Endorsement Split Dollar with Salary Continuation Using Indexed Universal Life

Preface Of all the strategies used by employers to provide significant amounts of life insurance for the protection of the families of valuable executives as well as substantial retirement benefits for the executive, this variation is most efficient. With this arrangement, the policy is issued on the executive's life and owned by the employer. values and benefits are allocated as follows: The employer owns all cash values which are carried as an asset on its books. (The employer's outlay is simply a transfer from the firm's "cash account" to "cash value account".) The employer has access to cash values through the policy's withdrawal and/or loan provisions. The employer's death benefit is equal to its cumulative premiums paid or, if greater, an amount equal to the policy cash value. Through use of a policy endorsement, the executive's beneficiaries are entitled to receive a portion of the policy death benefit. The documentation for the plan calls for the employer to pay a retirement income benefit to the executive (typically referred to as "salary continuation"). In addition to the salary continuation benefit, the arrangement may also include continuing the executive's share of the policy death benefit for a specified term of years after retirement or, in some cases, indefinitely. Alternatively, the executive's share of the death benefit may revert to the employer which, in turn, may use a portion of it to fund a survivor income benefit to the executive's family should the executive die prior to receiving all the scheduled salary continuation. Plan s Employer's Cash Flow $4M Empl Cum. Pmts Exec Cum. Pmts $4M Cum. Loans 3M 3M $3,249,24 2M 2M 1M $764,281 $ Yrs 1 2 3 4 1M Yrs 1 2 3 4 Employer's Values Executive's Values $4M Cash Value $4M Cum. A/T ² 3M 3M $3,2, 2M 1M $2,72,667 $1,688,77 2M 1M Yrs 1 2 3 4 Yrs 1 2 3 4 $ 1 To fund the executive's after tax salary continuation. 2 To the executive at retirement. Note: The after tax effects of bonuses are included in the cumulative net payments of both the employer and the executive. Page 1 of 17

Preface (continued) Split dollar plans have yearly income tax ramifications for the covered executive. Unless an offsetting payment is made, an executive covered with this type of arrangement is in receipt of a taxable economic benefit to the extent relief is provided from paying premiums personally. Since any premium payment by the executive results in taxable income to the employer (Reg. Section 1.61-22(f)(ii)), the accompanying illustration assumes that the executive pays no share of the premium. As a result, the executive will be in receipt of imputed income each year based on the attained age rates contained in Table 21 (issued as part of IRS Notice 21-1). This income consequence is illustrated in the accompanying reports including a bonus from the employer to help offset the income tax that results. Extensive life insurance coverage for the executive, combined with an impressive array of cash values for the employer, constitute a program that should be financially compelling to both employer and executive. Note: The Final Split Dollar Regulations (68 FR 54336) issued in September 23 should have no adverse impact on this plan as illustrated; however, in all cases, the approval of a client's legal and tax advisers must be secured regarding the implementation of any form of split dollar. Page 2 of 17

Who Pays What - Who Receives What Employer Pays Executive Pays Share 1 Bonus Tax 2 IRS Life Insurance Employer Receives Executive Receives Loans 3 Cash Value 4 1 1 To the executive at retirement. 2 See Executive's Analysis page for details. 3 To fund the executive's after tax salary continuation. 4 Equal to remaining balance after employer's portion is deducted. Page 3 of 17

Summary of Costs and s Form of Transaction (Endorsement) Employer's 34.% Executive's 35.% 7.5% E m ploye r E xe cutive Cumulative s Cash Value* (4) Share of (5) (6) (7) Share of 1 45 11,88 11,88 31,17 2, 2,, 2 46 11,187 22,275 132,767 296,96 2,, 3 47 11,31 33,576 241,527 41,713 2,, 4 48 11,47 44,983 357,947 514,127 2,, 5 49 11,514 56,497 482,547 634,723 2,, 6 5 11,635 68,132 616,48 764,65 2,, 7 51 11,791 79,923 76,46 94,627 2,, 8 52 1,997 711,92 813,18 953,34 2,, 9 53 2,274 714,194 87,7 1,6,16 2,, 1 54 2,594 716,788 931,35 1,63,5 2,, 11 55 2,95 719,738 1,4,16 1,132,33 2,, 12 56 3,326 723,64 1,81,78 1,25,92 2,, 13 57 3,696 726,76 1,164,51 1,284,643 2,, 14 58 4,23 73,783 1,252,713 1,368,84 2,, 15 59 4,37 735,9 1,346,757 1,458,877 2,, 16 6 4,627 739,717 1,446,86 1,554,997 2,, 17 61 5,54 744,771 1,549,453 1,657,59 2,, 18 62 5,658 75,429 1,658,91 1,767,47 2,, 19 63 6,453 756,882 1,775,637 1,883,773 2,, 2 64 7,399 764,281 1,9,63 2,8,2 2,, 21 65 764,281 1,827,973 2,494,68 16, 22 66 764,281 1,785,233 2,39,88 16, 23 67 764,281 1,743,817 2,185,26 16, 24 68 764,281 1,74,36 2,148,597 16, 25 69 764,281 1,665,797 2,111,437 16, 26 7 764,281 1,629,22 2,74,77 16, 27 71 764,281 1,595,47 2,8,693 16, 28 72 764,281 1,565,13 1,939,65 16, 29 73 764,281 1,538,787 1,867,373 16, 3 74 764,281 1,517,43 1,791,52 16, 764,281 1,6, Split dollar arrangement presumed terminated in year 2. *This illustration assumes the nonguaranteed values shown accompanied by a proposal from Sample Life. 3 Summary Employer's Cum. s 764,281 Employer's Cash Value 1,517,43 Employer's 1,791,52 Executive's Cum. s Executive's Cum. A/T 1,6, Executive's Page 4 of 17

Summary of Costs and s Form of Transaction (Endorsement) Employer's 34.% Executive's 35.% 7.5% E m ploye r E xe cutive Cumulative s Cash Value* (4) Share of (5) (6) (7) Share of 31 75 764,281 1,54,93 1,716,283 16, 32 76 764,281 1,497,73 1,722,317 16, 33 77 764,281 1,496,2 1,734,933 16, 34 78 764,281 1,5,547 1,754,963 16, 35 79 764,281 1,512,1 1,783,187 16, 36 8 764,281 1,531,83 1,82,36 16, 37 81 764,281 1,556,72 1,867,33 16, 38 82 764,281 1,591,147 1,924,59 16, 39 83 764,281 1,634,957 1,992,82 16, 4 84 764,281 1,688,77 2,72,667 16, 764,281 3,2, Split dollar arrangement presumed terminated in year 2. *This illustration assumes the nonguaranteed values shown accompanied by a proposal from Sample Life. 4 Summary Employer's Cum. s 764,281 Employer's Cash Value 1,688,77 Employer's 2,72,667 Executive's Cum. s Executive's Cum. A/T 3,2, Executive's Page 5 of 17

A Look at 4 Employer Executive 764,281 Cumulative s 3,2, Cumulative 1 1,688,77 2,72,667 Cash Value Split Dollar Arrangement Presumed Terminated in 2 1 To the executive at retirement. Note: The after tax effects of bonuses are included in the cumulative net payments of both the employer and the executive. Page 6 of 17

4 Analysis Plan s Employer's Cash Flow $4M Empl Cum. Pmts Exec Cum. Pmts $4M Cum. Loans¹ 3M 3M $3,249,24 2M 2M 1M $764,281 1M $ Yrs 1 2 3 4 Yrs 1 2 3 4 Employer's Values Executive's Values $4M Cash Value $4M Cum. A/T ² 3M 3M $3,2, 2M 1M $2,72,667 $1,688,77 2M 1M $ Yrs 1 2 3 4 Yrs 1 2 3 4 1 To fund the executive's after tax salary continuation. 2 To the executive at retirement. Note: The after tax effects of bonuses are included in the cumulative net payments of both the employer and the executive. Page 7 of 17

Employer's 4 Analysis $2,8, $2,1, $2,72,667 $1,688,77 $1,4, $7, $764,281 $ 1 2 3 4 s At 4 Employer's Cumulative s $764,281 Employer's Cash Value $1,688,77 Employer's $2,72,667 Note: The after tax effects of bonuses are included in the cumulative net payments of both the employer and the executive. Page 8 of 17

Executive's 4 Analysis $3,6, $3,2, $2,7, $1,8, $9, $ $ $ 1 2 3 4 s At 4 Executive's Cumulative s $ Executive's Cumulative $3,2, Executive's $ Note: The after tax effects of bonuses are included in the cumulative net payments of both the employer and the executive. Page 9 of 17

Employer's Analysis Form of Transaction (Endorsement) Employer's 34.% 7.5% Split Dollar Share Cum. Split Dollar Share Bonus to Executive (4) Cost of Bonus (5) Paid to Executive (6) Cost of (7) Loan Proceeds (8) +(4)+(6)-(7) (9) Cumulative s 1 45 1, 1, 1,648 1,88 11,88 11,88 2 46 1, 2, 1,798 1,187 11,187 22,275 3 47 1, 3, 1,971 1,31 11,31 33,576 4 48 1, 4, 2,132 1,47 11,47 44,983 5 49 1, 5, 2,294 1,514 11,514 56,497 6 5 1, 6, 2,477 1,635 11,635 68,132 7 51 1, 7, 2,714 1,791 11,791 79,923 8 52 7, 3,26 1,997 1,997 711,92 9 53 7, 3,446 2,274 2,274 714,194 1 54 7, 3,931 2,594 2,594 716,788 11 55 7, 4,469 2,95 2,95 719,738 12 56 7, 5,4 3,326 3,326 723,64 13 57 7, 5,6 3,696 3,696 726,76 14 58 7, 6,95 4,23 4,23 73,783 15 59 7, 6,526 4,37 4,37 735,9 16 6 7, 7,11 4,627 4,627 739,717 17 61 7, 7,657 5,54 5,54 744,771 18 62 7, 8,572 5,658 5,658 75,429 19 63 7, 9,778 6,453 6,453 756,882 2 64 7, 11,211 7,399 7,399 764,281 21 65 7, 246,155 162,462 162,462 764,281 22 66 7, 246,155 162,462 162,462 764,281 23 67 7, 246,155 162,462 162,462 764,281 24 68 7, 246,155 162,462 162,462 764,281 25 69 7, 246,155 162,462 162,462 764,281 26 7 7, 246,155 162,462 162,462 764,281 27 71 7, 246,155 162,462 162,462 764,281 28 72 7, 246,155 162,462 162,462 764,281 29 73 7, 246,155 162,462 162,462 764,281 3 74 7, 246,155 162,462 162,462 764,281 7, 97,396 64,281 2,461,55 1,624,62 1,624,62 764,281 *This illustration assumes the nonguaranteed values shown accompanied by a proposal from Sample Life. Split dollar arrangement presumed terminated in year 2. Page 1 of 17

Executive's Analysis Form of Transaction (Endorsement) Executive's 35.% 7.5% Split Dollar Share Additional Taxable Value of * Bonus Received (4) Taxable + (5) Tax Due on Col (4) (6) - + (5) (7) from Employer (8) 1 45 3,6 1,648 4,78 1,648 2 46 3,34 1,798 5,138 1,798 3 47 3,66 1,971 5,631 1,971 4 48 3,96 2,132 6,92 2,132 5 49 4,26 2,294 6,554 2,294 6 5 4,6 2,477 7,77 2,477 7 51 5,4 2,714 7,754 2,714 8 52 5,62 3,26 8,646 3,26 9 53 6,4 3,446 9,846 3,446 1 54 7,3 3,931 11,231 3,931 11 55 8,3 4,469 12,769 4,469 12 56 9,36 5,4 14,4 5,4 13 57 1,4 5,6 16, 5,6 14 58 11,32 6,95 17,415 6,95 15 59 12,12 6,526 18,646 6,526 16 6 13,2 7,11 2,31 7,11 17 61 14,22 7,657 21,877 7,657 18 62 15,92 8,572 24,492 8,572 19 63 18,16 9,778 27,938 9,778 2 64 2,82 11,211 32,31 11,211 21 65 246,155 16, 22 66 246,155 16, 23 67 246,155 16, 24 68 246,155 16, 25 69 246,155 16, 26 7 246,155 16, 27 71 246,155 16, 28 72 246,155 16, 29 73 246,155 16, 3 74 246,155 16, 18,88 97,396 278,276 97,396 2,461,55 1,6, *Assuming column offsets the economic benefit. This illustration assumes the nonguaranteed values shown accompanied by a proposal from Sample Life. Split dollar arrangement presumed terminated in year 2. Column is the imputed economic benefit in compliance with IRS Notice 22-8. (Table 21 rates utilized.) Page 12 of 17

Executive's Analysis Form of Transaction (Endorsement) Executive's 35.% 7.5% Split Dollar Share Additional Taxable Value of * Bonus Received (4) Taxable + (5) Tax Due on Col (4) (6) - + (5) (7) from Employer (8) 31 75 246,155 16, 32 76 246,155 16, 33 77 246,155 16, 34 78 246,155 16, 35 79 246,155 16, 36 8 246,155 16, 37 81 246,155 16, 38 82 246,155 16, 39 83 246,155 16, 4 84 246,155 16, 18,88 97,396 278,276 97,396 4,923,1 3,2, *Assuming column offsets the economic benefit. This illustration assumes the nonguaranteed values shown accompanied by a proposal from Sample Life. Split dollar arrangement presumed terminated in year 2. Column is the imputed economic benefit in compliance with IRS Notice 22-8. (Table 21 rates utilized.) Page 13 of 17

Executive's Personal Report Form of Transaction (Endorsement) Executive's 35.% 7.5% Executive's Costs Executive's Values Executive's Share of 1 45 2,, 2 46 2,, 3 47 2,, 4 48 2,, 5 49 2,, 6 5 2,, 7 51 2,, 8 52 2,, 9 53 2,, 1 54 2,, 11 55 2,, 12 56 2,, 13 57 2,, 14 58 2,, 15 59 2,, 16 6 2,, 17 61 2,, 18 62 2,, 19 63 2,, 2 64 2,, 21 65 16, 22 66 16, 23 67 16, 24 68 16, 25 69 16, 26 7 16, 27 71 16, 28 72 16, 29 73 16, 3 74 16, 1,6, This illustration assumes the nonguaranteed values shown accompanied by a proposal from Sample Life. Page 14 of 17

Executive's Personal Report Form of Transaction (Endorsement) Executive's 35.% 7.5% Executive's Costs Executive's Values Executive's Share of 31 75 16, 32 76 16, 33 77 16, 34 78 16, 35 79 16, 36 8 16, 37 81 16, 38 82 16, 39 83 16, 4 84 16, 3,2, This illustration assumes the nonguaranteed values shown accompanied by a proposal from Sample Life. Page 15 of 17

Illustration of Values Funding the Plan Employer's 34.% 7.5% Initial 1, Initial 2,2, Loan Proceeds Cash Value* Increase (4) End Cash Value* (5) 1 45 1, 31,17 31,17 2,2, 2 46 1, 11,66 132,767 2,296,96 3 47 1, 18,76 241,527 2,41,713 4 48 1, 116,42 357,947 2,514,127 5 49 1, 124,6 482,547 2,634,723 6 5 1, 133,933 616,48 2,764,65 7 51 1, 143,98 76,46 2,94,627 8 52 52,72 813,18 2,953,34 9 53 56,827 87,7 3,6,16 1 54 61,343 931,35 3,63,5 11 55 72,81 1,4,16 3,132,33 12 56 77,62 1,81,78 3,25,92 13 57 82,73 1,164,51 3,284,643 14 58 88,23 1,252,713 3,368,84 15 59 94,44 1,346,757 3,458,877 16 6 1,13 1,446,86 3,554,997 17 61 12,593 1,549,453 3,657,59 18 62 19,457 1,658,91 3,767,47 19 63 116,727 1,775,637 3,883,773 2 64 124,426 1,9,63 4,8,2 21 65 162,462-72,9 1,827,973 2,494,68 22 66 162,462-42,74 1,785,233 2,39,88 23 67 162,462-41,416 1,743,817 2,185,26 24 68 162,462-39,457 1,74,36 2,148,597 25 69 162,462-38,563 1,665,797 2,111,437 26 7 162,462-36,577 1,629,22 2,74,77 27 71 162,462-33,75 1,595,47 2,8,693 28 72 162,462-3,34 1,565,13 1,939,65 29 73 162,462-26,343 1,538,787 1,867,373 3 74 162,462-21,744 1,517,43 1,791,52 7, 1,624,62 3 Summary *This illustration assumes the nonguaranteed values shown accompanied by a proposal from Sample Life. Cum. s 7, Cum. Loan Proceeds 1,624,62 Cash Value 1,517,43 1,791,52 Page 16 of 17

Illustration of Values Funding the Plan Employer's 34.% 7.5% Initial 1, Initial 2,2, Loan Proceeds Cash Value* Increase (4) End Cash Value* (5) 31 75 162,462-12,113 1,54,93 1,716,283 32 76 162,462-7,2 1,497,73 1,722,317 33 77 162,462-1,71 1,496,2 1,734,933 34 78 162,462 4,527 1,5,547 1,754,963 35 79 162,462 11,463 1,512,1 1,783,187 36 8 162,462 19,73 1,531,83 1,82,36 37 81 162,462 25,637 1,556,72 1,867,33 38 82 162,462 34,427 1,591,147 1,924,59 39 83 162,462 43,81 1,634,957 1,992,82 4 84 162,462 53,75 1,688,77 2,72,667 7, 3,249,24 4 Summary *This illustration assumes the nonguaranteed values shown accompanied by a proposal from Sample Life. Cum. s 7, Cum. Loan Proceeds 3,249,24 Cash Value 1,688,77 2,72,667 Page 17 of 17