ESOP PLANS

An ESOP is a defined contribution employee benefit plan that allows employees to become owners of stock in the company they work for. It is an equity-based deferred compensation plan. Several features make ESOPs unique: first, only an ESOP is required by law to invest primarily in the securities of the sponsoring employer; second, an ESOP may borrow money. As a result, "leveraged ESOPs" may be used as a technique of corporate finance. An ESOP works as follows:

1. The ESOP operates through a trust, set up by the company, that accepts tax-deductible contributions from the company to purchase company stock.

2. The company's contributions are distributed to employee's accounts within the trust.

3. The amount of stock each individual receives may vary according to pre-established formulas based on salary, service, or position.

4. The employees may "cash out" after vesting in the program or when they leave the company, depending upon the vesting requirements.

5. When an employee who has at least 10 years of ESOP participation reaches age 55, he or she has the option of diversifying his/her ESOP account up to 25% of the value. This option continues until age 60, at which time the employee has a one-time option to diversify up to 50% of his/her account.

6. Employees receive the vested portion of their accounts at either termination, disability, death, or retirement, either in a lump sum or in installments.