18th Ohio Employee Ownership Conference

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18th Ohio Employee Ownership Conference

• Ohio Employee Ownership Center
• Kent State University
• April 16, 2004

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ESOPs 101

• ABCs 0f ESOPs for Employee Owners

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Employee Stock Ownership Plans

• ESOPS

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What Is An ESOP?

• A Pension Plan
• Can Borrow Money
• Invests in Company Stock
• Stock held in trust

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The ESOP Trust

• Suspense Account
• Individual Accounts

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Why Set Up An ESOP?

• Flexibility
• Create Equity
• Linked to Corporate Performance
• Tax Advantages

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Major Tax Incentives for Employee Ownership

• Contribution/Principal Deduction for the Company
• Tax-Sheltered Accounts for the Employees

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Common Questions

• As an ESOP shareholder, am I personally liable
  for the companys 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?

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Employee Owned Companies in the United States

• 1974---ESOP legislation passed by U.S. Congress
• 1975---1,600 employee-owned companies employing
  250,000
• 2003---11,000 employee-owned companies employing
  8.8 million

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Employee Owned Companies in Ohio

• Number of employee-owned companies in Ohio
• 425
• Number of Jobs
• 325,000

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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

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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

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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?

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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

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18th Ohio Employee Ownership Conference

• Ohio Employee Ownership Center
• Kent State University
• April 16, 2004