EFTA02703948.pdf

From: Brad Wechsler Sent: Thursday, February 18, 2016 11:43 PM To: Melanie Spinella; Jeffrey Epstein Subject: Fw: Term Sheet and Loan Agreement Attachments: Artace - Cap Table _Feb2016_V2.xlsx; Loan Agreement_Artace_Feb2016_V2-v3.docx; Term Sheet_Artace_Feb2016_V2-v4.docx Do you want this 2.2mm, non control, venture investment presented to trustees for their consideration? Sent from my Verizon Wireless BlackBerry From: 'than, Yvonne" Date: Thu, 18 Feb 2016 23:17:37 +0000 To: Keith Fox ; Brad Wechsler Cc: Deckelbaum, Subject: FW: Term Sheet and Loan Agreement Keith, Brad (apologies — I note you were not on the original email with the revised docs). Issues from Max's mark up as follows: 1. Amount of the investment: $2.250 MM versus our $2.2 MM. Pls confirm the deal. 2. Percentage ownership of the company: 19.57% for $2.25 MM. Is this the deal? 3. Interest rate on loan: 0.01%? we had 0.1%. 4. Default interest on loan: 1%? we had 10%. S. One year maturity for the loan: pls confirm OK. 6. Date for closing of the investment: April 19, 2016 — so four months to get the paperwork etc in place. OK? 7. Liquidation pref: one times. Consistent with seed preferred. Is this the deal? 8. Automatic conversion into common on a qualified public offering — it raises $20MM. pis confirm this is OK. 9. Monthly info — Keith — you asked for forecast vs actuals for downloads, usage and image uploads — their mark up suggests they will give you actual info only. Is this OK? 10. Materiality thresholds for Series A preferred consents: $500K - do we have any idea of their current financial situation? Should it be lower? EFTA_R1_02086282 EFTA02703948 11. Drag if majority in interest want to sell: we had changed to two thirds. Majority in interest is consistent with current stockholders agreement and pretty standard. 12. 5 member board : Magnus chooses three. Series A chooses one. Silent on the fifth — mark up deletes the nominee of Maleki. Have you discussed this? If they say the fifth is the CEO, then effectively Magnus has 4 seats. OK? Or did you expect a seed investor to select the fifth director? Or the fifth to be an independent or someone jointly selected by Magnus and Black ? 13. Board meetings: reduced from four to two semi-annual. OK? To finalize the docs and if you expect to sign tomorrow, I need the name and address of the Black entity that will fund the loan. Disbursement of loan will be 3 Biz Days after signing — so funding will be due Wednesday Feb 24. Let me know if you would like to discuss. On the business issues, it might be more efficient if you raised them with Max/Magnus before we revise and finalize the documents. Yvonne Y.F.Chan I Partner Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas I New York, NY 10019-6064 I www.paulweiss.com <http://www.paulweiss.com> From: Maximilian Straub Sent: Thursday, February 18, 2016 5:44 PM To: Chan, Yvonne < Cc: Keith Fox Magnus Resch Anastasiya Siro Deckelbaum, Ariel J < Subject: Re: Term Sheet and Loan Agreement Dear all, please find attached the revised version of both loan agreement and term sheet. While I accepted almost all of the edits, I unfortunately spotted a mistake we made on the valuation and investment sum (i.e. given the agreed pre-money valuation of USD 9 mn and a total Series A investment of 2.5 mn (2.25 Leon Black, 0.25 Anastasiya Siro), the fully diluted share of Leon Black should be 19.57% - see cap table). 2 EFTA_R1_02086283 EFTA02703949 Best, Max P.S.: For completeness, Anastasiya's share would be 2.17% for her Series A shares or a total of 3.74% including common shares On Thu, Feb 18, 2016 at 9:52 PM, Chan, Yvonne > wrote: All Attached are revised drafts of the loan agreement and the term sheet, reflecting our comments — and after a review of the current charter and stockholders agreement. I attach clean and redlined versions, the redlined versions are marked to show the changes from the initial drafts we received. Please let us know if you have any questions. Best regards Yvonne Yvonne Y.F.Chan I Partner Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas I New York, NY 10019-6064 I www.paulweiss.com <http://www.paulweiss.com> From: Keith Fox Sent: Thursday, February 18, 2016 3:16 PM To: Magnus Resch 3 EFTA_R1_02086284 EFTA02703950  Cc: Anastasiya Siro Maximilian Straub Chan, Yvonne Subject: RE: Term Sheet and Loan Agreement Yvonne is traveling back to her office and will send term sheet and loan revisions shortly. I spoke with several IP lawyers and would like your guidance on what I have learned. Here's the simple summary: - data is fair usage and not an issue for the app - user generated images and content is covered as long as we remove images, as requested. It's covered in DMCA, section 512 - scraped data is more problematic for several reasons: 1) many sites prohibit scraping in their terms and conditions and therefore image collection is a violation of their terms. 2) most commercial sites do not have the rights to the images. They are permitted for the sole purpose of the one-time commercial usage. 3) we are "commercial" and therefore required to clear rights through the artists directly, via galleries / institutions and through clearing houses like ARS and VAGA. You have $86,000 in year 1 and $172,800 in year 2 in your budget. Do you agree with this assessment? - Many of the images and prices are from auction houses. Are you concerned that they might ask you to take down the images? Can you let me know how you projected your image rights budget? Please let me know your thoughts. Keith 4 EFTA_R1_02086285 EFTA02703951  Keith Fox CEO Phaidon 65 Bleecker Street, 8th FL New York, NY 10012 phaidon.com <https://urldefense.proofpoint.com/v2/url?u=http- 3A_phaidon.com&d=CwMFaQ&c=MVcBZOqZGZLIcau 2IIMSkQ&r=NWjy9q4KCeeTzyh2RyBXZX lyfaTP85C4REvkszT_EKM &m=u4LsjAnlmu_JfKiMsjIvVjprpxwfD75-1_wmyBBsaC3s&s=fQf-GOnte011E33pUT7U97Lv6SawjHtrpXeH9zRh-RM&e=> From: Magnus Resch Sent: Wednesday, February 17, 2016 10:53 PM To: Keith Fox Cc: Anastasiya Siro; Maximilian Straub Subject: Re: Term Sheet and Loan Agreement Thank you for the update, Keith! Looking forward to your revision tomorrow at around noon. Btw: This is my lawyer (here <https://urldefense.proofpoint.com/v2/url?u=http- 3A_www.goodwinprocter.com_People_D_Oavis- 2DStephen.aspx&d=CwMGaQ&c=MVcBZOqZGZIJcau2llMSkQ&r=.NWjy9q4KCeeTzyh2RyBXZXlyfaTP85C4REvkszT_EKM& m=V39UzZH2KDKZ2blj3cAcVFofnLmaa4fT_StisLMbg45Q&s=Xea7-obp6P3tIW710.bWjZcZJBVviMnvopdiGEqT7u8Y&e=> ). Goodwin Procter is considered as the top lawyer for the tech industry. On Wed, Feb 17, 2016 at 10:43 PM, Keith Fox > wrote: 5 EFTA_R1_02086286 EFTA02703952  We are reviewing the updated term sheet in the am with Leon. I plan to send you the revised documents tomorrow, hopefully by 12:00. (My meeting is at 11:00.) I appreciate your quick responses. Keith Keith Fox CEO Phaidon 65 Bleecker Street, 8th FL New York, NY 10012 On Feb 17, 2016, at 7:01 PM, Magnus Resch > wrote: Dear Keith, Today we have provided with - all legal documents you asked for - extensive answers to your technical question regarding the IT stack. We replied within the shortest possible time. I pushed my team to act really fast because we are running against the deadline this Friday. Can you please give us an update on your next steps. Thank you, Magnus On Wed, Feb 17, 2016 at 10:26 AM, Keith Fox wrote: Ok. Reviewing with lawyers today at 12:30. Ok on rent. Four isn't an issue. I can call you later today to walk you through how I am thinking about it. We are space constrained, but I would like to have you and your team here! 6 EFTA_R1_02086287 EFTA02703953  Keith Fox CEO Phaidon 65 Bleecker Street, 8th FL New York, NY 10012 phaidon.com <https://urldefense.proofpoint.com/v2/url?u=http- 3A_phaidon.com&d=CwMGaQ8tc=MVcBZOqZGZIJcau2llMSkQ8e=NWjy9q4KCeeTzyh2RyBXZXlyfaTP85C4REykszT_EKM &m=V39UzZH2KDKZ2blj3cAcVFofrilmaa4fT_SUslMbg45Q&s=iFohZmHMi42bExSRrACUd4P5RYUnENyDsUMPtoRO0n4& From: Magnus Resch (manta: Sent: Wednesday, February 17, 2016 10:20 AM To: Keith Fox Cc: Anastasiya Siro; Maximilian Straub Subject: Re: Term Sheet and Loan Agreement Thank you. That's ok. Any comments on the TS? 7 EFTA_R1_02086288 EFTA02703954  And if you find the time please let me know your offer regarding rent. I would prefer a charge per seat. Initially I will need three seats which will go up to 10 seats until year end. On Wed, Feb 17, 2016 at 10:14 AM, Keith Fox wrote: Please see my edits: It is intended that Phaidon, Artspace and Artace form a strategic partnership in regards to their activities in e-commerce, lead generation, editorial content and data analysis. Phaidon and Artspace Inc. are Artace's exclusive partners for these activities and Artace grants them a right of first refusal on data integration, gallery listings, analytics, and search functionality of Artace's' app within Artspace and Phaidon.com chttps://urldefense.proofpoint.com/v2/url?u=http- 3A phaidon.com&d=CwMGag&c=MVc8ZOqZGZI.Icau2IIMSkQ&r=NWjy9q4KCeeTzyh2RyBX2X1yfaTP85C4REvkszT_EKM &m=V39UzZH2KDKZ2blj3cAcVFornimaa4fT_5UsLMbg45Q&s=iFohZmHMi42bExSRrACUd4P5RYUnENvDsUMPtqRO0n4& e=> . Artspace and Phaidon will create and execute promotional and editorial programs to extend Artace's reach and adoption, as guided by Artace, and provide additional services as required. Phaidon will in good faith provide publishing services for Artace art market reports, as required. Additionally, Phaidon will offer Artace favorable rent terms for up to 10 employees, or as needed. Magnus will provide advisory services to Artspace including but not limited to IT efficiencies, global gallery sales strategy and digital marketing initiatives. Keith Keith Fox CEO 8 EFTA_R1_02086289 EFTA02703955  Phaidon 65 Bleecker Street, 8th FL New York, NY 10012 phaidon.com <https://urldefense.proofpoint.com/v2/url?u=http- 3A phaidon.com&d=CwMGaQ&c=MVcBZOqZGZLIcau2IIMSkCI&r=NWjy9q4KCeeTzyh2RyBXZX1yfaTP85C4REvkszT_EKM &m=V39UzZH2KDKZ2blj3cAcVForriLmaa4fT_SUsLMbg45Q&s=iFohZmHMi42bExSRrACUd4PSRYUnENvDsUMPtqRO0n4& From: Magnus Resch Sent: Tuesday, February 16, 2016 3:20 PM To: Keith Fox Cc: Anastasiya Siro; Maximilian Straub Subject: Re: Term Sheet and Loan Agreement It is intended that Phaidon Digital, Artspace and Artace form a strategic partnership in regards to their activities in e-commerce, lead generation and data analysis. Phaidon Digital and Artspace Inc. are Artace's preferred partners for these activities and Artace grants them a right of first refusal. On Tue, Feb 16, 2016 at 3:12 PM, Keith Fox > wrote: We have reviewed the documents and are currently getting outside guidance on the language. Our meeting with our lawyers is tomorrow a.m. We'll provide edits soon after. 9 EFTA_R1_02086290 EFTA02703956  I'd also like to incorporate basic language on the strategic intent of the investment, including what you discussed with me and Leon. Would you like me to take the lead on drafting or would you like to take the lead? Thanks. Keith Keith Fox CEO Phaidon 65 Bleecker Street, 8th FL New York, NY 10012 phaidon.com <https://urldefense.proofpoint.com/v2/url?u=http- 3A_phaidon.com&d=CwMGaQ&c=MVcBZOqZGZlicau2IIMSkQ&r=NWjy9q4 KCeeTzyh2RyBXZX lyfaTP8SC4REvkszT_EKM &m=V39UzZH2KDKZ2blj3cAcVFofnLmaa4fT_SUsLMbgatl5C1&s=iFohZmHMi42bExSRrACUd4PSRYUnENvDsUMPtqRO0n4& From: Magnus Resch Sent: Tuesday, February 16, 2016 2:00 PM To: Keith Fox; Anastasiya Siro Cc: Maximilian Straub Subject: Re: Term Sheet and Loan Agreement Dear Keith, 10 EFTA_R1_02086291 EFTA02703957  I hope this finds you well and you enjoyed the long weekend. I wanted to follow up on the TS and loan agreement I sent over last week. We are still working against the deadline of the 19th (i.e. Friday) to close it. Please make sure to come back with any input today or tomorrow (Leon mentioned one change - 20% for 2.25mio, not 21.74% for 2.5mio) as otherwise I am getting under pressure from my alternative investors to close with them. Let's avoid that! All the best, Magnus On Fri, Feb 12, 2016 at 9:42 AM, Keith Fox < > wrote: I am traveling and will be able to review these early this afternoon. Thanks. Keith Keith Fox CEO Phaidon 65 Bleecker Street, 8th FL New York, NY 10012 On Feb 12, 2016, at 8:33 AM, Magnus Resch <mailto=a > wrote: Dear Keith, Please find attached the term sheet and loan agreement. Both are standard documents, just adapted to our needs. I would also like to introduce you to Maximilian Straub. Max was my partner in previous businesses, works for McKinsey and is member of the board of Artace. In this role he is taking care of all legal matters of the company and also coordinates with our lawyers. In order to structure the process please do the following: • If you would like to change/add something, please edit the docs via "Track Changes" - Max Straub (cc'd) and I will review it then and reply with our comments/changes in the document 11 EFTA_R1_02086292 EFTA02703958  Since I need to verify every changes with Max and in order to facilitate the process, please understand that I prefer a written communication on every matter related to these documents. Best, Magnus <Term Sheet_Artace_Feb2016_V2.docx> <Loan Agreement_Artace_Feb2016_V2.docx> 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. Maximilian Straub Gartliweg 1 CH-6300 Zug 12 EFTA_R1_02086293 EFTA02703959