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ESOP

ESOP. July 2004. presented by S.G. Brooke Tucker Tucker Capital Advisors LLC 211 Hunters Ridge Road Timonium, MD 21093 410.561.0699 / Fax: 410.561.3948 / Cell: 410.790.6940 email: brooke@tuckercapitaladvisors.com. ESOP Advantages. For The Selling Stockholder

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ESOP

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  1. ESOP July 2004 presented by S.G. Brooke TuckerTucker Capital Advisors LLC211 Hunters Ridge RoadTimonium, MD 21093410.561.0699 / Fax: 410.561.3948 / Cell: 410.790.6940email: brooke@tuckercapitaladvisors.com

  2. ESOP Advantages • For The Selling Stockholder • Provides a private, ready-made market for stock • Greater cash is realized than any other means of selling the company • Can sell all or just part of shares • Allows diversification of investment portfolio • A tool for business succession and estate planning • Deference of capital gains taxes is possible

  3. ESOP Advantages • For the Employees • Employees assume company stock with no cash • Employees get to own the company they helped build

  4. For The Company Can use ESOP as retirement plan or as a match for 401(k) Can borrow money and deduct both interest and principal from taxes Can refinance existing debt Can finance capital improvements Excellent for mergers & acquisitions Corporate performance improves Workers compensation claims reduced Prevents hostile take-overs and corporate raiding ESOP Advantages

  5. How The Plan Works ABC Corporation $3MM Value     Lender(Debt Capital) ESOP Plan Trustee Selling Stockholder  • ABC establishes ESOP and names Trustee • ESOP borrows $3MM from outside Lender based on guarantee from ABC • ESOP purchases $3MM of stock certificates from Selling Stockholder(s) • ABC makes periodic cash contributions to ESOP equal to debt service on loan. ABC then deducts entire contribution from its corporate income tax • ESOP makes debt payments to Lender

  6. How The Plan Works Lender (Debt Capital) Selling Stockholder ESOP Plan Trustee Employee Leaves Company Repurchase Obligation Funded • When a vested employee leaves the company, or any other qualifying event occurs, the vested employee redeems his or her shares of ABC corporation for cash • In order to insure that sufficient cash funds are available to redeem the shares of the departing vested employees, funding for the repurchase obligation is set up when the ESOP is established

  7. Thank You! S.G. Brooke TuckerManaging Director

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