Contract analysis

I. Purpose and Summary of This Letter We write to report to you on the mediation session held on Wednesday, April 12, 2023, before the Honorable Constance Adler (Retired) at the Westside Dispute Resolution Center, located at 11400 West Olympic Boulevard, Suite 550, Los Angeles, California 90064. As you will recall, the mediation was conducted pursuant to the Stipulation and Order for Mediation filed with the Los Ange

II. Summary of the April 12, 2023 Mediation Session A. Opening Statements and Procedural Framework The mediation session commenced at approximately 9:00 a.m. and continued until approximately 5:45 p.m., with a brief lunch recess from approximately 12:15 p.m. to 1:15 p.m. Judge Adler opened the proceedings with a framework discussion in which she outlined the ground rules for the day. She emphasized the confidentialit

1. The Alleged Premarital Agreement The Contestants continued to assert that a premarital agreement was executed by Teodoro R. Fonseca and Marguerite D. Fonseca on or about May 30, 2008, approximately two weeks before the parties' wedding on June 14, 2008. According to the Contestants, this agreement would classify all media-related assets originated or conceived prior to the marriage — including certain intellectual

2. Lumiére Canyon Studios LLC The Contestants asserted that the decedent's fifty percent (50%) membership interest in Lumiére Canyon Studios LLC constitutes his separate property. This interest is valued at approximately $15,800,000, based on the enterprise value of $31,600,000 as of December 31, 2021. The Contestants' theory is that Teodoro funded the company's formation with pre-marital capital — specifically, proc

3. Pacific Rim Narrative Partners LLC The Contestants claimed that the decedent's thirty-five percent (35%) membership interest in Pacific Rim Narrative Partners LLC ("PRNP") is separate property. PRNP is a media investment and content development fund with approximately $78,500,000 in assets under management, yielding an estimated value of the decedent's interest of approximately $27,475,000. Our position: PRNP was

4. Malibu Beach House (27100 Pacific Coast Highway) The Contestants argued that the real property located at 27100 Pacific Coast Highway, Malibu, California 90265 (the "Malibu Property") is Teodoro's separate property because it was purchased on August 22, 2007, for $4,750,000, approximately ten months before the marriage. The current fair market value of the Malibu Property is estimated at $6,200,000. Our position a

5. Beverly Hills Residence (1847 Coldwater Canyon Drive) The Contestants claimed that the Beverly Hills residence located at 1847 Coldwater Canyon Drive, Beverly Hills, California 90210, with a current fair market value of $8,450,000, is partially separate property. Their theory rests on an alleged pre-marital down payment made by Teodoro. Our position is that the property is community property. The property was purc

6. Isabela C. Fonseca-Greer's Promissory Note Claim Isabela C. Fonseca-Greer maintained her claim as a creditor of the estate, based on a promissory note dated January 15, 2020, in the principal amount of $1,200,000 payable to Amber Light Documentary Films LLC, a company controlled by Isabela. The note bears an annual interest rate of 3.5%. Including accrued interest through the date of Teodoro's death, Isabela claim

7. Nicolás R. Fonseca's Educational Expense Claim Nicolás R. Fonseca maintained his claim for $387,500 in educational expense reimbursement, based on an alleged oral promise by Teodoro to reimburse Nicolás for the cost of his graduate program at the Columbia University School of the Arts (film studies MFA program). Nicolás asserts that Teodoro orally promised to cover all educational expenses, including tuition, hous

III. Assessment of Litigation Risks and Strengths As your counsel, we are obligated to provide you with a candid assessment of the strengths and risks of your position should the matter proceed to contested litigation. We address each in turn. A. Strengths of Our Position We believe your position is strong on the merits for the following reasons: • Community Property Presumption. Under California law, there is a stro

IV. Recommendation — Settlement Standstill Agreement A. Proposed Standstill Terms Following the mediation, we have been in communication with Mr. Ortega regarding the terms of a proposed Settlement Standstill Agreement. The Contestants have expressed a willingness to enter into such an agreement, consistent with Judge Adler's recommendation. The proposed key terms are as follows:

1. Tolling of Litigation Deadlines. All litigation deadlines — including deadlines for discovery responses, motion filing, and trial-related proceedings — would be tolled for an initial period of six (6) months, commencing on the date of execution and extending through approximately October 28, 2023.

2. Moratorium on Litigation Activity. No new motions, discovery requests, or other litigation filings may be made by either party during the standstill period, except as may be necessary to preserve the estate or respond to emergency circumstances.

3. Continuation of Neutral Administration. The estate would continue to be administered by Ashford Fiduciary Services Inc. (Gerald Whitmore, principal officer), located at 600 Wilshire Boulevard, Suite 1450, Los Angeles, California 90017, serving as the neutral administrator appointed pursuant to the stipulation filed on March 22, 2023.

4. Administration Costs. Monthly administration costs of $8,500 payable to Ashford Fiduciary Services Inc. would continue to be shared equally: $4,250 per month payable by Ms. Fonseca, and $4,250 per month payable collectively by the Contestants. Additionally, Ashford's annual assets-under-administration (AUA) based fee of 0.15% of assets under administration would continue to apply.

5. Renewal and Termination. The standstill would be renewable in six-month increments by mutual written consent of both sides. Either party could terminate the standstill on thirty (30) days' written notice to the other party and to the Court, at which point all tolled deadlines would resume.

6. Confidentiality. All settlement discussions conducted during the standstill period would be subject to confidentiality provisions, consistent with the mediation confidentiality protections under the California Evidence Code.

7. Target Execution Date. The target execution date for the Settlement Standstill Agreement is April 28, 2023. We believe this timeline is achievable, provided you authorize us to proceed promptly. B. Benefits of the Standstill We believe the proposed Settlement Standstill Agreement offers several significant benefits: • Cost Savings. Active litigation in a contested probate matter of this complexity involves substan

V. Financial Status of the Engagement As set forth in the engagement letter dated October 12, 2022, referenced under Calderwood & Harkness Matter No. 1035-00005, an evergreen retainer of $150,000 was paid upon engagement. Fees and costs have been billed at the agreed hourly rates, as follows: An updated billing summary as of the date of this letter will be provided with the next monthly invoice, which you should expe

VI. Next Steps and Action Items Based on the foregoing analysis and recommendation, we propose the following next steps:

1. Authorization to Proceed. We respectfully request your written authorization to proceed with execution of the Settlement Standstill Agreement on or before the target date of April 28, 2023. Please indicate your authorization by signing and returning the enclosed authorization form, or by communicating your approval via email to the undersigned.

2. Pause of Litigation Activity. Upon execution of the standstill agreement, all litigation activity will be paused, including the pending discovery requests propounded by both sides and any motion practice currently in preparation.

3. Coordination with Ashford Fiduciary Services. We will continue to coordinate with Ashford Fiduciary Services Inc. regarding ongoing estate administration and quarterly reporting. Mr. Whitmore has been responsive and effective in his role as neutral administrator, and we will ensure that you are kept informed of all material administration developments.

4. Monitoring of Estate Accounting. We will continue to monitor the estate accountant's work through Ridgeway Accounting Partners LLP, including the preparation of the estate inventory and any required tax filings.

5. Settlement Communications. We will keep you informed of any communications from Brennan, Ortega & Saldívar LLP regarding settlement discussions, and we will not engage in any substantive settlement negotiations without your prior knowledge and approval.

6. Petition for Preliminary Distribution. The Petition for Preliminary Distribution of Non-Probate Assets (life insurance proceeds), filed on January 18, 2023, will be tolled during the standstill period under the general tolling provision. However, because the life insurance proceeds are non-probate assets and are undisputed, we may be able to pursue the petition separately if needed during the standstill period, de

7. Next Status Update. We will provide you with the next written status update following execution of the standstill agreement or upon any material development in the matter, whichever occurs first.

VII. Availability and Contact Information I am available to discuss this letter and our recommendation at your convenience. Please do not hesitate to contact me directly if you have any questions, concerns, or would like to schedule a meeting to discuss the matter in greater detail. Elliot Nguyen, the lead associate on this matter, is also available to assist you. Howard Quinn, Partner Calderwood & Harkness LLP 350 S