COMPANY

STOCKHOLDERS

EMPLOYEES

1. Substantial tax savings (up to 100%)
2. Corporate Perpetuation
3. Cash flow increased
4. Pre-tax dollars repay debt
5. S corporation stock owned by an ESOP is not subject to federal tax
6. Tax-deductible dividends
7. Net worth increased
8. Provides a match on employees' 401(k) deferrals
9. Justified accumulated retained earnings
10. Buy/sell agreements funded with pre-tax earnings

1. Creates liquidity at fair market value
2. Control maintained (if desired)
3. "Tax-free rollover" treatment available to sellers in closely-held companies
4. Establishes valuation and provides liquidity for estate tax purposes
5. Selling stockholder-employee participants in ESOP if "rollover" not elected
6. Selling shareholders excluded from ESOP participation can be "made whole"
7. Additional equity incentives still available

1. Employees share in equity growth of company
2. ESOP employer contributions tend to be larger than profit sharing contributions
3. Proven motivator. Builds unity and team spirit.
4. Accounts accumulate tax-free. Tax favored at distribution
5. Employees can realize dividend income
6. Buy/sell agreements insure future employee ownership through the ESOP
7. 401(k) Plans can be enhanced with ESOPs