As J.P. Morgan and others have concluded, the "odds are stacked against the average concentrated holder" over the long run. Since 1980, some 40% of Russell 3000 companies have suffered a permanent 70% decline in the value of their stock. Because of this ineradicable uncertainty, it is prudent for companies to invest in risk management solutions that mitigate catastrophic risks outside your control – to help protect everything you and your Employee-Owners have built so far.

Interested companies first complete a screening questionnaire. We then conduct due diligence requiring specific information regarding the company’s past, present, and future. All information received will be kept strictly confidential. Eligibility requirements include reasonable relative valuations of company stock; history of a stable or appreciating equity value; stable corporate history; highly-regarded management team; financial strength as measured by profitability, balance sheet liquidity and appropriate financial leverage; and quality valuation and legal advisors.

Yes, even if a company meets all eligibility criteria, we will eliminate it from consideration if we learn it poses any substantial risks to the group. In addition, each participating company must represent and warrant it complies with all applicable laws and regulations, knows of no significant pending litigation negatively affecting its business or its assets, and is not in possession of any material adverse information about itself. Perhaps most importantly, our financial interests are completely aligned with participating companies, as we earn the bulk of our compensation only in the event of a successful outcome. Losses reduce or eliminate our success fee paid at the end of the term of the trust.

Annual cash deposits can be as low as 0.5% (half of 1%) of the value of company stock protected by the ESOP Protection Trust. Participating companies are eligible for a refund of up to 80% of their deposits at the end of the term of the trust (to the extent funds are available after issuing restorative payments to ESOPs), so the actual cost could be as low as 0.10% (one-tenth of one percent) per annum. There is a one-time $5,000 application fee for each participating company and an annual $5,000 fee that covers all Trust administrative expenses.

Cash will be invested in a portfolio of U.S. Treasury Securities. The credit risk involved will be that of the U.S. Government.

The ESOP Protection Trust injects cash (restorative payments) into ESOPs that have sustained a more than 50% decline in the value of company stock. Declines in value less than 50% are not covered. The EPT is designed to be able to absorb at least two 100% losses in a pool of ten companies. In the highly unlikely event of more than two 100% losses, payouts will be reduced proportionately to match the size of eligible losses relative to the size of the cash pool; companies will not be required to deposit any more cash to offset the losses.

Participating companies must annually provide us a cumulative Total Return metric – a positive or negative percentage – on their company stock relative to the starting value upon inception of the Trust. In general, Total Return takes into account price appreciation or depreciation, adjusted for any stock splits, as well as any form of dividend income or other distribution.