EFTA01108985.pdf

LDB 2011 LLC Valuation of a 25% non-managing membership interest As of June 30, 2014 EMPIRE VALUATION CONSULTANTS. uk EFTA01108985  Table of Contents Executive Summary 1 Valuation Standards 1 Sources of Information 2 Business Profile 4 A. Ownership 5 B. Description of Assets and Liabilities 5 C. LDB Agreement Provisions 11 D. PLB Agreement Provisions 13 E. Phaidon Global Agreement Provisions 14 F. Phaidon Agreement Provisions 15 Economic, Capital Markets, and Private Equity Outlooks 16 A. General Economy 17 B. Capital Markets Overview 18 C. Private Equity Industry Outlook 24 D. Fine Art Outlook 28 Valuation Overview 29 A. General Valuation Methods 29 B. Outline of Valuation Proces • 30 Valuation of LDB's Assets and Liabilities 32 A. Valuation of Fixed-Term Fund Interests 32 B. Valuation of Restricted Investments 35 C. Valuation of PLB 38 D. Valuation of Cash, Marketable Securities, Fine Art, and Receivables 40 E. Liabilities 41 Valuation of LDB 2011 LLC 41 A. LDB's Adjusted Book Value 41 B. Investment Company Discount 43 C. Discount for Lack of Marketability 45 EFTA01108986  1. Background 45 2. Restricted Stock Studies — Qualitative Assessment 45 3. Estimated Lack of Marketability Discount - Qualitative Analysis 45 4. Restricted Stock Study Data — Quantitative Assessment 47 5. Summary Findings from the 2013 Discount Study Data 48 6. Quantitative Analysis Based on 2013 Discount Study 48 7. Concluded Discount for Lack of Marketability / Fair Market Value 50 Valuation Summary 51 Valuation Addenda Valuation Exhibits EFTA01108987 EMPIRE VALUATION CONSULTANTS, PRIVATE & CONFIDENTIAL August II, 2015 Alan S. Halperin, Esq. Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas, Suite 3115 New York, NY 10019-6064 Dear Mr. Halperin: You have engaged Empire Valuation Consultants, LLC ("Empire") to estimate the fair market value of a 25% non-managing membership interest (the "Interest") in LDB 2011 LLC ("LDB" or the "Company") as of June 30, 2014 (the "Valuation Date"). It is our understanding that this valuation will be used by you in advising your client for estate planning purposes. For purposes of this report, fair market value is defined in accordance with Treasury Regulations established for income, estate and gift taxes as the price at which ownership interests would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. Executive Summary The estimated fair market value of the Interest as of the Valuation Date is $23,000,000. The primary valuation method employed in the analysis was the adjusted book value method. A full description of how the valuation was performed is provided later in this report. Valuation Standards This report is an Appraisal Report as defined in Standards Rule 10 of The Appraisal Foundation's Uniform Standards of Professional Appraisal Practice ("USPAP"), which New York Boston • Cleveland Rochester • West Hartford EFTA01108988 Alan S. Halperin, Esq. August II, 2015 Page 2 specifically applies to the preparation of valuation reports of business interests. This report has also been prepared in accordance with the American Institute of Certified Public Accountants Statement on Standards for Valuation Services 1: Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset. This appraisal considered all pertinent factors outlined in USPAP Standards Rule 9 and IRS Revenue Ruling 59-60, including, but not limited to, the following: • the nature and history of LDB; • the financial and economic conditions affecting the general economy, the Company, and its industry; • the past results, current operations, and future prospects of LDB; • the earning capacity and dividend-paying capacity of the Company; • the economic benefit to the Company of both its tangible and intangible assets; • the market price of actively traded interests in public entities engaged in the same or similar lines of business as LDB, as well as sales of ownership interests in entities similar to the Company; • the prices, terms, and conditions of past sales of ownership interests in LDB; and • the impact on the value of ownership interests in LDB resulting from the existence of buy-sell and option agreements, investment letter stock restrictions, restrictive shareholders agreements, or other such agreements. Sources of Information Information used in determining the fair market value of the Interest was provided by the documents and sources listed below: • Copies of the Company's internally prepared financial statements for the fiscal years ended December 31, 2011 through 2013 and the six-months ended June 30, 2014; • A copy of LDB's Amended and Restated Limited Liability Company Agreement, dated June 30, 2014 (the "LDB Agreement"); • A copy of the J.P. Morgan brokerage account statement outlining the cash and marketable securities held in the account as of June 30, 2014; EMPIRE VALUATiON CONSULTANTS EFTA01108989 Alan S. Halperin, Esq. August II, 2015 Page 3 • Copies of the 2013 Schedule K-1 for each of the following entities: (1) AIF II, L.P. ("AIF II"); (2) AP SHL Investors, LLC ("AP SHL"); (3) AP Technology Partners, L.P. ("AP Tech"); (4) Apollo Investment Fund, L.P. ("AIF"); (5) Apollo Real Estate Investment Fund, LP ("REIF"); (6) AREIF III Transfer Members, LLC ("REIF III"); (7) AREIF IV Co-Invest, LLC ("REIF IV"); (8) BHM Investors, LLC ("BHM"); (9) Microbes Investors, LLC ("Microbes"); (10) PAM Centre, L.P. ("PAM"); and (11) Viropro Investors, LLC ("Viropro"); • A copy of an internally prepared capital account statement for REIF, REIF, III, and REIF IV; • For LDB's investment in FCI Co-Investors I (A), L.P. ("FCI"), copies of: (1) the June 30, 2014 capital account statement; (2) FCI's amended and restated partnership agreement, dated February 15, 2011; and (3) FCI's audited financial statements for the year ended December 31, 2013. • For LDB's investment in Quadrangle Capital Partners LP ("QCP"), copies of: (1) the June 30, 2014 capital account statement; (2) QCP's amended and restated limited partnership agreement, dated May 23, 2000; and (3) QCP's audited financial statements for the year ended December 31, 2013. • For LDB's investment in Quadrangle (Access) Capital Partners LP ("QACP"), a copy of the June 30, 2014 capital account statement. • For LDB's investment in Quadrangle (Offshore) Capital Partners LP ("QOCP"), a copy of the June 30, 2014 capital account statement. • For LDB's investment in Searchlight Capital, L.P. ("Searchlight"), copies of: (1) the June 30, 2014 capital account statement; (2) Searchlight's second amended and restated limited partnership agreement, dated December 29, 2011; and (3) Searchlight's audited financial statements for the year ended December 31, 2013. • For LDB's investment in Searchlight Capital AIV I, L.P. ("Searchlight AIV"), copies of: (1) the June 30, 2014 capital account statement; and (2) Searchlight AIV's audited financial statements for the year ended December 31, 2013. • A signed copy of the appraisal of a Selected Group of Works (the "Fine Art") held by LDB, prepared by Sotheby's Inc. as of June 23, 2014 (the "Fine Art Appraisal"); • A signed copy of the Valuation Agreement for the Fine Art Appraisal outlining that no blockage discount was applied to the Fine Art included in the Fine Art Appraisal; EMPIREVALUATION CONSULTANTS EFTA01108990 Alan S. Halperin, Esq. August II, 2015 Page 4 • A copy of PLB, LLC's ("PLB") Limited Liability Company Agreement, dated October 2, 2012 (the "PLB Agreement"); • A copy of Phaidon Global, LLC's ("Phaidon Global") Limited Liability Company Agreement, dated August 15, 2013 (the "Phaidon Global Agreement"); • A copy of Phaidon, LLC's ("Phaidon") Limited Liability Company Agreement, dated June 24, 2014 (the "Phaidon Agreement"); • A copy of the valuation report prepared by Empire outlining the fair market value of a 100% controlling interest in Phaidon Press Limited ("Phaidon Limited"), held by LDB through a series of holding companies, with an effective date of June 30, 2014 (the "Phaidon Limited Report"); • Balance sheets as of June 30, 2014 for the following entities: (1) JMWT Bidco LTD ("Bidco"); (2) JMWT Midco LTD ("Midco"); (3) JMWT Topco LTD ("Topco"); (4) JMWT Acquisition LLP ("Acquisition", along with Bidco, Midco, and Topco, the "JMWT Entities"); (5) Phaidon; (6) Regan Arts, LLC ("Regan"); (7) Phaidon Global; and (8) PLB; • Conversations and correspondence regarding LDB, its management policies, financial status and investments with Mr. Richard Joslin, Elysium Management LLC's CFO, and Mr. Richard D'Agostino of Elysium Management LLC (collectively referred to as "Management"); and • Other reviews, analyses, and research as were deemed necessary. Business Profile LDB operated as an investment holding company. The Company was formed on June 9, 2011. As of the Valuation Date, the Company's assets included: (1) the Fine Art; (2) cash; (3) a number of private equity investments; (4) a 14.925% non-managing interest in PLB; (5) receivables from related entities; (6) a J.P. Morgan brokerage account that included a number of marketable securities; and (7) a number of restricted investments that consisted of direct investments and private equity investments that were past their term and only held the remaining unliquidated assets. Details regarding the Company's investments are outlined further in this report. As of the Valuation Date, the Company's only liability was a distribution payable to members. As of the Valuation Date, the Company had total EMPIRE VALUATION CONSULTANTS EFTA01108991 Alan S. Halperin, Esq. August II, 2015 Page 5 assets with a book value of $377.6 million,' rounded and total liabilities with a book value of $14,329. While LDB made a material distribution of notes in 2013, historically the Company did not pay cash distributions in an amount that is greater than the members' pass-through tax liability. Please refer to Exhibits A through C for further details. A. Ownership LDB's ownership as of the Valuation Date is presented in the following table. LDB Ownership Ms ner Percentage BEB 2011 Tnist 25% .1MB 2011 Trust 25% ASB 2011 Trust 25% VRB 2011 Trust 25% Total 100% B. Description of Assets and Liabilities LDB was invested in cash, marketable securities, multiple private equity investments, restricted investments, the Fine Art, a 14.925% non-managing membership interest in PLB, and receivables from related parties. Details regarding the assets are provided below. A summary of the capital account balance for each interest is presented in Exhibit D. Cash and Marketable Securities: The Company had a J.P. Morgan brokerage account that had a cash balance of $25.2 million and marketable securities. The marketable securities included 24 publicly traded capital appreciation securities. The market value of the publicly traded equities, based on the average trading price as of the Valuation Date, was $5.1 million. Private Equity Investments: The Company had investments in FCI, QCP, QACP, QOCP, Searchlight, and Searchlight AIV. Details regarding each of the private equity investments are outlined below. • FCI: The capital account balance for LDB's investment in FCI was $18.5 million as of the Valuation Date. LDB had a capital commitment of $25.0 million, of which $12.6 million had been contributed. FCI invests substantially all of its Total assets as presented on Exhibit B of $377.6 million is inclusive of an interest in Black Family Partners LP that had an estimated value of $233.9 million. Further, Management stated that LDB contributed its interest in Black Family Partners LP to LDB 2014 LLC (an entity wholly-owned by LDB) and then LDB distributed its interest in LDB 2014 LLC to the members of LDB. However, the interest in LDB 2014 LLC (which held the interest in Black Family Partners LP) had not been removed from the Company's balance sheet as of the Valuation Date. As a result, "Private Investments", as presented in Exhibit B, include the interest in LDB 2014 LLC. EMPIREVALUATION CONSULTANTS EFTA01108992 Alan S. Halperin, Esq. August II, 2015 Page 6 investable assets in Financial Credit Investment I, L.P. ("FCI LP"). FCI LP carries out its investment activities through a special purpose vehicle, Financial Credit Investment I Limited ("FCI I Limited"). FCI I Limited is primarily invested in life insurance settlements. As such, FCI I Limited makes premium payments on the insurance policies and will receive proceeds at the time of death of the insured. Future capital calls to fund insurance premiums are expected for this investment. FCI (as well as the underlying funds) does not have a contractual termination date. However, given the nature of the investment, it was reasonable to consider that FCI's term would extend to 10 years or beyond the Valuation Date. • QCP, QACP, and QOCP (collectively, the "Quadrangle Entities"): The capital account balances for LDB's investments in QCP, QACP, and QOCP were $278,289, $125,977, and $409,182, respectively, as of the Valuation Date. QACP and QOCP were alternative investment vehicles for QCP. For QCP, LDB had a capital commitment of $427,638, of which $425,044 had been contributed. For QACP, LDB had a capital commitment of $193,585, of which $192,411 had been contributed. For QOCP, LDB had a capital commitment of $628,777, of which $624,964 had been contributed. Future capital calls were not expected for these investments. QCP has a contractual termination date of May 23, 2010 which can be extended for up to two additional 1-year terms based on the terms of QCP's agreement. However, limited partners agreed to two 1-year extensions to May 23, 2014. In 2014, LP's delegated their authority to the LP Advisory Committee to consider extending the fund for an additional year through May 23, 2015. As alternative investment vehicles, QACP's and QOCP's terms correspond with QCP. QCP's limited partners paid a 1.75% management fee and 20% carried interest fee and received an 8% preferred return. • Searchlight and Searchlight AIV: The capital account balance for LDB's investments in Searchlight and Searchlight AIV were $776,558 and $168,712, respectively, as of the Valuation Date. Searchlight AIV was alternative investment vehicle for Searchlight. For Searchlight and Searchlight AIV, LDB had a combined capital commitment of $2.0 million, of which $812,823 had been contributed. Future capital calls were not expected for these investments. Searchlight has a contractual termination date of March 30, 2022 which can be extended for up to two additional 1-year terms based on the terms of Searchlight's agreement. As an alternative investment vehicle, Searchlight AIV's term corresponds with Searchlight. Searchlight's limited partners paid a 20% carried interest fee and received an 8% preferred return. Searchlight AIV's limited partners do not pay management and carried interest fees and do not receive a preferred return. EMPIRE VALUATION CONSULTANTS EFTA01108993 Alan S. Halperin, Esq. August II, 2015 Page 7 Restricted Investments: The Company had restricted investments in AIF II, AP SHL, AP Tech, AIF, REIF, REIF III, REIF IV, BHM, Microbes, PAM, and Viropro. Capital account balances for each as of the Valuation Date are presented in the following table. Restricted Investment Capital Account Balances as of the Valuation Date Restricted Capital Account Investment Balance AIF II SO AP SHL $02 AP Tech $174,459 AIF $225 REIF $183,325 REIF III $25,308 REIF IV $735,778 BHM $159,692 Microbes $142,916 PAM $02 Viropro $300,000 Total $1,721,703 LDB's investments in AIF II, AP SHL, AP Tech, AIF, REIF, REIF III, and REIF IV were investments in private equity funds that had completed their respective terms and were in wind-up. The remaining assets held by these private equity funds were considered side-pocket assets. A date for liquidation of side-pocket assets, distribution of proceeds to each private equity funds' respective limited partners, and wind-up of the private equity funds was not known as of the Valuation Date. As a limited partner in each, LDB had limited ability to enforce liquidation and distribution of proceeds from each private equity funds' side-pocket investments. LDB's investments in BHM, Microbes, PAM, and Viropro were direct investments in holding companies. Each holding company held an interest in an operating company. No information on operations and profitability for each of the operating companies is provided to the members/partners of the respective holding company. As a non-managing member or limited partner in each holding company, LDB had limited ability to influence the operations of the underlying operating companies. An exit event and return of capital was not expected in the near term for LDB's investments in BHM, Microbes, PAM, and Viropro. Fine Art: As of the Valuation Date, the Company held collector quality art. According to the Fine Art Appraisal, the fair market value of the Fine Art held by LDB was $74,750,000 as of June 23, 2014. In addition, the Valuation Agreement for the Fine Art Appraisal stated that Sotheby's Inc. did not consider the applicability of a blockage discount for the Fine Art. 2 Schedule K-I presented a negative capital account balance. EMPIRE VALUATION CONSULTANTS EFTA01108994 Alan S. Halperin, Esq. August 11, 2015 Page 8 The following table presents each piece of the fine art and that appraised value as outlined in the Fine Art Appraisal. Fine Art and Respective Appraised Value t Pieter1'itle/A rt is t Market Value The Parable of the Wise and Foolish Virgins (1825) William Blake $2,500,000 Portrait de Fernand Leger (1930) Alexander Calder 52,500,000 L `Esprit veille (Te Arii Vahine) (Circa 1899) Paul Gauguin $2,500,000 Woman (1951) Willem De Kooning $3,500,000 Church Facade IV, Domburg (1914) Piet Mondrian $2,500,000 Composition with Color Planes and Gray Lines 1 (1918) Piet Mondrian $15,000,000 Untitled (1946) Barnett Newman 53,000,000 Deux femmes (1907.1908) Pablo Picasso $5,000,000 Jeune homme et cheval (1906) Pablo Picasso $2,500,000 Vent, pipe et paquet de tabac (1914) Pablo Picasso $2,000,000 Flusslandschaft mit zwei Baumen (1913) Egon Schiele $25,000,000 Au divan japonais (1887-1888) Georges Seurat $6,000,000 Le chien noir (Etude pour Un Dimanche a La Grande Jatte) (1884-1885) Georges Seurat $1,750,000 Study of a Seated Woman (date not presented) Jean-Antoine Watteau $1,000,000 Total $74,750,000 PLB: As of the Valuation Date, the Company held a 14.925% non-managing membership interest in PLB. The book value of the investment in PLB was $9.9 million as of the Valuation Date. PLB is a holding company whose primary asset is a 99.9% non-managing membership interest in Phaidon Global. PLB's primary liability as of the Valuation Date was $3.2 million due to Black Family Partners LP. See Exhibit G-8 for further details. Phaidon Global holds 100% interests in Regan and Phaidon and a 99.9% interest in Acquisition. According to Management, Regan has very limited operations and has not been active for a material amount of time. EMPIRE VALUATION CONSULTANTS EFTA01108995 Alan S. Halperin, Esq. August 11, 2015 Page 9 Phaidon holds a 0.1% interest in Acquisition. According to Management, Phaidon does not have any other assets and has no liabilities. Through Topco, Midco, and Bidco, a series of wholly-owned holding companies, Acquisition holds a 100% interest in Phaidon Limited. Phaidon Limited is an operating company that is a global publisher of books focused on the creative arts with over 1,500 titles in print as of the Valuation Date. Specifically, Phaidon Limited produces books on art, photography, design, architecture, fashion, food and cookery, travel, and illustrated books for children. Phaidon Limited is headquartered in London, U.K. For further details on Phaidon Limited, please refer to the Phaidon Limited Report. LDB's indirect ownership of Phaidon Limited through PLB, Phaidon Global, Phaidon, and the JMWT Entities is presented in the following diagram. (THIS SPACE INTENTIONALLY LEFT BLANK) EMPIREVALUATION CONSULTANTS EFTA01108996 Alan S. Halperin, Esq. August 11, 2015 Page 10 Phaidon Limited's Ownership Structure marmini innesi Phaidon Global tax /*miming hetetII Regan Phaidon WWI Acquisition LW 01% mendini MOW JIAWT loofa Limited MAW MidCo Limited HAM' BidCo Limited Phaidon Limited EMPIRE VALUATION CONSULTANTS EFTA01108997 Alan S. Halperin, Esq. August II, 2015 Page 11 Related Party Receivables: As of the Valuation Date, the Company had related party receivables from the BEB 2011 Trust and the JMB 2011 Trust in the amounts of $3.3 million and $6.0 million, respectively. According to Management, the amounts receivable reflected their market value and were expected to be fully collectible as of the Valuation Date. Liabilities: As of the Valuation Date, LDB's only liability was a $14,329 distribution payable to members. Summary: Based on the most recent capital account statements, Schedule K-1, and/or information provided by Management, the Company's total assets had an aggregate market value of $144.3 million.1" Since LDB's only liability was a $14,329 distribution payable to members, its aggregate members' capital was $144.2 million. See Exhibit D. Valuation adjustments necessary to reflect the market value of the Company's individual assets taking into consideration various restrictions that hinder LDB's control over the assets and lack of a ready market to dispose of or trade its assets is considered in detail in the valuation section of this report. C. LDB Agreement Provisions LDB was formed pursuant to Delaware Limited Liability Company Act (the "Act"). The LDB Agreement dictates the rights, responsibilities and restrictions placed on the Interest. A summary of key provisions impacting the fair market value of the Interest is presented below. • Management: The business affairs of the Company shall be managed by the managers. The managers may appoint officers of the Company who shall be authorized to perform actions on behalf of the Company. The managers may remove any officer at any time, without cause. (Section 8.1.1). There shall always be at least one manager. Each manager shall hold office until their death, incapacity, resignation or removal (Section 8.2). A majority in interest of the members may designate another entity or person to serve as an additional manager or as a successor manager. As a condition precedent to a designated person or entity becoming an additional or successor manager, such entity or person must qualify for the position of manager. A successor or additional manager shall 3 Based on the book value of $9.9 million for LDB's investment in PLB. 4 The variance between the total assets as presented on Exhibit B of $377.6 million and Exhibit D of $144.3 million is largely driven by an interest in Black Family Partners LP. According to Management, the interest in Black Family Partners LP had an estimated value of $233.9 million. Further, Management stated that LDB contributed its interest in Black Family Partners LP to LDB 2014 LLC (an entity wholly-owned by LDB) and then LDB distributed its interest in LDB 2014 LLC to the members of LDB. However, the interest in LDB 2014 LLC (which held the interest in Black Family Partners LP) had not been removed from the Company's balance sheet as of the Valuation Date. As a result, assets as presented in Exhibit B include the interest in LDB 2014 LLC while the assets as presented on Exhibit D do not include the interest in LDB 2014 LLC. EMPIRE VARIATION CONSVITANTS EFTA01108998 Alan S. Halperin, Esq. August II, 2015 Page 12 qualify as a manager if such entity or person provides the members with a statement that it, he or she agrees to become a manager and to be bound by all of the terms and conditions of the LDB Agreement as a manager. However, if any member who is an individual makes a gratuitous transfer of all or a portion of his or her interest, such transferor member may not in his or her individual capacity serve as a manager and if then serving, shall immediately cease to serve as a manager (Section 8.3). The members holding at least two-thirds interest may, by vote or written consent, remove any acting manager at any time, without cause (Section 8.4.2). If there is more than one manager serving at any time and an action is to be taken by the managers (or the Company), such action shall be taken by the managers, unanimously, or, if there are more than two managers, with the agreement of a majority of such managers (Section 11.1). The LDB Agreement identifies Barry J. Cohen as the manager (Definitions section). • Distributions: Distributions shall be made to the members at the times and in the aggregate amounts determined in the sole discretion of the managers (Section 5.1). No member shall be required to make additional contributions (Section 3.2). • Disclosure of Information: The books of the Company shall be open to the inspection and examination of all members, in person or by their duly authorized representatives, at reasonable times. The books of the Company shall be maintained based on generally accepted accounting principles, consistently applied (Section 10.2). At the request of any member, the Company shall furnish the members with a copy of the Company's financial statements for the current or any prior fiscal year and with a statement of such member's capital account, as reflected on the books of the Company. Each member shall also be supplied with all information with respect to the Company required in connection with the preparation of such member's tax returns (Section 10.3). • Right of Withdrawal: No member may withdraw from the Company or reduce their capital account. No member shall be entitled to receive or be credited with any interest on the balance in their capital account at any time (Section 6.5.1). However, at the request of a particular member, the managers may, but are not required to, redeem the withdrawing member's interest, in whole or in part, by distributing assets to such withdrawing member, the fair market value of which is to be determined by the managers (Section 6.5.2). • Death Consequences: The death, incapacity, liquidation, dissolution, or entry of an order for relief in a bankruptcy case of a member shall not dissolve the Company. In any such event, the successors, assigns, executors, administrators or personal representatives of such former member shall have all the rights of a member in respect of distributions, allocations and capital, but shall not become a member unless a majority in interest (excluding interests held by the former member) of the remaining members consent and the assignee agrees to the terms of EMPIRE VALUATION CONSULTANTS EFTA01108999 Alan S. Halperin, Esq. August 11, 2015 Page 13 the LDB Agreement and has agreed to pay all reasonable expenses relating to admission. The estate of a deceased former member shall be deemed to be the assignee of such former member's interest and such estate shall be bound in all respects by the deceased former member's obligations to the Company (Section 8.6.1). • Amendment of Agreement: The LDB Agreement may be amended from time to time upon the unanimous written consent of the members. Notwithstanding the foregoing, the administrative provisions in the LDB Agreement may be amended solely by the managers (Section 11.2). • Reimbursement of Expense: The managers shall be entitled to reimbursement from the Company funds for any reasonable out of pocket costs or expenses incurred by the managers in the conduct of Company business (Section 8.9). • Transfer Restrictions: No member or any assignee has the right to sell, assign, or otherwise transfer all or any part of its interest (Section 6.1). However, members may sell, assign, pledge or otherwise transfer all or any part of their interest to an eligible persons (Section 6.2 and Definitions section). Transfers to anyone other than an eligible person requires: (1) a bona fide written offer; (2) notification to each member that the member desires to sell their interest; and (3) an offer to sell the interest to current members on the same terms as the written offer (Section 6.1). Upon transfer, the transferee may not be admitted as a substituted member unless the transferee agrees to the terms of the LDB Agreement and has agreed to pay all reasonable expenses relating to admission (Section 9.1). • Dissolution: The term of the Company will be perpetual unless dissolved upon the occurrence o£ (1) the unanimous consent of the members; (2) at any time there are no members; or (3) the entry of a decree of judicial dissolution (Sections 1.5 and 7.1). D. PLB Agreement Provisions • Management: The business and affairs of PLB shall be managed by a manager (Section 16.a). The members shall appoint the manager and may remove the manager at any time with or without cause. A person appointed as manager shall serve until the earlier of his death, resignation or removal. Upon the occurrence of s Defined by the LDB Agreement as: (1) members; (2) Leon D. Black and his descendants; (3) the spouse of any member or Leon D. Black and his descendants; (4) the estate of any member; (5) trusts for the benefit of a member or Leon D. Black and his descendants, qualified charitable organizations, spouse of a member or Leon D. Black and his descendants, and descendants of members; (6) a beneficiary of any trust which is a member; and (7) any entity all the beneficial owners of which are persons or entities previously described as an eligible person. EMPIRE VALUATION CONK/TANTS EFTA01109000 Alan S. Halperin, Esq. August 11, 2015 Page 14 any such event, the members shall promptly appoint a replacement manager. The members appoint John J. Hannan as the initial manager (Section 16.6). • Distributions: Distributions shall be made to the members at the times and in the aggregate amounts determined by the manager (Section 14). Members are not required to make any additional capital contribution to PLB (Section 11). • Disclosure of Information: The manager shall keep or cause to be kept complete and accurate books of account and records with respect to PLB's business. The members and their duly authorized representatives shall have the right to examine PLB's books, records and documents during normal business hours. PLB, and the manager on behalf of PLB, shall not have the right to keep confidential from the members any information that the manager would otherwise be permitted to keep confidential from the members pursuant to Section 18-305(c) of the Act (Section 22). • Transfer and Withdrawal Restrictions: The PLB Agreement did not outline any provision regarding transfers or withdrawals. Therefore, the transfer and withdrawal provisions of the Act were considered. A limited liability company interest is assignable in whole or in part except as provided in a limited liability company agreement. The assignee of a member's limited liability company interest shall have no right to participate in the business and affairs of a limited liability company except as provided in a limited liability company agreement and upon the approval of all the members of the limited liability company other than the member assigning his interest (Section 18-702 of the Act). One or more additional members may be admitted to PLB with the written consent of the members. The admission of an additional member shall be effective upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of the PLB Agreement (Section 20). Unless a limited liability company agreement provides otherwise, a member may not resign from a limited liability company prior to the dissolution and winding up of the limited liability company (Section 18-603 of the Act). • Dissolution: PLB will be dissolved upon the earliest to occur of: (1) the written consent of the members; (2) at any time there are no members unless PLB is continued in accordance with the Act; or (3) the entry of a decree of judicial dissolution (Section 21.a). E. Phaidon Global Agreement Provisions • Management: The business and affairs of Phaidon Global shall be managed by a manager (Section 16.a). The members shall appoint the manager and may remove the manager at any time with or without cause. A person appointed as manager shall serve until the earlier of his death, resignation or removal. Upon the EMPIREVALUATION CONSULTANTS EFTA01109001 Alan S. Halperin, Esq. August 11, 2015 Page 15 occurrence of any such event, the members shall promptly appoint a replacement manager. The members appoint JMWT LLC as the initial manager (Section 16.b). • Distributions: Distributions shall be made to the members at the times and in the aggregate amounts determined by the manager (Section 14). Members are not required to make any additional capital contribution to Phaidon Global (Section 11). • Disclosure of Information: The manager shall keep or cause to be kept complete and accurate books of account and records with respect to Phaidon Global's business. The members and their duly authorized representatives shall have the right to examine Phaidon Global's books, records and documents during normal business hours. Phaidon Global, and the manager on behalf of Phaidon Global, shall not have the right to keep confidential from the members any information that the manager would otherwise be permitted to keep confidential from the members pursuant to Section 18-305(c) of the Act (Section 22). • Transfer and Withdrawal Restrictions: The Phaidon Global Agreement did not outline any provision regarding transfers or withdrawals. Therefore, the transfer and withdrawal provisions of the Act were considered. A limited liability company interest is assignable in whole or in part except as provided in a limited liability company agreement. The assignee of a member's limited liability company interest shall have no right to participate in the business and affairs of a limited liability company except as provided in a limited liability company agreement and upon the approval of all the members of the limited liability company other than the member assigning his interest (Section 18-702 of the Act). One or more additional members may be admitted to Phaidon Global with the written consent of the members. The admission of an additional member shall be effective upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of the Phaidon Global Agreement (Section 20). Unless a limited liability company agreement provides otherwise, a member may not resign from a limited liability company prior to the dissolution and winding up of the limited liability company (Section 18-603 of the Act). • Dissolution: Phaidon Global will be dissolved upon the earliest to occur of: (1) the written consent of the members; (2) at any time there are no members unless Phaidon Global is continued in accordance with the Act; or (3) the entry of a decree of judicial dissolution (Section 21.a). F. Phaidon Agreement Provisions • Management: The business and affairs of Phaidon shall be managed by a manager (Section 15.a). The members shall appoint the manager and may remove the manager at any time with or without cause. A person appointed as manager EMPIREVALUATION CONSULTANTS EFTA01109002 Alan S. Halperin, Esq. August II, 2015 Page 16 shall serve until the earlier of his death, resignation or removal. Upon the occurrence of any such event, the members shall promptly appoint a replacement manager. The members appoint JMWT LLC as the initial manager (Section 15.b). • Distributions: Distributions shall be made to the members at the times and in the aggregate amounts determined by the Manager (Section 13). Members are not required to make any additional capital contribution to Phaidon (Section II). • Disclosure of Information: The manager shall keep or cause to be kept complete and accurate books of account and records with respect to Phaidon's business. The members and their duly authorized representatives shall have the right to examine Phaidon's books, records and documents during normal business hours. Phaidon, and the manager on behalf of Phaidon, shall not have the right to keep confidential from the members any information that the manager would otherwise be permitted to keep confidential from the members pursuant to Section 18-305(c) of the Act (Section 21). • Transfer and Withdrawal Restrictions: The Phaidon Agreement did not outline any provision regarding transfers or withdrawals. Therefore, the transfer and withdrawal provisions of the Act were considered. A limited liability company interest is assignable in whole or in part except as provided in a limited liability company agreement. The assignee of a member's limited liability company interest shall have no right to participate in the business and affairs of a limited liability company except as provided in a limited liability company agreement and upon the approval of all the members of the limited liability company other than the member assigning his interest (Section 18-702 of the Act). One or more additional members may be admitted to Phaidon with the written consent of the members. The admission of an additional member shall be effective upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of the Phaidon Agreement (Section 19). Unless a limited liability company agreement provides otherwise, a member may not resign from a limited liability company prior to the dissolution and winding up of the limited liability company (Section 18-603 of the Act). • Dissolution: Phaidon will be dissolved upon the earliest to occur of: (1) the written consent of the members; (2) at any time there are no members unless Phaidon is continued in accordance with the Act; or (3) the entry of a decree of judicial dissolution (Section 20.a). Economic, Capital Markets, and Private Equity Outlooks In the appraisal of any company, the general economic factors prevailing at the valuation date, as well as those foreseen then, must be considered. Assimilation of these facts and forecasts provides insight into the economic climate in which investors are dealing. EMPIREVAWAllON CONSVITANTS EFTA01109003 Alan S. Halperin, Esq. August II, 2015 Page 1