EFTA01925919.pdf

To: Jeffrey [email protected]] From: Richard Joslin Sent Mon 5/5/2014 11:22:49 AM Subject FW: BofA Financing - PW Analysis - privileged and confidential - attorney work product Who is point person for art loan? From: Finkelstein, Brad J [mailto Sent: Friday, May 02, 2014 5:52 PM To: Richard Joslin Cc: Halperin, Alan S Subject: BofA Financing - PW Analysis - privileged and confidential - attorney work product Richard: Please see below for my thoughts on the existing loan documents. There are a variety of language changes I would like to make if given the chance, but below are the most important items. Please let me know when you would like to discuss. Best, Brad Major items we should change, that the Banks should be Ok with, and are not risky for us to bring up 1. Bank should not permitted to assign or participate out the Loans, absent Borrower's prior written consent (not to be unreasonably withheld). We would lose our consent right upon a payment or bankruptcy event of default. There should be a separate "blacklist" of 5 or so hedge funds (Apollo has a standing list) that should EFTA_R1_00371930 EFTA01925919  never be able to acquire the Loans under any circumstances. Existing documents don't have any constraint on Bank transferring Loans. Major items we should consider changing, but are potentially risky to bring up with the Banks given our potential non-compliance in the past 1. No ability to move the art outside the U.S. Must give 10 days advance notice prior to any movement of art to a new location. 2. No ability to put the art in storage. Major items we should consider changing, but that the Banks may object to I. Death or legal incapacity of Leon Black is an event of default. Given that the loan is collateralized, we should try to get this out. Wouldn't want to have to do a fire sale of the collateral if the estate doesn't have sufficient liquidity to repay the loan immediately. 2. Bank believing it has insufficient security backing the Loans is an event of default if unremedied 10 days after notice by the Bank. Just a very open-ended, ambiguous provision, especially since we have a specific LTV covenant. 3. Material adverse change in the financial condition of Leon Black or the Guarantor is an event of default. Again, a very open-ended, ambiguous provision, especially since we have a specific net worth covenant. 4. If our collateral value is insufficient (the amount of the Loans cannot exceed 50% of the Collateral value), we need to pledge more collateral. Consider a higher maximum LTV rate. Also, we can pledge non-art collateral to make up a shortfall — EFTA_R1_00371931 EFTA01925920  consider specifying a specific "advance rate" for AGM stock or other collateral that Leon Black might consider pledging to make up a shortfall. Certain minor items we should change, that the Banks should be Ok with, and are not risky for us to bring up I. Late payment charge of 4% should be reduced to 2%. 2. If the Loans are over-collateralized, we cannot ask for a Collateral release other than on a quarterly basis. Should be able to ask for a release at any time we are over- collateralized. Certain minor items we should consider changing, but are potentially risky to bring up with the Banks given our potential non-compliance in the past I. Insurance covenant is very open-ended and requires Bank to approve the specific insurance. There should be a pre-agreed insurance package that is automatically acceptable to Bank. Items to confirm I. Are we ok having the art appraised the art by Sotheby's or Christie's every year? 2. Are we ok with a $450 million net worth covenant? EFTA_R1_00371932 EFTA01925921  IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of(i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Click Here for More Information Brad J. Finkelstein Partner Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenu f the Americas I New York, NY 10019-6064 7 ax) This message is intended only for the use of the Addressee and may contain information that is privileged and confidential. If you are not the intended recipient, you are hereby notified that any dissemination of this communication is strictly prohibited. If you have received this communication in error, please erase all copies of the message and its attachments and notify us immediately. EFTA_R1_00371933 EFTA01925922