Common use of Opportunity Cost Clause in Contracts

Opportunity Cost. The Opportunity Cost for any Plan Year shall be calculated by multiplying (a) the sum of (i) the total amount of premiums set forth in the insurance policies described above, (ii) the amount of any Index Benefit (described at subparagraph b above), and (iii) the amount of all previous years after-tax Opportunity Costs; by (b) the average annualized after-tax cost of funds calculated using a one-year U.S. Treasury ▇▇▇▇ as published in the Wall Street Journal. The applicable tax rate used to calculate the Opportunity Cost shall be the Bank’s marginal tax rate until the Director’s Retirement, or other termination of service (including a Change in Control). Thereafter, the Opportunity Cost shall be calculated with the assumption of a marginal forty-two percent (42%) corporate tax rate each year regardless of whether the actual marginal tax rate of the Bank is higher or lower. [n] End of Year [A] Cash Surrender Value of Life Insurance Policy [B] Index [Annual Policy IncomeAn-An-1] [C] Opportunity Cost A0 = premium A0+C n-1x.05x (1-42%) [D] Annual Benefit B-C Cumulative Benefit D+Dn-1 0 $1,000,000 - - - - 1 $1,050,000 $50,000 $29,000 $21,000 $21,000 2 $1,102,500 $52,500 $29,841 $22,659 $43,659 3 $1,157,625 $55,125 $30,706 $24,419 $68,078 Assumptions: Initial Insurance = $1,000,000 Effective Tax Rate = 42% One Year US Treasury Yield = 5%

Opportunity Cost. The Opportunity Cost for any Plan Year shall be calculated by multiplying (a) the sum of (i) the total amount of premiums set forth in the insurance policies described above, (ii) the amount of any Index Benefit Benefits (described at subparagraph b above), and (iii) the amount of all previous years after-tax Opportunity Costs; by (b) the average annualized after-tax cost of funds calculated using a one-year U.S. Treasury ▇▇▇▇ Bill as published in i▇ the Wall Street Journal. The applicable tax rate used to calculate the Opportunity Cost shall be the Bank’s Employer's marginal tax rate until the Director’s Executive's Retirement, or other termination of service (including a Change in Control). Thereafter, the Opportunity Cost shall be calculated with the assumption of a marginal forty-two percent (42%) corporate tax rate each year regardless of whether the actual marginal tax rate of the Bank Employer is higher or lower. EXAMPLE INDEX BENEFITS [n] End of Year [A] Cash Surrender Index Opportunity Annual Cumulative Year Value of Life [Annual Cost Benefit Benefit Insurance Policy [Policy A0=premium B-C D+Dn-1 Income] Index [Annual Policy IncomeAnA0+cn-1x.05x An-An-1] [C] Opportunity Cost A0 = premium A0+C n-1x.05x An-1 (1-42%) [D] Annual Benefit B-C Cumulative Benefit D+Dn-1 0 $1,000,000 - - - - -- -- -- -- 1 $1,050,000 $50,000 $29,000 $21,000 $21,000 2 $1,102,500 $52,500 $29,841 29,840 $22,659 22,650 $43,659 3 $1,157,625 1,157,620 $55,125 55,120 $30,706 30,700 $24,419 24,410 $68,078 . . . Assumptions: Initial Insurance = $1,000,000 Effective Tax Rate = 42% One Year US Treasury Yield = 5%

Opportunity Cost. The Opportunity Cost for any Plan Year shall be calculated by multiplying (a) the sum of (i) the total amount of premiums set forth in the insurance policies described above, (ii) the amount of any Index Benefit Benefits (described at subparagraph b above), and (iii) the amount of all previous years after-tax Opportunity Costs; by (b) the average annualized after-tax cost of funds calculated using a one-year U.S. Treasury ▇▇Bi▇▇ as ▇s published in the Wall Street Journal. The applicable tax rate used to calculate the Opportunity Cost shall be the Bank’s Employer's marginal tax rate until the Director’s Executive's Retirement, or other termination of service (including a Change in Control). Thereafter, the Opportunity Cost shall be calculated with the assumption of a marginal forty-two percent (42%) corporate tax rate each year regardless of whether the actual marginal tax rate of the Bank Employer is higher or lower. EXAMPLE INDEX BENEFITS [n] End of Year [A] Cash Surrender Index Opportunity Annual Cumulative Year Value of Life [Annual Cost Benefit Benefit Insurance Policy [Policy A0=premium B-C D+Dn-1 Income] Index [Annual Policy IncomeAnA0+Cn-1x.05x An-An-1] [C] Opportunity Cost A0 = premium A0+C n-1x.05x An-1 (1-42%) [D] Annual Benefit B-C Cumulative Benefit D+Dn-1 0 $1,000,000 - - - - -- -- -- -- 1 $1,050,000 $50,000 $29,000 $21,000 $21,000 2 $1,102,500 $52,500 $29,841 29,840 $22,659 22,650 $43,659 3 $1,157,625 1,157,620 $55,125 55,120 $30,706 30,700 $24,419 24,410 $68,078 . . . Assumptions: Initial Insurance = $1,000,000 Effective Tax Rate = 42% One Year US Treasury Yield = 5%% 104

Opportunity Cost. The Opportunity Cost for any Plan Year shall be calculated by multiplying (a) the sum of (i) the total amount of premiums set forth in the insurance policies described above, (ii) the amount of any Index Benefit (described at subparagraph b above), and (iii) the amount of all previous years after-tax Opportunity Costs; by (b) the average annualized after-tax cost of funds calculated using a one-year U.S. Treasury ▇▇▇▇ as published in the Wall Street Journal. The applicable tax rate used to calculate the Opportunity Cost shall be the Bank’s marginal tax rate until the Director’s Retirement, or other termination of service (including a Change in Control). Thereafter, the Opportunity Cost shall be calculated with the assumption of a marginal forty-two percent (42%) corporate tax rate each year regardless of whether the actual marginal tax rate of the Bank is higher or lower. [n] End of Year [A] Cash Surrender Value of Life Insurance Policy [B] Index [Annual Policy IncomeAnIncome] An-An-1] An-1 [C] Opportunity Cost A0 Ao = premium A0+C n-1x.05x Ao+Cn-1 x 0.5x (1-42%) [D] Annual Benefit B-C Cumulative Benefit D+Dn-1 0 $1,000,000 - - - - — — — — 1 $1,050,000 $50,000 $29,000 $21,000 $21,000 2 $1,102,500 $52,500 $29,841 $22,659 $43,659 3 $1,157,625 $55,125 $30,706 $24,419 $68,078 . . . Assumptions: Initial Insurance = $1,000,000 Effective Tax Rate = 42% One Year US Treasury Yield = 5%