Letter: In defense of Sonnax
Editor of the Reformer:
I am writing this letter in response to reports regarding a lawsuit involving Sonnax Industries and The Department of Labor. Sonnax has been based in Vermont since 1978. While Sonnax began as a very small team of just a few people, we now employ about 190 full-time employees in Bellows Falls, and 60 others throughout the U.S.
I feel that Tommy Harmon and Rick Fritz have been portrayed in an unfavorable light, and, as a proud Employee Owner of Sonnax, stand behind them in their efforts to prevail in this action. It is important that our local community remember there are always two sides to a story, which sometimes, due to open litigation, are not reported equally or completely.
In 2010, Tommy Harmon, then majority owner, was looking toward retirement. He and Rick Fritz, then minority owner, had begun conversations about how to transfer ownership of Sonnax. After consulting with an investment banking firm, Sonnax was put up for sale. Likely buyers would be private equity firms or strategic buyers. While working with the investment bankers, Tommy and Rick learned more about an option called an Employee Stock Ownership Plan. An ESOP transaction enables employees to acquire ownership in a company and share in its economic success without investing any of their own money or assuming any risk. As Tommy and Rick considered their options, a couple of things became clear: If they sold to private equity or a strategic buyer, a new management team would be brought in, people would likely lose their jobs, and Sonnax could be broken up or moved out of Vermont altogether. If they created an ESOP, selling to their employees, the company would remain in Vermont and its dedicated employees who had helped grow the company would be rewarded and reap the benefits of Ownership.
In 2011, Tommy and Rick chose the ESOP option, selling 100 percent of their interests to an Employee Stock Ownership Plan. A trust was established to administer the ESOP, and allocate shares into individual employee accounts. There is no worry that Sonnax will move from Bellows Falls, an area that would suffer in our absence. In the six years since the inception of the ESOP, our stock price has grown considerably. Share values have risen more than 500 percent, and our ESOP accounts have grown with the share value.
I believe the ESOP was a generous gift given to all employees by Tommy and Rick. While reaping the benefits of Ownership, we have built a strong, successful company that will be around for years to come. Many longtime Employee Owners have found the financial retirement benefits of our ESOP far exceed a 401(k).
Tommy and Rick could have chosen another path, but they chose Employee Ownership. Had they gone in a different direction, they would have been paid 100 percent of their selling price and moved on. Without the ESOP, it's conceivable that Sonnax may not even exist today, let alone as a vibrant, growing business with great benefits and a loyal team of Employee Owners. By choosing to create the ESOP, Tommy and Rick were paid 30 percent of their selling price, and agreed to receive the balance over time, taking on the financial risk personally. If Sonnax was not successful as an Employee-Owned Company, they could have lost the remaining 70 percent due to them. They did this because they believed in the future of Sonnax, and more importantly, they believed in the employees.
I stand behind Tommy and Rick and believe, as they do, that the case brought against them is erroneous and without merit. Tommy and Rick are active, upstanding members of their communities and well respected by all. They are, generous, kind and caring, and I am proud to have them leading Sonnax to continued success.
Sonnax Employee Owner, March 3
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