TABLE OF CONTENTS:
1. INTRODUCTION

2. TAX-FREE ROLLOVER
   Alternative to Sale
   Investment Diversification
   Charitable Contributions
   Private Foundations

3. CAPITAL GAINS

4. DIVIDEND DEDUCTION

5. MECHANICS OF TAX-FREE ROLLOVER TRANSACTIONS

6. MECHANICS OF ESOP LOAN TRANSACTIONS

7. CASH FLOW INCREASES

8. MAXIMIZING EMPLOYEE INCENTIVES

9. REPLACEMENT OF PROFIT SHARING PLANS

10. DISADVANTAGES

11. HOW THE PLAN IS DESIGNED

12. ESOPs IN S CORPORATIONS

13. OUR SERVICES
   Installation
   Communications
   Administration

INTRODUCTION
Information in this booklet has been developed for those owners of privately-held businesses who are interested in liquefying some portion of the equity which has accumulated in their companies. We have assumed that many of our readers may be interested in accomplishing this objective without sacrificing the identity of their companies, jeopardizing the jobs of valued employees or relinquishing control of the companies they own.

An ESOP installation may provide the optimal solution for business owners hoping to achieve all of these goals. An ESOP (Employee Stock Ownership Plan) is a powerful and versatile business and financial tool which can help a business owner to accomplish the following:

• The ESOP trust establishes the fair market value of the company's privately held stock and it also functions as the marketplace for that stock.

• ESOPs assure flexibility by allowing an owner to liquefy whatever portion of his ownership he chooses. The owner does not have to sell the entire company in order to liquefy a portion of the accumulated equity in the company.

• In situations where the company treasury does not have resources sufficient to liquefy the privately-held stock being conveyed to the ESOP, the ESOP is allowed to borrow the funds necessary to complete the transaction.

• Moreover, the company owner does not have to relinquish control of his company. Regulations governing ESOP operations allow the owner to sit on the committee which oversees the ESOP. Indeed, the owner can be the sole committee member on the ESOP Committee if he so chooses.

• If 30% or more of the company's outstanding stock has been sold to the ESOP at the completion of the transaction, and the proceeds are reinvested in qualified replacement securities within 12 months from the date of sale, the selling shareholder can defer payment of income tax on the sale of privately held stock to the ESOP.

• The ESOP establishes an incentive-based retirement program for employees in the owner's company, making them beneficial stock owners in the company where they work. This incentive can produce very positive benefits for the company's bottom line profits. National studies reveal that on average ESOP companies tend to be 8 to 11% more profitable than their non-ESOP counterparts. As a direct consequence of sharing ownership with his employees, the business owner reaps the added benefit of increased profits for himself and for his company.

• For those business owners who are interested in charitable activities, the ESOP can also facilitate philanthropy. Just as the ESOP provides a fair market value and a ready market for shares of company stock which the owner or other shareholders may wish to liquefy, the ESOP can also assure a reliable value and a ready market for any shares of stock the owner may wish to convey to a deserving charity.

The remainder of this booklet discusses and more fully explains these and other capabilities of this versatile and powerful business and financial tool.

Back to the Index
Next Section: Tax-Free Rollover