How were the liabilities related to the Stretch Zone unit appreciation rights plan settled?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
uture operating results.
NOTE J - UNIT APPRECIATION RIGHTS LIABILITY AND LONG-TERM INCENTIVE PLAN
On December 28, 2021, the Company adopted a unit appreciation rights plan. The plan provided the right to receive payment in cash based upon varying vesting schedules and only upon a change in control, as defined. The payment is determined upon the fair value appreciation of these rights, as defined, from the date of issue to the date of conversion, and the awards expire upon termination of continuous service, as defined. Since the inception of the plan, 251,081 appreciation rights, as defined in the unit appreciation rights plan agreement, were granted. At December 31, 2022, the Company recorded a liability of $17,897,523 based on the appreciation in intrinsic value, the probability of a change in control, and the portion of the vested units. The intrinsic value appreciation was based on the transaction price of the change in control transaction effective March 31, 2023 and represents the actual cash paid at that time under the plan. The unvested units vested upon the change in control and the Company recognized an additional liability and related expense of $12,199,919 at March 31, 2023. This liability was settled through the proceeds from the acquisition by the Parent.
The Parent issued a long-term incentive plan to
Source: Item 3 — Franchisee/Debtor's Warranties. (FDD pages 263–364)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, the company adopted a unit appreciation rights plan on December 28, 2021. This plan provided the right to receive cash payments based on vesting schedules, but only upon a change in control. The payment amount was determined by the fair value appreciation of these rights from the issue date to the conversion date, and the awards expired upon termination of continuous service. By December 31, 2022, Stretch Zone had granted 251,081 appreciation rights and recorded a liability of $17,897,523, which was based on the appreciation in intrinsic value, the probability of a change in control, and the portion of vested units.
The intrinsic value appreciation was based on the transaction price of the change in control transaction effective March 31, 2023, representing the actual cash paid under the plan at that time. Upon the change in control, unvested units also vested, leading to an additional liability and related expense of $12,199,919 recognized on March 31, 2023.
Ultimately, the liabilities associated with the unit appreciation rights plan were settled through the proceeds from the acquisition by the Parent company. Following this, the Parent issued a long-term incentive plan to employees, consultants, and board members, with units vesting over time or based on performance.