EFTA02672197.pdf

SPLIT-DOLLAR PROPOSAL of McDermott Will & Emery LLP November 18, 2013 EFTA_R1_01945046 EFTA02672197 Step One: Distribution of BFP Interests (or a cash Loan) to 2011 Trusts The APO1 Trust distributes (decants) sufficient assets to each of the BEB 2011 Trust, the JMB 2011 Trust, the ASB 2011 Trust and the VRB 2011 Trust (the "2011 Trusts") under the Black 2011 Family Trust Agreement to enable it to purchase 25% of the stock of AIF IV Management Inc. ("AIF IV") from Leon. Distribution of $12.2 million- BEB 2011Trust 25% to each trust JMB 2011Trust ASB 2011 Trust VRB 2011 Trust Trustees: Barry Cohen, John Trustees: Debra Black, Barry Cohen, Hannan, Richard Ressler, John Hannan, Non-Administrative and after Leon's death, Trustees; US Trust Company of Debra Black. Delaware, Administrative Trustee EFTA_R1_01945047 EFTA02672198 Stet) Two: Leon Sells AIF IV Management Inc. to 2011 Trusts For tax reasons, Debra resigns as Trustee from the 2011 Trusts. Each of the the 2011 Trusts purchases from Leon 25% of the stock of AIF IV, valued using CSV of the policies ($24,752,474*) less the Note payable ($7,347,076 plus interest) to Black Family Partners, L.P. ("BFP") and applying a fractional interest discount (e.g. 30%). No value is attributed to AIF IV's limited partner interest in BFP. $12.2 million cash BEB 2011Trust-25% Leon 1MB 2011Trust-25% Sole stock- MB 2011Trust-25% Sells S-Corp Sock holder VRB 2011Trust-25% Debra Resigns as Trustee. Trustees: Barry Cohen, John Hannan, Non-Administrative Trustees, US Trust Company of Delaware, Administrative Owns Rights under split-dollar agreements, Trustee non-economic LP interest in BFP and Note payable to BFP • As of September 30, 2013 EFTA_R1_01945048 EFTA02672199 Step Three: Termination of Split-Dollar Agreements Because AIF IV's business operations ceased in 2007, the split-dollar agreements between it and the Leon D. Black 1999 Life Insurance Trust #1("Trust #1") and Trust #2 ("Trust #2") terminated at that time. AIV IV continued to honor the agreements but had the right at any time to take ownership of the policies from Trust #1 and Trust #2. AIF IV now exercises that right. Shareholders BEB 2011 Trust JMB 2011Trust AIF IV ASB 2011 Trust VRB 2011 Trust Transfers policies on Leon's life Transfers policies on lives of Debra $50 million death benefit; and Leon: $100 million death benefit; $8,021,868 CSV* $16,730,604 CSV* Owes premium Owes premium advances of Trust #1 Trust #2 advances $in/461,33os of$12,492,285* • As of September 30, 2013 EFTA_R1_01945049 EFTA02672200 Step Four: AIF IV Surrenders Single Life Policies. AIF IV surrenders the single life policies received from Trust #1and receives the cash surrender value. AIF IV uses the funds to repay BFP for premium loans. Repays premium loans of $7.3 million plus interest Black Family Partners, L.P. $8,021,868.53* AIF IV surrenders CSV paid to AIF IV single life policies Insurance Carriers 'As of September 30, 2013 EFTA_R1_01945050 EFTA02672201 Step Five: AIF IV Creates New LLC for Two Life Policies. AIF IV creates a single member LLC ("Newco") and funds it with the second-to-die insurance policies it received from Trust #2. Thereafter, AIF IV liquidates and transfers all assets, including the interests in Newco, to its shareholders. Transfers policies on lives of Debra and Leon: $100 million death benefit: $16,730,604 Lw On Liquidation, transfers Newco, LP Shareholders interest in BFP and all remaining assets BEB 2011 Trust JMB 2011 Trust ASB 2011. Trust VRB 2011 Trust 'As of September 30, 2013 EFTA_R1_01945051 EFTA02672202 Step Five: Retain or Surrender Second-to-die Insurance Policies AIF IV will consider whether to retain or surrender any or all of the five insurance polices on the joint lives of Leon and Debra it received from Trust #2. Owns policies on Joint Shareholders BEB 2011Trust lives of Debra and JMB 2011Trust Leon: $100 MM face Newco LLC Capital calls for ASB 2011Trust value; $16,730,604 premium VRB 2011Trust CSV• payments or use CSV Could distribute funds to 2011 Trusts for premium payments *As of September 30, 2013 EFTA_R1_01945052 EFTA02672203