Finding Good Employees & Succession Planning

Finding Good Employees & Succession Planning Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Panelists • Nancy Geary – Partner, ECS Financial Services, Inc. • Randy Haug – Sr. Vice President/Partner, LeaseTeam, Inc. • Daryn Lecy – VP of Operations, Stearns Bank Equipment Finance Division Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Finding Employees • Recruiting Strategies & Methods • Lucky we can stay local • local advertising • benefits of small town • Take advantage of Star Performers & the schools they came from • Referrals • Major source for us • Speeds up the process Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Finding Employees • Experience vs. Fresh Blood • Experience is good, but for many positions, fresh is better! • No bad habits to break • Typically savvier with technology • Source of new ideas & perspectives Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Finding Employees • Recruiting Strategies & Methods • Email • Effective Publications/sites/social media • Referrals • Local Advertising Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Interviewing • Interview process • Matter of perspective • One of my favorite things • Opportunity to tell our story • Explain the process & expectations • Let them see and taste the job to eliminate surprises Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Interviewing • Interview process • Review resumes • Phone screening • Employment tests • Personal interview • Meet various levels of staff; multiple office visits. • Evaluate professional expertise and ability to fit into corporate culture/atmosphere. • Be honest about your expectations. Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Employee Training & Retention • Training Programs • Combination training – books/videos/job shadowing • Personally directed development – employees enjoy and want control (Library of resources) • Keeping Employees Engaged • Let them lead • Let them speak – don’t always be the voice of the division, process, project, etc. Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Employee Training & Retention • Employee Performance Reviews • Don’t save up – timely interventions • Be prompt • Don’t rush through them • Thanking Employees • Sincerely and often • Little things – handwritten thank-you notes Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Employee Training & Retention • Training Programs (What & When) • Keeping Employees Engaged • Employee Performance Reviews • Thanking Employees Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

LeaseTeam, Inc. guiding employee principals! • 1. Listening • "When people talk, listen completely. Most people never listen." - Ernest Hemingway • 2. Storytelling • "Storytelling is the most powerful way to put ideas into the world today." -Robert McAfee Brown • 3. Authenticity • "I had no idea that being your authentic self could make me as rich as I've become. If I had, I'd have done it a lot earlier." – Oprah Winfrey

4. Transparency • "As a small businessperson, you have no greater leverage than the truth." – Russ Hallberg • 5. Team Playing • "Individuals play the game, but teams beat the odds." -SEAL Team Saying • 6. Responsiveness • "Life is 10% what happens to you and 90% how you react to it." -Charles Swindoll

7. Adaptability • "When you're finished changing, you're finished." -Ben Franklin • 8. Passion • "The only way to do great work is to love the work you do." -Steve Jobs • 9. Surprise and Delight • "A true leader always keeps an element of surprise up his sleeve, which others cannot grasp but which keeps his public excited and breathless." -Charles de Gaulle

The Golden Rule: Above all else, treat others as you’d like to be treated. • By showing others the same courtesy you expect from them, you will gain more respect from coworkers, customers, and business partners. Holding others in high regard demonstrates your company’s likeability and motivates others to work with you.

Employing Family • Expectations from both sides • No promises clause • Keeping it fair to all Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Succession Planning • Options • Selling the business (or portfolio) • Develop staff into future owners • Costs • Time (identify buyer, develop staff) • Consultant costs (legal fees, accountant advice) • Implementation Time • Long term; a “fire sale” isn’t going to draw the best deal! • When to start thinking about it? NOW Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Succession Planning Options Costs Implementation Time When to start thinking about it? Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Succession Planning • LeaseTeam Case Study • How our ESOP plan works • Win-Win • Key Employees – taking care of the right people Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Employee Stock Ownership Plan (ESOP) Fundamentals

ESOP Fundamentals • History of ESOPs • Mechanics of an ESOP, what it is and how it works • Reasons for implementing and ESOP, advantages and disadvantages • Future of ESOPs, research and trends

History of ESOPs • Concept was developed in the 1950’s by lawyer and investment banker Louis Kelso. • In 1956, he implemented for a San Francisco newspaper the first ownership transfer to Employees by means of what later became known as the “The Kelso Plan”. • He argued that the capitalist system would be stronger if all workers, not just a few stockholders could share in owning capital-producing assets. He felt this would increase company productivity and create tax breaks for the company. • Companies didn’t buy the idea because there were no clear IRS regulations and they were concerned that the courts would rule it improper.

History of ESOPs • In 1973, Kelso convinced Senator Russell Long, chairman of the tax-writing Senate Finance Committee, of the benefits and soon after federal legislation promoting ESOP’s appeared. • Employee Retirement Income Security Act of 1974 (ERISA) – governs employee benefit plans and established a statutory framework for ESOPs. • Other legislation includes the Tax Reform Acts of 1984 and 1986, Small Business Job Protection Act of 1996, Taxpayer Relief Act of 1997, and the Economic Growth and Tax Relief Reconciliation Act of 2001. • With the support of legislation, ESOPs have expand dramatically, from 200 in 1974 to over 13,000 in 2009 covering nearly 14 million employees in the US.

Mechanics of an ESOP What is it? An ESOP is a company-paid “qualified” retirement plan. Qualified means the plan adheres to the ESOP rules established by the IRS. The ESOP will invest primarily in the stock of LeaseTeam and the benefits you receive from the ESOP is directly related to the future financial performance of LeaseTeam.

Mechanics of an ESOP What is it really? • To the business owner: a buyer of stock and a means of succession planning • To the Company: an alternative to a merger/buyout and a means to increase productivity • To the Employee: a company funded qualified retirement plan and an incentive to affect their own personal wealth

Mechanics of an ESOP How does it work? • The ESOP operates through a trust, setup by the company, that accepts tax deductible contributions from the company to purchase company stock. • The contributions made by the company are distributed to individual employee accounts within the trust. • The amount of contributions each individual receives will vary according to salary. • At a specified time in the future, their will be a ‘stock sale’ in which the ESOP contributions will be used to purchase Company stock.

Mechanics of an ESOP How does it work? • The employees may ‘cash out’ after vesting in the program or when they leave the company. The amount they may cash out depends on the vesting requirements. • Employees receive the vested portion of their accounts at either termination, disability, death, or retirement. These distributions may be made in a lump sum or in installments over a period of years. If employees become disabled or die, they or their beneficiaries receive the vested portion of their ESOP accounts right away.

Reason’s for Implementing an ESOP Advantages • Easy Succession Plan: less stressful than having a larger shock to the Company from death or retirement • Increase in Employee Productivity: idea that people work best when they work for themselves, concept is to have employees think like an owner and if it benefits the company than it benefits them • Increases Company Cash Flow: reduces taxes and increases cash flow all while providing a retirement benefit

Reason’s for Implementing an ESOP Advantages • Creates Diversification for the Owners: ESOP creates a market to sell the shares, allows owners to sell all or part of their shares over years and involves no 3rd party or change of control. • Creates a Qualified Retirement Plan: Employees receive a retirement plan that is fully funded by the Employer, a benefit that costs nothing to the Employee. • ESOP Companies grow faster: By 60 percent over the past decade, versus flat employment in the economy as a whole.[23]

Reason’s for Implementing an ESOP Disadvantages • Company Stock is a speculative investment: Both the value of Company stock and Company contributions are dependant upon the success of the Company • S-Corp Limitations: Sellers will have to pay capital gains taxes on any sale of stock to the ESOP • Contribution Limit: Interest, forfeitures and other qualified retirement contributions are included in the 25% company contribution limit.

Reason’s for Implementing an ESOP Disadvantages • Must obtain financing: Either by incurring debt with a loan or funding the ESOP prior to a stock sale which could take years. • Liquidity: If the value of the stock appreciates substantially, the ESOP and/or the company may not have sufficient funds to repurchase stock, upon employees’ retirement or termination.

Future of ESOPs Research & Trends • Numerous studies have been conducted over the last 20 years and ALL have concluded that ESOP’s increase company performance overall. • 1987 – National Center for Employee Ownership (NCEO) • Stated that ESOP Companies with active Employee participation programs had on average higher sales growth of 8-11% compared to non-ESOP Companies. • 2004 – Department of Labor • The annual rate of return for ESOPs with more than 100 participants during the 10 year period from 1990-1999 was approximately 10% higher than for 401k plans with more than 100 participants.

Future of ESOPs • More than 50 years later, Louis Kelso’s vision for employee ownership has been fulfilled. • Millions of Employees now hold an ownership interest in the Company that employs them. • Since 1974, twenty-four different laws have been passed to strengthen ESOP’s • As long as congress continues to believe in tax subsidies for ownership transfers to employees, ESOPs will continue to survive.

ESOP Fundamentals Most of the information shared today can be found on the following websites: www.nceo.org www.esopassociation.org Please visit these sites for additional information.

Q&A Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Top 5 Reasons to Live in the Midwest • Number 5: Dripping Mustard on your shirt often gets comments from girls like. "Wow, you look really pretty good in yellow." • Number 4: We talk to our neighbors • Number 3: We know where to get the best beer, cheese, or pizza in the country. Sometimes all three. • Number 2: Discovering what you think is a Moose in your backyard and finding out later that it was just your spouse taking out the trash ! • And the Number 1 Best Reason to Live in the Midwest….. • Oh man, can we hold our liquor… Ya know! Soar to New Heights! 2013 National Equipment Finance Summit, Albuquerque, NM

Finding Good Employees & Succession Planning