Cassell Consulting Ltd. Mark Caster Susan Elliott

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1 A presentation designed for: Cassell Consulting Ltd. and Mark Caster Susan Elliott Prepared by: Sun Life Sample

2 Table of Contents This presentation contains 8 sections as follows: 1. Problem Description and Recommendation Page 3 2. Planning Considerations Page 5 3. Methods of Structuring a Buy-Sell Agreement Page 6 4. Assumptions Page 8 5. Summary of Tax Impact by Structure Page 9 6. Buy-Sell Structures - Tax Impact - i) Mark Caster Page 10 - ii) Susan Elliott Page Alternative Funding Solutions Page 14 - Cost Comparison of Alternatives Page Buy-Sell Agreement Checklist Page 16 If you have any questions, please feel free to contact me, Sun Life Sample About This Presentation This presentation was prepared for information purposes only and is not intended to provide or replace professional tax or legal advice. Every effort has been made to ensure the accuracy of the tax calculations based on tax laws and regulations in effect as of September 24, This is not an insurance contract or an offer to provide insurance. Unless otherwise indicated, none of the figures shown in this presentation are guaranteed. They are based on estimated values and future assumptions (shown on the Assumptions page) that are certain to change. Even a small change can have a large impact, either negative or positive, on the non-guaranteed figures shown. In some cases, these assumptions are based on important information supplied by you (e.g. the Current Value and Projected Growth Rate of Cassell Consulting Ltd.) and are subject to the accuracy of that underlying information. You can request additional presentations with different assumptions to help demonstrate the sensitivity these variables have on the figures shown in this presentation. For example, the life insurance payment referred to in the Cost Comparison of Alternatives is based on a predetermined policy type for comparison purposes only. You can request a presentation with an alternative policy type from your advisor. Page 2 of 16

3 Problem Description and Recommendation Situation Mark Caster and Susan Elliott are owners of Cassell Consulting Ltd.. You may already have a shareholder s agreement regarding your shares in the company. Objectives Ensure the continuation of Cassell Consulting Ltd. in the event of the premature death of yourself or any other significant shareholder. Guarantee that the full value of the deceased s shares will be paid to the beneficiaries of the deceased. Minimize the impact of taxes payable by the deceased, the estate and family and the surviving shareholders. Problems On death, you are deemed to have disposed of all your capital property, including your shares in Cassell Consulting Ltd., at fair market value. This deemed disposition may create a significant tax liability arising from the capital gain accrued to your shares. The premature death of Mark Caster or Susan Elliott may cause difficulties with suppliers, customers and even your corporate bankers. The loss of a business owner may lead to a drop in revenues and/or a loss of liquidity, which could restrict the ability of Cassell Consulting Ltd. to redeem your shares. This in turn may force the sale of these holdings at distressed prices in order to pay the taxes, resulting in a diminished estate for the heirs of the deceased. The surviving shareholders could be forced to divert attention away from operating Cassell Consulting Ltd. in order to deal with these problems. This may further reduce the revenues from the business. Advantages of Insured Buy-Sell Agreements For Cassell Consulting Ltd.: Tax-free insurance proceeds are payable immediately to the business, ensuring the smooth transfer of the ownership interest of the deceased shareholder. A smooth transition helps to restore confidence of suppliers and bankers in the ongoing success of the company. For heirs of the deceased: Prompt receipt of cash representing the agreed price for the deceased s interest in the shares of Cassell Consulting Ltd.. For the surviving shareholder(s): Tax-free funds are available to fund the buyout of the shares of the deceased shareholder. Full attention can be paid to steps necessary to ensure the ongoing success of Cassell Consulting Ltd. rather than dealing with lawyers and the estate trustees of the deceased shareholder and the surviving family members. Page 3 of 16

4 Recommendation Review the various Buy-Sell structures presented here and choose the most appropriate one consistent with the goals of all parties. (See the Planning Considerations section). Use an appropriate form of life insurance to fund the buyout of shares under the terms of the Buy-Sell agreement. Tax-free cash will be available to execute the strategy no matter which buyout structure you choose. Life insurance is usually the most efficient way to provide cash at the time of death. See the comparison with alternative funding methods. Life insurance can minimize the taxes payable on death in some situations, as noted in the accompanying analysis. Page 4 of 16

5 Planning Considerations for Business Continuation There are significant differences in the amount of tax payable on the death of a shareholder depending on the structure of the Buy-Sell agreement. Frequently this can delay the decision to implement a funded Buy-Sell agreement. The purpose of this presentation is to outline the tax consequences for one or more of: the deceased shareholder (tax payable on the final tax return) the estate of the deceased shareholder the surviving spouse the surviving shareholder(s) The Tax Challenge You are deemed to have disposed of all your capital assets for their Fair Market Value upon your death*. This includes your shareholdings in Cassell Consulting Ltd.. This means that upon your death, you will have to include the taxable portion of the capital gain on these shares as income on your final tax return. The capital gain is equal to the Fair Market Value of your shares less their Adjusted Cost Base (ACB). Under current rules, 50% of all capital gains is included on your final tax return and will affect the total tax payable in the year of death. Planning Considerations The following tax-planning options should be considered when choosing the appropriate Buy-Sell structure for your situation: If you own shares of a Qualifying Small Business Corporation (QSBC), you may be eligible for the 750,000 Enhanced Capital Gain Exemption (ECGE). In certain circumstances, it may be possible to crystallize the gain during your lifetime, in order to utilize this exemption. Your spouse and other family members may also be eligible to utilize the ECGE of $750,000. We recommend that you seek expert tax advice regarding eligibility and the most effective way to utilize this exemption. The tax otherwise payable on capital gains may be deferred when the capital assets are transferred to your spouse or a spousal trust under the terms of your will**. It may be possible to defer all or part of your capital gains into the hands of a surviving shareholder. The desirability or equitability of this option will differ depending on your point of view. You should consult with your legal and tax advisors on this matter. Preferred tax benefits available before the introduction of the Stop-Loss Rules*** on April 26, 1995 may be still available to you under grandfathering provisions introduced at that time. Your tax advisor can help you determine whether these rules apply to your situation. This is referred to as old rules in the following pages. * S 70(5) of the Income Tax Act (ITA) ** S 70(6) ITA *** S 112(3) ITA Note: Tax laws are subject to regular revision and there is no guarantee that the same rules will apply in the future. Page 5 of 16

6 Methods of Structuring a Buy-Sell Agreement The following structures are all based on the assumption that life insurance to fund the buyout of shares will be owned by Cassell Consulting Ltd.. Corporate-owned life insurance has several advantages: The cost of insurance is lower if the company has a lower marginal tax rate than the individual shareholders, since insurance is paid with after-tax dollars. Shareholders share the cost of the insurance in proportion to their shareholdings. Cross Purchase: How it Works: Under this structure, the surviving shareholder(s) agree to purchase the shares of the deceased from the estate or from the surviving spouse at Fair Market Value. The surviving shareholder(s) issue a promissory note to the estate of the deceased or to the surviving spouse, in order to acquire the shares. Note: the shares must "vest indefeasibly" in your spouse for both spouses to make use of the Enhanced Capital Gains Exemption. See your tax or legal advisor for more information. Life insurance proceeds are payable to Cassell Consulting Ltd.. The insurance proceeds in excess of the Adjusted Cost Basis of the policy create a credit to the company s capital dividend account. The company then declares a tax-free capital dividend to the surviving shareholder(s) who use this to redeem the promissory note. Results: The estate or surviving spouse has received cash for the shares. This amount will be reduced by the taxes payable on the capital gain. The surviving shareholder(s) will own all of the company. The acquired shares will have an Adjusted Cost Base equal to the purchase price. Share : How it Works: Under this structure, Cassell Consulting Ltd. will redeem the shares of the deceased at Fair Market Value, i.e. the shares are returned to the company for cancellation. Under the terms of the Income Tax Act, the redemption results in a deemed dividend to the estate of the deceased. Life insurance proceeds are payable to Cassell Consulting Ltd.. The insurance proceeds in excess of the Adjusted Cost Basis of the policy create a credit to the company s capital dividend account. There are a number of different tax consequences depending on the structure and whether or not the old rules apply as noted under the Planning Considerations section of this report. A redemption following a spousal rollover may achieve the same tax results as a redemption under the old rules provided the agreement is properly structured. The Buy-Sell agreement cannot provide for a mandatory sale of shares and redemption by the company. Instead, the shareholder s agreement includes a put/call option. This allows your surviving spouse the option of selling or not selling the shares and Cassell Consulting Ltd. the option of purchasing or not purchasing, thus establishing the necessary elements of indefeasible vesting. When the corporation redeems the shares under the call option, there is a deemed dividend under ITA rules. Cassell Consulting Ltd. and your spouse can elect to categorize the dividend as a tax-free capital dividend, meaning the redemption proceeds would be received tax-free. Page 6 of 16

7 Results The estate or surviving spouse has received cash for the shares. This amount will be reduced by the taxes payable on the deemed dividend unless the old rules allow an offsetting capital loss from the estate. To qualify for the old rules, either the Buy-Sell agreement or life insurance purchased for the purpose of funding the agreement was in place prior to April 27, Consult your tax advisor to determine if you qualify under the grandfathering provisions. The surviving shareholder(s) will own all of the company. The survivor s shares will have increased in value but with no increase in the Adjusted Cost Base. This means the survivors will later pay tax on the deferred gain. In some cases, this may result in double taxation of the capital gain in the deceased s shares. It should be noted that the value of the deceased s interest would be acquired at no direct cost to the surviving shareholder(s), which offsets the taxes payable. For illustration purposes, we have assumed the ACB of the policy is zero when the buyout occurs. and Cross Purchase: How it Works: This structure combines a share redemption with a cross purchase. Cassell Consulting Ltd. will redeem a portion of your shares for their Fair Market Value, and will declare a taxfree capital dividend for this amount based on the available life insurance proceeds and ACB of the life insurance policy. The surviving shareholders will purchase the balance of your shares at Fair Market Value. Results: The estate or surviving spouse has received cash for the shares. This amount will be reduced by the taxes payable on the deemed dividend unless the old rules allow an offsetting capital loss from the estate. To qualify for the old rules, either the Buy-Sell agreement or life insurance purchased for the purpose of funding the agreement was in place prior to April 27, Consult your tax advisor to determine if you qualify under the grandfathering provisions. The surviving shareholder(s) will own all of the company. The ACB of the purchased shares will be equal to the price paid for them, i.e. the Fair Market Value. The total value of the survivor(s) shareholdings will have increased by more than this, meaning there will be a deferred tax to be paid on the later sale of these shares or on the death of the shareholder. A checklist is attached to this report which outlines some of the clauses that should be considered when drafting a Buy-Sell agreement. Page 7 of 16

8 Assumptions Insureds Age % of Company Owned Enhanced Capital Gains Exemption Available ACB of Shares Paid-Up Capital of Shares Mark Caster % $0 $60,000 $30,000 Susan Elliott % $0 $40,000 $20,000 Insureds Existing Corporate Owned Life Proposed New Life Total Amount of Life Has Spouse Spouse's Enhanced Capital Gains Exemption Available Mark Caster $250,000 $2,233,128 $2,483,128 Yes $500,000 Susan Elliott $250,000 $1,405,419 $1,655,419 No $0 Marginal Tax Rate on Ordinary Income: 45.00% Marginal Tax Rate on Dividend Income: 31.00% Value of Cassell Consulting Ltd.: Current Value: $1,500,000 Projected Growth Rate: 7.00% Projected Value in 15 years*: $4,138,547 Projected Value in 25 years: $8,141,149 * This is the value used in the tax calculations that follow. Life Policy Assumptions: Policy Type: Payment method: SunUniversalLife Level Death Benefit with Level Cost of Planned payments Alternative Funding Assumptions: Sinking Fund After-Tax Return: 4.00% Loan Rate: 8.00% Discount Rate: 5.00% Page 8 of 16

9 Summary of Tax Impact by Structure This is a summary of the tax impact in the event of the death of one of the shareholders of Cassell Consulting Ltd., based on a projected fair market value of $4,138,547. It has been sorted in order of the most cash payable to the beneficiaries of the deceased after payment of capital gains taxes arising on death, i.e. in order of the least to most tax payable by the estate and the deceased. This should be only one of the criteria used in selecting a structure for your Buy-Sell agreement. On Death of Mark Caster Immediate Tax: With and Spousal Rollover & Cross Purchase 50% Solution on Final Return $0 $0 $6,587 $272,602 $0 by Estate $0 $0 $0 $0 $380,235 by Spouse $0 $0 $0 $0 $0 Total $0 $0 $6,587 $272,602 $380,235 Net to Beneficiaries $2,483,128 $2,483,128 $2,476,541 $2,210,526 $2,102,893 Deferred Tax to Shareholders $558,704 $558,704 $545,204 $558,704 $558,704 On Death of Susan Elliott Immediate Tax: With & Cross Purchase 50% Solution on Final Return $0 $4,391 $181,735 $0 $271,477 by Estate $0 $0 $0 $253,490 $0 by Spouse $0 $0 $0 $0 $0 Total $0 $4,391 $181,735 $253,490 $271,477 Net to Beneficiaries $1,655,419 $1,651,028 $1,473,684 $1,401,929 $1,383,942 Deferred Tax to Shareholders $372,469 $363,469 $372,469 $372,469 $186,235 Page 9 of 16

10 Buy-Sell Structures Impact on Total Taxes Paid Shareholder and Estate Mark Caster Final Return Cross Purchase Spousal rollover and ECGE 60,000 Without With and Spousal Rollover 50% Solution Deemed Disposition at Death - S. 70(5) 2,483,128 2,483,128 2,483,128 60,000 2,483,128 2,483,128 2,483,128 Adjusted Cost Base 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 Capital Gain (Loss) 0 2,423,128 2,423,128 2,423, ,423,128 2,423,128 2,423,128 Capital Gain Exemption Used 0 0 Loss Carry-Back from Estate - S. 164(6) 0 (2,453,128) (2,453,128) (2,393,853) 0 (1,211,564) (2,438,128) (613,282) Net Capital Gain (Loss) 0 (30,000) (30,000) 29, ,211,564 (15,000) 1,809,846 Taxable Capital Gain (Loss) (50%) 0 (15,000) (15,000) 14, ,782 (7,500) 904,923 TAX PAYABLE NIL NIL NIL 6,587 NIL 272,602 NIL 407,215 EFFECTIVE TAX RATE 0.27% 11.25% 16.81% Estate Dividend and Capital Gain (Loss) Dividend: Proceeds 0 2,483,128 2,483,128 2,423, ,483,128 2,483,128 1,241,564 Paid Up Capital 0 30,000 30,000 29, ,000 30,000 15,000 Deemed Dividend 0 2,453,128 2,453,128 2,393, ,453,128 2,453,128 1,226,564 Capital Dividend (if policy ACB = 0) 0 0 2,453,128 2,393, ,453,128 1,226,564 1,226,564 Taxable Dividend 0 2,453, ,226,564 0 TAX PAYABLE NIL 760,470 NIL NIL NIL NIL 380,235 NIL EFFECTIVE TAX RATE 31.38% 31.00% Gain (Loss): Proceeds of disposition 60,000 2,483,128 2,483,128 2,483, ,483,128 2,483,128 2,483,128 Less: Deemed Dividend - S. 84(3) 0 2,453,128 2,453,128 2,393, ,453,128 2,453,128 1,226,564 Adjusted Proceeds of Disposition 60,000 30,000 30,000 89, ,000 30,000 1,256,564 ACB of Shares 60,000 2,483,128 2,483,128 2,483, ,483,128 2,483,128 2,483,128 Capital Gain (Loss) 0 (2,453,128) (2,453,128) (2,393,853) 0 (2,453,128) (2,453,128) (1,226,564) Loss Reduction ,241,564 15, ,282 Capital Loss Transfer to Final Return 0 (2,453,128) (2,453,128) (2,393,853) 0 (1,211,564) (2,438,128) (613,282) TOTAL TAX PAYABLE NIL 760,470 NIL 6,587 NIL 272, , ,215 Page 10 of 16

11 Buy-Sell Structures Impact on Total Taxes Paid The Survivors of Mark Caster Surviving Spouse Cross Purchase Spousal rollover and ECGE 2,483,128 Without With and Spousal Rollover 50% Solution Gain (Loss): Proceeds of Disposition 0 Less Deemed Dividend 0 0 Adjusted Proceeds 2,483,128 0 Less ACB of Shares 60,000 0 Less Spouse Exemption (500,000) 0 Capital Gain (Loss) 1,923,128 0 Taxable Capital Gain (Loss) (50%) 961,564 0 TAX PAYABLE 432,704 NIL NIL NIL NIL NIL NIL NIL EFFECTIVE TAX RATE 22.50% Dividend: Proceeds ,483, Paid Up Capital , Deemed Dividend ,453, Capital Dividend ,453, Taxable Dividend 0 0 TAX PAYABLE NIL NIL NIL NIL NIL NIL NIL NIL EFFECTIVE TAX RATE Surviving Shareholder(s) Increase in FMV 2,483,128 2,483,128 2,483,128 2,483,128 2,483,128 2,483,128 2,483,128 2,483,128 Increase in Adjusted Cost Base 2,483, , ,241,564 Unrealized Capital Gain 0 2,483,128 2,483,128 2,423,128 2,483,128 2,483,128 2,483,128 1,241,564 Unused CDA available (if ACB = 0) ,000 89,275 30,000 30,000 1,256,564 1,256,564 Deferred Tax to Surviving Shareholders 0 558, , , , , , ,352 Net cash to beneficiaries 2,050,424 1,722,658 2,483,128 2,476,541 2,483,128 2,210,526 2,102,893 2,075,913 TOTAL TAX WITH DEFERRED 432,704 1,319, , , , , , ,567 Page 11 of 16

12 Buy-Sell Structures Impact on Total Taxes Paid Shareholder and Estate Susan Elliott Final Return Cross Purchase Without With and Spousal Rollover Not Available 50% Solution Deemed Disposition at Death - S. 70(5) 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 Adjusted Cost Base 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Capital Gain (Loss) 1,615,419 1,615,419 1,615,419 1,615,419 1,615,419 1,615,419 1,615,419 Capital Gain Exemption Used 0 Loss Carry-Back from Estate - S. 164(6) 0 (1,635,419) (1,635,419) (1,595,902) (807,710) (1,625,419) (408,855) Net Capital Gain (Loss) 1,615,419 (20,000) (20,000) 19, ,710 (10,000) 1,206,564 Taxable Capital Gain (Loss) (50%) 807,710 (10,000) (10,000) 9, ,855 (5,000) 603,282 TAX PAYABLE 363,469 NIL NIL 4, ,735 NIL 271,477 EFFECTIVE TAX RATE 22.50% 0.27% 11.25% 16.81% Estate Dividend and Capital Gain (Loss) Dividend: Proceeds 0 1,655,419 1,655,419 1,615,419 1,655,419 1,655, ,710 Paid Up Capital 0 20,000 20,000 19,517 20,000 20,000 10,000 Deemed Dividend 0 1,635,419 1,635,419 1,595,902 1,635,419 1,635, ,710 Capital Dividend (if policy ACB = 0) 0 0 1,635,419 1,595,902 1,635, , ,710 Taxable Dividend 0 1,635, ,710 0 TAX PAYABLE NIL 506,980 NIL NIL NIL 253,490 NIL EFFECTIVE TAX RATE 31.38% 31.00% Gain (Loss): Proceeds of disposition 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 Less: Deemed Dividend - S. 84(3) 0 1,635,419 1,635,419 1,595,902 1,635,419 1,635, ,710 Adjusted Proceeds of Disposition 1,655,419 20,000 20,000 59,517 20,000 20, ,710 ACB of Shares 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 Capital Gain (Loss) 0 (1,635,419) (1,635,419) (1,595,902) (1,635,419) (1,635,419) (817,710) Loss Reduction ,710 10, ,855 Capital Loss Transfer to Final Return 0 (1,635,419) (1,635,419) (1,595,902) (807,710) (1,625,419) (408,855) TOTAL TAX PAYABLE 363, ,980 NIL 4, , , ,477 Page 12 of 16

13 Buy-Sell Structures Impact on Total Taxes Paid The Survivors of Susan Elliott Surviving Spouse Cross Purchase Without With and Spousal Rollover Not Available 50% Solution Gain (Loss): Proceeds of Disposition 0 Less Deemed Dividend 0 Adjusted Proceeds 0 Less ACB of Shares 0 Less Spouse Exemption 0 Capital Gain (Loss) 0 Taxable Capital Gain (Loss) (50%) 0 TAX PAYABLE NIL NIL NIL NIL NIL NIL NIL EFFECTIVE TAX RATE Dividend: Proceeds 0 Paid Up Capital 0 Deemed Dividend 0 Capital Dividend 0 Taxable Dividend 0 TAX PAYABLE NIL NIL NIL NIL NIL NIL NIL EFFECTIVE TAX RATE Surviving Shareholder(s) Increase in FMV 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 1,655,419 Increase in Adjusted Cost Base 1,655, , ,710 Unrealized Capital Gain 0 1,655,419 1,655,419 1,615,419 1,655,419 1,655, ,710 Unused CDA available (if ACB = 0) ,000 59,517 20, , ,710 Deferred Tax to Surviving Shareholders 0 372, , , , , ,235 Net cash to beneficiaries 1,291,950 1,148,439 1,655,419 1,651,028 1,473,684 1,401,929 1,383,942 TOTAL TAX WITH DEFERRED 363, , , , , , ,712 Page 13 of 16

14 Alternative Funding Solutions Bank Loan: In the absence of life insurance or a sinking fund, Cassell Consulting Ltd. or the surviving shareholders may borrow funds in order to buy the shares of the deceased. Depending on the economic circumstances at that time, the cost of this solution may be extremely high or even unavailable. In any event, it will impact the credit standing of the company or the individuals. This analysis includes an example of the cost of borrowing the funds and repaying the loan over a 10 year period. Sinking Fund: A sinking fund is a savings plan that is set up to fund a purchase or share redemption on the death of one of the shareholders. There is no guarantee however that there will be enough time for the fund to grow to the amount needed to fund the buyout. Also, income from assets not used in the business is subject to a high rate of tax inside a corporation, making it difficult to accumulate funds quickly. If the fund is large, it could cause a Canadian Controlled Private Corporation (CCPC) to no longer qualify for the Enhanced Capital Gains Exemption and/or to lose the small business deduction. This analysis includes an example of the annual cost to build such a fund over a 15 year period and compares it to the cost of insurance and borrowing. Aside from not having the guaranteed payout that comes with life insurance, it may cost more than the insurance solution. Life : Life insurance payments can be paid monthly or annually and may be prepaid with some types of policies. This is usually the least costly option for funding a Buy-Sell arrangement. The annual payment is usually significantly lower than a loan payment or sinking fund deposit. The death benefit is a tax-free amount payable on the death of a shareholder - exactly when it is needed. A life insurance policy with a large cash value could also cause a Canadian Controlled Private Corporation (CCPC) to no longer qualify for the Enhanced Capital Gains Exemption and/or to lose the small business deduction. Page 14 of 16

15 Cost Comparison of Alternatives PV Discount Rate 5.00% Purchase Price in 15 years $2,483,128 for Mark Caster $1,655,419 for Susan Elliott Mark Caster Loan Savings Life Loan Amount $2,233,128 Future value $2,233,128 Initial death benefit $2,233,128 Amortization (yrs) 10 # of deposits (yrs) 15 Payment period (yrs)* 15 Rate 8.00% Net interest rate 4.00% Assumed rate N/A Annual Payments $332,802 Annual deposit $107,235 Initial annual payment $31,128 PV of Payments $1,236,122 PV of deposits $1,168,721 PV of payments $339,253 * The payment period matches the term to the purchase/redemption date. The insurance is NOT paid up at that time. Susan Elliott Loan Savings Life Loan Amount $1,405,419 Future value $1,405,419 Initial death benefit $1,405,419 Amortization (yrs) 10 # of deposits (yrs) 15 Payment period (yrs)* 15 Rate 8.00% Net interest rate 4.00% Assumed rate N/A Annual Payments $209,449 Annual deposit $67,489 Initial annual payment $20,164 PV of Payments $777,953 PV of deposits $735,534 PV of payments $219,760 * The payment period matches the term to the purchase/redemption date. The insurance is NOT paid up at that time. Page 15 of 16

16 Buy-Sell Agreement Checklist A Buy-Sell agreement should include most if not all of the following items: Date: Strategy: Buy-Sell Agreement Parties to the Agreement Shares of stock subject to the Agreement Definitions: Sale of shares on death, disability or early retirement: Price to be paid and Method for determining value: Life acquired to fund the Agreement: Payments: Payment default: Additional insurance acquired at a later date How insurance policies are dealt with in case of disagreement or retirement Payment of purchase price: If insurance proceeds are greater than purchase price If insurance proceeds are less than purchase price Prepayment when insurance is less than purchase price Restrictions on survivor(s) salaries while any balance unpaid Operation of company while money is owed by survivors Resolution of conflicts: Mediation, arbitration and/or litigation provisions Transfer or pledging of shares of stock prohibited Corporate resolutions Amendments to the agreement: Termination of the agreement: Binding on heirs and others General provisions Page 16 of 16

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