The founders of New Seasons Market have always had a goal of making our company more broadly owned. A first step was taken towards accomplishing this goal a number of years ago when a small amount of stock was distributed to the staff members who had been with us from the very first day in 1999. We took another big step last year when we partnered with Endeavour Capital. Today we're excited to announce the next step in this ongoing process.
With the goal of rewarding everyone's hard work, loyalty and commitment to providing great service, our Board of Directors has adopted a plan that enables us to grant unit options to staff. All staff members who have been with the Company on or before June 19, 2009 will receive options based on their position and how long they've worked here. We're excited that so many staff members (about 1500!) will have the opportunity to participate in the future value of the company. The options will vest over a five-year period.
To be clear, this does not mean that New Seasons Market is suddenly getting another 1500 owners. There’s no money changing hands to make this happen. It is important to note that options are not actual ownership interests in the Company. Instead they represent the opportunity to receive payment from the Company or the possibility to exercise some or all of the options in the future but only under certain circumstances.
There are a number of unique features of this plan. First, it’s unusual because the options are being distributed to so many people, instead of just to the senior management of the company. In a privately owned company that’s pretty much unheard of. Second, the fact that our form of ownership is a limited liability company (LLC) as opposed to a regular corporation makes the option plan very complicated (we can’t even begin to tell you how many times the lawyers told us “it can’t be done.”) Third, the ability to actually exercise the options and acquire ownership units is very limited. If the plan provided actual ownership to all of the staff members who will be receiving options, we would be required to make extensive governmental filings, which could be very, very expensive and time-consuming. We’d also have to make some of our private financial information public, which could hurt us and help our competitors.
There are lots of scenarios that could occur, but the bottom line is that the most likely benefit a staff member will get from owning options is the potential payment of cash from the Company if the value of the Company increases.
So how does that happen?
First of course, the Company has to increase in value. Every year the Board of Directors will determine the fair market value of the options. This is usually, but not always, accomplished by hiring an outside firm to do a third party independent appraisal.
Assuming the Company has increased in value from the time the options were granted the most likely scenario in which a staff member would receive the option value is if that person leaves the company. In this instance, the vested portion of their options will be automatically cashed out. There are other examples of how the options could have value but they involve selling the Company or merging with another company and we have no current plans to do that.
One obvious question has to do with the opportunities for newer staff to receive options. We’re sorry that we couldn’t include every single person, but we did have to establish a cut-off date at some point. So while there is not a plan to issue more options now, we will evaluate the opportunity to do so on a recurring basis.
Finally, in a nod to the lawyers, we have to say that this information is not a legal document and that New Seasons Market staff members should not rely on it to make any decisions. All staff members need to read the entire option agreement that they will soon be receiving since that option agreement is the actual legal and binding document.
We’re truly grateful to work with such a great group of people. As the Friendliest Store in Town, our staff is committed not only to providing heartfelt service; they are part of building our local community. With this option plan we’re saying thanks to our staff and we’re helping to ensure that New Seasons Market is around for generations to come.
Lisa Sedlar, President/COO
Brian Rohter, Chairman of the Board of Directors