EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
The EIS PIU Hybrid
A capital gains framework with indexed floor protection — built on three disciplines, grounded in settled law, zero administrative complexity for the holdco.
Where Things Stand
  • Norwest confirmed Steps 3 and 6 on April 14, 2026
  • The LLC conversion and PIU grants are already in their structure
  • Three details remain to be locked
  • This deck explains the full architecture and why it is worth the effort

Built on financial modeling, tax law, and trust and preservation law. This is not a creative financial product. It is a wealth preservation architecture.
EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
What Is Fixed. What Is Not. What This Structure Protects.
What Is Fixed at Close
The phantom stock tax event at close is a fixed cost based on agreements signed in 2025. Combined effective rates range from 43% to 55% depending on state. This cannot be restructured pre-close without triggering Section 409A penalties. Accept it. Plan for it. Move on.
What Happened on April 14
Norwest confirmed the LLC conversion as Step 3 and PIU grants through the management holdco as Step 6. The tax distribution clause was confirmed in the Operating Agreement. The structure the management team needs is already in Norwest's proposal. Three details remain to be locked.
What This Deck Addresses
The indexed investment floor — how it works, why it sits outside the holdco, why it introduces zero administrative complexity, and why it delivers $25.07M in aggregate retained wealth across the four holders at a 2x exit.

The Day 1 tax cost is fixed. Everything after close is not. This deck is about protecting everything that comes after.
EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
Why This Structure Can Be Trusted
Three disciplines working together — each independently rigorous, collectively decisive.
Financial Modeling
Redpath-verified blended tax rates for all four holders — Virginia, California, Wisconsin, and Minnesota. Model v1.5 independently audited across 10 test scenarios including edge cases. Zero formula errors. Every number traces to a source document.
  • Rajeev Joshi: +$10.69M
  • Karl Curtis: +$6.02M
  • Jeffry Eiselt: +$5.51M
  • Steven Meyer: +$2.85M
  • Combined: +$25.07M at 2x exit
Tax Law
Four authoritative legal anchors govern this structure completely.
  • IRS Rev. Proc. 93-27 / 2001-43 — PIU Safe Harbor
  • ES NPA Holding LLC v. Commissioner — Tax Court May 2023
  • IRC Section 83 — 83(b) election mechanics
  • Section 1061 TCJA — 36-month holding period
All four citations are well established in PE transaction practice.
Trust & Preservation Law
Estate planning benefit estimated at 20–30% of second bite appreciation. Two mechanisms: valuation discounts for lack of marketability and lack of control on closely held interests, typically 20–35%. Appreciation inside trust or LLC structure escapes estate tax entirely.
Each holder needs individual estate counsel. Present as a range — not a guarantee.

These three disciplines working together is what makes the PIU Hybrid more than a tax strategy. It is a wealth preservation architecture built on settled law.
EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
The Complexity Concern — Resolved
What sounded complicated and what is actually required are two very different things.
What Raised the Concern
The hybrid model appeared to require managing an indexed investment position inside the holdco — tracking returns, allocating gains, reporting on a financial product that varies by individual holder. That would be genuinely complex. The concern was legitimate.
What the Structure Actually Requires
The indexed investment position does NOT sit inside the holdco. It sits entirely on each individual holder's personal side — completely separate from the holdco structure. The holdco manages exactly one thing: PIU grants through the management holdco at the $186M benchmark. The two sides never interact.
What the Holdco Manages
PIU grants at $186M through the holdco. Standard. Clean. Already in Step 6.
What Sits on the Individual Side
Indexed investment. Personal decision. Personal advisor. Never appears in the holdco's documents.
Administrative Complexity Introduced
Zero. Administrative scope did not change. It was never going to.
EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
One Structure. Two Sides.
The holdco manages one thing. Everything else is on the individual side. The two sides never interact.
Holdco Never Sees This
Individual Holder Side
50% of the rollover. Personal financial decision. Compounds at approximately 10% per year, independent of company performance, the holdco structure, or exit multiple.
  • Works at 1x exit. Works at 2x. Works at 3x.
  • This is the floor — it is always working
  • Principal returns tax free
  • Only the gain is taxed at capital gains rates
This Is All the Holdco Manages
Management Holdco Side
50% of the rollover. PIU equity grants. Benchmark set at $186M enterprise value. Holders participate only in growth above $186M.
  • At 1x exit: PIU appreciation = $0 — correct by design
  • At 2x exit: appreciation flows at ~24% capital gains
  • At 3x exit: significant upside above hurdle
  • The holdco baseline is fully protected

The holdco issues PIUs at the $186M benchmark. That is its entire scope. The indexed investment sits on the individual holder's personal side and never appears in any holdco document, operation, or reporting.
EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
The Floor and the Upside — Every Scenario
The model works at 1x. It works at 2x. It works at 3x. — Karl Curtis shown as example (California, 10% interest, 52.65% blended rate)
1× Flat Exit
PIU equity appreciation: $0.00M — hurdle not exceeded, correct by design
Indexed half gain: $1.78M — compounding regardless
CG tax paid: $0.64M — only on FIA gain, principal tax free
2nd bite net: $6.99M
Advantage over Option 1: +$7.17M
The indexed floor delivered even when the company did not grow.
2× Exit — Base Case
PIU equity appreciation: $2.92M — company doubled above hurdle
Indexed half gain: $1.78M — still compounding
CG tax paid: $1.68M — only on combined gains, not principal
2nd bite net: $8.87M
Advantage over Option 1: +$6.02M
Both halves delivering. Capital gains rate of 24% instead of 52.65% ordinary income.
3× Exit — Strong
PIU equity appreciation: $5.84M — significant upside above hurdle
Indexed half gain: $1.78M — still compounding
CG tax paid: $2.72M — only on combined gains, not principal
2nd bite net: $10.75M
Advantage over Option 1: +$4.87M
PIU equity accelerates significantly. Tax treatment favorable at every multiple.

No scenario exists where Option 1 beats the PIU Hybrid. The floor protects the downside. The PIU rewards the upside. The tax treatment is better in every case.
EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
Four Holders. Four Individual Elections.
No uniformity required. Each holder chooses their rollover percentage independently. The holdco accommodates individual elections at the individual level.
Rajeev Joshi — Virginia | 20% Interest | 45.1% Blended Rate
Redemption value: $37.2M · Tax at close: $16.78M — fixed
PIU Hybrid advantage at 2x: +$10.69M
Current preference: PIU structure at 30% rollover
Aligned
Karl Curtis — California | 10% Interest | 52.65% Blended Rate
Redemption value: $18.6M · Tax at close: $9.79M — fixed
PIU Hybrid advantage at 2x: +$6.02M
Current preference: Option 1 common equity at 30% rollover

Choosing Option 1 costs $6.02M versus the PIU Hybrid at the same rollover percentage. His election to make.
Jeffry Eiselt — Wisconsin | 10% Interest | 47.0% Blended Rate
Redemption value: $18.6M · Tax at close: $8.74M — fixed
PIU Hybrid advantage at 2x: +$5.51M
Current preference: Persuadable — awaiting menu from Norwest
Needs Individual Numbers Presented
Steven Meyer — Minnesota | 5% Interest | 49.2% Blended Rate
Redemption value: $9.3M · Tax at close: $4.58M — fixed
PIU Hybrid advantage at 2x: +$2.85M
Current preference: Persuadable — awaiting menu from Norwest
Needs Individual Numbers Presented

Combined advantage all four holders at 2x exit: +$25.07M · Combined Day 1 taxes: $39.89M — fixed regardless of structure. The structure protects the $25M. Nothing protects the $39M. That is the entire conversation.
EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
Why S-Corp Outperforms W-2 — For Every Holder Who Wants It
The W-2 argument is rational. The math argues otherwise. Here is why.
Why W-2 Makes Sense on the Surface
Norwest already has payroll infrastructure in place. Accountants are managing it. Staying on W-2 means zero new responsibilities for the holder and zero learning curve. That is a completely rational comfort position and we heard it clearly.
Why the Math Changes Everything
The W-2 path leaves $208,000 per year on the table at a $400,000 income level — before the PIU second bite is even counted. Over a five-year hold period that is over $1,000,000 in additional retained wealth per holder. The S-Corp captures that through eight legal mechanisms the IRS specifically designed for this situation.
SE Tax Savings — K-1 Split
$23,000 — $60,000 per year
No FICA on distributions above the reasonable salary. W-2 taxes every dollar. The K-1 split does not.
Augusta Rule — IRC 280A
$21,000 — $35,000 per year
Rent your personal residence to the S-Corp up to 14 days per year. Tax free to you. Fully deductible to the S-Corp.
Accountable Plan
$10,000 — $30,000 per year
Home office, vehicle, technology, phone, board meeting travel. Tax free reimbursements. Dollar for dollar elimination of after-tax personal expenses.
Health Reimbursement Account
$15,000 — $25,000 per year
Medical, dental, vision for the entire family. Tax free to the individual. Fully deductible to the S-Corp.
Solo 401k Traditional and Roth
$43,000 — $66,000 per year
Employee plus employer contributions up to $66,000 annually. Traditional reduces taxable income today. Roth grows tax free forever.
Golden Roth — Mega Backdoor
$40,000 — $50,000 per year
After-tax contributions converted immediately to Roth. Builds a permanently tax-free wealth pool alongside the PIU Hybrid compounding independently for five years.
Hiring Your Children — IRC Section 73
$13,850 per child tax free
Under 18 employed by parent-owned S-Corp — no Social Security or Medicare tax. First $13,850 tax free per child. S-Corp deducts the wages.
Business Deductions
$5,000 — $15,000 per year
Technology, professional development, vehicle, liability insurance, legal fees, home office. All legitimate. All deductible before distributions flow.
Annual S-Corp cost: $5,000 — $8,500 · Return on cost: 8x to 12x every year
What changes for the holdco
One thing only. The K-1 flows to each holder's S-Corp instead of directly to the individual. That is one address change. Nothing else changes for the holdco, Norwest, or the operating company.
What each holder does
Establishes their own S-Corp. Hires Smart Life Financial as the coordinating firm. Makes their own elections. Zero burden on Norwest.
What Smart Life Financial does
Structures each S-Corp correctly from day one. Files all returns. Ensures compliance. Coordinates with Norwest. Keeps every holder calibrated and protected. One firm. Four holders. One relationship.

This is not a complicated structure. Millions of executives and business owners use it every day. The complication is not setting it up — the right firm makes that completely straightforward. The real cost is leaving $208,000 per year on the table because W-2 felt more familiar. Over five years that is over $1,000,000 per holder before the PIU second bite is even counted.
EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
Status After April 14
Three confirmed. Three remaining. Target — early next week.
✓ Confirmed on April 14, 2026
  • LLC Conversion — Step 3 of Norwest's structure — confirmed
  • PIU Grants through Management Holdco — Step 6 — confirmed
  • Mandatory Tax Distribution Clause — confirmed on the call
These were the three original Monday asks. All three confirmed.
⚠ Still to Finalize Before All-Hands
  1. Benchmark locked at $186M specifically — Step 6 language says "reflecting the Company's valuation" — vague — need specific number in definitive documents
  1. 83(b) election on closing checklist with named owner — 30-day hard deadline from PIU grant date — four separate filings — Nick owns this
  1. Menu of approved rollover options — Norwest defines the choices — four holders make individual elections — all-hands this week
EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
The Legal Foundation
Four citations. All settled. All in favor of this structure.
1
IRS Rev. Proc. 93-27 / 2001-43
The formal Safe Harbor protecting PIU grants from taxation at issuance. Three requirements — no predictable income stream, two-year holding period, not a publicly traded partnership. EIS Newco meets all three automatically. This is the foundational authority for the entire structure.
2
ES NPA Holding LLC v. Commissioner — Tax Court May 2023
Resolved the last remaining legal question about PIUs in multi-tiered PE holding structures in favor of the management team. Directly applicable to the EIS management holdco structure. Well established in PE transaction practice.
3
IRC Section 83 — 83(b) Election
Fixes tax at grant-date fair market value — $0 for a Safe Harbor PIU. Zero tax at grant. Zero tax as units vest. Must be physically filed within 30 calendar days of grant. No exceptions. No extensions. Nick owns this item. Four separate filings required — one per holder.
4
Section 1061 — Tax Cuts and Jobs Act
Extended the required holding period for long-term capital gains treatment on partnership interests from one year to three years. PIUs granted at close must be held through at least month 36 to secure the 20% long-term capital gains rate. For EIS this means no dispositions before month 36.
EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
The 50/50 Split Explained
How the PIU Hybrid actually works — the rollover splits into two positions. 50% into indexed investment. 50% into PIU equity. Both working from day one.
Indexed Investment Half — The Floor
50% of the rollover. Compounds at approximately 10% per year. Independent of company performance, exit multiple, or the holdco structure. Sits entirely on the individual holder's personal side. Never enters the holdco.
  • At 1x exit — this half still delivered five years of compounding
  • At 2x exit — compounding plus PIU upside added
  • Principal returns to holder tax free
  • Only the compounding gain taxed at capital gains rates
PIU Equity Half — The Upside
50% of the rollover as PIU grants. Benchmark set at $186M — holder participates only above this level. Flows through the management holdco. This is the only piece the holdco manages.
  • At 1x exit — PIU appreciation = $0. Hurdle not exceeded. Correct by design.
  • At 2x exit — significant appreciation at capital gains rates
  • At 3x exit — accelerating upside above hurdle
Karl Curtis example. CG tax applies only to gains — principal returned tax free in all scenarios.

The PIU Hybrid wins at every exit multiple. The floor is always working. The upside captures every multiple above the hurdle. The tax treatment is capital gains in every scenario. This is the only structure that provides both.
EIS MANAGEMENT COMPENSATION · APRIL 2026 · CONFIDENTIAL
The Structure Is Clean. The Return Is Real. Let Us Finish It.
The Day 1 tax cost is fixed at $39.89M across the four holders. It is the price of a $186 million outcome. Nothing changes it. No one is asking to change it. The question has never been whether to pay it. The question is whether to protect the $25.07M that comes after it. The PIU Hybrid does that. The holdco manages one structure. The indexed floor sits outside. Three details remain. Let us lock them and close this.
1
Benchmark — $186M in Definitive Documents
"Can we confirm the PIU benchmark is set at $186M enterprise value — not subject to post-close adjustment?"
2
83(b) Election on Closing Checklist — Named Owner
"30-day hard deadline from grant. Four separate filings. Needs a named owner before the all-hands."
3
Menu of Approved Options Defined
"Four holders make individual elections. No uniformity required. Norwest defines the menu."

Built on financial modeling, tax law, and trust and preservation law. Grounded in settled authority. Verified by independent audit. Zero administrative complexity for the holdco. This is the right structure. Let us get it done.
EIS Management Compensation · April 2026 · Confidential · Model v1.5 · All formulas independently audited