Use of Profit Sharing Assets to Purchase Employer Securities

[Guest rcm]

Manement group seeking to purchase closely-held corporation from 100% shareholder for, eg, $3,000,000, proposes to set-up leveraged ESOP, borrow $2,000,000 and then raise $1,000,000 by giving employees with balances in profit sharing plan the option to voluntarily

invest those balances, or portion therof, in employer stock.What fiduciary

concerns does this present? Can the employees effectively elect in, without profit sharing plan trustee being later held responsible? Can the profit sharing plan be amended and restated as ESOP or KSOP to effect transaction? Are there securities law issues?