fortress Operating Group.

Upon a Founder’s termination without “cause” or resignation for “good reason” (each as defined in the Founders Agreement), or termination due to his death or disability, the Founder will be entitled to certain payments to which he otherwise would have been entitled under the amended Principal Compensation Plan for the full year in which he was terminated, subject to execution of a release of claims. In addition, following any termination, a Founder will be entitled to receive and retain his vested equity interests granted in respect of incentive fees on private equity funds.

The foregoing summary of the Principal Compensation Plan amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Principal Compensation Plan amendment, filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on February 15, 2017, and incorporated herein by reference.

Indemnification Agreements

We have entered into separate indemnification agreements with our directors and officers. Each indemnification agreement provides, among other things, for indemnification to the fullest extent permitted by law and our Operating Agreement against (1) any and all expenses and liabilities, including judgments, fines, penalties and amounts paid in settlement of any claim with our approval and counsel fees and disbursements, (2) any liability pursuant to a loan guarantee, or otherwise, for any of Fortress’s indebtedness and (3) any liabilities incurred as a result of acting on our behalf (as a fiduciary or otherwise) in connection with an employee benefit plan. The indemnification agreements provide for the advancement or payment of all expenses to the indemnitee and for reimbursement to us if it is found that such indemnitee is not entitled to such indemnification under applicable law and our Operating Agreement.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”) may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. We maintain directors’ and officers’ liability insurance for our officers and directors.

Director Independence. On April 24, 2017, the Board determined the independence of each member of the Board in accordance with the NYSE corporate governance rules and applicable rules of the United States Securities and Exchange Commission (“SEC”). Each director affirmatively determined by the Board to have met the standards set forth in Section 303A.02(b) of the NYSE listing standards is referred to herein as an “independent director.” The Board has determined that the following Board members are independent directors because none of them had a material relationship with the Company: David B. Barry, Douglas L. Jacobs, Michael G. Rantz and George W. Wellde, Jr. In making its determinations, our Board considered all relevant facts and circumstances, as required by applicable NYSE listing standards, including continuing co-investment in real property among Messrs. Barry, Edens, and Nardone and the employment of Mr. Wellde’s daughter by the Company and Mr. Rantz’s daughter as part of the Company’s summer internship program.

The NYSE rules generally require that the boards of most listed companies consist of a majority of “independent directors” and that the nominating/corporate governance committee, the compensation committee and the audit committee of the Board consist entirely of “independent directors.” Under NYSE listing standards, whether a director is an “independent director” is a subjective determination to be made by the Board, and a director of Fortress only qualifies as “independent” if the Board affirmatively determines that the director has no material relationship with Fortress (either directly or as a partner, shareholder or officer of an organization that has a relationship with Fortress). While the test for independence is a subjective one, the NYSE rules also contain objective criteria that preclude directors from being considered independent in certain situations.

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Specifically, persons meeting any of the following objective criteria would be deemed to be not independent:

Ownership, either directly or indirectly, of a significant amount of Fortress’s Class A or Class B shares, by itself, does not constitute a material relationship. In addition, an investment in one or more Fortress Funds (as defined hereafter), by itself, also does not constitute a material relationship.

The Board has not established additional guidelines to assist it in determining whether a director has a material relationship with Fortress under NYSE rules. Instead, it evaluates each director or nominee for director under the tests set forth by the NYSE and through a broad evaluation of all relevant facts and circumstances. The Board, when assessing the materiality of a director’s relationship with Fortress, also considers the issue not merely from the standpoint of the director but also from that of persons or organizations with which the director has an affiliation.

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