"Wait and See" Purchase Agreement

The Wait and See Purchase Agreement provides a level of flexibility in that provisions are made for both the owners and the business to make the purchase. The decision of how to structure the transaction can be made at the time of the triggering event based on the situation at the time. The funding policies can be owned by the business as in the Entity Purchase Agreement, or they can be cross purchased as in the Cross Purchase Agreement. In most cases the funding will be structured like the Cross Purchase agreement with each owner holding a policy on every other owner. Split Dollar Funding arrangements may be used.

Basic Advantages:*

• Flexibility - able to choose the best option at the time of the triggering event.

Common Concerns:*

• May carry the concerns of either (or both) the Cross Purchase Agreement or the Entity Purchase agreement.

Note: Split Dollar Funding may be used to allow the business entity to assist the owners in purchase of the insurance policies. Under a Split Dollar Funding program, the business agrees to pay most or all of the insurance premium. The business can then reflect the security interest in the cash value of the plan as an asset. When the policy pays benefits, the company recovers what it paid in premiums. The down side to this is that the longer the policy is in force, the larger the portion that will go to the company rather than for the intended use. In some circumstances, the remaining amount may not be sufficient to make the designated purchase. This can be avoided through use of an adjustable or scheduled term rider or similar features that allow the policy amount to increase with time.

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* - These are some common consideration but by no means an exhaustive list of considerations. There are a number of tax and legal issues that can only be addressed by a careful examination of your specific situation by a qualified professional.