ii Black Family Partners Apollo Management 9 West 57. Street New York, New York 10019 Ada Ca To: From: Date: Re: Leon D. Black Ada Clapp December 11, 2013 Status of Split Dollar Insurance Proposals This memorandum provides a summary of the history of your split dollar arrangements and the status of the proposals to unwind them. Attached is a chart comparing the various proposals. A. Background. In 1999, you created two insurance trusts (Trust #1 and Trust #2, collectively, the "Trusts") with Norman Brownstein as Trustee. Trust #1 purchased $50 million of insurance on your life. Trust #2 purchased $100 million of insurance on the joint lives of you and Debra. Thereafter, the Trustee entered into a split dollar agreement (the "Agreements") between each Trust and AIF IV Management Inc. ("AIF"), as your employer. I The Trusts may terminate the Agreements at any time. AIF has no right to terminate. Under the terms of the Agreements, each year, AIF must pay the premiums on all policies (the "Premiums"). You or the Trusts must repay AIF for the annual cost of current life insurance (the "Employee's Portion"). AIF has paid Premiums of roughly $1.8 million each year. Each year the Employee Portion is taxed to you as both compensation income and a deemed gift to the Trusts. For 2012, the Employee Portion was $104,132. When the policies mature by reason of the death of the insured(s), AIF is entitled to a refund of the Premiums advanced. If, however, the Agreements terminate prior to the death of the insured(s) (e.g. because the Trusts elect to terminate them), the Trusts must repay AIF the lesser of Premiums advanced or the then cash surrender values of the policies.2 To secure the repayment obligation, the Trusts assigned their insurance policies to AIF as collateral. I As you know, AIF (a subchapter S corporation) was formed in 1997 as the original general partner of Apollo 2 As of September 30, 2013, (i) Premiums advanced to Trust #1 tot