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<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><b>For business owners</b> - What would selling to your employees look like?<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">While a sale may not be front of mind given the turbulent environment, perhaps events have afforded you more time to step back and evaluate where you see the business in the future.<span style=color:#1F497D>
</span> If you are considering a sale, one of the most powerful ways of transitioning a company is to share ownership with your employees through an Employee Stock Ownership Plan (ESOP). While each situation needs to be assessed individually, the following
characteristics can be used to identify a potential ESOP candidate:<span style=color:#1F497D><o:p></o:p></span></p>
<p class="MsoNormal" style=text-autospace:none><span style=color:#1F497D><o:p> </o:p></span></p>
<p class="MsoListParagraph" style="text-indent:-.25in;mso-list:l0 level1 lfo2;text-autospace:none">
<![if !supportLists]><span style=mso-list:Ignore>•<span style="font:7.0pt "Times New Roman"">
</span></span><![endif]>In order to maximize an ESOP (i.e.,<o:p></o:p></p>
<p class="MsoListParagraph" style=text-autospace:none>effectuate a tax-advantaged sale of<o:p></o:p></p>
<p class="MsoListParagraph" style=text-autospace:none>stock for the ESOP) the company must<o:p></o:p></p>
<p class="MsoListParagraph" style=text-autospace:none>currently be, or be willing to convert to, a<o:p></o:p></p>
<p class="MsoListParagraph" style=text-autospace:none>C corporation. S corporations do not give<o:p></o:p></p>
<p class="MsoListParagraph" style=text-autospace:none>sellers to ESOPs owning at least 30%<o:p></o:p></p>
<p class="MsoListParagraph" style=text-autospace:none>of the stock the ability to defer taxation<o:p></o:p></p>
<p class="MsoListParagraph" style=text-autospace:none>on the gain<o:p></o:p></p>
<p class="MsoListParagraph" style=text-autospace:none><o:p> </o:p></p>
<p class="MsoListParagraph" style="text-indent:-.25in;mso-list:l0 level1 lfo2;text-autospace:none">
<![if !supportLists]><span style=mso-list:Ignore>•<span style="font:7.0pt "Times New Roman"">
</span></span><![endif]> The company must have sufficient<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none>capacity (collateral or cash flow) to<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none>support funded debt.<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none><o:p> </o:p></p>
<p class="MsoListParagraph" style="text-indent:-.25in;mso-list:l0 level1 lfo2;text-autospace:none">
<![if !supportLists]><span style=mso-list:Ignore>•<span style="font:7.0pt "Times New Roman"">
</span></span><![endif]> A successor management team<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none>should be in place.<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none><o:p> </o:p></p>
<p class="MsoListParagraph" style="text-indent:-.25in;mso-list:l0 level1 lfo2;text-autospace:none">
<![if !supportLists]><span style=mso-list:Ignore>•<span style="font:7.0pt "Times New Roman"">
</span></span><![endif]> Owners must be open to the concept<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none>of broad-based ownership.<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none><o:p> </o:p></p>
<p class="MsoListParagraph" style="text-indent:-.25in;mso-list:l0 level1 lfo2;text-autospace:none">
<![if !supportLists]><span style=mso-list:Ignore>•<span style="font:7.0pt "Times New Roman"">
</span></span><![endif]> The company should have been in<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none>business for several years and have<o:p></o:p></p>
<p class="MsoNormal" style=margin-left:.5in;text-autospace:none>enough employees (i.e., at least 25) to<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none>make the plan worthwhile.<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none><o:p> </o:p></p>
<p class="MsoListParagraph" style="text-indent:-.25in;mso-list:l0 level1 lfo2;text-autospace:none">
<![if !supportLists]><span style=mso-list:Ignore>•<span style="font:7.0pt "Times New Roman"">
</span></span><![endif]> The company should be able to<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none>reasonably predict future revenue<o:p></o:p></p>
<p class="MsoNormal" style=margin-left:.5in;text-autospace:none>and cash flows (this is probably more<o:p></o:p></p>
<p class="MsoNormal" style=text-indent:.5in;text-autospace:none>important than having hard assets to<o:p></o:p></p>
<p class="MsoListParagraph" style=text-autospace:none>support the loan).<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">An employee stock ownership plan is a specific way to sell an ownership stake to company employees that can provide tax benefits to the company, the sellers of stock and to employees. Business owners selling a minority or majority interest
to an ESOP often see this approach as the best way to preserve the company’s legacy, reward the people who helped build the business and provide options for the owners to remain in the business in a capacity they choose. <o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Please see attached brochure for additional information on ESOPs and reach out if you have interest in exploring this process!<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal">Regards,<o:p></o:p></p>
<p class="MsoNormal">Brian<o:p></o:p></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><span style=font-family:"Arial",sans-serif;color:black>Brian C. O’Donnell<o:p></o:p></span></p>
<p class="MsoNormal"><span style=font-size:10.0pt;font-family:"Arial",sans-serif;color:black>Financial Advisor<o:p></o:p></span></p>
<p class="MsoNormal"><span style=font-size:10.0pt;font-family:"Arial",sans-serif;color:black>Alternative Investments Director<o:p></o:p></span></p>
<p class="MsoNormal"><span style=font-size:10.0pt;font-family:"Arial",sans-serif;color:black><o:p> </o:p></span></p>
<p class="MsoNormal"><span style=font-size:10.0pt;font-family:"Arial",sans-serif;color:black>The Tisi Hernandez Group<br/>
<b>Morgan Stanley Wealth Management<br/>
</b>522 Fifth Avenue, 11<sup>th</sup> floor | New York, NY 10036<br/>
Direct: +1 212 230-3446<br/>
Fax: +1 347 767-2473</span><span style=font-size:10.0pt;color:#1F497D><o:p></o:p></span></p>
<p class="MsoNormal"><u><span style=font-size:10.0pt;font-family:"Arial",sans-serif;color:blue><a href="mailto:brian.c.odonnell@morganstanley.com">brian.c.odonnell@morganstanley.com</a><o:p></o:p></span></u></p>
<p class="MsoNormal"><span style=font-size:10.0pt;font-family:"Arial",sans-serif>NMLS# 1393540<o:p></o:p></span></p>
<p class="MsoNormal"><span style=color:#1F497D><o:p> </o:p></span></p>
<p class="MsoNormal"><span style=font-size:12.0pt;color:#1F497D><a href="http://www.morganstanleyfa.com/thetisihernandezgroup/">http://www.morganstanleyfa.com/thetisihernandezgroup/</a>
<o:p></o:p></span></p>
<p class="MsoNormal" style=mso-margin-top-alt:auto;mso-margin-bottom-alt:auto><a href="http://www.morganstanley.com/app"><span style="font-size:12.0pt;font-family:"Times New Roman",serif;color:#7F7F7F;text-decoration:none"><img border="0" width="149" height="40" style="width:1.5471in;height:.415in" id="Picture_x0020_1" src='cid:image003.png@01D61739.7B7CA7B0' alt="cid:image001.png@01CFA7F5.2D8B3E40" /></span></a><span style="font-size:12.0pt;font-family:"Times New Roman",serif;color:#7F7F7F"> Click
the icon to learn more</span><span style=font-size:12.0pt;color:#7F7F7F><o:p></o:p></span></p>
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