EFTA01141475.pdf

SPLIT-DOLLAR PROPOSAL of McDermott Will & Emery LLP November 14, 2013 EFTA01141475 Step One: Distribution of BFP Interests (or a cash Loan) to 2011 Trusts The LDB 2011 LLC makes a pro-rata distribution of interests in Black Family Partners, L.P. ("BFP") 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. The value of the aggregate distribution will equal the purchase price of AIF IV Management Inc. ("AIF IV"). In the alternative, each of the 2011 Trusts could borrow the purchase money from the LDB 2011 LLC. Pro rata distribution of BFP Interests BEB 2011 Trust Valued at $12.2 million JMB 2011Trust LDB 2011 LLC ASB 2011Trust VRB 2011 Trust Or 2011Trusts borrow 12.2 million from LDB 2011 LLC EFTA01141476 Step Two: Leon Sells AIF IV Management Inc. to 2011 Trusts Each of the the 2011 Trusts purchases from Leon a 25% interest in AIF IV. Value determined by using cash surrender value of the policies ($24,752,474*) less the Note payable to BFP ($7,347,076 plus interest) and applying a fractional interest discount (e.g. 30%). No value is attributed to AIF IV's limited partner interest in BFP. BFP interests valued at roughly $12.2 million BEB 2011Trust-25% Leon JMB 2011Trust 25% < Sole stock- ASB 2011 Trust-25% r holder VRB 2011Trust-25% Sells S-Corp Sock Owns Rights under split-dollar agreements, non-economic LP interest in BFP and Note payable to BFP *As of September 30, 2013 EFTA01141477 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 the Leon D. Black 1999 Life Insurance 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. AIF IV now exercises its right to require Trust #1 and Trust #2 to transfer ownership of the policies to AIF IV. Shareholders BEB 2011 Trust JMB 2011 Trust ASB 2011 Trust VRB 2011Trust 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 $10,461,330* of$12,492,285* *As of September 30, 2013 EFTA01141478 Step Four: AIF IV Surrenders Single Life Policies. AIF IV surrenders the single life policies received from Trust #1 and 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 I Black Family Partners, $8,021,868.53* AIF IV surrenders CSV paid to AIF IV single life policies Insurance Carriers *As of September 30, 2013 EFTA01141479 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. Shareholders BEB 2011 Trust Owns policies on Joint lives of Debra and JMB 2011 Trust Leon: $100 MM face ASB 2011 Trust Makes value; $16,730,604 VRB 2011 Trust contributions for CSV* premium payments or use CSV Could distribute funds to Black Family 2011 Trusts for premium 2006 Trust payments. *As of September 30, 2013 EFTA01141480