EFTA02353963.pdf

From: Halperin, Alan S Sent: Sunday, December 13, 2015 5:28 PM To: jeffrey E.; Brad Wechsler; Ada Clapp Cc: Finkelstein, Brad Subject: Re: Thanks. Our finance partner will review comments. As for the interest rate,=please recall history: you suggested following terms of B of A loan, which=included reference to LIBOR plus; we wanted to make sure that the amount w=s no less than AFR; we wanted a cap in case LIBOR rose significantly; and you instructed us to remove cap.=/div> Alan S. Halperin I Partner Paul, Weiss, Rifkind, Wharton & Garrison =LP 1285 Avenue of the Americas I New York,&=bsp;NY 10019-6064 (Direct Phone) I (Direct Fax) I www.paulweiss.com From: jeffrey E. Sent: Sunday, December 13, 2015 11:26 AM To: Brad Wechsler; Ada Clapp; Halperin, Alan S Subject: my thoughts on the promissory note "Event of Default" (a) before there is a defa=lt for a failure to perform, a 5 day period runs from the occurrence =f any failure to perform or observe any covenant or agreement contained in=the note. There is no obligation to give notice of the failure and an opportunity to cure in 5 days. Just a f=ilure to perform and then a default if not corrected within 5 days of the =ailure. Notice by the Noteholder of the Payor's failure should=be required first and then a 5 day cure period. (b) the language of this E=ent of Default is as follows: "Any representation, warranty or =tatement made by or on behalf of Payor in this note or in any other document delivere= in connection [t]herewith shall prove to have been incorrect in any m=terial respect when made or at any future date." I have issues with all the underline= language. Who is making statements on behalf of Payor? What o=her documents are being referred to? The representations, warranties= and statements should be required to be "expressly made in writing" otherwise arguments about implied reps, warranties and s=atements might be made. Finally, making it a breach when any represe=tation, warranty or statement becomes incorrect at any future date is too =pen-ended. (d) Making it an event of =efault in this provision if the note ceases to be "in full, force and=effect, valid or enforceable", though not unheard of, obviously limit= the ability to defend against an enforcement action. "Interest Rate". Why is it the greater of the Long Ter= AFR or LIBOR plus .25%. Why not just the long Term AFR? "Note Obligations" includes "any indemnification obl=gations under this Note." I did not see any "indemnifica=ion" under the Note. I did see a requirement to pay enforcemen= costs, but that is not an "indemnification". EFTA_R1_01335067 EFTA02353963 Section 3.2(b) - Requires the Payor to notify the Noteholder promptly =ut in any event no later than 5 business days upon the Payor becoming awar= of "any material adverse change in Payor's financial position.&=8221; What is a material adverse change? Too open ended .!=br> Section 3.4 also makes reference to the Initial Net Worth statement pr=vided pursuant to Section 5.1 and requires the Payor, as of December 31 =f each year, to maintain a Net Worth of not less than 110% of the then out=tanding principal amount. It defines net worth as total assets minus=leons total liabilities.? Section 3.5 prohibits the Payor from incurring "any liens or =ny debt for bored money if the incurrence of any such debt or liens would =ave a material adverse effect on Payor's ability to make the payment= contemplated by this Note as such payments become due." "Material Adverse Effect" is too =ague and open-ended. Section 3.6 requires Payor to "furnish Noteholder with such a=ditional information as Noteholder shall reasonably request in order to en=ble Noteholder to determine whether the terms, covenants, provisions and c=nditions of this Note have been complied with by Payor." This seems like a very broad license to re=uire Leon to provide info, particularly financial info, at any time. =This is especially true when terms like "material adverse effect"= are used to trigger reporting obligations and violations of debt covenants. Section 6.2. Waivers of presentment, demand, protest, notice of =ntent to accelerate, notice of acceleration of maturity, notice of protest= notice of non-payment, except as are expressly provided in the Note are n=t unusual or overreaching, but they do limit Leon's defenses to enforcement actions. The consent i= Section 6.2(b) to "all waivers of any term hereof", is probably intended a= a consent to the Noteholder waiving an enforcement term against the Payor= but could be interpreted to mean that Payor even consents to waivers of a=y term that provides the Payor with any protections like prior notice, for example. This should be modified to make it c=ear that it is only a consent to a waiver by the Noteholder of any enforcement term of the Note. Section 6.3 permits an assignment of the Note by the Noteholder withou= consent by the Payor. Leon's consent should be required if th= Notheolder wants to assign the note. Section 6.4 makes Leon responsible to pay any stamp or oth=r documentary taxes that are due in connection with the execution or deliv=ry of this Note. What are they? If there are none, then delete=this provision. Section 6.5 seems to make the Payor liable for the costs and expenses =f the Noteholder's "attempted enforcement" of the Note. That could be=read to make Leon liable even if the Noteholder improperly commenced an en=orcement action and Leon won that case. It should only be payable i= the Noteholder is the prevailing party. Moreover why not make this a reciprocal provision, so that if the Noteholder commences =ction and the Payor is the prevailing party then the Noteholder pays cost =nd expenses? Also, the Note provides that the Payor should pay the c=sts and expenses incurred in any workout? Why? Section 6.7 Jury Trial waiver is an attempt to exclude a jury from hea=ing a dispute over the Note because the amounts are so big, and that might=impact the ability to get a proper result. Why not arbitration? please note The information contained in this communication is confidential, may be attorney-client privileged, may constitute inside information, and is intended only for the use of the addressee. 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