Emerging Trends in ESOPs: Acquisitions & Divestitures & Current Market Conditions David Engel, Director of Corporate Transactions Brian Bornino, CPA/ABV, CFA, CBA Director of Valuation Services Phillip DeDominicis Managing Director Investment Banking Robert E. Brown, Esq. Partner OEOC The 27th Annual Ohio Employee Ownership Conference “Employee Ownership: Building Jobs, Wealth & Communities”

Discussion Topics Acquisitions – steps in the transaction Valuation/Fairness/Price Your ESOP as an acquisition tool The affect on ESOP participants Participant communications Divestitures 2

Steps in the Transaction Who identifies the target? Board? Management? Trustee? What do we need to do to get to a Letter of Intent? What due diligence/negotiations take place before the Letter of Intent? What due diligence/negotiations take place after the letter of intent? When/how do we arrange our financing? What is a "Definitive Agreement" and how do we get there? Who needs to approve the deal? Do the ESOP participants get to vote? (state law, ESOP document) Should we pass the vote through even if it's not required? How much information do we need to give participants? Do you need an independent trustee? 3

Valuation/Fairness/Price How will an acquisition and potential acquisition debt affect our ESOP value? Can I minimize any adverse effects by working with my valuation advisor? When should the ESOP trustee be involved? I know that my ESOP can't pay more than "fair market value" for company stock. Can my ESOP-owned company pay a higher strategic price for another company if it makes business sense? Are these acquisitions covered by ERISA rules? Do we need a valuation or a fairness opinion? Who can give these opinions? Our ESOP valuation firm? Should the seller expect to be paid for normalization adjustments like key owner salaries of the target company? Should the seller expect to be paid for the synergies that will come from the combination? 4

Can Our ESOP Be an Effective Acquisition Tool? How can the ESOP create tax benefits that lower the purchase price and/or the cost of financing? What valuation or dilution issues arise if an ESOP is used to help with an acquisition? Who would give the valuation/fairness opinions? Can our ESOP valuation firm do it? Can using the ESOP conserve corporate cash? If the ESOP has cash, can it use the cash for the purchase? Is the transaction structure any different from a straight purchase? Do you need an independent trustee? 5

How Does an Acquisition Affect the ESOP/Participants? Is there dilution? Does the dilution affect value of the participants' accounts? Will the new employees participate in the ESOP? How does this figure into the negotiations? Is there a change in repurchase liability? Does it make any difference what percentage of our company the ESOP owns? Do we need (may we use) "floor pricing" to protect some or all of the participants? 6

HR Issues Post Acquisition How do you manage cultural differences in ownership? (e.g. Employee Ownership vs. Other Types of Ownership) How do you introduce the new employees to the ESOP? What if the new employees are not ESOP participants? 7

Are Divestitures Different? Who decides to divest a business line? Board? Management? Trustee? Does it make any difference what percentage of our company the ESOP owns? Who needs to approve the deal? Do the ESOP participants get to vote? (state law, ESOP document) Should we pass the vote through even if it's not required? How much information do we need to give participants? Do you need an independent trustee? Who determines if the sale price to adequate? Can our ESOP valuation firm help? What to we do with the sale proceeds? What happens to the ESOP accounts of the participants of the business that was sold? 8

Speaker Biographies 9

David Engel Director of Corporate Transactions As a Director in ComStock Advisors’ Newport, Kentucky (Cincinnati metro area) office, Dave brings more than 25 years of corporate transaction and financial advisory experience to clients’ business challenges. He has an extensive background in developing, defining, and executing M&A strategies, ownership transition of privately owned businesses, corporate divestitures (including carve-outs), management buy-outs, recapitalizations, and capital formation, and applies his leadership and financial expertise to the firm’s Corporate Transactions and other practice areas. Dave has a proven record of leading senior management teams in the development of innovative business solutions, e.g., spearheading corporate reorganizations, developing restructure plans, negotiating distribution channel agreements, and advising business owners on succession planning. His experience spans numerous industries, including manufacturing, distribution, technology, software, consumer products, business services, insurance, oil field services, and heavy construction. Dave earned a Bachelor of Science in Accounting from Miami University and an MBA in Finance/Economics from Xavier University. He is a member of The Association for Corporate Growth (ACG) and has spoken before various academic, professional, and economic development organizations. 1 Levee Way, Suite 3109 Newport, KY phone x27 fax

Brian Bornino Director of Valuation Services Brian is the Director of Valuation Services for GBQ Consulting, a 16-person valuation practice with offices in Columbus, Indianapolis, Cincinnati, Philadelphia, and New York. Brian has been involved in over 1,500 valuation engagements during the course of his career, including over 500 ESOP-related assignments. Brian’s valuation practice specializes in ESOP formations, valuations, and consulting, as well as valuations for various other reasons including corporate and shareholder planning, mergers and acquisitions, and various others. Brian has been active within The ESOP Association for 15+ years and is a frequent speaker on valuation, finance, and ESOP-related issues. Brian earned his undergraduate degree from Ohio University and his MBA from Case Western Reserve. 11 GBQ Consulting LLC 230 West Street, Suite 700 Columbus, OH P (614) F (614)

Phillip DeDominicis Managing Director, Investment Banking For the last nine years, Phil DeDominicis has been the senior East Coast partner of Menke & Associates, focusing on ownership transition through ESOPs and sales of companies. For 23 years, he has advised companies on both the buy-side and sell- side ranging in value from $1 million to $1 billion. He is also an expert on raising private financings, both debt and equity. Prior to joining Menke where he specializes in the installation of new ESOPs and advising ESOP-owned companies on merger and acquisition transactions, Mr. DeDominicis spent three years as a Director of Investment Banking in the Mergers & Acquisitions Group of Citigroup, focusing on change of control advisory assignments to middle-market companies. Prior to that, Mr. DeDominicis spent ten years as a Director of Investment Banking in the Mergers, Acquisitions & Private Finance Group and the Distressed Trading Group of Morgan Stanley. Mr. DeDominicis received his degree in Chemical Engineering from the University of Delaware in 1985, and his MBA in Finance from the Anderson Graduate School of Management at UCLA on He is series 3, 7 and 63 registered with the National Association of Securities Dealers. He is an active member in and speaker for the ESOP Association, the National Center for Employee Ownership (NCEO) and the Ohio Employee Ownership Center. 12 Menke & Associates, Inc Town Point Road Chesapeake City, MD p f

Rob Brown Partner Rob is a founding partner in ESOP Plus®: Schatz Brown Glassman Kossow, a boutique, middle market law firm that concentrates on ESOPs and employee ownership. Rob has practiced tax law, corporate finance law and employee benefits law for many years. In addition to speaking for the Ohio Employee Ownership Center, Rob often speaks about ESOP related issues and in has spoken about many tax, corporate, business and estate tax issues for national, regional and local meetings of other organizations such as The ESOP Association, the National Center for Employee Ownership, the former National Tax Association – Tax Institute of America and the New York University Annual Institute of Federal Taxation. Rob has published articles about ESOPs for several annual issues of the New York University Review of Employee Benefits and Executive Compensation and has authored other articles and reports on business and tax issues in connection with The New York University Institute on Federal Taxation and the Executive Committee of the New York Sate Bar Association Tax Section. Rob was a Founding Member and Director, Vice-President and President of the New York Employee Benefit Conference. He is also a member of the Alliance of Merger & Acquisition Advisors. He is a member of the Executive Committee of the New York State Bar Association Tax Section and a member of The ESOP Association's Legislative and Regulatory Committee. Rob is listed in The Best Lawyers in America, is a Top 50 Upstate New York Super Lawyer and has a "Preeminent” Martindale-Hubbell rating in ESOPs and Employee Ownership Law. Rob is on The ESOP Association's Legislative and Regulatory Committee. Rob is a graduate of Oberlin College (cum laude) and Yale Law School 13 ESOP Plus® 250 Mill Street Rochester, NY x 8122 cell: