Assume a Sub S ESOP owns 45% of the stock and the two other shareholders/employees have a vanilla buy/sell agreement between themselves. Do you think that the agreement counts as synthetic equity under 409(p)?

A plain vanilla buy-sell agreement (X will purchase Y's shares for $-Z-) would not be considered synthetic equity. However, it is possible to imagine a synthetic equity arrangement that is couched as a buy-sell agreement. If your buy-sell contains any elements of synthetic equity, you should obtain appropriate guidance from your own deferred compensation counsel with respect to the issue.