Chapter 2. The Magic of ESOPs.

2.1 Why ESOPs Are an Instrument of Succession Planning.

2.2 How an ESOP Can Create a Market for a Stockholder's Stock.

2.3 How a Corporation Can Cut the Cost of Borrowing Nearly in Half.

2.4 ESOPs-What they Really Are.

2.5 ESOP-The Ideal Financial Machine.

2.6 Advantages-Generally.

2.7 Congressional Backing.

2.8 ESOP-A Misunderstood Program.

2.9 Cost to Implement and Administer ESOPs.

Chapter 3. The Environment for ESOPs.

3.1 The ESOP Concept.

3.2 Slow Early Days of ESOPs.

3.3 Real Social Security through ESOPs.

3.4 ESOPs and Motivation.

3.5 The Use of ESOPs to Save Jobs.

Chapter 4. Exit Alternatives for Owners of Private Corporations.

4.1 The Preamble to Ownership Transition.

4.2 Selling the Company to an Outside Buyer.

4.3 The Initial Public Offering Alternative.

4.4 The Management Buyout Alternative.

4.5 The ESOP Alternative.

Chapter 5. Planning for Succession.

Chapter 6. ESOP versus Going Public versus Selling the Company.

6.1 Going Public.

6.2 Leveraged ESOP Loan versus Public Equity Financing.

6.3 Selling to Outsiders.

6.4 Selling to an ESOP.

Chapter 7. How You Can Defer or Avoid All Taxes by Selling Some or All Your Private Company to Employees.

7.1 The Tax-Deferred Stock Rollover.

7.2 Stock That Is Eligible for the Nonrecognition Sale.

7.3 ESOP Three-Year Holding Requirement.

7.4 Qualified Replacement Property.

7.5 Floating Rate Note.

7.6 How to Create an Actively Traded Portfolio with a Floating Rate Note.

7.7 How to Bootstrap a Seller-Financed ESOP.

7.8 Allocation Eligibility.

7.9 Procedures for Nontax Recognition on Stock Sale.

7.10 The Corporation's Consent to the Nontax Recognition.

7.11 How to Achieve Tax Nonrecognition with Less Bank Leverage.

7.12 Tax Nonrecognition on an Installment Sale.

7.13 Tax Requirements for the Tax-Deferred Rollout.

7.14 Selling the Company to Outsiders.

Chapter 8. How to Value the Stock of a Closely Held Company.

8.1 Why Have a Valuation?

8.2 Independence of the Appraiser.

8.3 Adequate Consideration.

8.4 The Valuation Report Contents.

8.5 Methods for Valuing Stock.

8.6 Fairness Opinion.

8.7 Control Premium, Minority Discounts, and Marketability Discounts.

8.8 Information the Appraiser Needs.

8.9 Summary.

Chapter 9. Eligibility for ESOP Participation.

9.1 Eligibility.

Chapter 10. How to Fund an ESOP at Zero Net Outlay.

Chapter 11. Contribution and Allocation Parameters of the ESOP.

11.1 Employer Contribution Limits.

11.2 Eligible Compensation.

11.3 Employer Contribution Limits to a Nonleveraged ESOP.

11.4 Combination ESOP.

11.5 Leveraged ESOP.

11.6 Dividends.

11.7 Contribution Limits on ESOPs in Conjunction with Other Qualified Plans.

11.8 Allocating the Benefits.

11.9 Allocation Exclusions.

11.10 Family Members Who Are Prohibited from Participation.

11.11 Family Members Who Can Participate in the Allocation.

11.12 Stockholders Who Own More Than 25 Percent of the Sponsor's Stock Directly or by Attribution.

11.13 How to Determine if One Owns More Than 25 Percent.

Chapter 12. ESOPs for Subchapter S Corporations.

12.1 Introduction.

12.2 Tax Flowthrough Attributes of S Corporations.

12.3 Unavailability of the 1042 Tax-Deferred Rollover.

12.4 Dividend Deductibility.

12.5 Leveraged S Corporation ESOPs.

12.6 Distributions to Terminated Participants.

12.7 Prohibited Transaction Rules.

12.8 Subchapter S Corporation ESOPs as an Employee Benefit.

12.9 Conversion-S to C/C to S Corporation.

12.10 Subchapter S Corporation ESOP Strategies.

Chapter 13. How ESOPs Can Increase Working Capital and Cash Flow.

Chapter 14. How to Increase Working Capital and Cash Flow by Converting a Profit-Sharing Plan or Pension Plan to an ESOP.

14.1 Partial Conversion.

14.2 Converting the Profit-Sharing Plan.

Chapter 15. How to Convert or Terminate an ESOP.

Chapter 16. Vesting Benefits.

Chapter 17. Distributing the ESOP Benefits.

17.1 Leveraged Distribution Rules.

17.2 Distribution Methods.

17.3 Nonleveraged Distribution Rules.

17.4 Liberal Distribution Practice.

17.5 Diversification Rules.

17.6 How to Diversify the Accounts.

17.7 Dividend Distribution.

17.8 Withholding.

17.9 Put Option.

17.10 Buy-Sell Agreements.

17.11 Distribution of Account Balances.

17.12 Tax on Distributions and Rollovers.

17.13 The Distribution Policy.

17.14 The Asset Diversification Exemption.

17.15 Withholding.

17.16 Tax to the Participant.

Chapter 18. Deductible Dividends-Only Through ESOPs.

18.1 How Your Corporation Can Deduct Dividends to Service Debt.

18.2 Passing the Dividend Through to Employees.

Chapter 19. ESOP Account Diversification Rules.

19.1 Introduction.

19.2 The De Minimis Rule.

19.3 Implementing the Diversification Elections.

Chapter 20. Leveraged Buyouts and the ESOP.

20.1 Leveraged Buyouts.

20.2 Leveraging the Leveraged Buyout with an ESOP.

20.3 Public Company Division Divestiture.

20.4 Use of ESOPs in Corporate Divestitures.

20.5 The MBO/ESOP Mechanics.

20.6 Dilutionary Offsets.

Chapter 21. The Leveraged ESOP for Business Succession.

21.1 The Dilemma of Nonliquid Stock Ownership.

21.2 How a Private Company Owner Can Provide for Successorship Through a Leveraged Buyout.

Chapter 22. How an ESOP Can Make a Leveraged Management Buyout Company Healthier.

22.1 How ESOPs Increase Corporate Value.

Chapter 23. ESOPs and Total Succession Planning: Why Total Succession Planning™ Is a Must for Private Company Owners.

23.1 Hurdles of Transferring Ownership.

23.2 The Loyalty Factor.

23.3 The Need for a Successor.

23.4 Preparing a Succession Plan.

23.5 Succession and Exit Plan Components.

23.6 What is a Total Succession Plan?

23.7 The ESOP as a Cornerstone for Total Succession Planning.

23.8 Prefunding the ESOP.

23.9 Moving Closer to Succession.

Chapter 24. ESOP-A Practical Means to Succession Planning.

24.1 Case Study.

24.2 Using Minority and Marketability Discounts for a Gift.

24.3 How to Maximize Net Investment Return.

24.4 Wealth Replacement Trust.

24.5 ESOP-The All-in-One Succession Planning Device.

Chapter 25. The Amazing Leveraged ESOPs.

25.1 The ABCs of a Leveraged ESOP Transaction.

25.2 How a Leveraged ESOP Can Cash Out a Stockholder.

25.3 Corporate Non-ESOP Loan Compared with a Leveraged ESOP Loan.

25.4 The Cost Effective ESOP Loan.

Chapter 26. The Management Leveraged ESOP Buyout.

26.1 Selling a Division to the Employees through a Leveraged ESOP Buyout.

26.2 Doing the Deal.

26.3 How ESOP Divestitures Can Enhance Succession Planning.

26.4 Management Groups as Acquirers.

26.5 The Leveraged ESOP Divestiture.

Chapter 27. ESOP Techniques to Acquire Competitors, Suppliers, and Other Corporations with Tax Benefits to Buyer and Seller.

27.1 Acquisition Technique 1: Buying Target, Inc., Stock or Assets and Deducting the Cost.

27.2 Acquisition Technique 2: Post-Transition ESOP.

27.3 Acquisition Technique 3: How to Acquire the Target Company with Pretax Dollars and Give Tax Benefits to the Seller.

27.4 The Loyalty Card.

27.5 Steps to the Acquisition Strategy. 27.6 Result of Transaction.

27.7 Acquisition Technique 4: How a Selling Stockholder Can Acquire a Corporation with Tax-Free Dollars.

27.8 Result of the Transaction.

Chapter 28. How an ESOP Can Help You Create a Miniconglomerate.

28.1 What to Look for in Selecting an ESOP Acquisition Target.

28.2 What Prospective Lenders Look for in Financing an Acquisition.

28.3 How to Structure Sequential ESOP Acquisitions.

28.4 How to Sweeten the Acquisition for the Seller.

Chapter 29. Strategies for Investing the ESOP Rollover.

29.1 The Floating Rate Note.

29.2 Selecting the Portfolio.

29.3 Maximizing Income the Charitable Way.

29.4 Summary.

Chapter 30. Seven Practical ESOP Exit Strategies.

30.1 Technique 1: Prefunding the ESOP.

30.2 Technique 2: How to Sell Stock Under Section 1042 but Avoid Leverage.

30.3 Technique 3: Self-Banking the Stock Sale.

30.4 Technique 4: The Cashless Transaction.

30.5 Technique 5: Corporation Wants Cashless Tax Deduction and Minimum Dilution.

30.6 Technique 6: How Contribution of Redeemed Shares Can Minimize Dilution,

30.7 Technique 7: How to Deduct Principal on an Existing Loan.

30.8 The Flip Side of Antidilution.

Chapter 31. How to Change Real Estate to Stock to Tax-Free Cash.

Chapter 32. How Mr. Big Sold His Company Tax Free and Still Kept It.

32.1 The Locked-In Stock.

32.2 How to Cash Out the Private Company Stock.

32.3 The Cashing Out Procedure.

32.4 Leveraging the Transaction.

32.5 The Tax-Deferred (Possibly Tax-Free) Rollout.

Chapter 33. What Lenders Look for in an ESOP Loan.

33.1 Lender's Criteria.

33.2 Analyze the Documents.

33.3 Fraudulent Conveyance.

33.4 Repurchase Liability Study.

Chapter 34. How to Obtain Financing for the ESOP.

34.1 Who Provides the Financing?

34.2 How a Lender Evaluates the Loan.

34.3 Other Factors for Analysis.

34.4 Real Value versus Cosmetic Effect.

Chapter 35. How to Recover Taxes Paid in Prior Years with No Cash Expenditures.

Chapter 36. Valuing Leveraged ESOP Stock.

36.1 Valuation in a Management Buyout.

36.2 Example.

36.3 ESOP Transactions Involving Multi-Investors.

Chapter 37. Issues in Selecting a Valuation Firm.

37.1 Fiduciaries Select the Valuation Firm.

37.2 Frequency of Appraisals.

37.3 Multistock Transactions.

37.4 Due Diligence in Selecting a Valuation Firm.

37.5 What a Business Valuation Report Should Cover.

37.6 Summary.

Chapter 38. Cashing Out through a Nonleveraged ESOP.

38.1 How Mr. Big Can Remove His Capital, Retain Control, and Perpetuate the Company.

38.2 How to Feel Loved and Needed after Selling the Company-Keep Control.

Chapter 39. Strategies for Selling an ESOP Company to Outsiders.

Chapter 40. The Mature ESOP Company.

40.1 Giving a Piece of the Pie to New Employees.

40.2 Planning for Repurchase Liability.

40.3 The Stagnating Company.

40.4 Participative Management.

40.5 Cooperative Governance Issues in ESOP Companies.

Chapter 41. How and Why to Keep, Freeze, or Terminate an ESOP.

41.1 Reasons to Keep the ESOP Active.

41.2 Freezing the ESOP.

41.3 Terminating the ESOP.

Chapter 42. The Emerging Repurchase Liability.

42.1 How the Put Option Affects Repurchase Liability.

42.2 How the Repurchase Liability Affects Valuation.

42.3 Repurchasing the Stock.

42.4 Whether to Redeem or Recycle the Shares.

42.5 A Funding Program That Won't Work.

42.6 The Repurchase Liability Study.

42.7 A Funding Program That Will Work.

42.8 Methods of Funding the Repurchase Liability.

42.9 Summary.

Chapter 43. The Charitable ESOP-How to Get a 200 Percent Personal and Corporate Tax Deduction on Your Charitable Gift and Other Strategies.

43.1 Tax Effect on the Donor.

43.2 Tax Effect on the Corporation.

43.3 The Charitable Remainder Trust CHESOP.

43.4 Charitable Gift Annuity CHESOP.

43.5 Pooled Income Fund Buyout Arrangement.

43.6 Charitable Lead Trust ESOP Buyout.

Chapter 44. Mixing and Matching ESOPs with Other Qualified Plans.

44.1 Contribution Limits.

44.2 Plan Characteristic Differences.

44.3 How the 401(k) Works with an ESOP.

Chapter 45. ESOPs as an Executive Benefit in Combination with Nonqualified Non-Equity Incentive Plans.

45.1 Designing the Incentive Plan.

45.2 Providing the Cash to the Corporation for a SERP.

45.3 The ESOP as a Compensation Plan.

Chapter 46. Equity Participation Planning.

46.1 Introduction.

46.2 Stock Options.

46.3 Incentive Stock Option Plan.

46.4 ISO Tax Treatment.

46.5 Nonqualified Stock Option Plan.

46.6 NSO Tax Treatment.

46.7 Stock Options-An Employee Win/No Lose Deal.

46.8 Vesting of the Options.

46.9 Stock Options for Employees of Closely Held Companies.

46.10 Determining Stock Value for Private Company Options.

46.11 Pros and Cons for Stock Options in Private Companies.

46.12 Direct Stock Purchase Programs.

46.13 Stock Purchase Plans under Code Section 423.

46.14 Securities Issues.

46.15 The Nonqualified Stock Bonus Plan.

46.16 Restricted Stock Plan.

46.17 Employee Stock Ownership Plans.

46.18 Summary.

Chapter 47. Profiles of Likely Candidates for ESOPs.

Chapter 48. Security Law and the ESOP.

48.1 Simplifying Securities Compliance.

48.2 Antifraud Regulations.

48.3 Registration Exemptions.

48.4 Stock Offerings to Sophisticated or Accredited Investors.

48.5 Public Company ESOPs.

48.6 Blue Sky Laws.

Chapter 49. Fiduciary Considerations.

49.1 Those Who Are Not Fiduciaries.

49.2 Investment Diversification and Fair Return Exemption.

49.3 Exclusive Benefit of Participants.

49.4 Trustee Selection.

49.5 ESOP as a Takeover Defense.

49.6 Multi-Investor Leveraged Buyouts.

49.7 Adequate Consideration.

Chapter 50. How to Communicate ESOP Benefits to Employees for Greater Public Relations.

50.1 Building the Ownership Culture.

Chapter 51. ESOPs for Lending Institutions.

51.1 Why a Bank or a Savings and Loan Should Adopt an ESOP.

51.2 ESOPs and Banks as Estate Trustees.

51.3 ESOPs for Federal Savings and Loans.

51.4 S&L as an Affiliated Person.

51.5 Equity Commitment Notes as Regulatory Capital.

Chapter 52. ESOP Disadvantages, Problems, and Solutions.

52.1 Problems.

52.2 Dilutionary Effect of Pensions and Profit-Sharing Plans.

Chapter 53. The ESOP Implementation Procedure.

53.1 Feasibility Study.

53.2 Steps to Adopting an ESOP.

53.3 The ESOP after Year One.

Chapter 54. Accounting Basics.

54.1 How Contributions to a Nonleveraged ESOP Are Treated.

54.2 Accounting for Dividends.

54.3 Reporting ESOP Loans on the Financial Statement.

54.4 Recording the Purchase and Release of ESOP Stock.

54.5 Earnings per Share.

Chapter 55. Meet Some ESOP Companies.

55.1 Case History Capsules.

Chapter 56. Driving Share Value for Small to Medium-Sized Companies.

56.1 Turning Turkeys into Improved Organizational Performance and Increased Share Value.

56.2 Driving Share Value-an Example.

56.3 Reviving the Mature ESOP.

Chapter 57. The Driving Share Value Program for Larger ESOP Companies.

57.1 The Larger Company.

57.2 Employee Owner Driving Share Value Groups (DSVGs).

57.3 Establishing DSVGs.

57.4 DSVGs-Not a Replacement for Management.

57.5 Driving Share Value Groups Formation Checklist.

57.6 The Senior Management/Employee Owner DSVG Committee Implementation Checklist.

57.7 Summary.

Chapter 58. Participative Management.

58.1 The Transition to the Ownership Culture.

58.2 Creating an Ownership Culture.

58.3 Components of the Ownership Culture.

58.4 Summary.

Chapter 59. Governance Issues in ESOP Companies.

59.1 Introduction.

59.2 Impact on Employees of the First ESOP Transaction.

59.3 How to Avoid Creating Two Classes of Employees.

Chapter 60. Succession Planning Case Histories.

60.1 Introduction.

60.2 Case 1: The Parents Who Wanted to Be Fair.

60.3 Case 2: Transition Plan for Owners with Different Goals.

60.4 Case 3: Transition Using a CHESOP.

60.5 Case 4: The Multistockholder Buyout.

60.6 Case 5: The Management Buyout of a Division.

Chapter 61. Companies That Should Not Have an ESOP.

61.1 ESOP Noncandidates-Rules of Thumb.

Chapter 62. The Perfect Exit-Maximize Tax Benefit to Selling Shareholder and to the Corporation.

62.1 Exit Strategy.

62.2 Floating Rate Note.

62.3 How the Company Can Operate Tax-Free.

62.4 Summary.

Chapter 63. Administration Policy Regarding Self-Correction-A Reprieve for Past Errors.

63.1 Introduction.

63.2 Eligibility of Use APRSC.

63.3 Summary.

Chapter 64. The Free ESOP Information Hotline: 800-422-ESOP (3767) 341.

Index.