Cross company has the acquisition of other company as part of our strategic plan in the next few years. Recently, a fellow associate inquired how an acquisition would impact our ESOP and that is an important enough question to share with everyone.
New Associate Vesting
Associates who join Cross Company via acquisitions have the same vesting schedule of 6 years – just like everyone else. Although not obligated to do so, we have always credited the new associates with their time with their acquired company for both ESOP vesting and vacation accruals. However, the new associate must work for Cross Company the required 1,000 consecutive hours before they can enter the ESOP.
To be clear, if they have worked with the acquired company for 6 years or more, they are automatically 100% vested, but only after they work 1,000 hours for Cross Company.
When we acquire another company and we take on their employees, they will participate in the release of the unallocated shares in the same ratio as everyone else. If the Board determines a higher benefit level than that created by the release of the unallocated shares and any shares recirculated from terminated/retiring associates, either cash or new shares will be contributed. Any new shares would be dilutive to the stock value.
The Board balances the number of shares every year by deciding on whether the shares from employees who leave the company, or diversify if they are eligible, will be either “retired” or “recirculated.”
If the shares are retired, that essentially reduces the number of shares. If they are recirculated, the number of shares stays the same. Plus, we recirculate all the “unallocated shares” that were used as collateral for the loan the company made to the ESOP in 2006 to take us to 100% employee-owned. So there are plenty of shares to go around! When the loan is completely paid off (roughly 2022), then the Board could authorize more shares to keep the ESOP in balance.
We All Win
In conclusion, acquisitions are a big part of the continued success and growth of Cross Company. Acquisitions have been part of our growth plans for a long time. Associates should take comfort in our strategic plan, the emphasis on our growth initiatives, hiring quality associates to join our team, and the commitment to our current associates. Plus, diversification provides those eligible to diversify their ESOP an option to reduce their concentration of their investments, and should be strongly considered.