EFTA00639850.pdf

From: Dangene and Jennie Enterprise < To: Jeffrey Epstein <Jeevacation@gmail.com> Subject: Fwd: Revised CORE/NM Investment Structure Date: Tue, 01 Mar 2016 21:10:39 +0000 Attachments: 94263201_I.DOCX.DOCX Inline-Images: EWLarge2.jpg; EWLarge2(1).jpg; image001.png Hi JEFFREY !!! Just sharing ....fingers crossed ...See you next week ...LOVE YOU !!! CORE: Jennie Enterprise I dand.enter rise Founder & Chairman I 66 East 55th Street New York NY 10022 I Main: www.coreaccess.net Begin forwarded message: From: Jennie Enterprise Subject: Fwd: Revised CORE/NM Investment Structure Date: March I, 2016 at 3:48:00 PM EST To: Russ Stein Cc: Nicholas D •ci , Daniel Rabia 1 , Dangene and Jennie Enterprise Hi RUSS ! HAPPY SUPER TUESDAY ! Below is the proposed new structure to create a brand new universe of exciting new projects while connecting to only the upside of CORE: NY unburdened by any legacy issues. This seems to accomplish our objectives but please let me know. Would love to chat as soon as you have had a chance to review. Thank you ! Jennie Ro. CORE: Jennie Enterprise @dandenterprise I Founder & Chairman 166 East 55th Street New York NY 10022 Main: www.coreaccess.net Begin forwarded message: From: "Beime, ICristina E." Subject: Revised CORE/NM Investment Structure Date: March I, 2016 at 3:37:21 PM EST EFTA00639850 To: "Jennie Ente rise "Dangene and Jennie Ente rise "Daniel Rabia Cc: "Ross, Rick" Based on our discussions with you and Daniel we understand that Russ and his team would prefer a structure which avoids any residual risk of exposure to The Core Club 55th Street's (the "Club Entity") and its related parties' liabilities (the "old structure liabilities"). To that end, we have revised our proposed structure as described below and in the attached chart, to move closer to an "asset deal", leaving all old structure liabilities behind. You will see that, as proposed below, we have chosen The Core Club IP, LLC ('TCC IP") as the entity through which you own your share of the JV and which contributes all of its assets to the Newco. As you know, TCC IP is a "clean" entity which has no outstanding liabilities (tax or otherwise) and only serves as one of the guarantors for the AES loan which is being forgiven as part of the transaction and it owns all of the relevant intellectual property. The reason why the invested funds from Nathan's entity are received while one of the existing entities is still in the current ownership chain is related to the need to preserve your ability to utilize the NOLs to shield income you will receive as a result of the transaction. We believe, however, that our proposed structure outlined below (which creates a form of "synthetic equity") puts you and Nathan into the same position (economically and from a governance perspective) as if you both owned the Club Entity's equity directly. You will also see that we have provided for a warrant structure below which is designed to serve as extra "insurance" to give Nathan the flexibility that if there is ever a scenario where it is more beneficial to him to have "real" rather than synthetic equity ownership in the Club Entity, he will have the option to acquire an actual equity interest. Of course, as always, we would be happy to discuss any questions or comments you and/or Russ may have in connection with this proposed structure - nothing is cast in stone, we are looking for a structure that will make all parties most comfortable and allow for a successful collaboration in the future. 1. TCC IP forms Newco as a new wholly-owned subsidiary. 2. Investor makes a convertible loan to Newco of $6 million. 3. TCC IP contributes the IP and know-how it owns to Newco as a capital contribution (but expressly leaves behind any and all liabilities including tax liabilities and founders liability—of which it should have none anyway, as they are at the sister or parent level). 4. Newco acquires the AES Loan for $4.9 million and immediately forgives the AES loan. Newco pays JE compensation of $100,000 for services rendered. Please note that this money will be used to purchase the TCCI and TCGM equity interests as stated in 5 below. 5. JE acquires RFR's interests in TCCI and TCGM for $100,000 (in the aggregate). 6. Newco pays TCCI expenses and reimburses JE for TCCI expenses previously paid by lE ($1M in the aggregate). 7. Investor converts convertible loan in exchange for 49% of Newco. Newco's LLC Agreement is amended and restated to include governance and exit provisions as previously discussed with your team (and reflected in the draft JV Agreement previously sent to you). 8. Newco enters into perpetual license with The Core Club 55th Street (the "Club Entity") to license back the IP to the Club Entity (for use in the NYC Club). • The License will also provide that any future know-how and IP generated by the Club's operations will be owned by Newco. Please note that we anticipate that, to the extent any future new club (which would be owned by a third-party) would utilize employees of the Club for staff training or other consulting purposes, these services would be subject to a separate consulting or service fee payable from such third-party to the Club Entity. • The License will provide that Newco as licensor will receive periodic payments (or payments upon a capital event) of fees from the Club Entity in an amount equal to the net operating profits (subject to the restrictions imposed by the "Schmuck Insurance") to put Investor in the same position economically as if he owned his 49% interest in the Club Entity directly (rather than through this License structure). • The License will contain provisions that incorporate the equivalent of the governance and information provisions (budgets, financial information etc.) so that Newco as licensor (and therefore indirectly the Investor) has the same rights Investor would have if he owned his interest in the Club Entity directly. EFTA00639851 • Parties will enter into a separate warrant or equivalent agreement that allows Investor to purchase 49% of the Club Entity for $100 in connection with (and immediately prior to) certain exit events, such as a sale of the Club Entity. This is designed as extra protection in the event it would be more beneficial for the Investor to be a direct equity owner of the entity rather than to rely on the license provisions mentioned above. Please let me know if you have any questions. Best, Kristina Kristina E. Beirne Partner D Bio I Website Dentons US LLP 1221 Avenue of the Americas, New York, NY 10020-1089 Salans FMC SNR Denton McKenna Long Dentons is a global legal practice providing client services worldwide through its member firms and affiliates. This email may be confidential and protected by legal privilege. If you are not the intended recipient, disclosure. copying, distribution and use are prohibited; please notify us immediately and delete this copy from your system. Please see dentons.com for Legal Notices. EFTA00639852