To: McCaffrey, Carlyn From: Jeffrey Epstein Sent Sun 2/10/2013 3:36:31 PM Subject: Re: good first try, yes call options are publicly traded, we would do five to ten year terms„ he could purchase the partner ship interest i guess, valuation the issue , he could decide on how much, we wouldn't need to bypass 2703, the stock would be full value but there would be an liability against it , which could not be ignored. he would not need much money to live as he would have the MI dividends. On Sun, Feb 10, 2013 at 11:16 AM, McCaffrey, Carlyn wrote: I agree (although at least one of my partners does not) that you can avoid the reach of section 2703 with a cash settled option. How would we price the option? Are call options on the stock publicly traded? How are dividends treated under the normal stock option? Here's how I understand your proposal. Step 1- LB buys stock from Trust (T) for $1B. LB issues a $1B note to T bearing interest at X%. and secured by a lien on his art. We need to discuss what X should be. We also need to think about the mechanics which are made a little difficult by the fact that the stock is held in a partnership. We also need to think about the fact that much of his art is already subject to a lien held by US Trust. Step #2 - LB sells a 2 year call to T. The price for the call is $.1B (obviously, a rough estimate); the strike price is the current market price. Step #3 - During the 2 year period of the call, LB spends the $.1B on living expenses, taxes, art, etc. Step #4 -Alternative 1- the $iis worth of stock is now worth $1.2 B. LB owes T .2 Billion. He issues a note to settle the option. No income tax consequences because of grantor trust rules. The trust is ahead but not as much as it would have been if it hadn't entered into the transaction but LB's spending needs have been taken care of. EFTA_R1_00334081 EFTA01903319