Charles H. Addis and Cindi Addis - Page 7




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               7.   Rights Under the Commercial Union Life Insurance Policy           
                    a.   NHF’s Rights                                                 
               The life insurance policy had an initial death benefit of              
          $991,789.  Under the DBOA, NHF became entitled to $557,280 of               
          that amount when it paid the $36,000 premium to Commercial Union            
          Life in 1997.  NHF’s portion of the death benefit was fixed at              
          $557,280, even if the total death benefit increased under the               
          policy.                                                                     
               Under the DBOA, NHF was guaranteed to receive either:                  
          (1) $557,280 when Mrs. Addis died; or (2) the termination account           
          or cash surrender value of the insurance policy if the policy was           
          terminated before Mrs. Addis died.  NHF was guaranteed to receive           
          the termination account value upon termination of the policy,               
          i.e., the cumulative amount of premiums paid by NHF, less the               
          cumulative cost of insurance that NHF was charged for its share             
          of the death benefit.                                                       
                    b.   The Addis Family Trust’s Rights                              
               In 1997, petitioners’ family trust was entitled to receive             
          $434,5094 of the death benefit.  Under the DBOA, the Addis family           
          trust could borrow against the life insurance policy only to the            



               4  Lawrence D. Cronin, the president of Cronin Insurance               
          Services, testified that petitioners’ family trust was entitled             
          to receive $424,509.  The initial death benefit was $991,789.               
          NHF was entitled to receive $557,280 of that amount, and                    
          petitioners’ family trust was entitled to receive the remainder.            
          The difference between $991,789 and $557,280 is $434,509.                   




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