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'. ,I I ' I I I I I I I I I I I I I I I I I Consul-Tech Enterprises, Inc. and Subsidiaries Notes to Consolidated Financial Statements . December 31, 2006 and 2005 I. Capital Stock (continued) In September 2005 the Company declared a reclassification of its stock, to allow three classes of shares: Convertible Preferred Stock, Series A Common Stock and Series B Common Stock. The previously authorized 1,000,000 shares were distributed as follows: 300,000 shares to Convertible Preferred Stock; 400,000 shares to Series A Common Stock; and 300,000 shares to Series B Common Stock. All previously issued and outstanding shares of common stock were exchanged for .2783627 shares of Convertible Preferred Stock and .5878788 shares of Series A Common Stock. All classes of stock have voting-rights, The Company is allowed to declare additional dividends on outstanding shares of the Company's Convertible Preferred Stock & Series B Common Stock without declaring dividends on any other class or series of stock. The Company is to pay preferential dividends in cash at the rate of $3,55 per share of Convertible Preferred Stock. These preferential dividends need to meet the ESOP's currently maturing debt obligations. Dividends of $453,203 and $119,172 were declared and paid in 2006 and 2005, respectively. The Convertible Preferred Stock may be converted at the option of the holder of said share, into one share of fully paid Series B Common Stock prior to redemption date. J. Pension Plans Employee Stock Ownership Plan Trust Effective September 1, 2005, the Company adopted a leveraged Employee Stock Ownership Plan ("ESOP") for eligible employees. The shares are allocated to eligible participants accounts based on total cash compensation earned during the calendar year. Shares vest immediately and require no cash payments from the recipient. Substantially all employees are eligible to participate in the ESOP, with the exception of two Company shareholders, In September 2005, the ESOP purchased from the stockholders 127,662.68 shares ofth.e Company's convertible preferred stock for $6,800,000. All shares are vested in the plan. The ESOP Trust fmanced the purchase by obtaining a loan from Consul-Tech Enterprises, Inc, which in turn obtained fmancing from a domestic bank (See Note G), The ESOP Trust is to repay the Company in seven equal annual installments of $971,429 plus interest accruing at 5%. This note is due in September 2012. The ESOP Trust has prepaid this note, As of December 31, 2006 and 2005 the receivable balance was $3,325,095 and $3,800,000, respectively. The contributions to the ESOP Trust are at the discretion of the Board of directors through the payment of preferred dividends and additional contributions (Note I), but must be at least sufficient to pay all of the currently maturing debt obligations, The ESOP contribution for the years ended December 31, 2006 and 2005 were $496,608 and $2,880,808, respectively. The ESOP Trust has made payments in advance of the scheduled debt retirement. The contributions beyond debt requirement were $21,703 in 2006 and $1,909,379 in 2005, 14