1. Initial ESOP Communications ESOP Association Two-Day Conference Las Vegas, Nevada 9:00 AM -- November 4, 2004 Loren Rodgers Ownership Associates

2. www.ownershipassociates.com Agenda 1.ESOP Training 2.Getting the Most from Required Communications 3.Going Beyond the Nuts and Bolts 4.Tips for Making it Work

3. www.ownershipassociates.com -1- ESOP Training

4. www.ownershipassociates.com Start with the Basics. DESIGNING ESOP COMMUNICATIONS

5. www.ownershipassociates.com So, what is an ESOP? E mployee S tock O wnership P lan

6. www.ownershipassociates.com ESOPs… …are retirement plans, and …they invest primarily in company stock.

7. www.ownershipassociates.com Cover the “hard issues” DESIGNING ESOP COMMUNICATIONS

8. www.ownershipassociates.com The “Hard Facts” Participant legal rights Risks of ownership Benefit trade-offs Sole ownership / joint ownership Direct ownership / beneficial ownership

9. www.ownershipassociates.com ESOPs and Rights Psychologically: Employee-Ownership means rights. Legally: Access to Plan Documents Annual Account Statements Voting on major corporate decisions –Liquidation –Sale of substantially all assets –Recapitalization –etc.

10. www.ownershipassociates.com Describe the upside -- without making promises. DESIGNING ESOP COMMUNICATIONS

11. www.ownershipassociates.com Research Highlights ESOP companies, on average, outperform non-ESOP companies by approximately 2.3% on a number of measures. ESOP companies file for bankruptcy less often than non-ESOP companies. On average, ESOP participants have approximately 2.5 times more retirement assets than non-ESOP participants, without a loss in income.

12. www.ownershipassociates.com Share the “big picture” – and employees’ role. DESIGNING ESOP COMMUNICATIONS

13. www.ownershipassociates.com Standard Employment Deal 8 hours pay 8 hours work

14. www.ownershipassociates.com 8 hours pay 8 hours work Ownership Rewards Ideas and Effort Employee-Ownership “New Deal”

15. www.ownershipassociates.com Ideas and Effort Department Performance Individual Performance

16. www.ownershipassociates.com Ownership Rewards Stock Value ESOP

17. www.ownershipassociates.com Department Performance Individual Performance Stock Value ESOP Employee’s Return on Effort

18. www.ownershipassociates.com Required every year, after the books have been closed. Three main methods: Asset Income Comparison Slide 29 Stock Valuations

19. www.ownershipassociates.com Use images. DESIGNING ESOP COMMUNICATIONS

20. www.ownershipassociates.com Total allocation = 850 shares If the total allocation is 850 shares,Suppose eligible payroll is $2,500,000 Total payroll = $2,500,000 Eligible Payroll ESOP Beth’s $25,000 and Beth earns $25,000 John’s $20,000 and John earns $20,000. Beth’s 8.5 shares Beth gets 8.5 shares John’s 6.8 shares and John gets 6.8 shares. Stage 2: Allocation

21. www.ownershipassociates.com -2- Getting the Most from Required Communications

22. www.ownershipassociates.com Account statements and the SPD can help… or hurt. DESIGNING ESOP COMMUNICATIONS

23. www.ownershipassociates.com 1 3 2

24. Account Statement: Part 1

25. www.ownershipassociates.com Account Statement: Part 2 from the year before current year allocation from the company Investment gain or loss distributions additions from other people forfeiting unvested value miscellaneous bookkeeping

26. www.ownershipassociates.com Account Statement: Part 2

27. www.ownershipassociates.com Account Statement: Part 2

28. www.ownershipassociates.com Account Statement: Part 3

29. www.ownershipassociates.com -3- Going Beyond the Nuts and Bolts

30. www.ownershipassociates.com ESOPs are not an “off-the-wall” idea. DESIGNING ESOP COMMUNICATIONS

31. www.ownershipassociates.com Number of ESOP Companies in the US Growing Popularity

32. www.ownershipassociates.com Where are they? Map of the U.S.

33. www.ownershipassociates.com Where are they in New England? Berlin City Car Center Cianbro Corporation Howell Laboratories J & S Oil Co. Sebago Technics MO Hypertherm O’Connor GMC Admix Cirtronix DENS Partners Normandeau Associates Carris ReelsKing Arthur Flour LITECONTROL

34. www.ownershipassociates.com Ownership means… investmen t employee involvement a good benefit equality bogus teamwork incentive what is it?

35. www.ownershipassociates.com The government actively supports ESOP development. DESIGNING ESOP COMMUNICATIONS

36. www.ownershipassociates.com LONG, Russell Billiu, born: November 3, 1918; US Senate 1948 to 1986. Chairman, Committee on Finance. Died: May 9, 2003. Russell Long

37. www.ownershipassociates.com Legislative Balance Legislative Goals Business Concerns Increase competitiveness Share ownership broadly Protect retirement savings Tax benefits Stable ownership structure Orderly Process

38. www.ownershipassociates.com

39. Oversight of ESOPs Internal Revenue Service ensures that tax benefits only go to companies who run the ESOP equitably and fairly according to the rules. The Department of Labor ensures that employees receive a fair benefit from the ESOP.

40. www.ownershipassociates.com Describe the ESOP transaction... and the motivations for the ESOP. DESIGNING ESOP COMMUNICATIONS

41. www.ownershipassociates.com Outside Purchaser OurCo Stock Founding Shareholders Smith and Others The Transaction: Option A What happens to OurCo, Inc.? OurCo Employees? Our “OurCo Culture”?

42. www.ownershipassociates.com The ESOP: A Trust for OurCo Employees OurCo Stock OurCo, Inc. (Cash and Loans) OurCo Stock Founding Shareholders Smith and Others The Transaction: Option B Stays intact!

43. www.ownershipassociates.com People want to know: why are we doing this? DESIGNING ESOP COMMUNICATIONS

44. www.ownershipassociates.com InvestmentReturn Incentive Only Low to Medium Low (-1 to 2%) Culture + IncentiveHigh High (5 to 13%) “Return on Ownership”

45. www.ownershipassociates.com The Five Challenges 1.The Policy Challenge 2.The Interpersonal Challenge 3.The Literacy Challenge 4.The Information Challenge 5.The Entrepreneurship Challenge

46. www.ownershipassociates.com Build systems to ensure perceptions of fairness and trust. DESIGNING ESOP COMMUNICATIONS

47. www.ownershipassociates.com -4- Tips for Making It Work

48. www.ownershipassociates.com 1.Support Middle Managers 2.Repeat / Use Multiple Channels 3.Use Structured Peer-to-Peer Learning 4.Warn About “First Year Dip” 5.Use Games 6.Be Careful with Projected Account Value 7.Interactive Learning

49. www.ownershipassociates.com Tips 1.Support Middle Managers 2.Repeat / Use Multiple Channels 3.Use Structured Peer-to-Peer Learning 4.Warn About “First Year Dip” 5.Use Games 6.Be Careful with Projected Account Value 7.Interactive Learning

50. www.ownershipassociates.com Common Feelings About Ownership Wait and See What is it? Fear Enthusiasm Cynicism

51. www.ownershipassociates.com Common Feelings About Ownership Write down one letter: a.Fear b.Cynicism c.What is it? d.Wait and See e.Enthusiasm

52. www.ownershipassociates.com 1.Physical Working Conditions 2.Election of Employees’ Committee 3.Speed of Production 4.Job Assignments 5.Safety Rules and Practices 6.Quality Standards and Measurement 7.Hiring 8.Promotions, Performance Evaluation 9.Equipment Layout 10.Asset Purchases 11.Employee Compensation and Benefits 12.Firing 13.Marketing and Advertising Strategies 14.Raising Capital, Relationships with Banks and Investment Groups 15.Product, Technology, and Investment Strategy 16.Lay-off Policy, Employment Levels 17.Management Compensation 18.Distribution of Profits (dividends, reinvestment, debt reduction) 19.Selection and Oversight of Senior Management 20.Constitutionalism: Setting and Moving Decision-Making Boundaries 21.Selection of Board of Directors 22.Fate of the Company: merger, sale, major location change Standard List of Corporate Decisions

53. www.ownershipassociates.com