111 KELLERHALS FERGUSON FLETCHER KROBLIN LLP To: Jeffrey E. Epstein From: Erika Kellerhals Re: The International Banking Center Regulatory Act Date: October 23, 2012 9100 FIAVENSIGHT PORT OF SALE STE 15 - 16 ST. THOMAS. VI 00802 PHONE (340) 779-2564 FAX (888) 316-9269 KFFKLAW. COM By his signature dated September 11, 2012, the Honorable Governor John P. deJongh, Jr. signed Bill No. 29- 0308, The International Banking Center Regulatory Act (hereinafter the "Act') into law. The Act repeals Title 9, chapter 21 of the Virgin Islands Code ("VIC') and replaces Exempt International Banking Facilities ("EIBP) with International Banking Entities ("IBE"), which will be administered by the Director of Banking and Insurance of the Office of the Lieutenant Governor ("Director"). We have provided a short summary of the Act below and laid out the specific requirements for an entity to qualify as an IBE. On behalf of our clients, we met with current Director, John McDonald, to discuss the mechanics of the application process and the expected regulatory framework that will govern the IBE program. Although he indicated that he would accept applications for IBEs now, he also indicated that he was not likely to have an application packet in the near term, and further that he did not have the manpower necessary to draft the required regulations. However, he advised that if we submit an application that contains all the information required by the Act, he would proceed with processing the application. We anticipate having a leadership role in the formation of the application and the drafting of the regulations so we will continually update you on any progress on that front. I. Organization of an IBE Pursuant to the Act, an IBE may be a person, other than an individual, incorporated or otherwise organized under the laws of the United States Virgin Islands ("USVI"), the United States or a foreign country, or constituted as a unit of another person, other than