Stoel Rives congratulates its client Organically Grown Company (OGC) on the transfer of majority ownership in OGC to an affiliated trust, The Sustainable Food and Agriculture Perpetual Purpose Trust. OGC is among the largest independent organic produce distributors in the nation, moving more than 100 million pounds of fresh fruit and vegetables across the Pacific Northwest region last year. The ownership transition is an effort by OGC to address one of the most common business challenges facing mission-driven enterprises: how does a values-based business scale and transition its founders without “selling out”? With its new ownership structure, Organically Grown Company becomes the first U.S. business to utilize trust law to structure its operational and funding model to support purpose-based entrepreneurship, ownership and succession.
Previously employee- and grower-owned, OGC is making a bold move to buy back all its common shares from its stockholders and transfer the shares to The Sustainable Food and Agriculture Perpetual Purpose Trust. The Purpose Trust, created by the company, now holds the majority of the OGC common shares and has reached agreement with its existing shareholders to purchase the remaining voting common stock during the next four years. Ownership by the Trust will ensure that the company delivers positive economic, social and environmental impact and maintains its independence into perpetuity, to be sold only if such a transaction furthers the “purpose” of the Trust. The Trust is overseen by a committee whose membership includes organic industry veteran leaders including Joe Rogoff, a former Whole Foods Market President, and Organic Valley CEO George Siemon.
Through this new structure, the pressure to maximize short-term quarterly profits and exit-value for shareholders is removed. Instead, OGC will maximize “purpose” and create long-term returns to mission-aligned evergreen investors while sharing the balance of profits with their stakeholders, including farmers, coworkers, customers and community. In purpose-run companies, profits are a means to an end but not an end itself, and are primarily reinvested to serve the mission. Control rights and responsibility lie with the staff who are tasked with producing long-term value rather than immediate financial returns.
“This groundbreaking ownership model embeds OGC’s commitment to organic and sustainable agriculture, and corporate, social and environmental stewardship into our governance and financing structure. Placing the company into a Purpose Trust ensures that we stay focused on our mission as a North Star, share real-time rewards with our stakeholders and have aligned financing to increase our impact,” said Elizabeth Nardi, CEO of Organically Grown Company.
Completion of the restructuring involved multiple steps and Stoel attorneys from several different practice groups and offices. The Purpose Trust concept was mutually developed by OGC, Ron McFall from Stoel and the Stoel Rives team, based on changes in U.S. trust law and prior efforts to create “employee ownership trusts” as an ownership vehicle for the benefit of employees. (The Purpose Trust concept goes further, by including additional categories of stakeholders, such as farmers, customers and community, to allow the benefits of the enterprise to be spread beyond just the venture’s employees.) The restructuring also included the creation of the Purpose Trust, an agreement by the Purpose Trust to purchase common stock from OGC’s non-ESOP stockholders, the Trust’s purchase of OGC shares owned by the OGC ESOP, and a financing transaction with RSF Social Investment Fund, Inc. to provide the resources to move from OGC’s current ownership to majority ownership by the Purpose Trust. The Stoel Rives team was led by Ron McFall and involved extensive efforts on various aspects of the project by Steven Bell, Penny Serrurier, Jeff Krueger, Mark Hanson, Adam Schurle, Steven Hull, Jenny Tuohy, Marc Therrien, Alyssa Petroff, Marc Al, Kevin Burnett and Erica Valli.
About Organically Grown Company: Founded in 1978 by a few gardeners, small-scale farmers, hippies, environmental activists and dreamers living near Eugene, Ore., today, Organically Grown Company buys, aggregates and distributes fresh, organically grown produce to retailers and eaters across the Pacific Northwest region though its four facilities in Washington & Oregon, and workforce of over 200. When people in the Northwest purchase organic fruits and vegetables at their grocery store, there is a very good chance that it’s there because of OGC. For the past 40-years, the company’s progressive and entrepreneurial spirit has fueled its mission and growth, meeting the demand for organics in the marketplace while supporting its community of farmers. Yet at the core of OGC is a simple idea that has held steady since the beginning: that organic agriculture is necessary for a healthy environment and healthy people. Their goal is to support organic agriculture and help it thrive, by doing business in a way that is good, clean and fair. Learn more at www.organicgrown.com