18 th Ohio Employee Ownership Conference Ohio Employee Ownership Center Kent State University April 16, 2004

ESOPs 101 ABC’s 0f ESOPs for Employee Owners

Employee Stock Ownership Plans ESOPS

What Is An ESOP? A Pension Plan Can Borrow Money Invests in Company Stock Stock held in trust

The ESOP Trust Suspense Account Individual Accounts

Why Set Up An ESOP? Flexibility Create Equity Linked to Corporate Performance Tax Advantages

Major Tax Incentives for Employee Ownership Contribution/Principal Deduction for the Company Tax-Sheltered Accounts for the Employees

Common Questions As an ESOP shareholder, am I personally liable for the company’s debts? Who gets the profits in the company? Can I vote my stock? What happens if the company goes under? Can I sell my stock? What if I leave the company before retirement?

Employee Owned Companies in the United States ESOP legislation passed by U.S. Congress ,600 employee-owned companies employing 250, ,000 employee-owned companies employing 8.8 million

Employee Owned Companies in Ohio Number of employee-owned companies in Ohio 425 Number of Jobs 325,000

Employee Ownership An idea that works for Ohio To create and retain jobs To raise and anchor capital in local communities To improve corporate performance

About the OEOC Since our founding in 1987, we have Assisted some 438 firms and plants employing 83,000 people explore whether employee ownership is for them Of these, 64 firms employing 13,600 have implemented partial or complete employee ownership

Key Factors to Consider in a Buyout Questions that help to identify red flags Is the current owner willing to sell? Do the employees and/or their union want to buy? Is competent management available? Is there enough time for a buyout? Is the plant competitive? Will labor-management relations hinder success?

Steps in Doing a Buyout Education about the buyout Establish a buyout association Preliminary feasibility assessment Business plan Negotiate sales agreement with seller Arrange financing Close deal

18 th Ohio Employee Ownership Conference Ohio Employee Ownership Center Kent State University April 16, 2004