What condition must be met for service-based options to vest annually for Batteries Plus Bulbs employees?

According to Batteries Plus Bulbs's 2025 Franchise Disclosure Document, service-based stock options granted under the 2016 Equity Incentive Plan will vest annually for employees if they remain continuously employed by Batteries Plus Bulbs over their defined service period. Specifically, 20% of the service-based options held by the employee will vest each year that the employee remains continuously employed.

This means that a portion of the stock options becomes available to the employee each year, contingent upon their continued employment with Batteries Plus Bulbs. This vesting schedule is designed to incentivize employees to remain with the company long-term. The fair value of these stock option grants is determined using the Black-Scholes options-pricing model at the time the options are granted.

As of December 31, 2024, the total unrecognized compensation cost related to non-vested service options granted under the 2016 Plan was $4,364,000, which is expected to be recognized over a weighted-average period of approximately 54.6 months. This indicates the total future expense Batteries Plus Bulbs anticipates recognizing for these options. This information is relevant to prospective franchisees as it provides insight into the company's employee compensation structure and its long-term financial planning.