Opinion ID: 3159358
Heading Depth: 2
Heading Rank: 1

Heading: 2003 ESOP Transaction

Text: The ESOP held roughly 43% of Antioch’s outstanding shares in 2003, while the remaining “non-ESOP” shareholders were primarily members of the Morgan family, trusts controlled by them, and other directors or officers of the company. In fact, the non-ESOP shareholders included six of the company’s nine directors and the ESOP Trustee. 2003 would be Antioch’s best year, although plaintiff contends that there were signs of slowing growth by mid2002. Whether or not a downturn was anticipated at that time, there is no dispute that Morgan began looking into estate planning options with an eye to getting out of the company’s stock. To that end, Morgan proposed in early 2003 that the company be converted to 100% ESOP ownership. Ultimately, the Board approved a tender offer transaction that closed on December 16, 2003. That transaction—the fairness of which was not addressed by the district court and remains contested in a related legal malpractice action—resulted in the leveraged buy-out of all of the non-ESOP shareholders and conversion to 100% ESOP ownership (through the ESOP’s agreement not to tender its shares). The tender offer was for $850 per share, or a “package” consisting of (i) $280 in cash, (ii) $280 in subordinated notes, and (iii) a warrant valued at $290 for the purchase of one share in the future. Among other terms, Antioch agreed to a guaranteed minimum share price for all ESOP participants who left or retired over the next three years. Case No. 14-3790, The Antioch Company Litigation Trust v. Lee Morgan, et al. The Company financed the ESOP Transaction by taking bank loans, issuing unsecured subordinated notes, and spending down the cash on hand. Plaintiff alleged that Antioch’s directors and officers, including Morgan and Moran, breached their fiduciary duties to the corporation by approving an overpriced, highly leveraged transaction that benefitted the nonESOP shareholders and left the corporation with too little cash and too much debt.2