PART II AND III

 

 

 

 

PRELIMINARY OFFERING CIRCULAR:  An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the offering statement in which such Final Offering Circular was filed may be obtained.

 

PRELIMINARY OFFERING CIRCULAR DATED OCTOBER 15, 2023, SUBJECT TO COMPLETION

 

 

MAJESTIC FUNDING PARTNERS, LLC

460 S Greenfield Rd

Suite 5

Mesa, AZ 85206

 

 

Best Efforts Offering of

 

4,500,000 CLASS A COMMON UNITS

Per Unit Purchase Price:  $10

 

Minimum Investment Amount:  $500 (50 Units)

 

This Offering Circular relates to the offer and sale of up to an aggregate of 4,500,000 Class A Common Units of Majestic Funding Partners, LLC (the “Company” or “Majestic”), at a price of ten dollars ($10) per Unit, in a self-underwritten, best-efforts offering for gross proceeds of forty-five million dollars ($45,000,000). Funds placed in escrow will be released to the Company and used when, as and if received and all escrow release criteria have been met. See “Process of Subscribing”. Each subscriber to purchase our Units must purchase a minimum of fifty (50) Units for a total minimum investment of five hundred dollars ($500). Sales of our Class A Common Units pursuant to offering will commence as soon as the Regulation A+ Offering Statement of which this Offering Circular is a part, is qualified by the U.S. Securities and Exchange Commission (the “SEC”), and will continue until the earliest of: (1) the date at which the maximum offering amount has been sold, (2) the date which is one year from this offering being qualified by the Commission, and (3) the date at which the offering is earlier terminated by Majestic in its sole discretion. See “Summary of Offering”, “Description of Securities We Are Offering”, and “Plan of Distribution”, in this Offering Circular. We are using the Form 1-A disclosure format in this Offering Circular.

 

The Company is a Delaware limited liability company. The Company is managed, overseen and governed by Management team. The Company is seeking to raise up to forty-five million dollars ($45,000,000) from the sale of Class A Common Units (the “maximum offering dollar amount”), which represents the Units available to be offered as of the date hereof out of the rolling 12-month maximum Offering amount. All investors will be required to purchase securities pursuant to subscription agreements which appear as Exhibits to the Offering Statement of which this Offering Circular forms a part, and which are irrevocable. These contain exclusive forum and jury waiver provisions which are similarly irrevocable, see “Risk Factors,” “Securities Being Offered – Class A Common Units – Forum Selection Provision,” “Securities Being Offered – Preferred Units – Forum Selection Provision,” and “Plan of Distribution and Selling Holders – Jury Trial Waiver.” Investors in Class A Common Units in this Offering will be required to grant a proxy to vote their Units to the company’s Chief Executive Officer, see “Risk Factors” and “Securities Being Offered – Class A Common Units – The Proxy.” This means voting control of the company will remain in the hands of the company’s Chief Executive Officer and its Chairman. See “Security Ownership of Management.”

 

The company has engaged Colonial Capital, LLC as the escrow agent (the “Escrow Agent” or “Colonial”) to hold funds tendered by investors. We may hold a series of closings at which we receive the funds from the escrow agent and issue the Units to investors. This offering will terminate at the earlier of the date at which the maximum offering amount has been sold or the date at which the Offering is earlier terminated


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by the company at its sole discretion. At least every 12 months after this Offering has been qualified by the United States Securities and Exchange Commission (the “SEC”), the Company will file a post-qualification amendment to include the Company’s recent financial statements. The Offering is being conducted on a best-efforts basis with a minimum target of one hundred fifty thousand dollars ($150,000). We may undertake one or more closings on a rolling basis. After each closing, funds tendered by investors will be available to us, and after we have raised $150,000, we will have access to these funds even if they do not cover the expenses of this Offering. After the initial closing of this Offering, we expect to hold closings on at least a monthly basis.

 

This Offering is available to both accredited and non-accredited investors. Generally, if you are a non-accredited investor, no sale may be made to you in this Offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth.  Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review rule 251(d)(2)(i)(c) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

 

 

Price to the Public

 

Underwriting fees and commissions1

 

Proceeds to Issuer2

 

Costs and Expenses*

 

 

 

 

 

 

 

 

Per Unit Offered

$10

 

$0.275

 

$8.89

 

$1.11

 

 

 

 

 

 

 

 

TOTAL OFFERING

$10

 

$1,257,500**

 

$40,000,000

 

$5,000,000*

 

(1)The Company has engaged Castle Placement as sales agents and underwriters. Please refer to the section entitled “Plan of Distribution” of this Offering Circular for additional information. **assumes full $45,000,000 raised. 

(2)Assuming the $45,000,000 is raised, we estimate that the Total Costs and Expenses in connection with the sale of our Units will be 11.1%. 

* Costs and Expenses includes the Underwriting Fees and Commissions of $1,257,500 noted above, Accounting and Legal Fees of $75,000, and Advertising, Marketing, and Promotional costs of $3,667,500.

 

Investment in our Units involves a high degree of risk. Before buying any Units, you should carefully read the discussion of material risks of investing in the Units in the “Risk Factors” section of this Offering Circular. This Offering Circular supersedes any prior offering memorandum with respect to the offered Units.

 

THE U.S. SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION, HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

 

Legends or information required by the laws of the states in which we intend to offer our Class A Common Units are set forth following the Table of Contents.

 

The date of this Offering Circular is October 15, 2023


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Table of Contents

 

IMPORTANT INFORMATION REGARDING THIS OFFERING CIRCULAR

3

STATE LAW EXEMPTION AND PURCHASE RESTRICTIONS

4

STATEMENT REGARDING FORWARD-LOOKING INFORMATION

5

YOU SHOULD RELY ONLY ON THE INFORMATION IN THIS OFFERING CIRCULAR

6

SUMMARY OF OFFERING

6

HOW WE PLAN TO OFFER AND SELL OUR UNITS

11

DESCRIPTION OF OUR BUSINESS

11

HOW WE PLAN TO USE PROCEEDS FROM THE SALE OF OUR UNITS

15

DESCRIPTION OF SECURITIES WE ARE OFFERING

16

DILUTION

17

PLAN OF DISTRIBUTION

18

RISK FACTORS

20

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

37

OUR MANAGEMENT

39

OWNERSHIP BY MANAGEMENT AND CERTAIN UNITHOLDERS

41

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

41

AUDITED FINANCIAL STATEMENTS

F-1

PART III—EXHIBITS

44

SIGNATURES

44

 

 

IMPORTANT INFORMATION REGARDING THIS OFFERING CIRCULAR

 

This Offering Circular has been prepared solely for the benefit of authorized persons interested in the Offering. This memorandum does not constitute an offer or solicitation to any person except those particular persons who satisfy the suitability standards described herein.

 

This Offering Circular is part of an offering statement that we filed with the SEC, using a continuous offering process. Periodically, as we make material investments, or have other material developments, we will provide an Offering Circular supplement that may add, update, or change information contained in this Offering Circular. Any statement that we make in this Offering Circular will be modified or superseded by any inconsistent statement made by us in a subsequent Offering Circular supplement. The offering statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this Offering Circular. You should read this Offering Circular and the related exhibits filed with the SEC and any Offering Circular supplement, together with additional information contained in our annual reports, semi-annual reports and other reports and information statements that we will file periodically with the SEC. See the section entitled “Additional Information” below for more details.

 

There is currently no public market for the offered Units. Units purchased and sums invested are also subject to substantial restrictions upon withdrawal and transfer, and the Units offered hereby should be purchased only by investors who have no need for liquidity in their investment.

 

Non-U.S. investors have certain restrictions on resale and hedging under Regulation S of the act. Distributions under this Offering might result in a tax liability for the non-U.S. investors. Each prospective investor is urged to consult his, her or its own tax advisor or pension consultant to determine his, her or its tax liability.

 

No person has been authorized in connection with this Offering to give any information or to make any representations other than those contained in this memorandum, and any such information or representations should not be relied upon. Any prospective purchaser of Units who receives any such information or representations should contact the Company immediately to determine the accuracy of such information. Neither the delivery of this memorandum nor any sales hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of the company or in the information set forth herein since the date hereof.

 

Prospective investors should not regard the contents of this memorandum or any other communication from the company as a substitute for careful and independent tax and financial planning. Each prospective investor is encouraged to consult with his, her, or its own independent legal counsel, accountant and other professionals with respect to the legal and tax aspects of this investment and with specific reference to his, her, or its own tax situation, prior to subscribing for any Units offered hereby.


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The purchase of Units by an individual retirement account (“IRA”), Keogh plan or other qualified retirement plan involves special tax risks and other considerations that should be carefully considered. Income earned by qualified plans as a result of an investment in the company may be subject to federal income taxes, even though such plans are otherwise tax exempt.

 

The Units are offered subject to prior sale, acceptance of an offer to purchase, and to withdrawal or cancellation of the Offering without notice. The Company reserves the right to reject any investment in whole or in part.

 

The Company will make available to any prospective investor and his, her, or its advisors the opportunity to ask questions and receive answers concerning the terms and conditions of the Offering, the Company or any other relevant matters, and to obtain any additional information to the extent the Company possesses such information.

 

The information contained in this memorandum has been supplied by the Company and its management. This memorandum contains summaries of documents not contained in this memorandum, but all such summaries are qualified in their entirety by references to the actual documents. Copies of documents referred to in this memorandum, but not included as an exhibit, will be made available to qualified prospective investors upon request.

 

Use of Pronouns and Other Words

 

The pronouns “we”, “us”, “our” and the equivalent used in this Offering Circular mean Majestic Funding Partners, LLC. In the footnotes to our financial statements, the “Company” means Majestic Funding Partners, LLC. The pronoun “you” means the reader of this Offering Circular.

 

Summaries of Referenced Documents

 

This Offering Circular contains references to, summaries of and selected information from agreements and other documents. These agreements and other documents are not incorporated by reference, but, are filed as exhibits to our Regulation A Offering Statement of which this Offering Circular is a part and which we have filed with the U.S. Securities and Exchange Commission. We believe the summaries and selected information provide all material terms from these agreements and other documents. Whenever we refer in this Offering Circular to any of our agreements and other documents, you should refer to the exhibits filed with our Regulation A Offering Statement of which this Offering Circular is a part for copies of the actual agreement or other document.

 

STATE LAW EXEMPTION AND PURCHASE RESTRICTIONS

 

Securities will be sold only to “qualified purchasers” (as defined in Regulation A under the Securities Act). As a Tier 2 offering pursuant to Regulation A under the Securities Act, this Offering will be exempt from state law “Blue Sky” review, subject to meeting certain state filing requirements and complying with certain anti-fraud provisions, to the extent that investments offered hereby are offered and sold only to “qualified purchasers” or at a time when our Securities are listed on a national securities exchange. “Qualified purchasers” include: (i) “accredited investors” under Rule 501(a) of Regulation D and (ii) all other investors so long as their investment does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non-natural persons). Accordingly, we reserve the right to reject any investor’s subscription in whole or in part for any reason, including if we determine in our sole and absolute discretion that such investor is not a “qualified purchaser” for purposes of Regulation A.

 

To qualify as an “Accredited Investor” an investor must meet one of the following conditions:

 

1.Any natural person who had an individual income in excess of Two Hundred Thousand Dollars ($200,000) in each of the two most recent years or joint income with that person’s spouse or spousal equivalent in excess of Three Hundred Thousand Dollars ($300,000) in each of those years and who has a reasonable expectation of reaching the same income level in the current year, 

 

2.Any natural person whose individual net worth or joint net worth, with that person’s spouse or spousal equivalent, at the time of their purchase exceeds One Million Dollars ($1,000,000) (excluding the value of such person’s primary residence), 

 

3.Any bank as defined in Section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary capacity, any broker or dealer registered pursuant to Section 15 of the Securities and Exchange Act of 1934 (the “Exchange Act”), any insurance company as defined in Section 2(13) of the Exchange Act, any investment company registered under the Investment Fund Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act, any Small Business Investment Fund (SBIC) licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the  


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Small Business Investment Act of 1958, any plan established and maintained by a  State, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000, any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of  Five Million Dollars ($5,000,000.00) or, if a self-directed plan, with investment decisions made solely by persons who are Accredited Investors,

 

4.Any private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940, 

 

5.Any organization described in Section 501(c)(3)(d) of the Internal Revenue Code of 1986, as amended (the “Code”), corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of Five Million Dollars ($5,000,000), 

 

6.Any director or executive officer, or knowledgeable employee of a fund, as the issuer of the securities being sold, or any director, executive officer, or knowledgeable employee, or fund of a fund of the issuer, 

 

7.Any trust with total assets in excess of Five Million Dollars ($5,000,000) not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Section 506(B)(b)(2)(ii) of the Code, and/or limited liability companies with $5 million in assets, SEC- and state-registered investment advisers, exempt reporting advisers, and rural business investment companies (RBICs), 

 

8.Any individual holding and maintaining in good standing with a specific, verifiable professional certification, designation, or credential as designated by the SEC via Commission Order or, any one of the following securities licenses: Series 7, Series 82, Series 65. 

 

9.Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries, that own “investments,” as defined in Rule 2a51-1(b) under the Investment Company Act, in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered. 

 

10.“Family Offices” with at least $5 million in assets under management and their “family clients,” as each term is defined under the Investment Advisers Act. 

 

11.Any entity in which all the equity owners are accredited investors as defined above. 

 

STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This Offering Circular contains forward–looking statements that involve risks and uncertainties. We use forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “outlook,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions, verbs in the future tense and words and phrases that convey similar meaning and uncertainty of future events or outcomes to identify these forward–looking statements. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information. Our ability to predict results or the actual effect of future events, actions, plans, or strategies is inherently uncertain. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth or anticipated in our forward-looking statements. Factors that could have a material adverse effect on our forward-looking statements and upon our business, results of operations, financial condition, funds derived from operations, cash available for dividends, cash flows, liquidity and prospects include, but are not limited to, the factors referenced in this Offering Circular, including those set forth below.

 

When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Offering Circular. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Offering Circular. The matters summarized below and elsewhere in this Offering Circular could cause our actual results and performance to differ materially from those set forth or anticipated in forward-looking statements. Accordingly, we cannot guarantee future results or performance. Furthermore, except as required by law, we are under no duty to, and we do not intend to, update any of our forward-looking statements after the date of this Offering Circular, whether as a result of new information, future events or otherwise.


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YOU SHOULD RELY ONLY ON THE INFORMATION IN THIS OFFERING CIRCULAR

 

You should rely only on the information contained in this Offering Circular. We have not authorized anyone to provide information different from that contained in this Offering Circular. We will sell our Units of Class A Common Units only in jurisdictions where such sale and distribution is permitted. The information contained in this Offering Circular is accurate only as of the date of this Offering Circular regardless of the time of delivery of this Offering Circular or the distribution of our Units of Class A Common Units.

 

SUMMARY OF THE OFFERING

 

The following information is only a brief summary of, and is qualified in its entirety by, the detailed information appearing elsewhere in this Offering Circular. This Offering Circular, together with the exhibits attached including, but not limited to, the Certificate of Formation and the Operating Agreement of the Company (collectively, the “Governing Documents”), and the Subscription Agreement, should be read in their entirety before any investment decision is made. All capitalized terms used herein but not defined herein shall have the meaning ascribed to them in the Governing Documents. If there is a conflict between the terms contained in this Offering Circular and the Governing Documents, then the Governing Documents shall prevail.

 

The Company

 

Majestic Funding Partners, LLC (the “Company”) is a Delaware limited liability company with a principal address located at 460 S Greenfield Rd., Suite 5, Mesa, AZ 85206.

 

Offering Size

 

The Company is seeking to raise a maximum aggregate amount of $45,000,000. However, the Management, in Management's discretion may reduce the maximum aggregate amount.

 

Securities offered by Majestic, LLC

 

Up to 4,500,000 Units of Class A Common Units (the “Units” or the “Securities”).

 

Offering Price per Unit

 

$10 per Unit.

 

Minimum Offering and Investment

 

The Minimum Offering (minimum amount to be raised) is twenty-five thousand dollars ($25,000). Investors shall have the opportunity to purchase Units of Class A Common Units of the Company in the minimum amount of fifty (50) Units for a total investment amount of Five Hundred Dollars ($500), however, Management may, in Management’s discretion, accept a lesser amount.

 

Number of Units outstanding before the Offering

 

As of the date hereof, the Company has issued and reserved 2,000,000 Class A Preferred Units and Zero (0) Class A Common Units.

Market for these Securities

 

There is presently no public market for these Securities.

 

Company’s Existing Business 

The Company was founded in 2022 to provide senior based services to the market under franchising, licensing, and direct servicing business models, to help seniors and their families to manage the changing needs as they age. The primary methodology of the business is to find and acquire successful going concerns operating in this sector and adapt them to fit within the franchise systems we employ to grow aggressively with the market. Additionally, we offer funding services for acquisition of residential senior home care operations with lease back terms and potential purchase options for the operators.

 

Use of Proceeds/ Investment Objective

The Company's objective is to execute on its game plan and leverage the team's expertise, experience  and network to build a top tier provider of senior services.  The funds will be used for acquisitions, sales and marketing and building out scalable platform infrastructure to support growth.

 

Management

 

The Company is managed by its Management team Chuck Bongiovanni and Vince Guarnieri (collectively, “Management” or the “Management team”). The Management team are well known and experienced investors and entrepreneurs and have collectively more than fifty (50) years’ experience.


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Term of the Company

 

The Company is an open-ended “evergreen” Company with no set end date. The Management expects to conduct its business until the Management believes market conditions do not justify doing so. Management intends generally to utilize the capital of the Company to finance the initial expenses required to fund and operate its business, to develop additional relationships and locations, in the United States and Canada, to conduct operations, and to provide investment returns as discussed in this Offering Circular.

 

If the Management deems it appropriate based on evolving market conditions and dynamics, the Management shall cease its funding of operations and shall distribute any return of capital from the disposition of Company Assets until all Company Assets have been liquidated in accordance with the Governing Documents and applicable law.

 

Investor Suitability

 

This Offering is limited to certain individuals, Keogh plans, IRAs and other qualified Investors who meet certain minimum standards related to income and/or net worth. Each purchaser must execute a Subscription Agreement and Investor Questionnaire making certain representations and warranties to the Company, including such purchaser’s qualifications as a “Qualified Purchaser.” (See “State Law Exemption and Purchase Restrictions” herein).

 

Financial Reporting

 

The Company expects to use the accrual basis of accounting and shall prepare its financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”). The Company will produce a minimum of quarterly financial reports to investors.

 

Books and Records

 

Unitholders or their authorized representatives shall, at all reasonable times and for any purpose reasonably related to the business and affairs of the Company and their interest therein, have access to the Company’s books and records.

 

Company Administration

 

The Company intends initially to manage administration in house but may retain the services of an outside third-party administrator, located in and conducting business under the laws of the United States of America and/or one or more of the States’ authorities, to provide administration and investor relations functions. The cost thereof shall be a Company Expense and shall be at usual and customary market rates.

 

Termination of the Offering

 

This Offering will close upon the earlier of (1) the sale of the maximum number of Units offered hereby, (2) one year from the date of this Offering being qualified by the SEC, or (3) a date prior to one year from the date this Offering begins that is so determined by the Management team.

 

Use of Leverage/Credit Facilities

 

The Company, in the Management team’s discretion, may choose to borrow money from time to time from one or more lenders including Management (“Facility”, “Credit Facilities”, or “Facilities”) and may pledge one or more Company Assets as collateral for any such borrowing.

 

Any Facility shall be nonrecourse to the Members. The Management and the Company may agree to provide guarantees for a given Facility but are not required to do so. Any Facility will likely have covenants that affect the Company and the Management.

 

Company Expenses

 

Company Expenses shall include, but not necessarily be limited to the following: Company organizational costs, legal and accounting related costs for tax return preparation, financial statement preparation and/or audits, legal fees and costs, filing, licensing or other governmental fees, other third party audits, insurance costs (including without limitation GL, D&O, E&O and Fidelity), Company administration costs, fees associated with any Credit Facilities, business development, employment, commissions to independent contractor investment bankers, technology, data, marketing, and any other expenses associated with operation of the Company. Expenses may include expenses for services provided by affiliates of the Management and/or Officers and costs and expenses may be apportioned and/or reimbursed to or from such affiliates.


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Implications of Being an Emerging Growth Company

 

We are not subject to the ongoing reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) because we are not registering our securities under the Exchange Act. Rather, we will be subject to the more limited reporting requirements under Regulation A, including the obligation to electronically file:

 

·annual reports (including disclosure relating to our business operations for the preceding three fiscal years, or, if in existence for less than three years, since inception, related party transactions, beneficial ownership of the issuer’s securities, executive officers and directors and certain executive compensation information, management’s discussion and analysis (“MD&A”) of the issuer’s liquidity, capital resources, and results of operations, and two years of audited financial statements), 

 

·semiannual reports (including disclosure primarily relating to the issuer’s interim financial statements and MD&A) and 

 

·current reports for certain material events. 

 

In addition, at any time after completing reporting for the fiscal year in which our offering statement was qualified, if the securities of each class to which the offering statement relates are held of record by fewer than 300 persons and offers or sales are not ongoing, we may immediately suspend our ongoing reporting obligations under Regulation A.

 

If and when we become subject to the ongoing reporting requirements of the Exchange Act, as an issuer with less than $1.07 billion in total annual gross revenues during our last fiscal year, we will qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and this status will be significant. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company, we:

 

·will not be required to obtain an auditor attestation on our internal controls over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, 

 

·will not be required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives (commonly referred to as “compensation discussion and analysis”), 

 

·will not be required to obtain a non-binding advisory vote from our Unitholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden-parachute” votes), 

 

·will be exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure, 

 

·may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, and 

 

·will be eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards. 

 

We intend to take advantage of all these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.

 

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, or such earlier time that we no longer meet the definition of an emerging growth company. Note that the offering, while a public offering, is not a sale of common equity pursuant to a registration statement since the Offering is conducted pursuant to an exemption from the registration requirements. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have more than $1.07 billion in annual revenues, have more than $700 million in market value of our Class A Common Units held by non-affiliates, or issue more than $1 billion in principal amount of non- convertible debt over a three-year period.


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Certain of these reduced reporting requirements and exemptions are also available to us since we may also qualify, once listed, as a “smaller reporting company” under the SEC’s rules. For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting, are not required to provide a compensation discussion and analysis, are not required to provide a pay-for-performance graph or CEO pay ratio disclosure and may present only two years of audited financial statements and related MD&A disclosure.

Selected Risks Associated with Our Business

 

Our business is subject to a number of risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this summary. These risks include, but are not limited to, the following:

 

Risk Factors Related to the Company and its Business

 

·The Company is in a very competitive industry, 

 

·We face significant market competition, 

 

·New entrants, platforms, and technologies in the industry could have a detrimental impact on the Company, 

 

·Any valuation of the Company is difficult to assess, 

 

·We operate in a regulatory environment that is evolving and uncertain, 

 

·As a regulated entity, we may be subject to subject to fines, business suspension or license revocation, 

 

·We may be subject to litigation involving investors and/or project developers, 

 

·We may be liable for misstatements made by project developers, 

 

·We depend on key personnel and face challenges recruiting needed personnel, 

 

·The Company and its providers are vulnerable to hackers and cyber-attacks, 

 

·Our compliance is focused on US laws, and we have not analyzed foreign laws regarding the participation of non-US residents, 

 

·We operate in a highly regulated industry, 

 

·We may be affected by SEC actions, 

 

·There are many requirements to operate effectively, and the Company’s business model and pricing structure may need to change significantly, 

 

·Our revenues and profits are subject to significant fluctuations, 

 

·Our business model is heavily dependent on capital raising success fees and subject to significant non-recurring revenue, 

 

·We are dependent on general economic conditions, 

 

·Natural disasters and other events beyond our control could materially adversely affect us, 

 

·We may not be able to protect all of our intellectual property, 

 

·The Company’s offerings and services are relatively unique and new in an industry that is quickly changing, 

 

·We have an evolving business model, 

 

·We rely on providing one main type of service, 

 

·The Company currently relies on one transfer agent, escrow agent and primary technology service provider, and 

 

·If the Company cannot raise sufficient funds it could negatively impact the execution of our strategies.  


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Risk Factors Related to the Class A Common Units and the Offering

 

·Since the Class A Common Units will be extremely illiquid, when the investor sells their Class A Common Units the price may be significantly below the investor’s purchase price, 

 

·There is no current market for our Class A Common Units, 

 

·The Class A Common Units will be volatile, 

 

·The exclusive forum provision in the subscription agreements may have the effect of limiting an investor’s ability to bring legal action against us and could limit an investor’s ability to obtain a favorable judicial forum for disputes, 

 

·The amount of time it will take for us to deliver securities to investors under this Offering is uncertain, 

 

·The Class A Preferred Members have voting control of the Company and the Class A Common Units DO NOT VOTE, 

 

·You will need to keep records of your investment for tax purposes, 

 

·Investors in this Offering have less favorable outcomes as plaintiff(s) in any action under the agreements because they may not be entitled to a jury trial with respect to claims arising under the subscription agreements, and 

 

·Future fundraising may affect the rights of investors and Class A Common Members. 


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HOW WE PLAN TO OFFER AND SELL OUR UNITS

 

We are offering 4,500,000 Units of our Class A Common Units at a price of ten dollars ($10) per Unit, in a self-underwritten, best-efforts public offering for gross proceeds of forty-five million dollars ($45,000,000). Each subscriber to purchase our Units must purchase not less than fifty (50) Units for a total minimum investment amount of five hundred dollars ($500). Our Management and executive officers may offer and sell our Units but will not receive any commission or other compensation related to these activities. The Offering will terminate one year from the date of this Offering Circular, unless earlier terminated as set forth herein. You have no assurance we will be able sell any or all of the Class A Common Units.

 

Persons who decide to purchase our Units of Class A Common Units will be required to complete a subscription agreement (attached at the end of this Offering Circular) and submit it, together with funds for the subscription price, as set forth in the “PLAN OF DISTRIBUTION” in this Offering Circular. We reserve the right to reject subscriptions for any reason. In the event we reject any subscription the associated funds will be promptly refunded to the subscriber without interest, offset or deduction.

 

DESCRIPTION OF OUR BUSINESS

Our Overview and History

 

Majestic Funding Partners, LLC was formed to invest in real property, license our management and operational systems for senior assisted housing, and coordinate a management franchise opportunity for operators of individual properties owned or partially owned by the Company. Each property, along with other assets, are known as “Company Assets”. The Company seeks capital from this Offering to fully execute its rollout of acquiring strategic going concerns for expansion using our franchise model. We have already started the process of identifying businesses to engage in acquisition efforts once funding is available through this Offering. This ensures immediate cash flow to the company versus starting a stream of business acquisitions from scratch. Supporting this with expansion of the business through implementation of the franchise model pushes faster expansion of the business and produces ongoing monthly royalty revenue. The extensive experience of the Management team in both the senior services industry and franchising strongly lends itself to successful rollout of the business plan.

 

Objectives and Strategy

 

The mission of Majestic Funding Partners from inception has been twofold. First, to provide group home franchisees leasehold opportunities for their group homes and improvements where traditional finance programs are not available. Leases are expected to be at the prime of interest with five (5) year terms. The franchisees will have the right to purchase the group homes and facilities at cost plus appreciation. Second, acquire and grow senior services businesses that will involve cross-marketing to permit our franchisees the opportunity to develop franchise opportunities within the Senior Care industry. Each segment of the Senior Care industry will involve regular cross-marketing of services to accommodate the changing needs of the Senior Care industry and individual senior residents as they continue their journey through life.

 

BUSINESS AND ANTICIPATED GROWTH

 

Competition

 

The senior services industry is highly competitive. Within the senior services market we compete with numerous organizations, including not-for-profit entities, that offer similar communities and services, community-based service programs, retirement communities, convalescent centers, and other senior living providers. In general, regulatory and other barriers to competitive entry in the senior services industry are currently not substantial. Consequently, we may encounter competition that could limit our ability to attract and retain residents, patients and customers, raise or maintain fees, and expand our business, which could have a material adverse effect on our revenues, results of operations, and cash flows.  Certain competitors may price aggressively in order to capture market share. Major senior housing competitors include Atria Senior Living Inc., Life Care Services, LLC, Sunrise Senior Living, LLC, Erickson Senior Living, AlerisLife Inc., and multiple regional providers with large localized market presence, as well as a large number of not-for-profit entities.  Major home care competitors include Home Instead, Honor, Right at Home, Visiting Angels, Comfort Keepers, Senior Helpers, Home Helpers, and multiple regional providers with large localized market presence, as well as a large number of not-for-profit entities.  Major VA Benefits competitors include VetAssist.org, and multiple regional providers with large localized market presence, as well as not-for-profit entities.  Major assisted living placement competitors include CarePatrol, Assisted Living Locators, Oasis Senior Advisors, and multiple regional providers with large localized market presence, as well as a large number of not-for-profit entities.


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Over the long term we plan to evaluate and, where opportunities arise, pursue development, investment, and acquisition opportunities. The market for acquiring and/or operating senior services businesses is highly competitive, and some of our present and potential senior services competitors have, or may obtain, greater financial resources than us and may have a lower cost of capital. In addition, several publicly-traded companies and private equity firms have similar objectives as we do, along with greater financial resources and/or lower costs of capital than we are able to obtain.

 

Execution Strategy

 

Our franchising system is based on similar franchise systems worldwide while extracting those attributes that offer the best roadmap to a successful brand. As with any business, having a firm grasp and understanding of particular industries is vital to success.

 

In this case, the principles of MFP are well-versed and grounded in knowing the ins and outs of the senior care industry. Our CEO, Chuck Bongiovanni, is a Certified Franchise Executive with two decades of franchising experience, which provides a solid foundation for success.

 

The MFP’s system captures established local and potentially established national and international brands and converts them into a workable franchise portfolio model of companies. 

 

In addition, the brands we bring into our system are proven business models within the senior care sector. These brands have value-driven propositions that can function within the franchise environment because they are already profitable. These attributes allow us to present an already tested and refined business model to potential franchisees that offers significantly increased overall success.

 

MFP provides extensive training and ongoing support to the franchises, access to financing when necessary, and marketing, operations, and management support to ensure overall profitability. We view our role as the equivalent of a board of directors providing guided principles to each franchise. As a result, we create the ability for our brands to scale appropriately on all aspects of their business. 

 

One area where this is seen most strongly is Marketing.  Marketing is crucial for any business.  We offer traditional marketing functions such as marketing campaigns, advertising materials, and strategies that franchisees can use to promote their businesses.  However, each business under the “My Family Brands” presents a coherent referral base amongst and between the various anticipated acquired brands.

 

There is particular emphasis on inter-brand referrals in each brand’s training component. However, on the whole, My Family Brands captures the client for a more extended time throughout their continuum of care. This synergy increases the revenue spent throughout their classification as a senior.

 

Our Key Advantage

 

The Management team has a combined experience of over 25 years in the business of Franchising and over 65 years combined experience in senior-care related industry. Our CEO, Chuck Bongiovanni, is personally responsible for having built an innovative and industry leading assisted living placement franchise business. This extensive experience is accented by having well established relationships with over 800 franchise brokers who will fuel growth through the franchise sales network. The Company will be first to market with new franchising concepts in the senior care industry by capturing successful senior care businesses that have never previously franchised. Simply stated, we are doing what has not been done before and this gives the Company a significant competitive advantage. Market conditions are favorable. The need for senior services is rapidly expanding with aging population growth. The Company’s business model brings a level of simplicity to an otherwise complicated and often times disjointed industry. In doing this the Company will develop a relationship with a senior and their family in the beginning of the senior’s transition throughout the remainder of life, offering them consistency and quality in care and related resources for each remaining stage of their life.

 

Development and Growth

 

Growth of the franchise base will focus on businesses already strategically positioned within the senior care industry and converting them to our franchise system model, as well as the aggressive pursuit of new franchisees.


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Employees

 

The Company currently has no employees.  However, our Management team will become full-time employees upon the successful raise of the minimum in this Offering, with the Management team being paid their full salaries as approximately ten percent (10%) of the Offering is achieved (four million five hundred thousand dollars ($4,500,000)), and expect to hire additional employees and support staff as franchises are sold and the need for franchise administration arises and expands. In cases where strategic acquisitions are made, we expect to bring on key persons from the acquired company(ies) to continue to manage and administrate the acquired companies.

 

Litigation

 

The Company is not involved in any current litigation.

 

Our Founders, Management team and their background

 

Charles Bongiovanni

 

Chuck has been a nationally recognized innovator and pioneer in the Senior Placement and Residential Assisted Living industry with decades of direct experience and over 14 years of franchising experience. He has earned his professional certification in franchising as well as multiple academic degrees.

 

1995-2009 Co-Founder Preferred Assistance, the pioneer in the Senior Placement industry located in Phoenix, Arizona market assisting families in finding residential, assisted living and memory care communities. 

 

2000-2003 Co-Founder 24 Hours A Day in home caregiving services in the Phoenix metropolitan area. 

 

2009-2018 Founder, CEO CarePatrol Franchise Systems, national franchise system, the largest franchised senior placement franchise in the market. Sold to private equity in 2018. 

 

2018-Current Founding President National Placement & Referral Alliance, the national trade association for senior placement & referral agents. 

 

2018-2019 Brand President, CarePatrol Franchise Systems. 

 

2019- 2020 Executive Vice President of National Partnerships for Best Life Brands. Securing national agreements and partnerships for ComForCare In-Home Care Franchise, CarePatrol Senior Placement & Blue Moon Estate Sales Franchise. 

 

2020-Current Co-Founder, CEO Majestic Residences Franchise Systems, residential assisted living home franchise. 

 

2023-2026 Council Member, Town of Gilbert Elected official to the largest town in the nation. $1.6B budget.  

 

Vincent F Guarnieri, MC, CPRS

 

Bachelor’s in psychology with a minor in Philosophy University of South Alabama 

 

Master’s degree in counseling, University of Phoenix. Vince has had extensive experience in senior care spanning over 30 years. 

 

1999-2003 Co-Founder Preferred Assistance, the pioneer in the Senior Placement industry located in Phoenix, Arizona market assisting families in finding residential, assisted living and memory care communities. 

 

2000-2003 Co-Founder 24 Hours A Day in home caregiving services in the Phoenix metropolitan area. 

 

2003-2009 Co-Founder Legal Awareness for Seniors Estate planning, Medicare and Medicaid planning consultant. 

 

2009-2016 Founder, CEO Guardian Asset Protection- Estate planning, Medicare and Medicaid planning consultant. 

 

2017-2019 Executive Director Defenders of Children - Assisted victims of crime. 

 

2020-Current Director of Operations National Placement & Referral Alliance. Oversee operations of national trade association for senior placement & referral agents. 


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Joshua M Smith

 

Bachelor’s degree in business administration from the University of Wisconsin Madison and Certified Franchise Executive. 

 

2012-2015 Barclays Capital Healthcare Services Investment Banking Analyst, worked on 3 LBO deals, 6 M&A deals, 1 restructuring deal and 6 debt and equity financing deals across the healthcare services industry including CVS Caremark’s acquisition of Coram ($2.1bn), Sheridan Healthcare’s sale to Amsurg ($2.4bn) and the restructuring of Rotech Healthcare. 

 

2015-2021 Private Equity Investment Professional, Riverside Company, completed 2 platform acquisitions, 8 add-on acquisitions, 1 dividend recap and sold 2 portfolio companies.  Led the creation of a senior services franchisor Best Life Brands which included the acquisition of home care franchisor ComForCare, senior placement franchisor CarePatrol, estate sale and transition franchisor Blue Moon Estate sales and ProCare home health agency. 

 

2021-Current CEO of Centrix Health Resources a provider of home health and hospice services. 

 

Brett A Gibson, BS, JD

 

Bachelor’s degree in business administration from the University of Anchorage, Alaska. 

 

Juris Doctorate from University of Toledo. 

 

Licensed attorney with over 26 years of experience in practice of law and business entrepreneur-based ventures. 

 

Founder, CEO Yummy Chummies, a successful and innovative manufacturing business within the multi-billion-dollar pet industry.  

 

Devotion of substantial effort towards pro bono and other charitable functions within all aspects of life that help people and enrich lives both within the realm of business dealing and legal guidance. 

 

ADVISORY BOARD

 

Sandy Messer

 

Industry expert on veteran, Medicaid and other government benefit programs with over 10 years of experience as a business executive and financial planner specializing in these areas. Sandy is a VA Accredited Agent and Certified Medicaid Planner.  Bachelor's in business administration and accounting from Ambassador University.

 

Keith Kuhn

 

Industry expert on healthcare systems, including hospitals and outpatient services.  Over 18 years of experience as CEO, COO and other executive roles in complex healthcare systems across multiple states including both for-profit and non-profit settings.  MBA and MSW from Arizona State University.

 

Anthony Zerilli

 

Industry expert on assisted living and care homes.  Over 28 years of experience in the assisted living industry working with big box facilities and care home chains, including executive roles.  Founding member of the Arizona Assisted Living Homes Association.

 

Russell Morgan

 

Expert on franchise growth and operations with over 20 years of experience including executive roles at senior services franchise systems.  As an executive played a key role in the growth and sale of 3 businesses to private equity firms.  MBA from California State University Long Beach.

 

Shannon Mcinnis 

 

Expert on franchise development and compliance with over 11 years of experience including management roles for senior services franchise systems.  Experience includes Chief Compliance Officer and Franchise Development Manager at CarePatrol and Sales Operations Manager for ZeeSprout. 


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HOW WE PLAN TO USE PROCEEDS FROM THE SALE OF OUR UNITS

 

The net proceeds to the Company from the sale of the Units will be equal to the aggregate purchase price of the Units we sell less our Offering expenses. If we sell the maximum Offering amount, which is forty-five million dollars ($45,000,000) (and the current Class A Common Unitholders do not sell any of their Class A Common Units). The net proceeds will be approximately $41,742,500, after deducting estimated expenses for the preparation, filing, printing, legal, accounting, marketing and other fees and expenses related to the Offering of approximately $3,742,500.

 

The Company intends to use the net proceeds from this Offering to: make acquisitions of successful operating facilities, acquire franchised operating facilities and the franchisors of such operating facilities, build-out the Company’s data and technology capabilities, increase marketing to build brand awareness and increase the acquisition origination pipeline, and support the aforementioned activities. It is important to note that the Company will primarily target operations that are already franchised by the owners.  The Company’s value-add will be the expansion and streamlining of acquired operations with the franchisors the Company also intends to acquire.

 

The Company does not expect to, but may also use a portion of the net proceeds to repurchase equity interests of the Officers in the Company in order to increase the Investors’ share of ownership going forward.

 

The purposes to which we intend to apply the proceeds are set forth in the following table. The columns in the table indicate the level of proceeds applied to the individual line items in the table based on the percentage of the total Offering that we sell.

 

Use of Proceeds: (1)

 

10%

 

50%

 

100%

Capital Raised

 

$4,500,000 

 

$22,500,000 

 

$45,000,000 

Less: Offering Expenses and Sales Commissions

 

$500,000 

 

$2,500,000 

 

$5,000,000 

Net Offering Proceeds

  

$4,000,000 

 

$20,000,000 

 

$40,000,000 

 

Specific Uses:

 

10%

 

50%

 

100%

Marketing

 

$200,000 

 

$500,000 

 

$1,000,000 

Business Development & Acquisitions

 

$1,500,000 

 

$17,000,000 

 

$36,000,000 

Management Compensation

 

$990,000 

 

$990,000 

 

$990,000 

Additional Support Personnel

 

$310,000 

 

$510,000 

 

$500,000 

Working Capital*

 

$1,000,000 

 

$1,000,000 

 

$1,510,000 

TOTAL

  

$4,000,000 

 

$20,000,000 

 

$40,000,000 

 

(1)The Management team reserves the right to reallocate the use of net proceeds, if, in its judgment, such reallocation will best serve the Company’s needs in meeting changes, challenges, developments, and unforeseen delays and/or difficulties. Pending use, the net proceeds will be held in a federally insured banking association, money market account, treasury bills, and similar short term, liquid investments with substantial safety of principal. 

 

* This includes estimated salaries and compensation for additional employees and staff whose employment is contingent upon the success of this Offering.  Costs of Marketing this Offering are included in the table above.

 

Salaries and commissions are expected to be our largest fixed expenditure upon reaching ten percent (10%) of the total Offering.

 

Acquisitions are expected to be our largest expected expenditure regardless of the amount raised. These figures include the costs of acquiring senior assisted living homes, real estate upon which to develop such homes and facilities, and the acquisition of interests in both real estate and businesses in the senior assisted living and convalescent care sectors.

 

Marketing is our third largest expected operational expenditure, and the objective of our marketing efforts is to build the Majestic Funding Partners brand as well as the development of relationships with owners of senior assisted and convalescent care facilities as well as relationships with developers of. and lenders to, such facilities and properties.  Marketing expenses are expected to be deployed with third-party agencies but may also be deployed with Affiliates of the Company or Management team members.

 

Majestic is likely, and reserves the right, to change the above use of proceeds if Management believes it is in the company’ best interest to do so.

 

The capital markets are constantly evolving. Therefore, the allocation of the net proceeds of the Offering set forth above represents Majestic’s estimates based upon its current plans, assumptions it has made regarding the industry and general economic conditions, its future revenues (if any), its expenditures, the results of its current activities, and its strategic goals.


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Expenditures may vary substantially from the above estimates, and Investors should be aware of this possibility and understand the risks and consequences that could result. Investors will be relying on the judgment of Majestic management, who will have broad discretion regarding the application of the proceeds from this Offering. The amounts and timing of the actual expenditures will depend upon numerous factors, including without limitation the performance of the company, market conditions, cash generated by the company’s operations (if any), business developments, the company’s growth, and the state of the investment banking industry and the capital markets. The company may find it necessary or advisable to use portions of the proceeds from this Offering for other purposes. Majestic does not have any committed sources of financing. In the event that the company does not raise the entire amount it is seeking, then the company may attempt to raise additional equity and/or debt.

 

DESCRIPTION OF SECURITIES WE ARE OFFERING

 

The following description of our Non-Voting Class A Common Units is qualified in its entirety by reference to our Certificate of Formation, our Operating Agreement, and Delaware limited liability company law. As a limited liability company there is no legal limit as to the number of Common Units we may issue. At the date of this Offering Circular, we have zero (0) Class A Common Units issued and outstanding, and two million (2,000,000) Class A Preferred Units issued and outstanding, and reserved for additional issuances to employees.

 

The Class A Non-Voting Common Units (“Class A Common Units”) have the following features:

 

·have equal rights with all holders of issued and outstanding Class A Common Units and Class A Preferred Units to receive distributions from funds legally available therefore, if any, when, as and if declared from time to time by the Management, 

·are entitled to share equally with all holders of issued and outstanding Class A Common Units and Class A Preferred Units in all of our assets remaining after payment of liabilities, upon liquidation, dissolution or winding up of our affairs, 

·do not have preemptive, subscription or conversion rights, and 

·do not have cumulative or any other voting rights. 

 

Our transfer agent is Colonial Transfer Company, Inc., whose address is 7840 S, 700 E, Salt Lake City, UT 84070, phone number is 801-355-5740, and web address is www.colonialstock.com.


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DILUTION

 

Dilution is the amount by which the Offering price paid by purchasers of shares of Class A Common Units sold in this Offering will exceed the pro forma net tangible book value per share of Class A Common Units after the Offering. 

 

Immediate dilution

 

There are at least two ways to think about dilution: immediate and future dilution. Early-stage companies typically sell their Units (or grant options exercisable for their Units) to their founders and early employees at a very low cash cost because they are, in effect, putting their “sweat equity” into the company. When the company seeks cash investments from outside investors (like you in this Offering for Majestic Funding Partners, LLC Class A Common Units) the new investors typically pay a much larger sum for their Units than the founders or earlier investors, which means that the cash value of your stake is diluted because all the Units are worth the same amount, and you paid more than earlier investors for your Units. The following table demonstrates the price that new investors are paying for their Units and the immediate dilution under various total investment scenarios. The dilution is based on the company’s net asset value on December 31, 2022. We believe this method gives investors a better picture of what they will pay for their investment compared to previous investors and Company insiders than simply listing such transactions for the last 12 months.

 

Future dilution

 

Future dilution provides a different perspective which could affect you: the dilution that happens due to future actions by the company. The investor’s stake in a company could be diluted due to the company issuing additional Units. In other words, when Majestic issues more Units, the percentage of the company that you own will go down, even though the value of Majestic may go up. You will own a smaller piece of that company. This increase in the number of Units outstanding could result from a stock offering (such as an initial public offering, another crowdfunding round, a venture capital round, or angel investment), employees exercising stock options, or by conversion of certain instruments (e.g., convertible bonds, preferred Units or warrants) into stock. If Majestic decides to issue more Units, an investor could experience value dilution, with each Unit being worth less than before, and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per Unit (though this typically occurs only if the company offers dividends, and most early-stage companies are unlikely to offer dividends, preferring to invest any earnings into the company). The type of dilution that hurts early-stage investors most occurs when the company sells more Units in a “down round,” meaning at a lower valuation than in earlier offerings. The following example (numbers are for illustrative purposes only) demonstrates how future dilution might occur:

 

In April 2023 Maria invests $20,000 for Units that represent 2% of a company valued at $1 million. 

 

In October 2023 the company is doing very well and sells $5 million in Units to venture capitalists on a valuation (before the new investment) of $10 million. Maria now owns only 1.3% of the company but her stake is worth $200,000. 

In April 2024 the company has run into serious problems and in order to stay afloat it raises $1 million at a valuation of only $2 million (the “down round”). Maria now owns only 0.89% of the company and her stake is worth only $26,660. 

Future dilution might also occur upon conversion of convertible notes into Units. The terms of typical convertible notes issued by early- stage companies provide that in the event of another round of financing, the holders of the convertible notes get to convert their notes into equity at a “discount” to the price paid by the new investors (i.e., they get more Units than the new investors would for the same price). Additionally, convertible notes may have a “price cap” on the conversion price, which effectively acts as a Unit price ceiling. Either way, the holders of the convertible notes get more Units for their money than new investors. In a “down round” financing, holders of convertible notes will dilute existing equity holders, even more than the new investors do, because they get more Units for their money. Investors should pay careful attention to the amount of convertible notes that the company has issued (and may issue in the future), and the terms of those notes. If you are making an investment expecting to own a certain percentage of the company or expecting each Unit to hold a certain amount of value, it is important to realize how the value of those Units can decrease by actions taken by the company. Dilution can make drastic changes to the value of each Unit, ownership percentage, earnings per Unit, and voting control.

 

The Company anticipates that subsequent to this Offering the Company may require additional capital and such capital may take the form of Common Units, other Units or stock, or securities or debt convertible into shares of stock. Such future fundraising will further dilute the percentage ownership of the shares sold by the Company. 


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If you invest in our Class A Common Units, your interest will be diluted immediately to the extent of the difference between the Offering price of our Class A Common Units and the pro forma net tangible book value per share of our Common Units after this Offering. As of the date of this Offering, the net tangible book value of the Company was approximately $3,550.00. Based on the number of Units issued and outstanding as of the date of this Offering Circular, which equates to a net tangible book value of approximately $0.00065 per Unit on a pro forma basis. Net tangible book value per share consists of shareholders' equity adjusted for the retained earnings (deficit), divided by the total number of shares outstanding. The pro forma net tangible book value, assuming this Offering is fully subscribed ($45,000,000), would be approximately $4.00 per Unit. 

 

Thus, if the Offering is fully subscribed, the net tangible book value per Unit owned by our current Unitholders will have immediately increased by approximately $4.1255 without any additional investment on their part and the net tangible book value per Unit for new investors in the Units will be immediately diluted to $4.1261 per Unit.

 

DILUTION TABLE

 

Assets Post Raise (Raise + Net Book Value)

$45,003,550   

Offering Expenses

$3,742,500   

Net Tangible Assets

$41,261,050   

New Units

4,500,000   

Total Units

10,000,000   

Previous Book Value per Unit before Offering

$0.00065   

Book Value per Unit after Offering

$4.1261   

Increase to Prior Unitholders

4.1255   

Price per Unit Paid by Investors

10.000   

Change in Value to Investor per Unit

$-5.8739   

Percentage Dilution

59% 

Investors Percentage of Outstanding Units

45% 

 

PLAN OF DISTRIBUTION

 

Plan of Distribution

 

Majestic is seeking to raise up to $45,000,000 in total. The company will raise the money through the sale of up to 4,500,000 Non-Voting Class A Common Units. The maximum Offering amount is $45,000,000 which represents the value of securities available to be offered as of the date of this Offering Circular. Under Regulation A, the company may only offer forty-five million dollars ($45,000,000) in securities during a rolling 12- month period. From time to time, we may seek to qualify additional shares.

 

The Company is offering a maximum of 4,500,000 Non-Voting Class A Common Units on a “best efforts” basis at ten dollars ($10) per Unit.

 

The minimum investment is $500 (50 Units).

 

The company’s Offering Circular will be furnished to prospective investors in this Offering via download 24 hours a day, 7 days a week on its website.

 

Castle Placement, LLC—Underwriter and Commissioned Sales Agent

 

Castle Placement, LLC has disrupted investment banking by revolutionizing the capital raising process and raised over one billion dollars for our clients. Castle raises equity and debt for private companies utilizing our robust, data-driven technology platform and experienced investment banking team. The Managers are well known and experienced investment bankers from bulge bracket investment banks and each has over 30 years of experience. We have access to over 600,000 accredited investors and 64,500 institutional, private equity, venture capital and strategic investors, family offices, pension funds, foundations, endowments, sovereign wealth funds, hedge funds and lenders. Over 30 experienced Castle investment bankers (independent contractors) with significant personal relationships provide full-service investment banking assistance to our clients. The Company is currently raising capital for over 50 companies with capital raises between a few million dollars to several hundreds of millions.


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CPGO, Castle’s cutting-edge web-based app, allows companies and investors to meet each other, and provides transparency throughout the entire process. Companies view all information regarding their deal, view detailed investor information, directly contact investors, and input notes about their investors. Investor views all information regarding their deals, follow-up with company, and input notes about their progress. Investors view all information regarding our transactions, directly contact the company, and input notes about their progress. Separately and on a pay-as-you-go basis, investors (over 64,500 institutional investors) and companies (over 500,000 with revenue between $1 million and $1+ billion) raising capital can each find, purchase and message each other using our proprietary matching technology and detailed contact/company information. The app provides curated, granular investor/lender criteria and portfolio information, one-click automated contact messaging (email, LinkedIn, and CPGO), and simple to use productivity tools (search, matching technology, ranking, note taking, etc.).

 

This unique full integration of sophisticated data/technology with full-service investment banking has resulted in over $1 billion of capital raised by Castle for our clients. Most importantly, we believe that we achieve the best possible execution for our clients. We connect companies of all sizes seeking to raise capital through our online electronic platform that connects companies (all industries, sizes, stages, geographies, equity and debt) with investors all over the world seeking favorable investment opportunities.

 

Castle is FINRA/SIPC licensed and is registered in all 50 states, the District of Columbia and Puerto Rico.

 

Process of Subscribing

 

Investors in Class A Common Units may only complete the subscription agreement on our website.

 

The subscription agreement must be delivered to us and funds for the subscribed amount must be delivered in accordance with the instructions stated in the subscription agreement. Investors will specify whether they will purchase Units via credit card, wire transfer, ACH transfer, or check.

 

The subscription agreement includes a representation by the investor to the effect that, if you are not an “accredited investor” as defined under securities laws, you are investing an amount that does not exceed the greater of 10% of your annual income or 10% of your net worth (excluding your principal residence).

 

East West Bank is our registered escrow company. They offer escrow services as well as an integrated technology platform for processing investment transactions. The company has agreed to pay East West Bank a fee of fifteen hundred dollars ($1,500) plus transactional fees and costs as requested and agreed to by us in advance, for Escrow services for one year after approval of this Offering (See Escrow Agreement, Part III, Exhibit 8).

 

Our registered transfer agent, Colonial Stock Transfer Company, will maintain stockholder information on a book-entry basis (See Transfer Agent Agreement, Part III, Exhibit 6(b)).

 

Tender of Funds by Investors

 

Majestic will accept tenders of funds to purchase the Units. The Company may close on investments on a “rolling” basis (so not all investors will receive their Units on the same date). The funds tendered by potential investors will be held by Colonial Capital, LLC, the Escrow Agent, and will be transferred to Majestic upon each closing. The Escrow Agreement can be found in Exhibit 8 to the offering statement of which this Offering Circular is a part. The Escrow Agent will not investigate the desirability or advisability of investment in the Units in this Offering nor will it approve, endorse or pass upon the merits of purchasing those Units. The Escrow Agent is performing OFAC due diligence on all investors and AML due diligence on investors as required. The Escrow Agent will use a third-party identity verification service to verify customer identification and run AML checks. The process is automated for domestic US, Canadian, and UK investors who are natural persons. If information provided by the investor matches the information on file with the identity verification service, the investor will be cleared for AML. If the information does not match or is not found, the Escrow Agent will request official documentation (e.g., a driver’s license) from the investor to verify that the information provided is accurate. For international investors (excluding Canada and the UK) and non-natural persons, the due diligence will be effected using the LexisNexis system. The investor will need to provide additional information, which may include a copy of a valid passport, copy of a valid government issued ID, proof of residency, trust agreements and operating agreements. The Escrow Agent performs funds origination verification on all investments. If the name on the bank account, wire or check used to invest matches the name of the investor, the funds origination is cleared. If the source of funds does not match the name of the investor, authorization or verification documentation is required. Information and verification that may be required includes: names, tax ID, SSNs, government issued ID numbers, addresses, dates of birth, copies of valid government issued ID (passport/visa/driver’s license), address verifications (mail item within the last 90 days that lists the individual and the address provided) if address is not listed on ID, and copies of business entity documentation showing formation, ownership and control


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structure (such as Articles of Incorporation/By-laws/Operating Agreement). Documents must show that the contact / associated person listed is an authorized signor for the business entity. In addition to identity verification and source-of-funds validation, the Escrow Agent performs watch list checks on all investors, including various lists created and maintained by the OFAC. If there is a watch list hit, the Escrow Agent employs a conservative, best-efforts approach to determine if the hit is a false positive. In the case that a false positive cannot be reasonably ascertained, the Escrow Agent notifies the proper authorities, which can include but are not limited to government agencies such as the Federal Bureau of Investigation.

 

A closing will occur each time the Company determines to accept funds. There are no conditions that the Company must meet in order to hold a closing. All funds are held in escrow pending satisfactory due diligence. The Company will accept a Subscription (i.e., hold a closing) within 30 calendar days after due diligence is successfully completed. Given the timing of completion of diligence, it is possible that the Company could conduct a closing every weekday, which would be administratively burdensome. In order to reduce the number of closings, the Company may wait until it has completed due diligence on several investments before submitting a disbursement request to the Escrow Agent. We expect that investors who provide the information required by the Subscription Agreement and give accurate instructions for the payment of the Subscription Price should receive their securities in no more than six months, however, we cannot guarantee that you will receive your securities by a specific date or within a specific time frame. We expect that the average period from subscription to closing will be approximately 30 days. If an investor subscribes by ACH, the period between subscription and closing will likely be at least 15 days. Subscriptions are irrevocable, and during the period between an investor’s subscription and a closing, the investor will not have the rights of a Unitholder. The funds in escrow will be returned to the investor if the minimum closing does not happen for whatever reason, including, the dissolution or liquidation of the Company. Tendered funds will only be returned to investors in the event we decide to terminate the Offering, in which case any money tendered by potential investors that is still held in escrow will be promptly returned by the Escrow Agent upon our instruction. Upon each closing, funds tendered by investors will be made available to the Company for our immediate use. Upon the receipt of funds and closing you will receive notice from the Company.

 

Issuance of Units

 

The information regarding the ownership of Class A Common Units will be recorded with the Transfer Agent.

 

Waiver of Trial by Jury

 

Pursuant to the subscription agreement, subscribers waive the right to a jury trial of any claim they may have against Majestic arising out of or relating to the subscription agreement, including any claim under federal securities laws. If we opposed a jury trial demand based on the waiver, a court, in accordance with applicable statutory and case law, would determine whether the waiver was enforceable given the facts and circumstances of that case.

 

RISK FACTORS

 

There are significant risks associated with investing in the Company’s Securities and such Securities are highly speculative and should not be purchased by anyone who cannot afford a total loss of his or her entire investment. Before you purchase Securities in the Company, please review below a list of risks that the Company specifically wants to bring to your attention. There are undoubtedly many more risks that could interfere with the business of the Company and the summary below is not intended to be full and complete. You should carefully consider the following risk factors together with all of the other information included in this Offering Circular, including the matters addressed under “Forward-Looking Statements,” in evaluating an investment in the Company’s Securities. If any of the following risks were to occur, the Company’s business, financial condition, results of operations, cash flows and ability to make cash distributions could be materially adversely affected. The following risk factors do not include factors or risks which may arise or result from general economic conditions that apply to all businesses in general or risks that could apply to any issuer or any offering.

 

Risks Related to an Investment in the Company - General

 

We are conducting this Offering on a “best efforts” basis.

 

This Offering is being conducted on a “best efforts” basis. No guarantee can be given that all or any of the securities will be sold, or that sufficient proceeds will be available to conduct successful operations. Receipt of a relatively small amount of capital contributions may reduce the ability of the Company to spread investment risks through diversification of its loan portfolio. If we are unable to raise substantial funds, we will make fewer investments resulting in less diversification in terms of the type, number and size of investments that we make. In that case, the likelihood that any single asset’s performance would adversely affect our profitability will increase. Your investment in our Units will be subject to greater risk to the extent that we lack a diversified portfolio of investments. Further, we will have certain


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fixed operating expenses, including certain expenses as a public reporting company, regardless of whether we are able to raise substantial funds in this Offering. Our inability to raise substantial funds would increase our fixed operating expenses as a percentage of gross income, reducing our net income and limiting our ability to make distributions.

 

An investment in Securities is speculative and there is no guarantee of profitability.

 

Management anticipates that revenues will be sufficient to create net profits for the Company. However, there can be no assurance that revenues will be sufficient for such purpose. Although the Management believes in the Company’s economic viability, there can be no guarantee that the business of the Company will be profitable to the extent anticipated. The projections of the Company are not based on historical operations of the Company and are aspirational in nature due to the Company’s limited operations to date.

 

There is no guaranteed return of Investor’s investment.

 

The investments offered hereby are speculative and involve a high degree of risk.  There is no assurance that the investment will be profitable, or that the profit will meet expectations. There is no guarantee that the Company will be able to return to Investors the full amount of their investment, or even a portion of their investment. There is the potential that Investors could lose their entire investment in the Company. For this reason, each prospective Investor should read this Offering Circular and all documents in the Subscription Booklet carefully and should consult with his/her or its own legal counsel, accountant(s), or business advisor(s) prior to making any investment decision.

 

We may raise additional capital that may not be available on acceptable terms.

 

We may in the future raise additional capital through a variety of sources, including the public equity markets, additional private equity financings, collaborative arrangements and/or private debt financings. Additional capital may not be available on terms acceptable to us, if at all. If additional capital is raised through the issuance of equity securities, our Unitholders will experience dilution, and such securities may have rights, preferences, or privileges senior to those of the holders of our Class A Common Units. If we raise additional capital through the issuance of debt securities, the debt securities would have rights, preferences, and privileges senior to holders of Class A Common Units, and the terms of that debt could impose restrictions on our operations.

 

This Offering is being made subject to Regulation A, which has recently undergone significant changes.

 

The Company is conducting this Offering pursuant to Regulation A, which was amended effective June 19, 2015. Because of these recent amendments, there is still significant uncertainty with respect to the parameters of an offering pursuant to this regulation. In addition, these regulations may change as regulators develop practices with respect to such amendments, which changes may be detrimental to the Company or its ability to raise funds. If the Company were to inadvertently violate the parameters of this type of offering, it may be subject to enforcement action or civil liabilities under securities laws. Such violation may also affect the Company’s ability to raise capital in the future.

 

Compliance with anti-money laundering requirements may require the Company to disclose Investor information to regulatory authorities.

 

The Company may be subject to certain provisions of the Uniting and Strengthening America By Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“the Patriot Act”), including, but not limited to, Title III thereof, the International Money Laundering and Abatement and Anti-Terrorist Financing Act of 2001 (“Title III”), certain regulatory and legal requirements imposed or enforced by the Office of Foreign Assets Control (“OFAC”) and other similar laws of the United States. In response to increased regulatory concerns with respect to the sources of the Company’s capital used in investments and other activities, the Management may request that Investors provide additional documentation verifying, among other things, such Investor’s identity and source of funds to be used to purchase Units. The Management may decline to accept a subscription if this information is not provided or on the basis of the information that is provided. Requests for documentation and additional information may be made at any time during which an Investor holds Units. The Management may be required to report this information or report the failure to comply with such requests for information, to appropriate governmental authorities, in certain circumstances without informing a Member that such information has been reported. The Management will take such steps as it determines are necessary to comply with applicable law, regulations, orders, directives or special measures, including, but not limited to, those imposed or enforced by OFAC, the Patriot Act and Title III. Governmental authorities are continuing to consider appropriate measures to implement anti-money laundering laws and at this point it is unclear what steps the Management may be required to take however, these steps may include prohibiting a Member from investing further monies in the Company, depositing distributions to which such Member would otherwise be entitled into an escrow account or causing the redemption of such Member’s investment in the Company.


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We have not analyzed foreign laws regarding the participation of non-US residents in our transactions, and our compliance is focused on US laws.

 

We have not researched all the applicable foreign laws and regulations that could impact our business, and we have not set up our structure to be compliant with foreign laws. Some of the investment opportunities posted on our platform are open to non-US residents. It is possible that we may be deemed in violation of those laws, which could result in fines or penalties as well as reputational harm. This may limit our ability in the future to assist companies in accessing money from those investors, and compliance with those laws and regulation may limit our business operations and plans for future expansion and may result in increased operating costs.

 

If Majestic cannot raise sufficient funds, it could negatively impact Majestic’s future results.

 

To date, we have not raised outside capital. However, we may have a continuing need for capital to execute our business model. We are Offering securities in the amount of up to forty-five million dollars ($45,000,000) in this Offering and may close on any investments that are made. The amount we can raise in any 12-month period is limited to forty-five million dollars ($45,000,000). Even if the maximum amount is raised (in this 12-month period or in subsequent periods), we are likely to need additional funds in the future to grow. If we cannot raise those funds for whatever reason, including reasons relating to Majestic itself or to the broader economy, we may not survive. If we manage to raise only a portion of funds sought, we may have to adjust our business model or find other sources of funding for some of the plans outlined in “Use of Proceeds.” No alternative sources of funds have been committed to Majestic.

 

The closing of this Offering is subject to a low minimum amount.

 

This is a “best efforts” offering with a minimum of just twenty-five thousand dollars ($25,000). Therefore, Majestic will have access to any funds raised in excess of twenty-five thousand dollars ($25,000). Any investment made could be the only investment in this Offering, leaving Majestic without adequate capital to pursue its business plan. Furthermore, the capital raised herein may not even be sufficient to cover the expenses of this Offering, including legal, marketing, etc.

 

Risks Relating to an Investment in the Company – General

 

No Guarantee of Profitability.

 

The Company remains an early-stage company with no history of profitable operations.  There is no assurance that cash flow will ever be sufficient to create net profits for the Company even if the Management team believes in each Company Asset’s economic viability. Poor performance by a few of the Company Assets could significantly affect the total returns to Investors. In addition, there is no guarantee that any return will be paid on a quarterly basis, if at all. The Management team may choose not to make a distribution of cash flow to Members if it is in the best interest of the Company to do so.

 

No Guaranteed Return of Investor’s Capital Contributions.

 

Investment in the Company is speculative and involves a high degree of risk. There can be no guarantee that an Investor will realize a substantial return on the investment, or any return at all, or that the Investor will not lose the entire investment. For this reason, each prospective Investor should read this PPM and all documents in the applicable Subscription Booklet carefully and should consult with his, her, or its own legal counsel, accountant(s), or business advisor(s) prior to making any investment decision.

 

Borrowing by the Company Could Increase the Risk of Losses.

 

As described herein, the Company may choose to borrow money from time to time by issuing debt securities and/or from one or more senior lenders (“Credit Facilities” or “Facilities”) and may directly pledge one or more Company Assets as collateral for any such borrowing. The LLC Agreement grants the Management team significant latitude and discretion in its ability to issue debt securities and to use Credit Facilities in the operation of the Company.

 

Any debt security and any Credit Facility shall be nonrecourse to the Members. The Management team (and/or its principals) and the Company may agree to provide guaranties for a given Facility but are not required to provide a guarantee under any circumstances. Any Credit Facility will likely have covenants that affect the Company and the Management team and will impact the Company’s operation and cash flow, and could impair or eliminate any cash flow such that the Company does not have adequate resources and/or cash flow to distribute to Members.


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The interest rates at which the Company is able to borrow funds will affect the Company’s operating results. While the use of borrowed funds will increase returns if the Company earns a greater return on the incremental investments purchased with borrowed funds than it pays for the funds, the use of leverage will decrease returns if the Company fails to earn as much on such incremental investments as it pays for the funds. The effect of leverage may therefore result in a greater decrease in the net asset value of the Company than if the Company was not so leveraged. The use of leverage has the potential to magnify the gains or the loss on the Company’s investments and to make the Company’s returns more volatile.

 

The Company may be unable to meet its obligations to a lender under a Credit Facility. If this occurs, the Company may be liable for increased payments and penalties to the lender. The lender may also foreclose on any Company Assets in which it holds a security interest. As such, the Company’s inability to perform under a Credit Facility could have significant negative effects on the Company, its Assets, and ultimately the Investors.

 

The Company could be in a position where it must borrow funds in order to cover its operating expenses, overhead, or committed investments. In any of these events, it is uncertain whether debt financing will be available to the Company on desirable terms, or at all. If the Company is unable to secure debt financing in these circumstances, the Company could end up in default of its obligations to Credit Facilities or other third parties and incur significant penalties and other negative consequences. If the Company is able to secure debt financing in these circumstances, the Company could be highly leveraged and would be subject to all the risks associated with borrowing.

 

Risks of Credit Facility Being Unavailable, Called or Terminated.

 

The Company has not yet obtained a Credit Facility, and its ability to do so is not certain. Even if the Company is able to obtain a Credit Facility, that Credit Facility could later be called or terminated for a variety of possible reasons. The Credit Facility lender may be acquired, may cease such a business unit altogether, or may claim an event of default under the terms of the Credit Facility. In such an event, the Company may need to either replace a substantial amount of money or the lender may collect all incoming cash and not allow for any distributions to Members until the default is cured or the Credit Facility is paid off.

 

Ability to Make Sufficient Number of Loans.

 

The Company’s business model depends in part on its ability to make loans to franchisees and others in the Senior Care industry, and in adequate amounts and with fees and interest rates high enough to generate income in excess of the Company’s debt service costs and other expenses. If demand for loans is not sufficient or if the Company is not able to charge sufficient rates or fees on the loans due to market pressures or other reasons, the Company’s income from interest and fees may not be adequate for the Company to achieve its anticipated net income, and may result in net losses. This could have a material adverse impact on the Company’s financial condition and ability to provide a return to Investors.

 

Governmental Regulation Could Be Costly and Restrict the Company.

 

The industry in which the Company will become an active participant may be highly regulated at both state and federal levels, both with respect to its activities as an issuer of securities and its investing activities. Some of these regulations are discussed in greater detail below under “U.S. Securities Laws and Foreign Investors,” “Compliance with Anti-Money Laundering Requirements,” “Compliance with Dodd-Frank Act,” “Usury Risk,” “Risk that the Company May Become Subject to the Provisions of the Investment Company Act of 1940,” “Risk that the Management team May Become Subject to the Provisions of the Investment Advisers Act of 1940,” “The Company’s Reliance on Exclusions from the Investment Company Act May Impact Certain Investment Decisions,” and “Recent and Anticipated Legislative and Regulatory Activity.” The Company or the Company Assets may be subject to governmental regulations in addition to those discussed in this Offering Circular, and new regulations or regulatory agencies may develop that affect the Company’s operations and ability to generate revenue. The Company will attempt to comply with all applicable regulations affecting the markets in which it operates. However, such regulation may become overly burdensome and therefore may have a negative effect on the Company’s ability to perform as anticipated and projected.

 

U.S. Securities Laws and Foreign Investors.

 

The offer and sale of the Units will not be registered under the Securities Act or the laws of any applicable state pursuant to an exemption from the registration requirements of the Securities Act, and the securities laws of certain states. Each Investor must furnish certain information to the Management team and represent, among other customary private placement representations, that it is acquiring its Units for investment purposes and not with a view towards resale or distribution. The acquisition of Units by each Investor also must be lawful under applicable state securities laws or the laws of the applicable foreign jurisdiction if the Investor is a non-U.S. person.


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Further, Units may not be offered, sold, transferred, assigned or delivered, directly or indirectly, to any “Unacceptable Investor.” An Unacceptable Investor means any person who is known to be a:

 

(a)person or entity who is a “designated national,” “specially designated national,” “specially designated terrorist,” “specially designated global terrorist,” "foreign terrorist organization,” or “blocked person” within the definitions set forth in the Foreign Assets Control Regulations of the United States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as amended, or 

 

(b)person acting on behalf of, or an entity owned or controlled by, any government against whom the United States maintains economic sanctions or embargoes under the Regulations of the United States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as amended—including, but not limited to—the “Government of Sudan,” the “Government of Iran,” the “Government of Cuba,” the “Government of Syria,” and the “Government of Burma”, or 

 

(c)person or entity subject to additional restrictions imposed by the following statutes or Regulations and Executive Orders issued thereunder: the Trading with the Enemy Act, the Iraq Sanctions Act. Pub. L. 101-5 13, Title V, §§ 586 to 586J, 104 Stat. 2047, the National Emergencies Act, 50 U.S.C. §§ 1601 et seq., the Antiterrorism and Effective Death Penalty Act of 1996, Pub. L. 104 132, 110 Stat. 1214 1319, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., the United Nations Participation Act. 22 U.S.C. § 287c, the International Security and Development Cooperation Act, 22 U.S.C. § 2349aa-9, the Nuclear Proliferation Prevention Act of 1994, Pub. L. 103 236, 108 Stat. 507, the Foreign Narcotics Kingpin Designation Act, 21 U.S.C. §§* 1901 et seq., the Iran and Libya Sanctions Act of 1996, Pub. L. 104 172, 110 Stat. 1541, the Cuban Democracy Act. 22 U.S.C. §§ 6001 et seq., the Cuban Liberty and Democratic Solidarity Act. 22 U.S.C. §§ 6021-91, and the Foreign Operations, Export Financing and Related Programs Appropriations Act, 1997, Pub. L. 104 208, 110 Stat. 3009 172, or any other law of similar import as to any non-U.S. country, as each such Act or law has been or may be amended, adjusted, modified, or reviewed from time to time. 

 

In the event of a registered public offering of Units in the U.S., the Company would become subject to the reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Under such circumstances, a Member that owns more than 5% of the Company’s outstanding Units may be obligated to make certain information filings with the Commission pursuant to the Exchange Act. Each prospective Member is advised to consult with its own legal advisor regarding the securities law consequences of ownership of Units if the Units become subject to the Exchange Act.

 

Compliance with Anti-Money Laundering Requirements May Require Reporting Investor Interests and Affect Investor Rights to Participate in the Company.

 

The Company may be subject to certain provisions of the USA PATRIOT Act of 2001 ("the Patriot Act"), including, but not limited to, Title III thereof, the International Money Laundering and Abatement and Anti-Terrorist Financing Act of 2001 ("Title III"), certain regulatory and legal requirements imposed or enforced by the Office of Foreign Assets Control (“OFAC”) and other similar laws of the United States. In response to increased regulatory concerns with respect to the sources of the Company’s capital used in investments and other activities, the Management team may request that Investors provide additional documentation verifying, among other things, such Investor’s identity and source of funds to be used to purchase Units. The Management team may decline to accept a subscription from an Investor if this information is not provided or on the basis of the information that is provided. Requests for documentation and additional information may be made at any time during which a Member holds Units. The Management team may be required to report this information or report the failure to comply with such requests for information, to appropriate governmental authorities, in certain circumstances without informing a Member that such information has been reported. The Management team will take such steps as it determines are necessary to comply with applicable law, regulations, orders, directives, or special measures, including, but not limited to, those imposed or enforced by OFAC, the Patriot Act, and Title III. Governmental authorities are continuing to consider appropriate measures to implement anti-money laundering laws and at this point it is unclear what steps the Management team may be required to take however, these steps may include prohibiting a Member from making further contributions of Capital to the Company, depositing distributions to which such Member would otherwise be entitled into an escrow account or causing the withdrawal of such Investor from the Company.

 

Compliance with New Regulations.

 

The U.S., state, and foreign governments have taken or are considering extraordinary actions in an attempt to address real or perceived underlying causes of financial crisis and fraud and to prevent or mitigate the recurrence. These actions or other actions under consideration could result in unintended consequences or new regulatory requirements which may be difficult or costly to comply with. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act or the “Dodd-Frank Act,” creates a Financial Services Oversight Council to identify emerging systemic risks and improve interagency communication, creates a Consumer Financial Protection Agency authorized to promulgate and enforce consumer protection regulations relating to financial products, which would affect both banks and non-bank finance companies, imposes a comprehensive new regulatory regime of financial markets, including derivatives and securitization markets and creates an Office of National Insurance within Treasury. While the bill has been signed into


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law, a number of provisions of the law remain subject to changes and amendments through the rulemaking process at various regulatory agencies. It is unforeseeable what the final form of these rules will be when implemented by the respective agencies, but certain aspects of the new legislation, including, without limitation, the additional cost of higher deposit insurance and the costs of compliance with disclosure and reporting requirements and examinations by the new Consumer Financial Protection Agency, could have a significant impact on the Company’s business, financial condition, and results of operations. Additionally, it is unforeseeable whether there will be additional proposed laws or reforms that would affect the U.S. financial system or financial institutions, including the Company, whether or when such changes may be adopted, how such changes may be interpreted and enforced or how such changes may affect the Company. For example, bankruptcy legislation could be enacted that would hinder the ability to foreclose promptly on defaulted Loans or permit limited assignee liability for certain violations in the mortgage origination process, any or all of which could adversely affect the Company’s business or result in the Company and/or the Management team being held responsible for violations in the Loan origination process even were the Company was not the originator of the loan.

 

Other laws, regulations, and programs at the federal, state, and local levels are under consideration that seek to address the economic climate and real estate and other markets and to impose new regulations on various participants in the financial system. It is unforeseeable the effect that these or other actions will have on the Company’s business, results of operations and financial condition. Further, the failure of these or other actions and the financial stability plan to stabilize the economy could harm the Company’s business, results of operations, and financial condition.

 

The Management team’s Interests May Be in Conflict with the Members’ Interests.

 

The Management team and its affiliates are subject to various conflicts of interest in managing the Company.

 

The Company will pay the management team and/or affiliates substantial compensation that was not determined by arm’s length negotiations. The Management team may invest further sums in the Company, but the amount and timing of their investments has not been determined. Once they do invest, they will be entitled to receive a pro rata share of any distributions made by the Company, based on their Capital Contributions to the Company as Members. In addition, the Management team will receive a portion of the cash that would otherwise be distributable by the Company to the Investors as further described in this Offering Circular.

 

There is no requirement that the Company create or utilize a board or committee of unaffiliated Members or other advisors to review and approve transactions that may constitute a conflict of interest or any determination by the Management team of the value of any Company assets.

 

The Company does not, at this time, have its own officers, directors, or employees. The Management team supervise and control the business affairs of the Company, locate investment opportunities for the Company, raise capital for the Company, administer the financial affairs of the Company, and render certain other services, in each case subject to delegation to other firms or affiliates of the Management team. The Management team, however, are only obligated to devote such time to the Company’s affairs as may be reasonably necessary to conduct its business. The Management team or their respective affiliates may be a Manager of, or investor in, other companies (some of which will very likely directly compete with the business of the Company) and have other business interests of significance. Notwithstanding the foregoing, the LLC Agreement requires the Management team to give the Company the ability to take advantage of any potential investment (each an “Opportunity”) that is suitable for the Company (as determined by the Management team) prior to the Management team taking that Opportunity itself. Factors the Management team may consider in determining whether an Opportunity is suitable for the Company include, but are not limited to, whether the Opportunity meets the Company’s investment and/or underwriting criteria, whether it is consistent with the investment objectives of the Company, and whether the Company has sufficient financial resources at the time to accommodate the Opportunity. The Management team may also determine that an Opportunity is too small for the more complex structure of the Company, or an outside investor with significant capital may require that an Opportunity be pursued without the Company.

 

Please see the “CONFLICTS OF INTEREST” section for more discussion of the actual or potential conflicts of interest as between the interests of the Management team and its affiliates, on one hand, and the interests of the Investors on the other.

 

Risk of Additional Investors.

 

While this Offering is for up to a maximum amount of forty-five million dollars ($45,000,000), this amount may be increased at any time in the sole discretion of the Management team OR the Management team may initiate another offering of debt or equity securities with rights prior or preferential to those being offered in this Offering. As additional Units are issued, the increase in Units may reduce the amounts the Company has available to make distributions to any one Investor, as distributions will need to be distributed amongst more Units. The Company intends to only accept additional capital to the extent it will result in additional yields sufficient to provide for the associated distributions, but the Company cannot assure Investors that this will happen. In addition, subsequent sales of equity or convertible debt securities may be at a Unit Price higher or lower than the price at which the Company issues the Class A Common Units in this Offering.


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Since all Class A Common Units are Pari Passu, however, Investors that paid different amounts may be entitled to similar returns on a per Unit basis.

 

Failure of Digital and Technology Systems and Interruptions of the Management team’s Operations Could Damage the Company.

 

The Company depends on the Management team to develop, implement and maintain appropriate systems for the Company’s activities. The Management team use technology extensively, with all documents secured and managed digitally. The Management team use software that allow them to track and manage its investments with confidence and accuracy. In addition, the Company relies on information systems to store sensitive information about the Company, the Management team, and the Members. However, there are risks associated with such technology and systems. Defects in software products and errors or delays in processing of electronic transactions could result in:

 

·transaction or processing errors, 

·diversion of technical and other resources from other efforts, 

·loss of credibility with current or potential customers, 

·harm to reputation, or 

·exposure to liability claims. 

 

Certain of the Company’s and the Management team’s activities will be dependent upon systems operated by third parties including brokers, the third-party administrator, and other service providers, and the Management team may not be in a position to verify the risks or reliability of such third-party systems and technology. These third-party systems and technologies may also contain undetected errors, viruses, or defects that could have a material adverse effect on the Company’s financial condition and results of operations. Disruptions in the Company’s operations or breach of the Company’s information systems, or failures in the systems employed by the Company’s or the Management team’s third-party service providers may cause the Company to suffer, among other things, financial loss, the disruption of its business, liability to third parties, regulatory intervention or reputational damage which could have a material adverse effect on the Company and the Members’ investments therein.

 

Despite any security measures established by the Management team and third-party service provider to safeguard the information in these systems, such systems may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise these systems and result in the theft, loss or public dissemination of the information stored therein. Disruptions in the Company’s operations or breach of the Company’s or the Management team’s information systems may cause the Company to suffer, among other things, financial loss, the disruption of its business, liability to third parties, regulatory intervention or reputational damage which could have a material adverse effect on the Company and the Members’ investments therein.

 

Coronavirus and other Pandemic Related Issues.

 

There are ongoing outbreaks of a novel and highly contagious form of coronavirus (“COVID-19”), which the World Health Organization has declared to constitute a “Public Health Emergency of International Concern.” The outbreak of COVID-19 has resulted in numerous deaths, adversely impacted global commercial activity and contributed to significant volatility in certain equity, debt, derivatives and commodities markets. The global impact of the outbreak is rapidly evolving, and many countries have reacted by instituting (or strongly encouraging) quarantines, prohibitions on travel, the closure of offices, businesses, schools, retail stores, restaurants, hotels, courts and other public venues, and other restrictive measures designed to help slow the spread of COVID-19. Businesses are also implementing similar precautionary measures. Governments are also implementing moratoriums or other restrictions on tenant evictions due to the economic fallout from COVID-19. Such measures, as well as the general uncertainty surrounding the dangers and impact of COVID-19, are creating significant disruption in supply chains and economic activity and are having a particularly adverse impact on transportation, hospitality, tourism, entertainment, and related industries. Moreover, with the continued spread of COVID-19, governments and businesses are likely to take increasingly aggressive measures to help slow its spread and mitigate its damages. For this reason, among others, as COVID-19 continues to spread, the potential impacts, including a global, regional or other economic recession, are increasingly uncertain and difficult to assess.

 

Any public health emergency, including any outbreak of COVID-19, SARS, H1N1/09 flu, avian flu, other coronavirus, Ebola or other existing or new epidemic diseases, or the threat thereof, could have a significant adverse impact on the Company. The extent of the impact of any public health emergency on the Company will depend on many factors, including the duration and scope of such public health emergency, the extent of any related travel advisories and restrictions implemented, the impact of such public health emergency on overall supply and demand, goods and services, investor liquidity, consumer confidence and spending levels, and levels of economic activity, the length, frequency, or magnitude of any moratoriums or other restrictions on tenant evictions applicable to the Project, and the extent of its disruption to important global, regional and local supply chains and economic markets, all of which are highly uncertain and cannot be predicted. The effects of a public health emergency may materially and adversely impact


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the development of the Project and its performance once stabilized, which could result in significant losses to the Company. In addition, the operations of the Management team (or others involved with the Project) may be significantly impacted, or even temporarily or permanently halted, as a result of government quarantine measures, voluntary and precautionary restrictions on travel or meetings and other factors related to a public health emergency, including its potential adverse impact on the health of their key service providers or other personnel.

 

Side Letters.

 

The Management team may enter into letter agreements or other similar agreements (collectively, “Side Letters”) with one or more persons. These Side Letters may entitle the recipient to make an investment in the Company on terms other than those described in this Offering Memorandum or the LLC Agreement or provide the recipient with additional or different rights and benefits. Any such terms, including with respect to (i) access to information, (ii) liquidity, or (iii) re-allocating profits allocated to the Management team, may be more favorable than those offered to any other Member.

 

As a result of these Side Letters, certain persons may receive additional benefits (including expanded informational rights or re-allocation of profits allocated to the Management team) that other Members will not receive. The Management team will not be required to notify any or all of the other Members of any such Side Letters or any of the rights or terms or provisions thereof, nor will the Management team be required to offer such additional or different rights or terms to any or all of the other Members. The Management team may enter into such Side Letters with any party as the Management team may determine in their sole and absolute discretion at any time. The other Members will have no recourse against the Company, the Management team, or any of their affiliates in the event that certain Members receive additional or different rights, terms or benefits as a result of such Side Letters.

 

Risks Specifically Related to the Company’s Business Model

 

An Investment in the Company Involves Various Risks Associated with Many Other Real Estate Investments.

 

The Company will be subject to the risks that generally relate to investing in real estate. Real estate historically has experienced significant fluctuations and cycles in performance that may result in reductions in the value of the Company’s real estate related investments. The performance and value of its investments once originated or acquired depend upon many factors beyond the Company’s control. The ultimate performance and value of the Company’s investments are subject to the varying degrees of risk generally incident to the ownership and operation of the properties in which the Company invests, and which collateralize or support its investments.

 

The ultimate performance and value of the Company’s investments will depend upon, in large part, the Borrower’s ability to operate any given property so that it produces sufficient cash flows necessary to pay the interest and principal due to the Company on any Loans it originates and holds, or acquires.

 

In addition, revenues and cash flows may be adversely affected by: changes in national or local economic conditions, changes in local real estate market conditions due to changes in national or local economic conditions or changes in local property market characteristics, including, but not limited to, changes in the supply of and demand for competing properties within a particular local property market, competition from other properties offering the same or similar services, changes in interest rates and the credit markets which may affect the ability to finance, and the value of, investments, the ongoing need for capital improvements, particularly in older building structures, changes in real estate tax rates and other operating expenses, changes in governmental rules and fiscal policies, civil unrest, acts of God, including earthquakes, hurricanes, and other natural disasters, acts of war, or terrorism, which may decrease the availability of or increase the cost of insurance or result in uninsured losses, changes in governmental rules and fiscal policies which may result in adverse tax consequences, unforeseen increases in operating expenses generally or increases in the cost of borrowing, decreases in consumer confidence, government taking investments by eminent domain, various uninsured or uninsurable risks, the bankruptcy or liquidation of major tenants, adverse changes in zoning laws, the impact of present or future environmental legislation and compliance with environmental laws, the impact of lawsuits which could cause the Company to incur significant legal expenses and divert management’s time and attention from the day-to-day operations of the Company, and other factors that are beyond the Company’s control and the control of the property owners.

 

Any of the foregoing factors as well as others could adversely impact the return on and cash flows and values of the Company’s investments. In addition, property values can decline below their acquisition price or below their appraised, assessed, or perceived values after the acquisition. Appraisals, if obtained, are only the appraiser’s opinion of the property values at a given point in time. Material declines in values could result in subsequent losses. The Company’s real estate-based investments may be difficult to sell in an efficient and expeditious manner, and there can be no assurance that there will be a ready resale market if or when the Company finds it necessary or otherwise elects to sell such investments.


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The Company’s Underwriting Standards and Procedures are More Lenient than Conventional Lenders.

 

The Company will originate and invest in Loans with borrowers who may not be required to meet the credit standards of conventional mortgage lenders, which is riskier than investing in loans made to borrowers who are required to meet those higher credit standards.

 

Because the Management team approves Loans more quickly than some other lenders or providers of capital, there may be a risk that the due diligence the Management team performs as part of its underwriting procedures would not reveal the need for additional precautions. If so, the interest rate the Company charges and the Collateral the Company requires may not protect the Company adequately or generate adequate returns for the risk undertaken.

 

A borrower’s ability to pay a Loan balance in a large lump sum may depend on its ability to obtain suitable refinancing, sell the property or otherwise raise a substantial cash amount. The Company can provide no assurance that any borrower will accomplish any of those things.

 

Risk of Default on Loans / Nonperforming Loans.

 

The Company’s investment strategy includes the acquisition or origination of Loans which are subject to the risk of default. At the time of their acquisition, origination, or thereafter, Loans may be nonperforming for a wide variety of reasons. Such nonperforming Loans may require a substantial amount of workout negotiations and/or restructuring, which may entail, among other things, a substantial reduction in the interest rate, a substantial write-down of the principal of such Loan, and/or the necessity of purchasing senior loans to protect the Company’s interest in its investment.

 

Loans may become uncollectible or subject to a reduced return due to any voluntary or involuntary bankruptcy, insolvency, or similar proceeding affecting any of the Company’s borrowers or guarantors. It is possible that the Management team may find it necessary or desirable to foreclose on collateral securing one or more Loans purchased by the Company. The foreclosure process will vary from jurisdiction to jurisdiction and is lengthy and expensive. Borrowers often resist foreclosure actions by asserting numerous claims, counterclaims, and defenses against the holder of a Loan, including, without limitation, lender liability claims and defenses, even when such assertions may have no basis in fact, in an effort to prolong the foreclosure action. During the foreclosure proceedings, a borrower may have the ability to file for bankruptcy or its equivalent, potentially staying the foreclosure action and further delaying the foreclosure process. Foreclosure litigation may create a negative public image of the collateral property and may result in disrupting ongoing leasing and management of the property. The collateral value could also be negatively impacted if a defaulting borrower were to damage the property, negligently or intentionally, while still in possession. Even if foreclosure can be avoided and a restructuring were successfully accomplished, a risk exists that upon maturity of such Loan, replacement or “takeout” financing will not be available.

 

In certain circumstances, the Company may lose priority of its liens to mechanic or materialmen’s liens, by reason of the borrower’s wrongful acts or the priority allowed to certain tax liens. It is possible that the total amount recovered by the Company upon default may be less than the total amount of its Loan, with resultant losses to the Company. In such circumstances, the Management team may pursue deficiency judgments against borrowers, if available. Most, if not all, of the Company’s Loans will be general obligations of the borrower or principals of the borrower. Properties held as collateral and foreclosed upon may not generate sufficient income from operations to meet associated expenses of the Company. In addition, operation of foreclosed properties may require the Company to spend money for an extended period, and subsequent income and capital appreciation from the foreclosed properties to the Company may be less than competing investments.

 

The Company may be required to rely totally on its interest in the collateral for repayment of a Loan. The value of the collateral may be affected by general or local economic conditions, neighborhood values, interest rates, real estate tax rates, and other operating expenses, the possibility of competitive overbuilding, and of the inability to obtain or maintain full occupancy of the properties, governmental rules and fiscal policies, acts of God or casualties for which insurance is not available or obtainable for commercially reasonable premiums, and other factors which are beyond the Company’s or the Management team’s control.

 

The Company may require transaction analysis reports for environmental screening or other environmental reports on the proposed collateral, which reports may not reveal actual conditions and risks associated with the collateral. The presence of hazardous substances on such collateral may subject the Company to substantial liability for the cost of removal and/or treatment, reduce the value of the collateral or make it unmarketable. That cost may substantially exceed the value of the collateral involved.


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Further, under U.S. law, investments in properties or loans operating under bankruptcy laws are, in certain circumstances, subject to certain additional potential liabilities that may exceed the value of the Company’s original investment therein. In addition, under certain circumstances, payments to the Company and distributions by the Company to its Members may be reclaimed if any such payments or distributions are later determined to have been fraudulent conveyances or preferential payments under applicable law.

 

The Company May Have Difficulty Protecting its Rights as a Secured Lender.

 

The Company believes that its documents will enable it to enforce commercial arrangements with Borrowers and other counterparties. However, the rights of Borrowers, counterparties, and other secured lenders may limit the Company’s practical realization of those benefits. For example:

 

·Judicial foreclosure is subject to the delays of protracted litigation. Although the Company expects non-judicial foreclosure to be generally quicker, the Company’s Collateral may deteriorate and decrease in value during any delay in foreclosing on it. 

·The borrower’s right of redemption during foreclosure proceedings can deter the sale of the Collateral and can for practical purposes require the Company to manage the property. 

·The Company will be making loans in different states, with varying foreclosure laws, procedures, and timelines. Depending on which state a Company Asset is located, there may be more or less time, effort, and cost associated with foreclosing on Loans. 

·Unforeseen environmental hazards may subject the Company to unexpected liability and procedural delays in exercising its rights. 

·The rights of junior or senior secured parties in the same property can create procedural hurdles for the Company when it forecloses on Collateral. 

·The Company may not be able to pursue deficiency judgments after it forecloses on Collateral. 

·State and federal bankruptcy laws can prevent the Company from pursuing any actions, regardless of the progress in any of these suits or proceedings. 

·The courts, particularly the bankruptcy courts, may unilaterally alter the contractual terms of Company Assets, including doing so to the detriment of the Company. 

·The Company will also take a secured interest in assets other than real estate assets owned by various borrowers. There is no assurance that such collateral will have value equal to or greater than the amount borrowed by such borrowers. Neither the Company nor any of its Management team are experts in valuing collateral other than real estate and such, there is no way of assuring that the Company is adequately secured in its loans. Throughout the period of its loans, the Company may be under-secured. 

 

Care is exercised upon creation of the Loan documents at the time of origination or acquisition to ensure that as many bases as possible have been covered in the documents. However, in the event of default, it can be very difficult to predict with any certainty how courts will respond.

 

Risk of Lack of Knowledge in Distant Geographic Markets.

 

Although the Company intends to focus its investments in locations with which the Management team is generally familiar, the Company runs a risk of experiencing underwriting challenges or issues associated with a lack of familiarity in some markets. Each market has nuances and idiosyncrasies that affect values, marketability, desirability, and demand for individual Collateral that may not be easily understood from afar. While the Management team believes it can effectively mitigate these risks in a myriad of ways, there is no guarantee that investments in geographic markets outside the physical location of the Management team (or even inside this perceived boundary) will perform as expected.

 

Risks of Real Estate Ownership.

 

When the Company acquires real estate, either directly or through foreclosure, deed in lieu of foreclosure, or otherwise, it has economic and liability risks as the owner, including but not limited to:

 

·earning less income on disposition of the property than costs incurred in purchasing, improving it, and maintaining it, 

·keeping the property leased by tenants, 

·potential damage to the property by any tenants, 

·lack of availability or lapse in insurance coverage for the property, 

·controlling operating expenses, 

·coping with general and local market conditions, 

·possible exposure to environmental contamination remediation and cleanup costs, which in some cases could exceed the value of the property, 

·complying with changes in the laws and regulations pertaining to taxes, use, zoning and environmental protection, and/or 

·possible liability for injury to persons and property. 


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The Company intends to secure insurance against hazards and contingencies to the extent it can obtain such insurance as an owner at a reasonable cost.

 

The Company’s Participation in Assets with Other Investors May Result in Decisions and Outcomes Different than Those Best for the Company.

 

·Other owner(s) of a Participation Interest in such a Company Asset may have different ideas, motivations, or desired outcomes than the Company which may give rise to disputes in how to manage the Asset. 

·There may be complications in disposing of a Participation Interest that require additional time, money, and cooperation of parties who may be adverse at the time of maturity or disposition of the Asset, which may reduce the amount recovered by the Company on such an Asset. 

·The Management team and/or the Company may not control or have influence over the transaction involving the Asset subject to agreement governing the Participation Interest. Such a scenario would subject the Company to the decisions of another party, whose interests may be adverse to those of the Company. 

·There may be regulations or laws that govern or influence a Participation Interest that are unknown at the time the investment is made, but which have a negative impact on the Asset at the time of maturity or disposition. 

 

Risks of Investing in Subordinated (or Second Lien Position) Loans or Securities.

 

Some of the Company’s investments may consist of subordinated Loans or securities. Such investments will be subordinated to the senior obligations of the property or issuer, either contractually, inherently due to the nature of equity securities, or both. In the event of default on the senior debt, the Company as a holder of a subordinated loan may be at the risk of realizing a loss of up to all of its investment before the senior debt will suffer any loss. Consequently, greater credit risks are usually attached to subordinated investments than to a borrower’s first mortgage or other senior obligations. In addition, securities may not be protected by financial or other covenants and may have limited liquidity. Adverse changes in the borrower’s financial condition and/or in general economic conditions may impair the ability of the borrower to make payments on the subordinated securities and cause them to default more quickly with respect to such securities than with respect to the borrower’s senior obligations. In most cases, the Company’s management of its investments and its remedies with respect thereto, including the ability to foreclose on any collateral securing investments, will be subject to the rights of the more senior lenders and contractual intercreditor provisions. The Company may also take a secured interest in assets other than real estate assets owned by various borrowers. There is no assurance that such Collateral will have value equal to or greater than the amount borrowed by such borrowers. Neither the Company nor any of its Management team are experts in valuing Collateral other than real estate and such, there is no way of assuring that the Company is adequately secured in its loans. Throughout the period of its loans, the Company may be under-secured.

 

The Company’s Investments are Illiquid in Nature, Which Could Limit the Company’s Flexibility or Cause the Company to Receive Less than Anticipated Value on Disposition.

 

Although some of the Company’s investments may generate current income the Company’s investments will primarily be illiquid and may not be readily sold for fair value. The illiquidity commonly associated with real estate investments may limit the Company’s ability to vary its portfolio of investments in response to changes in economic and other conditions. Illiquidity may result from the absence of an established market for investments as well as the legal or contractual restrictions on their resale. In addition, illiquidity may result from the decline in value of a property comprising one of the Company’s investments. There can be no assurances that the fair market value of any property held by the Company will not decrease in the future, leaving the Company’s investment relatively illiquid.

 

Furthermore, although the Management team expects that the Company’s investments will be disposed of prior to dissolution, the Company may have to sell, distribute, or otherwise dispose of its investments at a disadvantageous time as a result of dissolution.

 

Other Real Estate Related Risks.

 

The Company’s real estate related investments will be subject to the varying degrees of risk and significant fluctuations in their value. The value of the Company’s investments depends upon the real property owner’s ability to repair or rehabilitate the property as projected, operate the real property in a manner sufficient to meet its commitments, including debt service, and/or maintain or increase revenues in excess of operating expenses or, in the case of real property leased to a single lessee, the ability of the lessee to make rental payments. Revenues may be adversely affected by changes in national or international economic conditions, changes in local market conditions due to changes in general or local economic conditions and neighborhood characteristics, the financial condition of tenants, buyers, and sellers of properties, competition from other properties offering the same or similar services, changes in interest rates and in the availability, cost, and terms of mortgage funds, the impact of present or future environmental legislation and compliance with environmental laws, the ongoing need for capital improvements (particularly in older structures), changes in real estate tax rates and other operating expenses, adverse changes in governmental rules and fiscal policies,


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civil unrest, acts of God, including earthquakes, hurricanes, and other natural disasters, acts of war, acts of terrorism (any of which may result in uninsured losses), adverse changes in zoning laws, and other factors that are beyond the control of the real property owners and the Company. In the event that any of the properties underlying the Company’s investments experience any of the foregoing events or occurrences, the ability of the real property owner to pay the interest and principal on any debt securities would be negatively impacted.

 

Further Deterioration in the Mortgage, Real Estate or Financial Markets or the Economy in General May Cause the Company to Experience Losses.

 

The recent downturns in the U.S. and many non-U.S. economies, including the European sovereign debt and banking crises, have resulted, and may continue to result, in an unusually high degree of volatility in the financial markets, both within and outside the United States. The mortgage market has been adversely affected by changes in the lending landscape, and there is no assurance that these conditions will stabilize or that they will not worsen. In addition, global economies and financial markets are becoming increasingly interconnected, which increases the possibilities that conditions in one country or region might adversely impact conditions in a different country or region. In the U.S. and other jurisdictions where economic conditions are recovering, they are nevertheless perceived as still fragile. The Company’s investments will be materially affected by conditions in the mortgage market, the residential and commercial real estate markets and the financial markets and the economy generally. Delinquencies and losses with respect to residential and commercial real estate loans generally have increased in recent years and may continue to increase. Although the Company’s investments may be acquired at favorable prices that already reflect these circumstances, a further deterioration of the mortgage or real estate markets or the financial markets or the economy in general may nonetheless cause the Company to experience losses related to its investments in real estate loans.

 

Interest Rate Fluctuations and Other Risks Could Negatively Impact the Company’s Operating Results.

 

The Company’s operating results depend, to a large extent, on its ability to generate a net profit, which is essentially the difference between the interest income earned on its loans to business and projects and the interest expense incurred in connection with its interest-bearing liabilities, such as any Credit Facility. Changes in the general level of interest rates can affect the Company’s ability to generate a net profit by affecting the spread between the Company’s interest earning assets (i.e., loans originated to business and projects) and interest-bearing liabilities, such as any Credit Facility or debt securities issued by the Company. This may be due to the disparate maturities when repricing the Company’s interest earning assets and interest-bearing liabilities.

 

In addition to its effect on the Company’s interest rate spread, changes in the general level of interest rates also affect, among other things:

 

·the ability of the Company to originate Loans, 

·the average life of the Company's Loans. 

 

Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond the control of the Company.

 

Borrower Fraud May Adversely Impact Results of the Company’s Operations.

 

Of paramount concern in originating and acquiring loans is the possibility of material misrepresentation or omission on the part of the borrowers. The quality of the Company’s investments in loans is subject to the accuracy of representations made by borrowers. Misrepresentations or omissions by borrowers may adversely affect what the Company believes to be the value of the collateral underlying the loans or may adversely affect. The ability of the Company or its affiliates to perfect or effectuate a lien on the Collateral securing the loans. The Company will rely upon the accuracy and completeness of representations made by borrowers to the extent reasonable but cannot guarantee such accuracy or completeness. It is unclear whether loans and other forms of direct indebtedness offer securities laws protections against fraud and misrepresentation. Accordingly, the Company is subject to the risk that the systems used by the originators of Loans to minimize borrower misrepresentations or omissions are defective.

 

Loans by the Company Could be Challenged under Usury Laws.

 

State and federal usury laws limit the interest that lenders are entitled to receive on loans. Statutes differ in their provision as to the consequences of a usurious loan. One group of statutes requires the lender to forfeit the interest above the applicable limit or imposes a specified penalty. Under this statutory scheme, the borrower may have the recorded mortgage or deed of trust canceled upon paying its debt with lawful interest, or the lender may foreclose, but only for the debt plus lawful interest. Under a second, more severe type of statute, a violation of the usury law results in the invalidation of the transaction, thereby permitting the borrower to have the recorded mortgage or deed of trust canceled without any payment and prohibiting the lender from foreclosing.


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Usury laws in the states where the Company’s investments are located may limit the ability of the Company to charge interest and create the risk that the Company may not be able to fully realize their investment in their Loans. For example, some states make it unlawful for a lender to charge or collect interest at a rate exceeding a statutorily prescribed interest rate per annum, unless the lender falls into one or more exclusion categories which exempts it from such prohibition. The Management team and/or the Company may not be eligible for such exemptions under the relevant usury restrictions, and moreover, exemptions may not be available in all states in which the Company intends to invest. In addition, if a license were required in a state in order to avail the Company of an exemption, and the Management team loses its license in that state, the Management team and hence the Company may no longer be eligible for that state’s exemptions from usury law relying on such licensing, which may in turn limit the Company’s ability to generate revenues. While the Management team and the Company intend to fully comply with any usury laws affecting the Company’s investments, in the event the Company does violate these laws, it may have a negative impact on the Company’s operations and ability to recover on its investments.

 

The Company is Subject to Other Risks Associated with Real Estate Investment and Ownership.

 

The Company’s investments will be subject to the varying degrees of risk and significant fluctuations in their value. Revenues may be adversely affected by changes in national or international economic conditions, changes in local market conditions due to changes in general or local economic conditions and other characteristics, the financial condition of borrowers, tenants, buyers, and sellers of properties, competition from other companies offering the same or similar services, changes in interest rates and in the availability, cost, and terms of mortgage funds, the impact of present or future legislation and compliance with laws, the ongoing need for capital improvements (particularly in older structures), changes in tax rates and other operating expenses, adverse changes in governmental rules and fiscal policies, civil unrest, acts of God, including earthquakes, hurricanes, and other natural disasters, acts of war, acts of terrorism (any of which may result in uninsured losses), adverse changes in zoning laws, and other factors that are beyond the control of the Company.

 

Other General Risks of an Investment in the Company

 

Investors Have Limited Information Upon Which To Base Investment Decisions Because The Company Is A Newly Formed Entity.

 

The Company is a newly formed entity with no operating history on which prospective Investors may base an evaluation of likely performance, and the Company will be the first Company managed by the Management team. To the extent that the Management team and affiliates are responsible for the investment results of previous investment funds, those results are, in any event, past results and are not necessarily indicative of future results of the Company’s investments. There can be no assurance that any of the Company’s investments will perform as well as the past investments of the Management team or that the Company’s investments will meet the Company’s target return.

 

Investors Must Rely on the Management team to Source Investments Consistent with the Company’s Objectives, Unspecified Investments.

 

The Company has not identified all of the particular investments it will make, or any specific investments it will make. Accordingly, an Investor must rely upon the ability of the Management team in making investments consistent with the Company’s investment objectives and policies. Although the Management team have been successful in locating investments in the past, the Company may be unable to find a sufficient number of attractive opportunities to invest its committed capital or meet its investment objectives. An Investor has no ability to control or determine the Company’s underwriting criteria, investment decisions, or other decisions with respect to the business of the Company. Nor is there any requirement that the Company create or utilize a board or committee of advisors to assist the Management team with respect to such decisions. Therefore, an Investor must completely rely on the discretion of the Management team and their respective employees and contractors with respect to such decisions and the overall performance of the Company.

 

The Company’s Due Diligence May Not Reveal All Factors Affecting an Investment and May Not Reveal Weaknesses in Such Investments.

 

There can be no assurance that the Management team’s due diligence processes will uncover all relevant facts that would be material to an investment decision. Before making an investment, the Management team will assess the strength of the underlying properties and any other factors that they believe are material to the performance of the investment. In making the assessment and otherwise conducting customary due diligence, the Management team will rely on the resources available to them and, in some cases, investigations by third parties.


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No Minimum Offering Amount, Investments May be Less than Anticipated and the Company's Investments May Not Be Diversified.

 

While the Company is targeting a forty-five million dollar ($45,000,000) maximum offering amount, there is no minimum total amount the Company must receive before accepting subscriptions, transferring Investor money to the Operating Account and acquiring Company Assets. There is a substantial risk that the Company will receive less subscriptions or Capital investments than it anticipates. In such event, the Company’s investment strategy will be adversely affected, the opportunity for diversification of investments will be materially decreased, and the returns on those investments likely will be reduced as a result of allocating Company expenses among fewer investments. During the period when the Company acquires its initial Company Assets and until the time the Company acquires a substantial amount of Company Assets, the Company will not be diversified, and Company Assets may consist of only a few Company Assets. In addition, without broad diversification, the risk of loss to the Company and its Investors is much greater.

 

The Company’s Results Will Depend on the Management team’s Performance and Continuing Services.

 

The Management team will make all Company decisions, including Company Asset selection. The Company will be relying solely on the Management team’s expertise and judgment. There is no requirement that the Company create or utilize a board or committee of advisors to assist the Management team in making decisions with respect to the Company. The Management team may resign at any time with one year's notice to the Members without liability to the Company. The Members may only remove the Management team for Cause upon a vote of the Members holding at least eighty percent (80%) of the Ownership Interests. There can be no guaranty or assurance that a suitable replacement Management team will be identified and elected in the event of the resignation or removal of the Management team.

 

Key Persons.

 

The Management team (“Management team”) are Chuck Bongiovanni and Vincent Guarnieri, who are considered an integral part of the Company’s investments and operations (each a “Key Person”). The death or permanent disability of a Key Person may impair the Company’s ability to conduct its business as anticipated.

 

The Company Is at Risk if the Management team Withdraw or are Terminated.

 

The Company is presently comprised of two members, Chuck Bongiovanni and Vincent Guarnieri. If the Management team withdraw from the Company, are terminated by the Members for Cause, or are terminated as Management team by dissolution or bankruptcy, it may be difficult or impossible for the Members of the Company to locate a suitable replacement for the Management team. If it is unable to replace the Management team, the Company would proceed with liquidating the Company’s Assets, which may or may not be able to be successfully executed.

 

Valuation Risk of Illiquid Investments.

 

Certain of the securities or assets the Company will purchase or originate will not be actively traded. In the absence of market comparisons, the Company will be required to resort to other pricing methodologies, including, for example, models based on assumptions regarding expected trends, historical trends following market conditions believed to be comparable to the then current market conditions and other factors believed at the time to be likely to influence the potential resale price of an Investment. Such methodologies may not prove to be accurate and the Company’s inability to accurately price securities or assets may adversely affect the return on the Company’s investments.

 

The Company Could Incur Losses as a Result of Litigation.

 

The Company’s investment activities may include activities that will subject it to the risks of becoming involved in litigation by third parties. The expense of defending claims against the Company by third parties and paying any amounts pursuant to settlements or judgments would be borne by the Company and would reduce net assets and could require the Members to return distributed capital and earnings to the Company. The Management team, its affiliates and their members will be indemnified by the Company in connection with such litigation, subject to certain conditions.

 

Lender Liability Risks Including Equitable Subordination.

 

In recent years, a number of judicial decisions in the U.S. have upheld the right of borrowers to sue lending institutions on the basis of various evolving legal theories (collectively termed “lender liability”). Generally, lender liability is founded upon the premise that an institutional lender has violated a duty (whether implied or contractual) of good faith and fair dealing owed to the borrower or has assumed a degree of control over the borrower resulting in creation of a fiduciary duty owed to the borrower or its other creditors or shareholders. Because of the nature of certain of the Company’s investments, the Company could be subject to allegations of lender liability.

 

In addition, under common law principles that, in some cases, form the basis for lender liability claims, if a lending institution (a) intentionally takes an action that results in the undercapitalization of a borrower to the detriment of other


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creditors of such borrower, (b) engages in other inequitable conduct to the detriment of such other creditors, (c) engages in fraud with respect to, or makes misrepresentations to, such other creditors, or (d) uses its influence as an equity holder to dominate or control a borrower to the detriment of the other creditors of such borrower, a court applying bankruptcy laws may elect to subordinate the claim of the offending lending institution to the claims of the disadvantaged creditor or creditors, a remedy called “equitable subordination.” The Company could be subject to claims from creditors of an obligor that the Company’s investments in debt obligations of such obligor should be equitably subordinated. Alternatively, in bankruptcy a court may re-characterize the Company’s claims or restructure the debt using “cram down” provisions of the bankruptcy laws.

 

Recourse to the Company’s Assets.

 

The Company’s Assets, including any investments made or acquired by the Company, may be required to be available to satisfy all liabilities and other obligations of the Company in certain circumstances. Although the Company may seek to structure investments through investment entities having limited liability, there can be no assurance that such efforts will always be successful or respected. If the Company or one or more of its investments becomes subject to a liability, parties seeking to have the liability satisfied may have recourse to the Company’s Assets generally and not be limited to any particular Asset of the Company, such as the Asset representing the Investment giving rise to the liability.

 

A Changing Economic Environment and Increasing Regulation of the Financial Markets Could Constrain Capital.

 

As a result of the credit crisis in the years 2007-2010, and the occurrence of several high-profile bankruptcies, government bailouts, bank failures, other negative corporate events and certain other events, the financial markets have been disrupted in general and the availability and cost of capital for the Company and that of the Company’s competitors have been adversely affected. The achievement of the Company’s targeted rate of return is dependent, at least in part, upon the Company’s ability to access capital at rates and on terms the Management team determines to be acceptable. If the Company’s ability to access capital becomes significantly constrained, the Company’s financial condition and future investments may be significantly adversely affected.

 

Company Losses May Be Uninsured Losses.

 

The Company will attempt to ensure that all Assets are insured against reasonably foreseeable hazards. However, some events may be uninsurable or insurance coverage for such events may not be economically practicable. Losses from earthquakes, floods, or other weather phenomena, for example, that could occur may be uninsured and cause losses to the Company. In addition, insurance may lapse without proper notice to the Management team and/or Assets may become temporarily uninsured and sustain damage during this period.

 

Risk of Repayment of Company Assets and Redeployment of Cash.

 

There is a risk that when Company Assets are sold or Loans are paid off, there may not be sufficient quality opportunities to immediately redeploy the proceeds received from these payoffs into new Company Assets. If the Company is unable to locate new Assets in a timely manner, the excess cash may water down the overall yield to the Company, or the Management team may choose to repay Investors a portion or all of their Capital Account earlier than expected.

 

Defective Title May Impact the Value of Company Assets.

 

The Company may acquire real estate either directly, through foreclosure, or deed in lieu of foreclosure, and knowingly or unknowingly, may incur defective title on such property. Defective title on real estate could result in other parties laying claim to all or a portion of the property. Such additional claims may have to be litigated or paid in order for the Company to rehabilitate, develop or dispose of such property. Costs for litigation or satisfaction of such claims may result in an investor losing all or a portion of its investment in such real estate or in the Company.

 

Competition for Company Assets Could Reduce Company Results.

 

The business and arena in which the Company is engaged is highly competitive, and the Company and Management team compete with numerous established entities, some of which have more financial resources and experience in the business than the Company or Management team. The Company and Management team expect to encounter significant competition from other market participants including private lenders, private equity Company Management team, real estate developers, pension Funds, real estate investment trusts, other private parties, potential investors or homeowners, and other people and/or entities with objectives similar in whole or in part to those of the Company. Any general increase in the availability of capital for such purposes may increase competition for Company Assets and could reduce the yields they produce, including those of the Company.


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Risk of Loss of Funds in Money Market Accounts or Other Investments.

 

The Management team has all power of investment of the Company’s Assets, including investment into rated or non-rated instruments and issuances of all types, short duration or long duration investments, government backed investments, non-government backed and uninsured investments, and private investments for cash and Assets not otherwise deployed. Each Money Market Account is expected to consist of investments that are immediately liquid, and that, in the Management team’s judgment, are sufficiently safe while producing a small yield on the Company’s cash. Notwithstanding the foregoing, any investment inherently involves risks.

 

Risks Related to Conflicts of Interest

 

There are conflicts of interest between the Company, our Management and Officers.

 

The Management team and any Officers are subject to various conflicts of interest in managing the Company. The Company may pay the Management team and/or Officers, or their affiliates, if any, substantial fees which will not be determined by arm’s length negotiations, subject to the terms and restrictions of the Operating Agreement.

 

The Management team and Officers, or their affiliates, may charge reasonable, market-based operations, administration, servicing, inspection and/or other fees in connection with services provided in connection with the business of the Company. All fees and compensation paid to the Management team, Officers and/or their affiliates shall be market-based and commercially reasonable at all times. In these regards, the interests of the Management, Officers, and their affiliates are in conflict with the Unitholders. Any fee paid to any Management, Officer and/or their affiliate shall be consistent with what other third parties may charge, and neither the Management team, the Officers, nor the Company shall co-mingle any Company assets or funds with any account of any Management team member, Officer, or their affiliate.

 

The Company currently expects to compensate its Management team and Officers via salaries. The Management team and Officers supervise and control the business affairs of the Company, raise capital for the Company, administer the financial affairs of the Company, and render certain other services. The Management team, however, shall devote only such time to the Company’s affairs as may be reasonably necessary to conduct its business. The Management team, Officers, and/or their affiliates may be involved with, manage, or be officers of other companies (some of which may directly compete with the business of the Company) and have other business interests of significance. These conflicts are described in greater detail under “Conflicts of Interest” herein.

 

Other General Risks of an Investment in the Company

 

The Company will be relying on the Management’s discretion and expertise.

 

Investment in the Units does not grant Investors any management rights in the operation of the Company, nor does it convey sufficient voting rights to elect or remove the Management team. All decisions with respect to the management of the Company will be made by the Management team and any additional management that the Company may later add.  Accordingly, no person should purchase the Units unless he, she or it is willing to entrust all aspects of the management of the Company to the Management team. If the Management team were to leave the Company, the Company’s ability to achieve its goals could be materially and adversely affected. The Management team members and any Officer may resign at any time with one-year notice to the Unitholders without liability to the Company or any Member.

 

We may become subject to the Investment Company Act, which could interfere with our intended operations.

 

The Company intends to operate so as to not be regulated as an investment company under the Investment Company Act of 1940 (the “Investment Company Act”) based upon the definition of an “investment company” set forth in Section 3(a)(1) of the Investment Company Act (15 U.S.C. § 80a-3(a)(1)) and the exemption provided by Section 3(b)(1) (15 U.S.C. § 80a-3(b)(1)) thereunder. Companies that are subject to the Investment Company Act must register with the SEC and become subject to various registration, governance, and reporting requirements. Compliance with such restrictions would create additional financial and administrative burdens on the Company. The Company believes it can avoid these restrictions based on the exemption described above. Specifically, the Company expects to be exempted from registration under the Investment Company Act because the Company does not meet the definition of an “investment company” and will be engaged in the business of buying and selling precious metals. Accordingly, the Company does not expect to be subject to the restrictive provisions of the Investment Company Act. If the Company fails to qualify for exemption from registration as an investment company, its ability to conduct its business as described herein will be compromised. Any such failure to qualify for such exemption would likely have a material adverse effect on the Company.

 


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Though the Management team does not intend to register under the Investment Advisers Act, it may be required to register under one or more state investment adviser acts (“State Advisers Acts”). State Advisers Acts are similar to the Investment Advisers Act but generally apply to investment advisers that are not subject to the Investment Advisers Act because of exemptions from registration. The Management team intends to seek exemptions from such registration where possible. If the Management team does have to register under one or more State Advisers Acts, such registration may create administrative and financial burdens on the Management team.

 

Our Management may become subject to the Investment Company Act, which would subject it to various regulatory requirements.

 

Neither the Management team nor any member thereof, nor any Officer has registered as an investment adviser under the Investment Advisers Act of 1940 (the “Investment Advisers Act”) and intend to operate so as to not be required to register as an investment adviser with the SEC for as long as possible (based upon certain exemptions thereunder). Specifically, investment advisers are not required to register under the Investment Advisers Act so long as they have less than $110 million in “Assets Under Management” (AUM). If or when the Management team or an Officer exceeds that threshold, unless it is eligible for another exemption, it will be required to register under the Investment Advisers Act and will be subject to various restrictive provisions provided for therein. The Management team cannot determine at this time, what, if any, impact such registration and restrictions will have on its business or the business of the Company.

 

Recent legislative and regulatory initiatives have imposed restrictions and requirements could have an adverse effect on our business.

 

The U.S. Congress, the SEC, and other regulators have taken, or represented that they may take, action to increase or otherwise modify the laws, rules, and regulations applicable to techniques and instruments in which the Company may invest. New (or modified) laws, rules, and regulations may prevent, or significantly limit the ability of, the Management team from using certain such instruments or from engaging in such transactions. This may impair the ability of the Management team to carry out the Company’s investment strategy and may otherwise have an adverse impact on the Company’s returns. Compliance with such new or modified laws, rules, and regulations may also increase the Company’s expenses and therefore, may adversely affect the Company’s performance. It is not possible at this time to predict with certainty what, if any, impact the new or modified regulations will have on the Management team or the Company, and it is possible that such impact could be adverse and material.

 

The Company is liable for indemnification obligations to the Management Team or its Affiliates.

 

The Company will be required to indemnify the Management team, Officers, and certain affiliated persons and entities of the Management team for liabilities incurred in connection with the affairs of the Company. Such liabilities may be material and have an adverse effect to the Members, or total returns to the Members. The indemnification obligation of the Company will be payable from the assets of the Company, and Investors may be required to return certain amounts distributed to them to satisfy the indemnity obligations of the Company.  No Preferred Returns are guaranteed. The projections of the Company are not based on historical operations of the Company and are aspirational in nature due to the Company’s limited operations to date.

 

Tax Risks

 

General tax considerations.

 

As with any investment that generates income and/or loss and distributes cash, an investment has federal income tax risks. The significant tax risks are discussed in greater detail later in this Offering Circular. All Investors are encouraged to review the tax risk section with competent tax counsel.

 

Investors should understand the role of the Company and the United States Internal Revenue Service (“IRS”) concerning the tax issues involved in any investment in the Company. The IRS may do any of the following:

 

Review the federal income taxation rules involving the Company and any investment in it, and issue revised interpretations of established concepts. 

Scrutinize the proper application of tax laws to the Company, including a comprehensive audit of the Company at any time. The Company does not expect to fall under the reporting requirements for tax shelters, as the Company does not have the avoidance or evasion of Federal income tax as a significant purpose. If the Company borrows significant sums and incurs significant losses, however, the Company may be required to notify the IRS of its status as a tax shelter. The effect of such action is generally unknown but could result in increased IRS scrutiny of the Company’s taxes. 


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The Company will:

 

Retain an accounting firm to annually prepare a financial statement on the Company’s behalf. At the discretion of the Management, the Management may at any time change accounting firms, and 

Not apply to the IRS for any ruling concerning the establishment or operation of the Company. 

 

AN INVESTMENT IN THE UNITS WILL RESULT IN TAX CONSEQUENCES TO THE INVESTOR. THUS, EACH PROSPECTIVE INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR, ATTORNEY, FINANCIAL ADVISOR, BUSINESS ADVISOR, AND ACCOUNTING ADVISOR AS TO LEGAL, BUSINESS, TAX, ACCOUNTING AND RELATED MATTERS, IN ORDER TO FULLY UNDERSTAND THE FEDERAL, STATE, LOCAL, AND FOREIGN INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE COMPANY, AND ANY AND ALL TAX RAMIFICATIONS, AND ITS SUITABILITY FOR THE INVESTOR FROM A TAX AND PLANNING STANDPOINT.

 

This Offering Circular and any subscription materials provided by the Company do not constitute tax advice and are not intended to substitute for tax planning.

 

The various tax issues, for both US and non-US investors, are beyond the scope of this Offering Circular and any subscription materials provided by the Company.

 

Nothing contained in this Offering Circular or any subscription or other materials should be construed as legal, financial, business, tax or accounting advice.

 

Nothing in this Offering Circular or any subscription or other materials should be relied upon for the maintenance of books and records for any tax, accounting, legal, or other procedure.

 

Neither the Company nor any Management thereof has any indemnification obligation to any Member or Investor as a result of any tax due as a result of an investment in the Company.

 

Investors may be subject to state and local taxes and filings.

 

Even if you would not otherwise be subject to tax in certain states, you may be required to file tax returns in states where we invest. Certain jurisdictions may collect taxes through withholding at the company level or at the investment level and any amounts so withheld that are allocable to your investment may be treated as a distribution to you. It is expected that income and gain we earn will subject you to tax and filing requirements in an unknown number of jurisdictions. We urge you to consult your tax advisor regarding the applicability of state and local taxes to, and additional filing requirements associated with, an investment in the Company.

 

EACH PROSPECTIVE INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR, ATTORNEY, FINANCIAL ADVISOR, BUSINESS ADVISOR, AND ACCOUNTING ADVISOR AS TO LEGAL, BUSINESS, TAX, ACCOUNTING AND RELATED MATTERS, IN ORDER TO PROPERLY RECORD AND ACCOUNT FOR THE FEDERAL, STATE, LOCAL, AND FOREIGN INCOME TAX CONSEQUENCE (AND OTHER TAX CONSEQUENCES) OF AN INVESTMENT IN THE COMPANY, AND ANY AND ALL TAX REPORTING, FILINGS AND PROCEDURES REQUIRED AS A RESULT OF THE TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing at the end of this Offering Circular. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this Offering Circular.

 

Overview

 

The Company seeks the capital from this Offering to fully execute its role out of acquiring strategic going concern businesses for expansion using our franchise model.  We have already begun the process of identifying businesses to engage in acquisition efforts once funding is available through this Offering. This ensures immediate cash flow to the Company versus starting acquisitions from scratch. Supporting this with expansion of the business through implementation of the franchise model pushes faster expansion of the business and produces ongoing monthly royalty revenue. The extensive experience of the Management team in both the senior services industry and franchising strongly lends itself to successful rollout of the business plan.


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We have a fast-growing franchise model of senior services with immediate revenue upon acquisition of strategic companies who offer much needed senior services. Equally important is that all of our revenue sources feed into one another providing a one-stop shop for seniors and their families to address needs as they age. Our model brings a measure of simplicity to an otherwise complex industry to navigate.

 

The extensive experience of the Management team in both the senior services industry and franchising strongly lends itself to successful rollout of the business plan.

 

Results of Operations

 

In late 2021 founder and CEO, Chuck Bongiovanni first recognized a need in the market for a source of funding to help people entering into the Residential Assisted Living industry. There was no real option for financing of the homes to house seniors. The result of this observation and solution to the market problem is the Company: Majestic Funding Partners. Through a series of meetings, the founders have built and pursued the concept of acquiring the homes and leasing them back to owners of residential assisted living facilities. As part of this collaboration another void and opportunity in the senior market was identified by the founders: building a senior-based service business around a single coherent brand using well established franchise models. The benefits of housing multiple business services under a single brand and entity are many, and cross referrals between various franchised business segments provides a simple organizational structure to navigate as the needs of seniors change over time, which will allow the Company to capture the benefits of rapid growth through the franchise model, provide consistent quality services and products to seniors, and address a need in the senior care market that is lacking. The result is better overall care and experiences for the aging senior and their families.

Building on this, the Company was formed in November of 2022 and the Management team and Officers invested in developing the business, marketing and franchise plan, along with bringing this Offering to market.  At present there is no Revenue stream from operations. However, during the past year the Management team and Officers have identified prospective opportunities to purchase senior care businesses to which to apply the franchise model. Upon successful sale of this Offering, the Company expects to execute initial acquisitions and implement the franchise model for senior services. Equally important is the revenue stream produced by acquiring established senior care facilities and businesses along with revenue from acquisitions and lease-backs on residential senior care homes during the role out of the franchise system. The acquisition of senior care facilities and the development of the co-branded strategy within the senior industry through franchising is the core of the Management team’s plan. 

Liquidity and Capital Resources

 

At the time of this Offering the Company has limited cash resources and reserves. The Management team and Officers have provided the capital required for Company formation, business and marketing plan development, franchise development and initial franchise marketing, and to bring this Offering to the market. The Management team and Officers are committed to making the next stage of the Company a success with the proceeds from this Offering. 

 

Capitalization and Financing Activities

 

The Company has been 100% capitalized by the Management team and Officers and has never taken funds from outside investors. The Company has issued no Units, stock, notes, or warrants for services.

 

Critical Accounting Policies

 

We have identified the policies outlined in this Offering Circular and attachments as critical to our current business operations and an understanding of our results of operations. Those policies outlined are not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management’s judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operation where such policies affect our reported and expected financial results. Note that our preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

 

Additional Company Matters

 

The Company has not filed for bankruptcy protection, nor has it ever been involved in receivership or similar proceedings. The Company is not presently involved in any legal proceedings material to the business or financial condition of the Company. The Company does not anticipate any material reclassification, merger, consolidation, or purchase or sale of a significant proportion of assets (not in the ordinary course of business) during the next 12 months.


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OUR MANAGEMENT

 

The Company is primarily managed by Charles Bongiovanni and Vincent Guarnieri who are the Management team.  Josh Smith and Brett Gibson are the current executive Officers.

 

Name

Title

Age

Expected Tenure

Charles Bongiovanni

CEO

57

5 years

Vincent Guarnieri

VP

58

5 years

Josh Smith

CFO

35

5 years

Brett Gibson

General Counsel

56

5 years

 

Compensation of the Management team and Officers

 

Information about the annual compensation we have agreed to pay to our Management team and executive Officers is set forth in the following table:

 

Name/Position

Cash Compensation*

Other Compensation

Total Compensation

 

 

 

 

Charles Bongiovanni

$225,000

Standard Benefits

Cash and Benefits

Vincent Guarnieri

$225,000

Standard Benefits

Cash and Benefits

Josh Smith

$225,000

Standard Benefits

Cash and Benefits

Brett Gibson

$225,000

Standard Benefits

Cash and Benefits

 

* Management Compensation is included in the Use of Proceeds raised in this Offering and is not expected to be fully implemented until the Company has raised at least ten percent (10%) of this Offering (four million five hundred thousand dollars ($4,500,000)).

 

Employment Contracts

 

The Company has no written employment contracts.

 

Company Expenses

 

The Company will be responsible for all of its operating expenses including, without limitation, (i) all costs and expenses incurred in connection with evaluating and negotiating service agreements (including, without limitation, any due diligence, travel, legal and accounting expenses, and other fees and out-of-pocket costs related thereto), (ii) all costs and expenses incurred (including, without limitation, any due diligence, travel, legal and accounting expenses, and other fees and out-of-pocket costs related thereto) in connection with bookkeeping, recordkeeping/auditing, and compliance oversight/auditing for all transactions and services performed by outside servicers for the Company, (iii) taxes of the Company (iv) all costs and expenses associated with obtaining and maintaining insurance for the Company and its assets, if any, (v) all costs related to litigation (including threatened litigation) involving the Company, and indemnification expenses, (vi) expenses and fees associated with third party auditors, accountants, attorneys and tax advisors and other professionals with respect to the Company and its activities, (vii) fees incurred in connection with the maintenance of bank or custodian accounts, (viii) brokerage points and commissions, referral and finder fees, and other investment costs incurred by or on behalf of the Company and paid to third parties, (ix) all expenses incurred in connection with the registration of the Company’s securities under applicable securities laws or regulations, (x) all expenses associated with the borrowing of funds and procurement of lines of credit, if any, (xi) all expenses of liquidating the Company or its investments, and (xii) other general ordinary Company administration and overhead expenses.

 

Investment by the Management team and Officers

 

The Class A Preferred Members, including the Management and Officers or their affiliated companies, have invested all of the Company capital to date and collectively own 100% of the Units of the Company prior to this Offering.

 

Fiduciary Duties of the Management and Officers

 

Duties owed the Company by the Management team and Officers are prescribed by law and our Operating Agreement (“Operating Agreement”). The Act provides that Delaware limited liability companies may, in their Operating Agreements, limit or eliminate any and all liabilities for breach of duties (including fiduciary duties) of a member, manager or other person to a limited liability company or to another member or manager or to another person that is a party to or is otherwise bound by a limited liability company agreement.

 

The Operating Agreement provides that the Management team, Officers, or their affiliates, or any director, manager, officer, agent, employee, or owner of the Management team, or its affiliates (“Covered Parties”) will not be liable to the Company for losses resulting from errors in judgment or other acts or omissions unless a Management member and/or Officer acted fraudulently or in bad faith.


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It is the position of the U.S. Securities and Exchange Commission that indemnification for liabilities arising from, or out of, a violation of federal securities law is void as contrary to public policy. However, indemnification will be available for settlements and related expenses of lawsuits alleging securities law violations if a court approves the settlement and indemnification, and also for expenses incurred in successfully defending such lawsuits if a court approves such indemnification.

 

The Operating Agreement provides that the Management team are not required to manage the Company as their sole and exclusive function, nor are the Officers required to restrict their business activities solely to those of the Company. The Management team and Officers have other business interests and may engage in activities other than those relating to the Company. The pursuit of such ventures by the Management team, Officers and/or their affiliates, even if competitive with the business of the Company, shall not be deemed wrongful or improper or a violation of any fiduciary duties by the Management team or any Officer.

 

Indemnification and Exculpation

 

Subject to certain limitations, our operating agreement limits the liability of our Management team, Officers, sponsors, and their affiliates, for monetary damages and provides that we will indemnify and pay or reimburse reasonable expenses in advance of final disposition of a proceeding to our Management team, Officers, sponsors, and their affiliates.

 

Our operating agreement provides that to the fullest extent permitted by applicable law our Management team, Officers, employees and agents, will not be liable to the Company. In addition, pursuant to our operating agreement, we have agreed to indemnify our Management team, Officers, employees and agents, to the fullest extent permitted by law, against all expenses and liabilities (including judgments, fines, penalties, interest, amounts paid in settlement with the approval of our Company and attorney’s fees and disbursements) arising from the performance of any of their obligations or duties in connection with their service to us or the operating agreement, including in connection with any civil, criminal, administrative, investigative or other action, suit or proceeding to which any such person may hereafter be made party by reason of being or having been the Management team or one of our Officers.

 

Insofar as the foregoing provisions permit indemnification of Management team, Officers or Persons controlling us for liability arising under the Securities Act, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.


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OWNERSHIP BY MANAGEMENT AND CERTAIN UNITHOLDERS

 

The following table presents information regarding the ownership of the Company’s equity interests as of October 15, 2023, by:

 

 

our Management team,

 

our Officers other than the Management team,

 

other holders of 10% or more of the beneficial equity interests of the Company.

 

Beneficial ownership is generally determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise noted, the address for each beneficial owner is listed below:

 

Name

Class of Units

Number of Units

Ownership

 

 

 

 

Bongenuity, LLC (Charles Bongiovanni)

Class A Pref.

520,000

26%

VinPossible, LLC (Vince Guarnieri)

Class A Pref.

520,000

26%

JMS Equity, LLC (Josh Smith)

Class A Pref.

420,000

21%

6G Holdings, LLC (Brett Gibson)

Class A Pref.

200,000

10%

Allocation of Future Units to

 

 

 

Management and Employees*

Class A Pref.

340,000

17%

 

Other holders of 10% or more of the beneficial equity interests of the Company:       

 

NONE

 

TOTAL:

Class A Pref.

2,000,000

100%

 

*As of the Date of this Offering Circular, the 550,000 Class A Preferred Units for additional management and future employees have been allocated but are unissued.

 

Our controlling Unitholders are set forth in the table above. These controlling Unitholders include entities owned by our Management team and executive Officers who are Unitholders, and we believe each of these persons has sole voting and investment power over the Units they own, unless otherwise noted.

 

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

 

Chuck Bongiovanni is a minority owner of Best Life Brands, a subsidiary of The Riverside Group. Best Life Brands currently owns ComForCare Franchise Systems which would be a competing interest if Majestic Funding Partners purchases an In-Home Companion service (which is part of our business plan). Mr. Bongiovanni has no oversight or decision-making capacity for Best Life Brands and retains 9.5% ownership due the acquisition of CarePatrol Franchise Systems to The Riverside Group in 2018.

 

CONFLICTS OF INTEREST

 

The Company is subject to various conflicts of interest arising out of its relationship with the Management team and Officers, and certain non-controlling Unitholders. None of the agreements and arrangements between the Company and the Management, Officers, and/or such non-controlling Unitholders, including those relating to compensation, if any, resulted from arm’s length negotiations. In addition, no assurances can be made that other conflicts of interest will not arise in the future. These conflicts of interest include, but are not limited to, the receipt of any compensation paid to the Management team and Officers, company administration fee, and loan servicing fees by the Management team and/or Officers. The Management team and Officers are not currently paid any fees or compensation and have not entered into any agreement or arrangement with the Company to be paid any such fees or compensation in the future. In the event the Management team and Officers are paid compensation as a percentage based on the stated value of the Company (as determined by the Management team), such fees are intended to compensate the Management team and/or Officers for their services. Since absent the existence of such compensation, Unitholders might receive a higher rate of return, the interests of the Management team, Officers, and the Investors are adverse in this respect. However, the Company intends to negotiate any such percentage fees for the Management team’s and/or Officers’ services on an arm’s length basis to the extent possible, and any such fees shall be market-based and commercially reasonable at all times.


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Receipt of Other Fees by the Management Team, Officers, and their Affiliates

 

The Management team, Officers, and/or their affiliates, if any, may be paid reasonable, market-based processing, servicing, administration, accounting, legal, and other relevant fees in connection with services provided in connection with the business of the Company. All fees and compensation paid to the Management team, Officers, and/or their affiliates, shall be market-based and commercially reasonable at all times.

 

Competition by the Company with Other Affiliated Companies

 

The Management team and Officers, and their affiliates, may engage for their own accounts or for the accounts of others in other business ventures, including other public or private limited partnerships or limited liability companies. Neither the Company nor any holder of a Unit issued by the Company is entitled to an interest therein.

 

Other Investments

 

The Management team and Officers may have investments in other companies, funds or accounts and real estate interests sponsored by or affiliated with the Management team and/or Officers as well as investments in non-affiliates, however, any such investments for which the performance of and financial returns of such other investments may be at odds with those of the Company, shall be non-controlling investment interests.

 

Lack of Independent Legal Representation

 

The Management team, Officers, and the Company are not represented by separate counsel. The attorneys and other experts who have prepared the documents for this Offering also perform other services for the Management team on behalf of the Company. This representation will continue.

 

Management team and other Officers

 

The Management team are Unitholders of the Company and from time to time may invest additional amounts in the Company. Any further investment by the Management and/or Officers will be with the approval of the Management team in its sole discretion, without notice or approval of the other Unitholders. The Management team may also determine to have the Company accept its investment while rejecting the investments of others (though it does not intend to do so). As additional Units are issued, the increase in Units may reduce the amounts the Company has available to make distributions to other Investors, as distributions will need to be distributed amongst more Units. In addition, the Management team will be eligible to have the same rights to request the Company to redeem its Units as any other Member. Any such redemption may reduce the amount of funds available for the redemption or repayment of other Investors’ interests.

 

Indemnification

 

Pursuant to the Operating Agreement, the Company will indemnify its Management team, Officers, and any affiliates, agents, or attorneys from any action, claim, or liability arising from any act or omission made in good faith and in performance of its duties under the Operating Agreement. If the Company becomes obligated to make such payments, such indemnification costs would be paid from funds that would otherwise be available to distribute to Investor Members or invest in further Company Assets. To the extent these indemnification provisions protect the Management team, Officers, and/or affiliates, agents, or attorneys at the cost of the Investors in the Company, a conflict of interest may exist.

 

Other Services or Potential Compensation

 

The Company may engage affiliates of the Management team or Officers to perform services for and on behalf of the Company and the Company may, in connection with such services, pay to such affiliates servicing fees and other compensation as described in this Offering Circular. A service provider for the Company, including but not limited to the Operations Servicer, may receive commissions or fees from unrelated third parties for providing services or engaging in operations similar or in direct competition with those of the Company and, in such event, such service provider may have a potentially conflicting division of loyalties and responsibilities regarding the Company and the other parties.


42


 

ADDITIONAL INFORMATION

 

Legal Matters

 

Certain legal matters with respect to the validity of the Units of Class A Common Units to be distributed pursuant to this Offering Circular will be passed upon for us by Wallace A. Glausi, Attorney at Law.

 

Experts

 

We have relied on Fruci & Associates II, LLC as experts for audit of our financial statements.

 

Where You Can Find More Information

 

We have filed an offering statement on Form 1-A under the Securities Act with the U.S. Securities and Exchange Commission for the Class A Common Units offered by this Offering Circular. This Offering Circular does not include all of the information contained in the offering statement. You should refer to the offering statement and our exhibits for additional information. Whenever we refer in this Offering Circular to any of our contracts, agreements or other documents, the references are not necessarily complete, and you should refer to the exhibits attached to the offering statement for copies of the actual contract, agreement, or other document. Upon the qualification of our initial offering statement, we became subject to the informational reporting requirements of the Exchange Act that are applicable to Tier 2 companies whose securities are registered pursuant to Regulation A, and accordingly, we will file annual reports, semi-annual reports and other information with the SEC. When we complete this Offering, we will also be required to file certain reports and other information with the SEC for a period of time and may continue to voluntarily file such reports.

 

You can read our SEC filings, including the offering statement of which this Offering Circular is a part, and exhibits, over the Internet at the SEC’s website at www.sec.gov. You may also read and copy any document we file with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room.


43



 

 

INDEPENDENT AUDITORSʼ REPORT

 

 

 

To the Managers and Members of

Majestic Funding Partners, LLC

Chandler, AZ

 

Opinion

We have audited the financial statements of Majestic Funding Partners, LLC (“the Company”) (a Delaware limited liability company), which comprise the balance sheet as of December 31, 2022 and the related statements of operations, changes in membersʼ equity, and cash flows for the period from October 26, 2022 (inception) to December 31, 2022, and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Majestic Funding Partners, LLC as of December 31, 2022, and the results of its operations and its cash flows for the period from October 26, 2022 (inception) to December 31, 2022 in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditorsʼ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Majestic Fundings Partners, LLC and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Substantial Doubt About the Companyʼs Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has not yet began its principal operations and requires significant additional capital to do so, thus has determined that substantial doubt exists about the Companyʼs ability to continue as a going concern. Managementʼs evaluation of the events and conditions and managementʼs plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Majestic Funding Partners, LLCʼs ability to continue as a going concern within one year after the date that the financial statements are available to be issued.


Members of:

802 North Washington

WSCPA

PO Box 2163

AICPA

Spokane, Washington

PCPS

99210-2163

 

 

 

P 509-624-9223

 

TF 1-877-264-0485

 

mail@fruci.com

 

www.fruci.com



Auditorsʼ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditorsʼ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with generally accepted auditing standards, we:

·Exercise professional judgment and maintain professional skepticism throughout the audit. 

·Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. 

·Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Majestic Funding Partners LLCʼs internal control. Accordingly, no such opinion is expressed. 

·Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. 

·Conclude, whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Majestic Funding Partners LLCʼs ability to continue as a going concern for a reasonable period of time. 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

 

 

 

Spokane, Washington
August 16, 2023




 

 

 

MAJESTIC FUNDING PARTNERS, LLC

 

FINANCIAL STATEMENTS

 

FOR THE PERIOD OF INCEPTION

(OCTOBER 26, 2022) TO DECEMBER 31, 2022




TABLE OF CONTENTS

 

 

PAGE NO.

FINANCIAL STATEMENTS

 

Balance Sheet

1

Statement of Operations

2

Statement of Changes in Members’ Equity

3

Statement of Cash Flows

4

Notes to Financial Statements

5 - 6




MAJESTIC FUNDING PARTNERS, LLC

BALANCE SHEET

DECEMBER 31, 2022

 

 

ASSETS

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

 

Cash

 

$17,390 

 

 

 

 

 

 

 

Prepaid expenses

 

42,500 

 

 

 

 

 

 

 

TOTAL CURRENT ASSETS

 

 

 

$59,890 

 

 

 

 

 

TOTAL ASSETS

 

 

 

$59,890 

 

 

 

 

 

MEMBERS' EQUITY

 

 

 

 

 

 

 

 

 

MEMBERS' EQUITY

  

 

 

$59,890 

 

No assurance is provided on this financial statement.


F-1



MAJESTIC FUNDING PARTNERS, LLC

STATEMENT OF OPERATIONS

FOR THE PERIOD OF INCEPTION (OCTOBER 26, 2022)

TO DECEMBER 31, 2022

 

REVENUE

$ 

 

 

OPERATING EXPENSES

 

Bank fees

110  

 

 

NET LOSS

$(110) 

 

No assurance is provided on this financial statement.


F-2



MAJESTIC FUNDING PARTNERS, LLC

STATEMENT OF CHANGES IN MEMBERS’ EQUITY

FOR THE PERIOD OF INCEPTION (OCTOBER 26, 2022)

TO DECEMBER 31, 2022

 

BALANCE, OCTOBER 26, 2022
(DATE OF INCEPTION)

$ 

MEMBER CONTRIBUTIONS

60,000  

NET LOSS

(110) 

BALANCE, DECEMBER 31, 2022

$59,890  

 

No assurance is provided on this financial statement.


F-3



MAJESTIC FUNDING PARTNERS, LLC

STATEMENT OF CASH FLOWS

FOR THE PERIOD OF INCEPTION (OCTOBER 26, 2022)

TO DECEMBER 31, 2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net loss

 

$(110) 

 

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

Prepaid expenses

 

(42,500) 

 

 

NET CASH USED IN OPERATING ACTIVITIES

 

 

 

$(42,610) 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Member contributions

 

60,000  

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

 

60,000  

 

 

 

 

 

NET INCREASE IN CASH

 

 

 

17,390  

 

 

 

 

 

CASH, OCTOBER 26, 2022 (DATE OF INCEPTION)

 

 

 

 

 

 

 

 

CASH, DECEMBER 31, 2022

  

 

 

$17,390  

 

 

 

 

 

Supplement cashflow

 

 

 

 

Interest paid

 

$0 

 

$0 

Taxes paid

 

$0 

 

$0 

 

No assurance is provided on this financial statement.


F-4



MAJESTIC FUNDING PARTNERS, LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE PERIOD OF INCEPTION (OCTOBER 26, 2022)

TO DECEMBER 31, 2022

 

NOTE 1ORGANIZATION 

 

Majestic Funding Partners, LLC (“Company”) was established on October 26, 2022 under the laws of the state of Delaware to provide franchising and financing within the senior care industry.

 

The Company was formed as a limited liability company; therefore no member, manager, agent or employee of the Company shall be personally liable for the debts, obligations, or liabilities of the Company. The duration of the Company is perpetual.

 

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

 

Basis of Presentation

 

The financial statements are presented on the accrual basis of accounting in accordance with generally accepted accounting principles (GAAP) in the United States of America.

 

Cash and Cash Equivalents

 

The Company considers unrestricted currency, demand deposits, money market accounts, and all highly liquid debt instruments purchased with original maturities of ninety days or less to be cash and cash equivalents.

 

Accounting Estimates

 

Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used.

 

Income Taxes

 

The financial statements do not include a provision for income taxes because the Company has elected to be taxed as a partnership for federal and state income taxes. The Company’s net income is included in the members’ income tax returns and is taxed at the member’s tax rates.

 

The Company follows the accounting principle for uncertainty in income tax guidance which clarifies the accounting and recognition for tax positions taken or expected to be taken in its income tax returns.


F-5



MAJESTIC FUNDING PARTNERS, LLC

NOTES TO FINANCIAL STATEMENTS

FOR THE PERIOD OF INCEPTION (OCTOBER 26, 2022)

TO DECEMBER 31, 2022

 

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

 

Risk and Uncertainties

 

Operations

 

The company’s activities are subject to risk and uncertainties, as the Company has not commenced operations.

 

Cash in bank

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and equivalents. The Company maintains its cash and equivalents in various bank accounts that, at times may exceed federally insured limits. The Company’s cash and equivalent accounts have been placed with high credit quality financial institutions. The Company has not experienced, nor does it anticipate, any losses with respect to such accounts.

 

Subsequent Events

 

Management has evaluated subsequent events through August


F-6



PART III—EXHIBITS

 

Item 16.

Index to Exhibits

 

 

2(a)

Certificate of Formation

2(b)

Operating Agreement

4

Form of Subscription Agreement

6

Transfer Agency and Registrar Services Agreement with Colonial

8

Form of Escrow Agreement with East West Bank

11(a)

Consent of Wallace A. Glausi, Attorney at Law (included in Exhibit 12)

11(b)

CPA Consent

12

Opinion of Counsel

 

*(Fully executed Agreement to be filed by Amendment or Supplement)

 

SIGNATURES

 

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this Offering Circular to be signed on its behalf by the undersigned, duly authorized, in ___________ county, _________ on the ______ day of _________, 2023.

  

 

MAJESTIC FUNDING PARTNERS, LLC

 

 

 

 

 

By:

/s/ Charles Bongiovanni

 

Name:

Charles Bongiovanni

 

Title:  

 CEO

 

This Offering Circular has been signed by the following persons in the capacities and on the dates indicated.

 

Name

Title

Date

Charles Bongiovanni

CEO

October 15, 2023


44

 

CERTIFICATE OF FORMATION

OF

Majestic Funding Partners, LLC

A DELAWARE SERIES LIMITED LIABILITY COMPANY

 

FIRST: The name of the limited liability company is: Majestic Funding Partners, LLC

SECOND: The Corporation's registered office in the State of Delaware is located at 16192 Coastal Highway, Lewes, Delaware 19958, County of Sussex. The registered agent in charge thereof is Harvard Business Services, Inc,

 

TIDRD: The limited liability company is established pursuant to the Delaware Limited Liability Company Act (the "Act") and, pursuant to Section 18-215 or Section 18-218 of that Act, may establish separate and distinct series of members, managers, and interests, each having separate rights, powers or duties with respect to specified property or obligations of the. limited liability company or profits and losses associated with specified property or obligations. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable against the assets of such series only, and not against the assets of the limited liability company generally or any other series thereof, and none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the limited liability company generally or any other series thereof shall be enforceable against the assets of such series. These series may be established as "protected series" or "registered series" as such terms are used in the Act.

 

IN WITNESS WHEREOF, the undersigned, being fully authorized to execute and file this document have signed below and executed this Certificate of Formation on this October 26, 2022.

 

 

 

 

 

Harvard Business Services, Inc., Authorized Person

 

By: Michael J, Bell, President


 

STATEMENT OF AUTHORIZED PERSON

*************************

IN LIEU OF ORGANIZATIONAL MEETING

FOR

Majestic Funding Partners, LLC

October 26, 2022

 

We, Harvard Business Services, Inc., the authorized person of Majestic Funding Partners, LLC -a Delaware Limited Liability Company -- hereby adopt the following resolution:

 

Resolved: That the Certificate of Formation of Majestic Funding Partners, LLC was filed with the Secretary of State of Delaware on October 26, 2022.

 

Resolved: That on October 26, 2022 the following persons were appointed as the initial members of the Limited Liability Company until their successors are elected and qualify:

 

Bogenuity, LLC.

 

6G Holdings, LLC.

 

VinPossible, LLC.

 

JMS Equity, LLC.

 

Resolved: That the undersigned signatory hereby resigns as the authorized person of the above named Limited Liability Company.

 

This resolution shall be filed in the minute book of the company.

 

 

 

 

Harvard Business Services, Inc., Authorized Person

 

By: Michael J. Bell, President

 

AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANYAGREEMENT

 

MAJESTIC FUNDING PARTNERS, LLC

(A Delaware Limited Liability Company)

 

 

Dated Effective as of September 15, 2023

 

SUPERSEDES ANY PREVIOUS

LIMITED LIABILITY COMPANYAGREEMENT

 

MAJESTIC FUNDING PARTNERS, LLC

AMENDED AND RESTATED

LIMITED LIABILITY COMPANYAGREEMENT

 

MAJESTIC FUNDING PARTNERS, LLC

 

This Amended and Restated Operating Agreement of Majestic Funding Partners, LLC (this “Agreement”), dated effective as of March 31, 2023, is executed and agreed to, for good and valuable consideration, by the Members (as defined below).

 

ARTICLE I

DEFINITIONS

 

1.1Definitions 

 

As used in this Agreement, the following terms have the following meanings:

 

“Act” means the Delaware Limited Liability Company Act and any successor statute, as amended from time to time.

 

“Affiliate” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls is controlled by or under common control with, such Person. For the purposes of this definition, the term “controls,” “is controlled by” or “under common control with” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether (i) through the ownership of voting securities, (i) by contract, or (ii) otherwise.

 

“Agreement” has the meaning given that term in the introductory paragraph.

 

“Capital Account” means the capital account of a Member in the Company.

 

“Capital Contribution'“ means any contribution by a Member to the capital of the Company.

 

“Certificate” has the meaning given that term in Section 2.01.

 

“Class A Common Members” means those members holding Class A Common Units.

 

“Class A Common Units” means the Class A Common Non-Voting Units of the Company.

 

“Class A Preferred Members” means those members holding Class A Preferred Units.

 

“Class A Preferred Units” means the Class A Preferred Units of the Company. Each Class A Preferred Unit has ten (10) votes.

 

“Code” means the Internal Revenue Code of 1986, as amended.


 

“Company” means Majestic Funding Partners, LLC, a Delaware limited liability company.

 

»Gross Asset Value” means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows:

 

(i) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the Manager;

 

(ii) The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Manager, as of the following times: (A) the acquisition of an additional Interest by any new or existing Member in exchange for more than a de minimis Capital Contribution; (B) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for the Member's Interest in the Company; (C) the liquidation of the Company within the meaning of Regulations Section 1.7041(b)(2) (ii)(g); and (D) in connection with the grant of an Interest in the Company (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Company by an existing Member acting in a partner capacity, or by a new Member acting in a partner capacity in anticipation of being a Member; provided, however that adjustments pursuant to clauses (A), (B), and (D) above shall be made only if the Manager reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company;

 

(iii) The Gross Asset Value of any Company asset distributed to any Member shall be adjusted to equal the gross fair market value of such asset on the date of distribution as determined by the distributee and the Manager; and

 

(iv) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Section 743(b) but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to (A) Regulations Section 1.7041(b)(2)(iv)(m) and (B) subparagraph  (vi) of the definition of “Profits” and “Losses” or Section 7.03(g), provided, however that Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to the extent the Manager determines that an adjustment pursuant to subparagraph (ii) is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv).

 

If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraphs (i), (ii), or (iv), such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.

 

“Members” means any member admitted to the Company.

 

“Membership Interests” means the interest of Members in the Company, including without limitation, rights to distribution (operating and/or liquidating or otherwise), allocations, information, accounts and inspections to consent or approve.”

 

“Losses” shall mean, for each fiscal year, the losses and deductions of the Company,

 

“Officers” has the meaning given that term in Section 6.02.

 

“Profits” shall mean, for each fiscal year, the income and gains of the Company.

 

“Person” has the meaning given that term in 518-101 of the Act.

 

Other terms defined herein have the meanings so given them.

 

1.2Construction 

 

Whenever the context requires, the gender of all words used in this Agreement includes the masculine, feminine and neuter. All references to Articles and Sections refer (unless stated otherwise) to articles and sections of this Agreement

 

ARTICLE II

FORMATION

 

2.01Formation 

 

The Company has been organized as a Delaware limited liability company by the filing of a certificate of formation (“Certificate”) under the name of “Majestic Funding Partners, LLC”.


 

2.2Name 

 

The name of the Company is on the cover page of this Agreement and all Company business must be conducted in that name or such other names as the Members may select from time to time.

 

2.3Registered Office: Registered Agent: Principal Office; Other Offices 

 

The registered office of the Company required by the Act to be maintained in the State of Delaware shall be the office of the initial registered agent named in the Certificate or such other office (which need not be a place of business of the Company) as the Members may designate from time to time in the manner provided by the Act. The registered agent of the Company shall be the initial registered agent named in the Certificate or such other Person or Persons as the Members may designate from time to time in the manner provided by the Act. The principal office of the Company shall be at such place as the Members may designate from time to time, and the Company shall maintain records there as required by the Act. The Company may have such other offices as the Members may designate from time to time.

 

2.4Purpose 

 

The purpose of the Company is to transact any and all other lawful business for which limited liability companies may be organized under the Act, including without limitation, to act as a broker dealer and provide advisory services.

 

2.5Tern-I 

 

The Company commenced on the date the Secretary of State of the State of Delaware issued a certificate of organization for the Company and shall continue in existence perpetually or until such time as this Agreement may specify.

 

2.6Rights and Obligations 

 

The rights and obligations of the Members with respect to the Company will be governed by the Act.

 

ARTICLE III

MEMBERSHIP

 

3.1Members 

 

The Members of the Company are listed on Exhibit A, as amended from time to time.

 

3.2Information 

 

In addition to the other rights specifically set forth in this Agreement, the Members are entitled to all information to which the Members are entitled to have access pursuant to the Act under the circumstances and subject to the conditions therein stated.

 

3.3Liability to Third Parties 

 

Neither the Members nor any Officer of the Company shall be liable for the debts, obligations or liabilities of the Company, including under a judgment, decree or order of any court. In addition, and without limiting the foregoing, the Members, on the one hand, and the Company, on the other hand, are separate and distinct persons, each responsible for their own obligations and liabilities.

 

ARTICLE IV

CAPITAL CONTRIBUTIONS; ALLOCATIONS AND TAX ALLOCATIONS

 

4.1Initial Contributions 

 

The Company was formed by the Members on October 26, 2022 and the Class A Preferred Members

made their initial contributions at that time.

 

4.2Subsequent Contributions 

 

Except as provided in Section 4.01, no Members shall have any obligation to make any Capital Contribution. Subsequent Capital Contributions may be made from time to time at the discretion of the Members.


 

4.3Return of Contributions 

 

The Members are not entitled to the return of any part of their Capital Contributions or to be paid interest in respect of cither their Capital Account or their Capital Contribution. An underpaid Capital Contribution is not a liability of the Company. The Members shall not be required to contribute or to lend any cash or property to the Company to enable the Company to return the Members' Capital Contribution.

 

4.4Advances by Members 

 

If the Company does not have sufficient cash to pay its obligations, the Members, in their sole discretion, may agree to advance all or part of the needed funds to or on behalf of the Company. An advance described in this Section 4.04 constitutes a loan from the Members to the Company, bears interest at the rate agreed to with the Company at such time from the date of the advance until the date of payment, and is not a Capital Contribution. Upon the Members' request, the Company shall execute and deliver to the Members a promissory note setting forth the terms and conditions of any advance.

 

4.5Capital Accounts 

 

A separate Capital Account shall be maintained for each of the Members.

 

4.6Ownership Interest 

 

The ownership interest of the Members in the Company (the “Ownership Interest”) as of the date hereof is set forth on Exhibit A.

 

4.7Limited Liability 

 

Except to the extent required under the Act, no member of the Company (regardless of whether such member is serving as Manager (as hereinafter defined) shall be personally liable for any debt, obligation or liability of the Company, regardless of whether the debt, obligation or liability arises in contract, tort or otherwise, solely by reason of being a member of the Company.

 

4.8Capital Accounts 

 

There shall be established for each Member on the books of the Company a capital account (a “Capital Account”), which shall be maintained and adjusted in accordance with the following provisions:

 

(a)To each Member's Capital Account there shall be credited such Member's Capital Contributions, such Member's distributive share of Profits and any items in the nature of income or gain that are specially allocated pursuant to this Agreement, and the amount of any Company liabilities assumed by such Member or that are secured by any property distributed to such Member. 

 

(b)To each Member's Capital Account there shall be debited the amount of cash and the Gross Asset Value of any property distributed to such Member pursuant to any provision of this Agreement, such Member's distributive share of Losses and any items in the nature of expenses or losses that are specially allocated pursuant to this Agreement, and the amount of any liabilities of such Member assumed by the Company or that are secured by any property contributed by such Member to the Company. 

 

(c)In the event all or a portion of an Interest is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Interest. 

 

(d)In determining the amount of any liability for purposes of subparagraphs (a) and (b), there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations. 


 

The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.7041(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Manager determines that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities that are secured by contributed or distributed property or that are assumed by the Company or any Member), are computed in order to comply with such Regulations, the Manager may make such modification, provided that it is not likely to have a material adverse effect on the amounts distributable to any Member pursuant to this Agreement upon the dissolution of the Company. The Manager also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the aggregate Capital Accounts of the Members and the amount of Company capital reflected on the Company's balance sheet, as computed for book purposes, in accordance with Regulations Section 1.7041(b)(2)(iv)(q) and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.7041 (b), provided that, to the extent that any such adjustment is inconsistent with other provisions of this Agreement and would have a material adverse effect on any Member, such adjustment shall require the consent of such Member.

 

4.9Profits and Losses 

 

After giving effect to the special allocations set forth below, Profits and Losses for any Allocation Year shall be allocated to the Members in a manner such that the Capital Account of each Member, immediately after making such allocation, is, as nearly as possible, equal (proportionately) to the distributions that would be made to such Member if (i) the Company were dissolved, its affairs wound up and its assets sold for cash in an amount equal to their Gross Asset Values, (ii) all Company liabilities were satisfied (limited, in the case of any nonrecourse liability, to the Gross Asset Values of the assets securing such liability), and (ii) the net assets of the Company were distributed in accordance with this Agreement to the Members, after subtracting for this purpose each Member's share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed immediately after the hypothetical sale of assets.

 

4.10Special Allocations 

 

The following special allocations shall be made in the following order:

 

(a)Minimum Gain Chargeback. Except as otherwise provided in Regulations Section 1.7042(f), notwithstanding any other provision of this Agreement, if there is a net decrease in Company Minimum Gain during any Allocation Year, each Member shall be specially allocated items of Company income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years) in an amount equal to such Member's share of the net decrease in Company Minimum Gain, determined in accordance with Regulations Section 1.7042(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections 1.7042(f)(6) and 1.7042(j)(2). This Section is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.7042(f) and shall be interpreted consistently therewith. 

 

(b)Member Minimum Gain Charqeback. Except as otherwise provided in Regulations Section 1.7042(i)(4), notwithstanding any other provision of this Agreement, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Allocation Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.7042(1)(5), shall be specially allocated items of Company income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years) in an amount equal to such Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.7042(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections 1.7042(i)(4) and 1.7042(j)(2). This Section is intended to comply with the minimum gain chargeback requirement in Regulations Section 1.7042(i)(4) and shall be interpreted consistently therewith. 

 

(c)Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Regulations Section 1.7041(b)(2)(ii)(d)(4), Section 1.7041(b)(2)\(i)(d) (5), or Section 1.7041(b)(2)(ii)(d)(6), items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Agreement have been tentatively made as if this Section were not in the Agreement. 


 

(d)Gross Income Allocation. In the event any Member has a deficit Capital Account at the end of any Allocation Year that is in excess of the sum of (i) the amount such Member is obligated to restore pursuant to any provision of this Agreement and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.7042(g)(1) and 1.7042(1)(5), each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section shall be made only if and to the extent that such Member would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Agreement have been made as if Section 4.11(c) and this Section 4.11(d) were not in this Agreement. 

 

(e)Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Allocation Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Regulations Section 1.7042(i)(1). 

 

(f)Nonrecourse Deductions. Nonrecourse Deductions for any Allocation Year shall be specially allocated among the Members in proportion to their capital contributions. 

 

(g)Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Section 743(b) is required pursuant to Regulations Section 1.7041(b)(2)(iv)(m)(2) or Section 1.7041(b)(2)\(iv)(m)(4) to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of its Interest, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Regulations Section 1.7041(b)(2)\(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event Regulations Section 1.7041(b)(2)(iv)(m)(4) applies. 

 

(h)Allocations Relating to Taxable Issuance of Company Interests. Any income, gain, loss, or deduction realized as a direct or indirect result of the issuance of an Interest by the Company to a Member (the “Issuance Items”) shall be allocated among the Members so that, to the extent possible, the net amount of such Issuance Items, together with all other allocations under this Agreement to each Member, shall be equal to the net amount that would have been allocated to each such Member if the Issuance Items had not been realized. 

 

4.11Loss Limitation 

 

Losses allocated pursuant hereto shall not exceed the maximum amount of Losses that can be allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Allocation Year. In the event some but not all of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses in this Agreement, the limitation set forth in this section shall be applied on a Member by Member basis and Losses not allocable to any Member as a result of such limitation shall be allocated to the other Members in accordance with the positive balances in such Member's Capital Accounts so as to allocate the maximum permissible Losses to each Member under Regulations Section 1.704-1(b)(2)(ii)(d).

 

4.12Other Allocation Rules 

 

(a)Profits, Losses, and any other items of income, gain, loss, or deduction shall be allocated to the Members pursuant to this Agreement as of the last day of each Fiscal Year, provided that Profits, Losses, and such other items shall also be allocated at such times as the Gross Asset Values of Company property are adjusted pursuant to subparagraph (ii) of the definition of “Gross Asset Value.” 

 

(b)For purposes of determining the Profits, Losses, or any other items allocable to any period, Profits, Losses, and any such other items shall be determined on a daily, monthly, or other basis, as determined by the Manager using any permissible method under Code Section 706 and the Regulations thereunder. 

 

(c)The Members are aware of the income tax consequences of the allocations made by this Agreement and hereby agree to be bound by the provisions of this Agreement in reporting their shares of Company income and loss for income tax purposes, except to the extent otherwise required by law. 

 

(d)Solely for purposes of determining a Member's proportionate share of the “excess nonrecourse liabilities” of the Company within the meaning of Regulations Section 1.7523(a)(3), the Members' interests in Company profits are in proportion to their capital contributions. 

 

(e)To the extent permitted by Regulations Section 1.7042(h)(3), the Manager shall endeavor to treat distributions of Net Income as having been made from the proceeds of a Nonrecourse Liability or a Member Nonrecourse Debt only to the extent that such distributions would cause or increase an Adjusted Capital Account Deficit for any Member. 


 

4.13Tax Allocations; CodeSection704(c) 

 

In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value (computed in accordance with subparagraph (i) of the definition of “Gross Asset Value” herein). In the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph (ii) of the definition of “Gross Asset Value”, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder. Any elections or other decisions relating to such allocations shall be made by the Manager in any manner that reasonably reflects the purpose and intention of this Agreement, provided that the Company shall elect to apply the allocation method selected pursuant to the Regulations under Section 704(c). Allocations pursuant to this Section are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account or share of Profits, Losses, other items, or distributions pursuant to any other provision of this Agreement. Except as otherwise provided in this Agreement, all items of Company income, gain, loss, deduction, and any other allocations not otherwise provided for shall be divided among the Members in the same proportions as they share Profits or Losses, as the case may be, for the Allocation Year.

 

ARTICLE V

WITHDRAWALS AND DISTRIBUTIONS

 

5.01Withdrawals 

 

(a)A Member may withdraw from the Company in accordance with the provisions of this Agreement or make a withdrawal from its Capital Account upon notice to the Manager(s). Upon withdrawal by a Member, the Manager shall have a reasonable period of time in which to distribute the Member's final capital account. All Distributions of cash and other Company assets that are provided for in this Agreement shall be made only to Persons who, according to the books and records of the Company, are holders of records of Interest in the Company on the date determined by the Manager as of which the Members are entitled to any such distributions. 

 

(b)The Manager may require a Member to withdraw all or any amount of the value of the Member's Capital Account if the Manager reasonably deems it necessary to do so to comply with anti-money laundering or other laws and regulations applicable to the Company, the Manager, the Members, or any of the Company's service providers, or to avoid a material adverse impact on the Company or the other investors in the Company. In such event, the Manager shall give not less than five days' written notice to the Member specifying the date of withdrawal. As soon as practicable thereafter, the withdrawing Member shall receive the balance of the value in such Member's Capital Account, subject to all appropriate adjustments pursuant to the provisions of this Agreement. 

 

5.02Distributions of Net Cash from Operations 

 

Except as provided herein, the Manager shall distribute any Net Cash from Operations as of the end of each calendar quarter to the Members within 30 days after the end of the quarter equally to the Class A Preferred Units and the Class A Common Units, and then to each Unit within each Class, prorata as to the number of Units owned of each Class.

 

5.03Distributions of Net Cash from   Capital Events 

 

(a)Except as provided herein, the Manager shall distribute any Net Cash from Capital Events as of the end of each calendar quarter to the Members within 30 days after the end of the quarter equally to the Class A Preferred Units and the Class A Common Units, and then to each Unit within each Class, pro-rata as to the number of Units owned of each Class. 

 

(b)Notwithstanding any provision to the contrary in this Agreement, the Company, and the Manager on behalf of the Company, shall not make a distribution to any Member on account of the Member's interest in the Company if such distribution would violate the Act or other applicable law. 

 

(c)Tax Distributions. Subject to the last sentence of this Section, the Manager shall use its commercially reasonable efforts to cause the Company to distribute, within 100 days after the end of each Fiscal Year, an amount of cash, calculated in accordance with the next sentence, to each Member equal to such Member's tax percentage of the Company's net taxable income and gain allocated to such Member in respect of such Fiscal Year. The amount of any tax distribution will be calculated by the Manager in its sole discretion using the highest blended U.S. federal and state income tax rates applicable to the Members and to capital gains and ordinary income, as applicable. All Tax Distributions will be made to the Members in proportion to allocations of taxable income for the applicable calendar year, which in turn are based on the Manager's calculations. Any amounts to be distributed to a Member as a Tax Distribution shall be reduced by any amount of cash  


already distributed to the Member, and any Tax Distribution actually distributed to a Member shall be treated as an advance against, and shall reduce the amount of, subsequent distributions of Net Cash pursuant to this Section.

 

(d)In-Kind Distribution. If any assets of the Company are distributed to the Members in kind, such assets shall be valued based on the Fair Value thereof on the date of distribution. The Fair Value of such assets shall be determined by the Manager. The amount by which the Fair Value of any property to be distributed in kind to the Members exceeds or is less than the basis of such property shall, to the extent not otherwise recognized by the Company, be taken into account in computing gain or loss of the Company for purposes of crediting or charging the Capital Accounts of the Members. At a Member's request, if assets are to be distributed in-kind, the Company may, in the sole discretion of the Manager and at the expense of the Company, form a liquidating trust or other entity to hold such assets on behalf of such Member, and distribute the net proceeds from the sale or other disposition of such assets to such Member from time to time as they become available. 

 

(e)Suspension of Payment of Distribution and Withdrawal Proceeds for Anti-Money Laundering Purposes- The Manager, by written notice to any Member, may suspend payment of any distribution or withdrawal proceeds to such Member if the Manager reasonably deems it necessary to do so to comply with anti-money laundering laws and regulations applicable to the Company, the Manager, any of the Managing Members or any of the Company's service providers. 

 

(f)Withholding Obligations. To the extent the Company is required by law to withhold or to make tax payments on behalf of or as to any Member (“Tax Payments”), the Company may withhold such amounts and make such Tax Payments as may be required. All such Tax 

 

Payments shall be treated for all other purposes of this Agreement as having been paid to such Member (whether before or upon liquidation) in respect of the amount of such Tax Payments. Each Member hereby agrees to (a) indemnify and hold harmless the Company and the Manager from and against any liability as to Tax Payments made on behalf of or as to such Member, and (b) promptly give the Company any certification or affidavit that the Company may request in connection with this Section.

 

(g)Return of Distributions. For up to three years after the final dissolution of the Company, to the extent needed to fund Company liabilities, including the Company's indemnity obligations under this Agreement, in the event the Company does not have sufficient cash or unfunded Capital Commitments to satisfy those obligations, the Company may require the Members to return any distributions previously made to them; provided, however, that in no event will a Member be obligated to return an amount greater than 25% of the lesser of (1) that Member's total Capital Commitment and (ii) all distributions previously made to that Member. 

 

ARTICLE VI

MANAGEMENT; OFFICERS; MEETINGS; INDEMNIFICATION

 

6.1Management Rights 

 

(a)Members. The Company shall be Managed by the Manager(s), who shall have all power and authority to solely and exclusively manage and control the business and affairs of the Company. 

 

(b)Meetings. The Members may, but need not, hold meetings from time to time at such time 

and at such place as shall be determined by the Manager(s).

 

(c)Quonum and Voting. At all meetings of the Members a majority of the total number of Members (whether present in person or by telephone or other means of telecommunication) shall constitute a quorum for the transaction of business and, unless otherwise specified herein, or otherwise provided by law, the act of the majority of the Members present at a meeting at which there is a quorum shall be the act of the Members. 

 

(d)Action without Meeting. Unless otherwise specified herein, any action required or permitted to be taken at a meeting of the Members or of any committee thereof, may be taken without a meeting, if al! members of the Members or such committee thereof, consent in writing to such action. 


 

6.2Officers 

 

(a)Designation and Appointment. The Company shall have such officers as the Members shall designate and appoint from time to time in their sole discretion (the “Officers”). Any number of offices may be held by the same person. Officers need not be residents of the State of Delaware or Members. Any Officers so designated shall have such authority and perform such duties as the Members may, from time to time, delegate to them by written resolution of the Members. Each Officer shall hold office until he or she shall resign or shall have been removed in the manner hereinafter provided. The salaries or other compensation, if any, of the Officers of the Company shall be fixed from time to time by the Members. 

 

(b)Resignation/Removal. An Officer may resign at any time by an instrument in writing delivered to the Members. Any Officer may be removed as such, either with or without cause, at any time by the Members. 

 

(c)Duties of Officers Generally. The Officers, in the performance of their duties as such, shall owe to the Company duties of loyalty and due care of the type owed by the officers of a corporation to such corporation and its stockholders under the laws of the State of Delaware. 

 

6.3Reimbursement 

 

The Members and Officers of the Company shall be entitled to be reimbursed for out-of-pocket costs

and expenses incurred in the course of their service hereunder.

 

6.4Conflicts of Interest 

 

Subject to the other express provisions of this Agreement, the Members and each of the Officers of the Company, at any time and from time to time, may engage in and possess interests in other business ventures of any and every type and description, independently or with others, including ones in competition with the Company, with no obligation to offer to the Company or any other Member or Officer of the Company the right to participate therein. The Company may transact business with such Member or any Officer or Affiliate thereof, provided the terms of those transactions are no less favorable than those the Company could obtain from unrelated third parties.

 

6.5Indemnity of Officers and Members 

 

Any Officer of the Company and the Members, their Affiliates, or any partner, member, shareholder, director, officer, venturer, proprietor, trustee, employee, agent and/or legal representative of any Member or its Affiliates will not be liable or accountable, in damages or otherwise, to the Company or to any other Officer of the Company or any other Member for any error of judgment or for any mistake of fact or law or for anything that it may do or refrain from doing hereafter in connection with the business and affairs of the Company, except in the case of willful misconduct. The Company shall indemnify and hold harmless any Officers, employees and agents of the Company, the Members, any Affiliates of the Members, or any of their partners, members, shareholders, managers, officers, venturers, proprietors, trustees, employees, agents and/or legal representatives (collectively, “Indemnified Persons”) from and against any and all loss, cost, damage, expense (including without limitation fees and expenses of attorneys) or liability by reason of any acts taken or not taken by the Indemnified Persons for the Company (INCLUDING ANY LOSS, DAMAGE, EXPENSE, OR LIABILITY CAUSED BY OR ATTRIBUTABLE TO THE ORDINARY OR GROSS NEGLIGENCE OF THE INDEMNIFIED PERSON AND FOR ANY ACTION FOR WHICH THE INDEMNIFIED PERSON MAY INCUR STRICT LIABILITY), except in the case of willful misconduct. The Company shall advance, before the final disposition of any court or administrative proceeding, expenses incurred by an Indemnified Person (a) who was, is or is threatened to be made a named defendant or respondent in a court or administrative proceeding or (b) in connection with that Person's appearance as a witness or other participation in a court or administrative proceeding involving or affecting the Company or any affiliated entity at a time when that Person is not a named defendant or respondent in the court or administrative proceeding. The provisions of this Section 6.06 shall be enforceable to the fullest extent permitted by the Act, as it may be hereafter amended (but, in the case of any amendment, only to the extent that such amendment permits broader indemnification rights than the Act allowed before such amendment). The Company's obligations under this Section 6.06 shall be limited to the assets of the Company, and the Members shall not be-required to make any Capital Contribution in respect thereof.


 

 

ARTICLE VII

BOOKS, RECORDS AND BANK ACCOUNTS

 

7.1Maintenance of Books 

 

The Company shall keep books and records of accounts and shall keep minutes of the proceedings of its Members. The books of account for the Company shall be maintained in accordance with the tenants of this Agreement.

 

7.2Accounts 

 

The Members shall establish and maintain one or more separate bank and investment accounts and arrangements for Company funds in the Company's name with financial institutions and firms that the Members determine.

 

ARTICLE VIII

DISSOLUTION, LIQUIDATION, AND TERMINATION

 

8.1Dissolution 

 

The Company shall dissolve and its affairs shall be wound up on the first to occur of the

following :

 

(a)the unanimous written consent of the Members; 

(b)the expiration of the period (if any) fixed for the duration of the Company set forth in the Certificate; and 

(c)entry of a decree of judicial dissolution of the Company under 518-802 of the Act.  

 

8.2Liquidation and Termination 

 

On dissolution of the Company, the Person appointed by the Members shall be the liquidator. The liquidator shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Act. The costs of liquidation shall be borne as a Company expense. Until final distribution, the liquidator shall continue to operate the Company properties with all of the power and authority of the Members. The steps to be accomplished by the liquidator shall be as follows;

 

(a) as promptly as possible after dissolution and again after final liquidation, the liquidators shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company's assets, liabilities, and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable;

 

(b) the liquidator shall cause the notice to be mailed to each known creditor of and claimant against the Company in accordance with the Certificate;

 

(c) the liquidator shall pay, satisfy or discharge from Company funds all of the debts, liabilities and obligations of the Company (including, without limitation, all expenses incurred in liquidation and any advances described in Section 4.04) or otherwise make adequate provision for payment and discharge thereof (including, without limitation, the establishment of a cash escrow fund for contingent liabilities in such amount and for such term as the liquidator may reasonably determine); and

 

(d) all remaining assets of the Company shall be distributed to the Members ih accordance with the Distributions of Net Cash from Operations here in.

 

All distributions in kind to the Members shall be made subject to the liability of each distributee for costs, expenses, and liabilities theretofore incurred or for which the Company has committed prior to the date of termination, and those costs, expenses, and liabilities shall be allocated to the distributee pursuant to this Section. The distribution of cash or property to the Members in accordance with this Section constitutes a complete return to the Members of their Capital Contributions and a complete distribution to the Members of their Membership Interests and all the Company's property.

 

8.3Certificate of Cancellation 

 

On completion of the distribution of the Company's assets as provided herein, the Company is terminated, and the Person appointed by the Members (or such other Person or Persons as the Act may require or permit) shall file a certificate of cancellation with the Secretary of State of the State of Delaware, cancel any other filings made pursuant to Section 2.05, and take such other actions as may be necessary to terminate the Company.


 

ARTICLE IX

GENERAL PROVISIONS

 

9.1Offset 

 

Whenever the Company is to pay any sum to the Members, any amounts that the Members owe the Company may be deducted from that sum before payment.

 

9.2Notices 

 

Except as expressly set forth to the contrary in this Agreement or unless otherwise waived by the Members in their sole discretion, all notices, requests, or consents provided for or permitted to be given under this Agreement must be in writing and must be given either by depositing that writing in the United States mail, addressed to the recipient, postage paid, and registered or certified with return receipt requested, or by delivering that writing to the recipient in person, by courier, or by facsimile or electronic transmission; and, except as otherwise provided in this Agreement, a notice, request, or consent given under this Agreement is effective on receipt by the Person to receive it. All notices, requests, and consents to be sent to the Members must be sent to or made at such address as such Member may specify. Whenever any notice is required to be given by law, the Certificate or this Agreement, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.

 

9.3Entire Agreement 

 

This Agreement, together with the Certificate, constitutes the entire agreement of the Members relating to the Company and supersedes all prior contracts or agreements with respect to the Company, whether oral or written.

 

9.4Effect of Waiver or Consent 

 

A waiver or consent, express or implied, to or of any breach or default by any Person in the performance by that Person of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that Person of the same or any other obligations of that Person with respect to the Company. Failure on the part of a Person to complain of any act of any Person or to declare any Person in default with respect to the Company, irrespective of how long that failure continues, docs not constitute a waiver by that Person of its rights with respect to that default until the applicable statute-of-limitations period has run.

 

9.5Amendment or Modification 

 

This Agreement may be amended or modified from time to time only by a written instrument executed by the unanimous consent of the Members.

 

9.6Binding Effect: No Third Path Beneficiaries 

 

This Agreement is binding on and inures to the benefit of the Members and their respective successors and assigns. There are no third-party beneficiaries of this Agreement.

 

9.07Governing Law: Severability 

 

THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION.

 

In the event of a direct conflict between the provisions of this Agreement and (a) any provision of the Certificate, or (b) any mandatory provision of the Act or (to the extent such statutes are incorporated into the Act) the Delaware General Corporation Law, the applicable provision of the Certificate, the Act or the Delaware General Corporation Law shall control. If any provision of this Agreement or the application thereof to any Person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other Persons or circumstances is not affected thereby and that provision shall be enforced to the greatest extent permitted by law.

 

9.08Counterparts 

 

This Agreement may be executed in any number of counterparts with the same effect as if all signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument.


ARTICLE X

VOTING

 

10.1Members Voting Rights. 

 

The Class A Preferred Units shall have ten (10) votes per Unit and the Class A Non-Voting Common

Units shall have zero (0) votes per Unit.

 

ARTICLE XI

MANAGEMENT

 

11.1Manager(s) 

 

Charles Bongiovanni and Vincent Guarnieri are hereby designated to serve as managers of the Company (the “Managers”) commencing on the date hereof. The Managers may, but need not, be members of the Company.

 

11.2Powers of the Managers; Attorneys-in-Fact. 

 

Except for instances in which the vote, consent or approval of the Member is expressly required by the Act or this Agreement, the Managers will have full, complete and exclusive authority, power and discretion to manage and control the business, property and affairs of the Company, to make all decisions regarding those matters and to perform any and all other acts and activities customary or incident to the management of the Company's business, properties and affairs, Notwithstanding the foregoing, the Managers may not, without the consent of the Member (i) do any act in contravention of this Agreement, (ii) do any act which would make it impossible to carry on the ordinary business of the Company, (iii) confess a judgment against the Company, or (iv) possess property of the Company or assign the rights of the Company in specific property for other than a Company- related purpose.

 

11.3Removal 

 

The Managers may be removed at any time, with or without cause, by the written consent of the Member. Upon the removal of the Managers, the Member shall appoint successor Managers who will succeed to all of the rights and obligations of the Managers hereunder.


 

ARTICLE XII

ADMISSION OF NEW MEMBERS

 

12.1Admission of New or Substitute Members 

 

No person may become a member of the Company unless and until he, she or it has been approved in writing by the Managers and has executed and delivered to the Company a copy of this Agreement. Upon such admission, a new Exhibit A shall be prepared by the Manager and circulated to the Member(s).

 

In Witness whereof, the Members do hereby execute this Agreement below.

 

 

MEMBERS:

 

 


 

EXHIBIT A

 

OWNERSHIP INTERESTS

 

March 31, 2023

 

 

Member

Class A Common Units

Preferred Class A

Bongenuity, LLC

26%

520,000

6G Holdings, LLC

10%

200,000

VinPossible, LLC

26%

520,000

JMS Equity, LLC

21%

420,000

Undistributed

17%

340,000

 

 

 

MAJESTIC FUNDING PARTNERS, LLC

SUBSCRIPTION AGREEMENT

 

 

THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. THIS INVESTMENT IS SUITABLE ONLY FOR PERSONS WHO CAN BEAR THE ECONOMIC RISK FOR AN INDEFINITE PERIOD OF TIME AND WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. FURTHERMORE, INVESTORS MUST UNDERSTAND THAT SUCH INVESTMENT IS ILLIQUID AND IS EXPECTED TO CONTINUE TO BE ILLIQUID FOR AN INDEFINITE PERIOD OF TIME. NO PUBLIC MARKET CURRENTLY EXISTS FOR THE SECURITIES.

 

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE-SKY LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND STATE SECURITIES OR BLUE-SKY LAWS. ALTHOUGH AN OFFERING CIRCULAR HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), THAT OFFERING CIRCULAR DOES NOT INCLUDE THE SAME INFORMATION THAT WOULD BE INCLUDED IN A REGISTRATION STATEMENT UNDER THE ACT. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON THE MERITS OF THIS OFFERING OR THE ADEQUACY OR ACCURACY OF THE SUBSCRIPTION AGREEMENT OR ANY OTHER MATERIALS OR INFORMATION MADE AVAILABLE TO SUBSCRIBER IN CONNECTION WITH THIS OFFERING OVER THE WEB-BASED PLATFORM MAINTAINED BY THE COMPANY (THE “PLATFORM”). ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

INVESTORS WHO ARE NOT “ACCREDITED INVESTORS” (AS THAT TERM IS DEFINED IN SECTION 501 OF REGULATION D PROMULGATED UNDER THE ACT) ARE SUBJECT TO LIMITATIONS ON THE AMOUNT THEY MAY INVEST, AS SET OUT IN THE “STATE LAW EXEMPTION AND PURCHASE RESTRICTIONS” SECTION OF THE OFFERING CIRCULAR. THE COMPANY IS RELYING ON THE REPRESENTATIONS AND WARRANTIES SET FORTH BY EACH SUBSCRIBER IN THIS SUBSCRIPTION AGREEMENT AND THE OTHER INFORMATION PROVIDED BY SUBSCRIBER IN CONNECTION WITH THIS OFFERING TO DETERMINE THE APPLICABILITY TO THIS OFFERING OF EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT.

 

PROSPECTIVE INVESTORS MAY NOT TREAT THE CONTENTS OF THE SUBSCRIPTION AGREEMENT, THE OFFERING CIRCULAR OR ANY OF THE OTHER MATERIALS AVAILABLE ON THE PLATFORM (COLLECTIVELY, THE “OFFERING MATERIALS”) OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM THE COMPANY OR ANY OF ITS OFFICERS, EMPLOYEES OR AGENTS (INCLUDING “TESTING THE WATERS” MATERIALS, IF ANY) AS INVESTMENT, LEGAL OR TAX ADVICE. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND THE RISKS INVOLVED. EACH PROSPECTIVE INVESTOR SHOULD CONSULT THE INVESTOR’S OWN COUNSEL, ACCOUNTANT AND OTHER PROFESSIONAL ADVISOR AS TO INVESTMENT, LEGAL, TAX AND OTHER RELATED MATTERS CONCERNING THE INVESTOR’S PROPOSED INVESTMENT.

 

THE OFFERING MATERIALS MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

 

THE COMPANY MAY NOT BE OFFERING THE SECURITIES IN EVERY STATE. THE OFFERING MATERIALS DO NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR JURISDICTION IN WHICH THE SECURITIES ARE NOT BEING OFFERED OR IN ANY STATE OR JURISDICTION IN WHICH AN OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO.

 

THE INFORMATION PRESENTED IN THE OFFERING MATERIALS WAS PREPARED BY THE COMPANY SOLELY FOR THE USE BY PROSPECTIVE INVESTORS IN CONNECTION WITH THIS OFFERING. NOTHING CONTAINED IN THE OFFERING MATERIALS IS OR SHOULD BE RELIED UPON AS A PROMISE OR REPRESENTATION AS TO THE FUTURE PERFORMANCE OF THE COMPANY.


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THE COMPANY RESERVES THE RIGHT IN ITS SOLE DISCRETION AND FOR ANY REASON WHATSOEVER TO MODIFY, AMEND AND/OR WITHDRAW ALL OR A PORTION OF THE OFFERING AND/OR ACCEPT OR REJECT IN WHOLE OR IN PART ANY PROSPECTIVE INVESTMENT IN THE SECURITIES OR TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE AMOUNT OF SECURITIES SUCH INVESTOR DESIRES TO PURCHASE. EXCEPT AS OTHERWISE INDICATED, THE OFFERING MATERIALS SPEAK AS OF THEIR DATE. NEITHER THE DELIVERY NOR THE PURCHASE OF THE SECURITIES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THAT DATE.


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TO MAJESTIC FUNDING PARTNERS, LLC OR

ITS DULY AUTHORIZED ATTORNEY-IN-FACT

460 S Greenfield Rd

Suite 5

Mesa, AZ 85206

 

1.SUBSCRIPTION. 

 

(a)  The undersigned (whether one or more, hereafter referred to as the “Subscriber”) hereby irrevocably subscribes for and agrees to purchase the number of Class A Common Units (the “Securities”) of Majestic Funding Partners, LLC, a Delaware limited liability company (the “Company”), at a purchase price of $10.00 per Unit (the “Per Unit Price”), with a minimum purchase of five hundred dollars ($500.00) which is fifty (50) Units or higher (“Minimum Purchase”), subject to the discretion of the Company and upon the terms and conditions set forth herein. The rights of the Class A Common Unit(s) are as set forth in the Certificate of Formation and Operating Agreement of the Company, each included in the Exhibits to the offering circular of the Company filed with the SEC (the “Offering Circular”). 

 

(b) Subscriber understands that the Securities are being offered pursuant to an offering statement dated October 15, 2023 (the “Offering Statement”), a copy of which has been filed with the SEC. By executing this Subscription Agreement, Subscriber acknowledges that Subscriber has received this Subscription Agreement, copies of the Offering Circular, including the Exhibits thereto, and any other Offering Materials or other information required by the Subscriber to make an investment decision.  

 

(c)  Subscriber’s subscription may be accepted or rejected in whole or in part, at any time prior to a Closing Date (as hereinafter defined), by the Company, in its sole discretion. In addition, the Company, in its sole discretion, may allocate to Subscriber only a portion of the number of Securities for which the Subscriber has subscribed. The Company will notify Subscriber whether this subscription is accepted (whether in whole or in part) or rejected. If Subscriber’s subscription is rejected, Subscriber’s payment (or portion thereof if partially rejected) will be returned to Subscriber without interest and all of Subscriber’s obligations hereunder relating to the rejected portion of the subscription shall terminate. 

 

(d)  The aggregate number of Securities sold shall not exceed 4,500,000 Class A Common Unit(s) (the “Maximum Number of Units”).  The Company may accept subscriptions until ___________, 2024, unless extended by the Company, in its sole discretion, in accordance with applicable SEC regulations or until the Maximum Number of Units under the Offering are sold, whichever shall first occur (the “Termination Date”). The Company may elect at any time to close all or any portion of this offering, on various dates at or prior to the Termination Date (each a “Closing Date”). 

 

(e) This Agreement and the covenants made herein shall survive the closing of the purchase of the Securities, provided, however, that in the event of rejection of this subscription in its entirety, or in the event the sale of the Securities (or any portion thereof) is not consummated for any reason, this Subscription Agreement shall have no force or effect, except for Section 5 hereof, which section shall survive termination of this Subscription Agreement and shall remain in full force and effect. 

 

(f) The terms of this Subscription Agreement shall be binding upon Subscriber and its transferees, heirs, successors and assigns (individually and collectively, the “Transferee”); provided, however, that for any such transfer to be deemed effective, the Transferee shall have executed and delivered to the Company, in advance, an instrument in a form acceptable to the Company, in its sole discretion, pursuant to which the proposed Transferee shall acknowledge, agree to, and be bound by the representations and warranties of Subscriber and the terms of this Subscription Agreement, and the Company consents to the transfer in its sole discretion. 

 

(g)  By agreeing to these provisions, Subscribers will not be deemed to have waived their rights under the federal securities laws and the rules and regulations thereunder. 

 

2.PURCHASE PROCEDURE. 

 

(a)  Payment. The purchase price for the Securities shall be paid prior to the execution and delivery to the Company of the signature page of this Subscription Agreement as an e-signature. Subscriber shall deliver an e-signed copy of this Subscription Agreement, after payment for the aggregate purchase price of the Securities by any means approved by the Company, including but not limited to a check, ACH electronic transfer, or by wire transfer to an account designated by the Company and as set forth in the Offering Circular. 


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(b) Deposit Arrangements. Payment for the Securities must be received by Colonial Capital, LLC from Subscriber by ACH electronic transfer, wire transfer of immediately available funds, check or other means approved by the Company, in the amount as set forth on the signature page hereto. Subscriber shall receive notice and evidence of the digital entry of the number of the Securities owned by Subscriber reflected on the books and records of the Company and verified by Colonial Capital, LLC, which books and records shall bear a notation that the Securities were sold in reliance upon Regulation A. 

 

3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 

 

The Company represents and warrants to Subscriber that the following are true and complete in all material respects as of the date of each Closing Date, except as otherwise indicated. For purposes of this Subscription Agreement, an individual shall be deemed to have “knowledge” of a particular fact or other matter if such individual is actually aware of such fact. The Company will be deemed to have “knowledge” of a particular fact or other matter if one of the Company’s current managers or officers has, or at any time had, actual knowledge of such fact or other matter.

 

(a) Organization and Standing. The Company is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite power and authority to own and operate its properties and assets, to execute and deliver this Subscription Agreement, and any other agreements or instruments required hereunder. The Company is duly qualified and authorized to conduct business and is in good standing as a foreign entity in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business. 

 

(b) Issuance of the Securities. The issuance, sale, and delivery of the Securities in accordance with this Subscription Agreement have been duly authorized by all necessary corporate action on the part of the Company. The Securities, when so issued, sold, and delivered against payment therefor in accordance with the provisions of this Subscription Agreement, will be duly and validly issued, fully paid and non-assessable. 

 

(c) Authority for Agreement. The execution and delivery by the Company of this Subscription Agreement and the consummation of the transactions contemplated hereby (including the issuance, sale and delivery of the Securities) are within the Company’s powers and have been duly authorized by all necessary corporate action on the part of the Company. Upon full execution hereof, this Subscription Agreement shall constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies and (iii) with respect to provisions relating to indemnification and contribution, as limited by considerations of public policy and by federal or state securities laws. 

 

(d) No Filings. Assuming the accuracy of the Subscriber’s representations and warranties set forth in Section 4 hereof, no order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or filing or registration with, any governmental body, agency or official is required by or with respect to the Company in connection with the execution, delivery and performance by the Company of this Subscription Agreement except (i) for such filings as may be required under Regulation A or under any applicable state securities laws, (ii) for such other filings and approvals as have been made or obtained, or (iii) where the failure to obtain any such order, license, consent, authorization, approval or exemption or give any such notice or make any filing or registration would have a material adverse effect on the ability of the Company to perform its obligations hereunder. 

 

(e) Capitalization. The authorized and outstanding securities of the Company immediately prior to the initial investment in the Securities pursuant to this Offering is as set forth in the Offering Circular. Except as set forth in the Offering Circular, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), or agreements of any kind (oral or written) for the purchase or acquisition from the Company of any of its securities. 

 

(f) Financial Statements. Complete copies of the Company’s consolidated financial statements consisting of the balance sheets of the Company as of June 30, 2021, and the related statements of operations, shareholders’ equity and cash flows for the period then ended (the “Financial Statements”) have been made available to the Subscriber and appear in the Offering Circular. The Financial Statements are based on the books and records of the Company and fairly present, in all material respects, the consolidated financial condition of the Company as of the respective dates they were prepared and the results of the operations and cash flows of the Company for the periods indicated. Fruci & Associates, which has audited the Financial Statements, is an independent accounting firm within the rules and regulations adopted by the SEC. 


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(g) Proceeds. The Company shall use the proceeds from the issuance and sale of the Securities as set forth in the Offering Circular. 

 

(h) Litigation. There is no pending action, suit, proceeding, arbitration, mediation, complaint, claim, charge or investigation before any court, arbitrator, mediator or governmental body, or to the Company’s knowledge, currently threatened in writing (a) against the Company or (b) against any consultant, officer, manager, director or key employee of the Company arising out of his or her consulting, employment or board relationship with the Company or that could otherwise materially impact the Company. 

 

4.REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER 

 

By executing this Subscription Agreement, Subscriber (and, if Subscriber is purchasing the Securities subscribed for hereby in a fiduciary capacity, the person or persons for whom Subscriber is so purchasing) represents and warrants that the following are true and complete in all material respects as of each Closing Date:

 

(a)  Requisite Power and Authority. Subscriber has all necessary power and authority under all applicable provisions of law to execute and deliver this Subscription Agreement and other agreements required hereunder and to carry out the provisions thereof. All action on Subscriber’s part required for the lawful execution and delivery of this Subscription Agreement and other agreements required hereunder have been or will be effectively taken prior to the applicable Closing Date. Upon their execution and delivery, this Subscription Agreement and other agreements required hereunder will be valid and binding obligations of Subscriber, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (b) as limited by general principles of equity that restrict the availability of equitable remedies. 

 

(b)  Investment Representations. The Securities subscribed to pursuant to this Subscription Agreement will be purchased for Subscriber’s own account and will be held for investment and not with the view to, or for resale in connection with, any distribution thereof. By such representation Subscriber means that Subscriber intends to hold the Securities for investment without the intent of participating directly or indirectly in a distribution thereof, and that Subscriber does not intend to dispose of all or any part of the Securities unless Subscriber determines that some change in Subscriber’s personal circumstances, by reason of some intervening event not now in contemplation, has occurred which makes such disposition necessary. 

 

Subscriber understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). Subscriber also understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Subscriber’s representations contained in this Subscription Agreement.

 

Subscriber agrees that Subscriber will not in any way transfer or dispose of any of the Securities unless either the Securities are covered by an effective registration statement under the Securities Act, or the transfer or disposition is exempt from the registration requirements of the Securities Act. Subscriber further agrees that Subscriber will not in any way transfer or dispose of any of the Securities in violation of any other applicable securities laws and regulations, or in violation of any other applicable law.

 

Subscriber hereby agrees that the Securities shall be transferable only on the books of the Company, and that no transfer shall be made on the books of the Company and no attempted transfer shall be effective unless and until the request for transfer is accompanied by an opinion of counsel of the Company, or an opinion of counsel for Subscriber which is acceptable to the Company, in their reasonable discretion, to the effect that neither the sale nor the proposed transfer results in a violation of the Securities Act, any other applicable securities laws and regulations, or any other applicable law of which said counsel is aware.  Subscriber hereby acknowledges that the Company is under no obligation to assist Subscriber financially or otherwise in registering the Securities under the Securities Act or any other applicable securities laws and regulations, or in obtaining said opinion of counsel, and Subscriber agrees to bear the entire cost of obtaining any such opinion. Subscriber agrees that a legend in substantially the following form may be placed on any certificate or certificates delivered to Subscriber or any substitutes therefor:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE FEDERAL AND STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE FEDERAL AND STATE SECURITIES LAWS.  THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT IN A TRANSACTION WHICH IS REGISTERED UNDER, EXEMPT FROM, OR OTHERWISE IN COMPLIANCE WITH THE FEDERAL AND STATE SECURITIES LAWS, AS TO WHICH THE ISSUER HAS RECEIVED SUCH ASSURANCES AS THE ISSUER MAY REQUEST, WHICH MAY INCLUDE, A SATISFACTORY OPINION OF ITS COUNSEL.


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(c)  Illiquidity and Continued Economic Risk.  Subscriber acknowledges and agrees that there is no ready public market for the Securities and that there is no guarantee that a market for their resale will ever exist.  Subscriber must bear the economic risk of this investment indefinitely and the Company has no obligation to list the Securities on any market or take any steps (including registration under the Securities Act or the Securities Exchange Act of 1934, as amended) with respect to facilitating trading or resale of the Securities. Subscriber acknowledges that Subscriber is able to bear the economic risk of losing Subscriber’s entire investment in the Securities.  Subscriber also understands that an investment in the Company involves significant risks and has taken full cognizance of and understands all of the risk factors relating to the purchase of Securities. 

 

(d)  Unitholder Information. Within five (5) days after receipt of a request from the Company, the Subscriber hereby agrees to provide such information with respect to its status as a unitholder (or potential shareholder) and to execute and deliver such documents as may reasonably be necessary to comply with any and all laws and regulations to which the Company is or may become subject. Subscriber further agrees that in the event it transfers any Securities, in addition to any other requirements, restrictions, or provisions hereunder, Subscriber will require the Transferee of such Securities to agree to provide such information to the Company as a condition of such transfer. 

 

(e) Company Information. Subscriber understands that the Company is subject to all the risks that apply to early-stage companies, whether or not those risks are explicitly set out in the Offering Circular. The Subscriber has had an opportunity to discuss the Company’s business, management and financial affairs with managers and officers of the Company and has had the opportunity to review the Company’s operations and facilities. Subscriber has also had the opportunity to ask questions of and receive answers from the Company and its management regarding the terms and conditions of this investment. Subscriber acknowledges that except as set forth herein, no representations or warranties have been made to Subscriber, or to Subscriber’s advisors or representative, by the Company or others with respect to the business or prospects of the Company or its financial condition. 

 

(f) Valuation. The Subscriber acknowledges that the price of the Securities was set by the Company on the basis of the Company’s internal valuation and no warranties are made as to value. The Subscriber further acknowledges that future offerings of Securities may be made at lower valuations, with the result that the Subscriber’s investment will bear a lower valuation. 

 

(g) Domicile. The Subscriber maintains Subscriber’s domicile (and is not a transient or temporary resident) at the address shown on the signature page hereto. 

 

(h) No Brokerage Fees. There are no claims for brokerage commission, finders’ fees, or similar compensation in connection with the transactions contemplated by this Subscription Agreement or related documents based on any arrangement or agreement binding upon Subscriber. The undersigned will indemnify and hold the Company harmless against any liability, loss, or expense (including, without limitation, reasonable attorneys' fees, and out-of-pocket expenses) arising in connection with any such claim. 

 

(i) Foreign Investors. If Subscriber is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Subscriber shall immediately notify the Company, and Subscriber hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Subscription Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Securities. Subscriber’s subscription and payment for and continued beneficial ownership of the Securities will not violate any applicable securities or other laws of the Subscriber’s jurisdiction. 

 

5.INDEMNITY.  

 

The representations, warranties and covenants made by the Subscriber herein shall survive the closing of the transactions contemplated by this Subscription Agreement. The Subscriber agrees to indemnify and hold harmless the Company and its respective officers, managers and affiliates, and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all reasonable attorneys’ fees, including attorneys’ fees on appeal) and expenses reasonably incurred in investigating, preparing or defending against any false representation or warranty or breach of failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or in any other document furnished by the Subscriber to any of the foregoing in connection with this transaction.


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6.GOVERNING LAW; JURISDICTION.  

 

This Subscription Agreement shall be governed and construed in accordance with the laws of the State of Delaware.

 

EXCEPT FOR MATTERS OR ACTIONS ARISING UNDER THE SECURITIES ACT OF 1933 OR THE EXCHANGE ACT OF 1934, SUBSCRIBER AND THE COMPANY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE STATE OF DELAWARE AND AGREE THAT ANY ACTION OR PROCEEDING RELATING TO THIS SUBSCRIPTION AGREEMENT MAY BE LITIGATED IN SUCH DELAWARE COURTS. SUBSCRIBER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS SUBSCRIPTION AGREEMENT. EACH OF SUBSCRIBER AND THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS FROM ANY OF THE AFOREMENTIONED COURTS IN THE MANNER AND TO THE ADDRESSES SPECIFIED IN THIS SUBSCRIPTION AGREEMENT.

 

7.DIGITAL SIGNATURES; ELECTRONIC COMMUNICATION. 

 

Digital (“electronic”) signatures, often referred to as an “e-signature,” enable paperless contracts and help speed up business transactions. The 2001 E-Sign Act was meant to ease the adoption of electronic signatures.

 

You may execute this Subscription Agreement by providing one of the following: (i) your original, scanned, or faxed signature; or (ii) your electronic signature, as prescribed in the bulleted paragraphs below.

 

·The mechanics of the electronic signature requested herein include your execution of this Subscription Agreement and other governing agreements (such as LLC or operating agreements, certificates of formation, resolutions, etc.) for the Company in a single signature block.  By typing in your name, with the underlying software recording your IP address, your browser identification, the timestamp, and a security hash within an SSL encrypted environment, you will have accepted and agreed, without reservation, to all of the terms and conditions contained within this Subscription Agreement and other governing agreements. Your electronically signed Agreements will be stored by the Company in such a manner that the Company can access them at any time. 

 

·You hereby consent and agree that the electronic signature below constitutes your signature, acceptance, and agreement of both the Subscription Agreement and other governing agreements as if each of these documents were actually signed by you in writing.  Further, all parties agree that no certification authority or other third-party verification is necessary to validate any electronic signature; and that the lack of such certification or third-party verification will not in any way affect the enforceability of your signature or resulting contract between you and the Company. You understand and agree that your e-signature executed in conjunction with the electronic submission of this Subscription Agreement and other governing agreements shall be legally binding and that such transaction has been authorized by you.  You agree that your electronic signature below is the legal equivalent of your manual signature on both this Subscription Agreement and other governing agreements and that you consent to be legally bound by terms and conditions of such Agreements. The Subscription Agreement and other governing agreements may be executed in counterparts and by electronic signature, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 

 

Furthermore, you hereby agree that all current and future notices, confirmations and other communications regarding this Subscription Agreement or the other governing agreements specifically, and/or future communications in general between the parties, may be made by email, sent to the email address of record as set forth in the vesting information below or as otherwise from time to time changed or updated and disclosed to the other party, without necessity of confirmation of receipt, delivery or reading, and such form of electronic communication is sufficient for all matters regarding the relationship between the parties. If any such electronically sent communication fails to be received for any reason, including but not limited to such communications being diverted to the recipients’ spam filters by the recipients’ email service provider, or due to a recipients’ change of address, or due to technology issues by the recipients’ service provider, the parties agree that the burden of such failure to receive is on the recipient and not the sender, and that the sender is under no obligation to resend communications via any other means, including but not limited to postal service or overnight courier, and that such communications shall for all purposes, including legal and regulatory, be deemed to have been delivered and received. No physical, paper documents will be sent to you, and if you desire physical documents then you agree to be satisfied by directly and personally printing, at your own expense, the electronically sent communication(s) and maintaining such physical records in any manner or form that you desire.


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YOUR CONSENT IS HEREBY EXPRESSLY GIVEN TO THE FOLLOWING:

 

By signing this Subscription Agreement, you are explicitly agreeing to receive documents electronically, including your copy of this signed Subscription Agreement and other governing agreements, as well as ongoing disclosures, communications, and notices.

 

By signing this document, the Subscriber is agreeing to both all other governing agreements and the Subscription Agreement and all provisions, clauses, representations, warranties, acknowledgments and covenants contained therein, each of which: (i) shall be binding on the heirs, executors, administrators, successors and permitted assigns of the undersigned, and (ii) may not be cancelled, withdrawn, revoked, or terminated by the undersigned except as set forth therein. If there is more than one signatory hereto, the representations, warranties, acknowledgments, and agreements of the undersigned are made jointly and severally.

 

8.MISCELLANEOUS. 

 

(a) All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons or entity or entities may require. 

 

(b) This Subscription Agreement is not transferable or assignable by Subscriber, except as set forth in Section 1(f) hereof. 

 

(c) The representations, warranties and agreements contained herein shall be deemed to be made by and be binding upon Subscriber and its heirs, executors, administrators, assigns, and successors and shall inure to the benefit of the Company and its successors and assigns. 

 

(d) None of the provisions of this Subscription Agreement may be waived, changed, or terminated orally or otherwise, except as specifically set forth herein or except by a writing signed by the Company and Subscriber. 

 

(e) In the event any part of this Subscription Agreement is found to be void or unenforceable, the remaining provisions are intended to be separable and binding with the same effect as if the void or unenforceable part were never the subject of agreement. 

 

(f) The invalidity, illegality or unenforceability of one or more of the provisions of this Subscription Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Subscription Agreement in such jurisdiction or the validity, legality or enforceability of this Subscription Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. 

 

(g) This Subscription Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof. 

 

(h) The terms and provisions of this Subscription Agreement are intended solely for the benefit of each party hereto and their respective successors and assigns, and it is not the intention of the parties to confer, and no provision hereof shall confer, third-party beneficiary rights upon any other person. 

 

(i) The headings used in this Subscription Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof. 

 

(j) This Subscription Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 

 

(k) No failure or delay by any party in exercising any right, power or privilege under this Subscription Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 

 

[SIGNATURE PAGE FOLLOWS]


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MAJESTIC FUNDING PARTNERS, LLC
SUBSCRIPTION AGREEMENT - SIGNATURE PAGE

 

The undersigned, desiring to purchase Class A Common Units in Majestic Funding Partners, LLC, by executing this Signature Page, hereby executes, adopts, and agrees to all the terms, conditions, and representations set forth in the undersigned’s Subscription Agreement and the governing documents of the Company.

 

(a)The number of Class A Common Units the undersigned hereby irrevocably subscribes for is: ________________ (print number of Securities) 

(b)The aggregate purchase price (based on a Per Unit Price of $10.00) the undersigned hereby irrevocably subscribes for is:  $_________________ (print aggregate purchase price) 

(c)The Securities being subscribed to will be owned by, and should be recorded on the Company’s books as held in the name of ___________________________________________ (print name of owner or joint owners): 

 

Subscriber Signature:  ______________________________________

Subscriber Name:  _________________________________________

Subscriber Address:  _______________________________________

_________________________________________________________

 

Date:  ______________________

 

This Subscription is accepted by Majestic Funding Partners, LLC

 

Date: _________________, 20__.

 

 

By: _______________________________

 

Name:  ____________________________

 

Title: ______________________________


CONFIDENTIAL
 


ESCROW AGREEMENT

 

This ESCROW AGREEMENT (this “Agreement”) dated as of this 4th day of October 2023 by and among Majestic Funding Partners, LLC, a Delaware Limited Liability Company (the “Company”), having an address at 13945 E. Vallejo, Street, Chandler, AZ 85249 (the “Company” or “Issuer”); Castle Placement, LLC, having an address at 1460 Broadway, New York, NY 10036 (“Placement Agent”), and EAST WEST BANK, a California chartered bank with trust powers (in its capacity as escrow holder, the “Escrow Agent”), with its principal corporate trust office at 135 N. Los Robles Ave., Pasadena, CA 91101. The Company and the Placement Agent, each a “Party,” are collectively referred to as “Parties” and individually, a “Party.”

 

W I T N E S S E T H:

 

“WHEREAS, the Company proposes to sell a maximum of 4,500,000 Class A Common Units (“Common Units”), at an offering price of $10 per Unit for an offering amount of $45,000,000 (provided, however, that the Company may, in its sole discretion, determine to offer and sell additional Units) (the “Offering”) to investors (each, an “Investor”); and

 

WHEREAS, subject to all conditions to closing being satisfied or waived, the closing(s) of the Offering shall take place from time to time until the earlier of (a) the date which is  days after the Offering commences, or (b) the date on which this Offering is earlier terminated by the Company in its sole discretion (the “Termination Date”) (the earlier of (a) or (b), the “Final Termination Date”); and

 

WHEREAS, in connection with the Offering contemplated by the Subscription Agreement, the Company entered into a Placement Agent Agreement between the Company and the Placement Agent, and certain other agreements, documents, instruments and certificates necessary to carry out the purposes thereof, including without limitation the Subscription Agreement (collectively, the “Transaction Documents”); and

 

WHEREAS, the Company desires to establish an escrow account with the Escrow Agent with to hold Investors’ funds pending a closing of the Offering (a “Closing”).

 

NOW, THEREFORE, IT IS AGREED as follows:

 

 

ARTICLE 1

ESCROW DEPOSIT

 

Section 1.1 Establishment of Escrow Account; Delivery of Escrow Funds.

 

(a)Company hereby appoints Escrow Agent to act as escrow holder to receive and hold the proceeds of the Offering. 


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(b)Escrow Agent shall establish a non interest-bearing escrow account for the Offering at East West Bank, as depository, entitled “EAST WEST BANK as Escrow Agent for [name of Company/Offering]” (the “Escrow Account”), subject to the Company’s provision of all information, agreements, documents and things required or requested by East West Bank to establish such account. 

 

(c)The Company and Placement Agent shall instruct the Investors to deposit checks, utilize a credit card, ACH, wire transfer or other accepted modes of investment for the payment of money made payable to the order of “EAST WEST BANK. as Escrow Agent for   Escrow,” and the Escrow Agent is willing to accept said checks and other instruments for the payment of money in accordance with the terms hereinafter set forth, provided however, the Escrow Agent will not accept Investor payments by credit card. Therefore, if the Company and Placement Agent choose to allow Investors to transmit funds by credit card, the Company and Placement Agent shall arrange for a third party merchant services provide to process such payments and transmit the proceeds to Escrow Agent. Escrow Agent’s delivery instructions for payments are as follows: 

 

EAST WEST BANK

ABA #: 322070381

A/C #: 8003277814

A/C Name: East West Bank as Escrow Agent for Majestic Funding Partners, LLC

Attn: Escrow Department

 

All such payments remitted to the Escrow Agent shall be accompanied by information identifying each Investor, subscription, the Investor’s social security or taxpayer identification number and address. In the event the Investor’s address and/or social security number or taxpayer identification number are not provided to Escrow Agent by the Investor, then Placement Agent and/or the Company agree to promptly upon request provide Escrow Agent with such information in writing. The payments shall be deposited into the Escrow Account.

 

(d)The collected funds deposited into the Escrow Account are referred to as the “Escrow Funds.” 

 

(e)The Escrow Agent shall have no duty or responsibility to enforce the collection or demand payment of any funds deposited into the Escrow Account. If, for any reason, any payment deposited into the Escrow Account shall be returned unpaid to the Escrow Agent, the sole duty of the Escrow Agent shall be to return the payment to the Investor and advise the Company and Placement Agent promptly thereof. 

 

(f)In the event that market conditions are such that negative interest applies to amounts deposited with the Escrow Agent, the Company shall be responsible for the payment of such interest and the Escrow Agent shall be entitled to deduct from amounts on deposit with it an amount necessary to pay such negative interest. For the avoidance of doubt, the indemnification protections afforded to the Escrow Agent under Section 2.2 of this Agreement shall cover any interest-related expenses (including, but not limited to, negative interest) incurred by the Escrow Agent in the performance of its duties hereunder. 


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Section 1.2Release of Escrow Funds. The Escrow Funds shall be paid by the Escrow Agent in accordance with the following: 

 

(a)If the Company terminates the Offering, the Company shall promptly deliver a written notice to the Escrow Agent and the Placement Agent in the form of Exhibit B advising the Escrow Agent that the Offering has been terminated (the “Termination Notice”). Upon receipt of the Termination Notice, the Escrow Agent shall promptly return the funds paid by each Investor to such Investor without interest or offset in the same method as the Investor caused payment to be delivered to the Escrow Agent. If an Investor’s funds were received by Escrow Agent from an intermediary or payment processor, such funds shall be returned to the intermediary or payment processor, as the case may be. 

 

(b)At each Closing, the Company and the Placement Agent shall provide the Escrow Agent with written instructions regarding the disbursement of the Escrow Funds in accordance with Exhibit A attached hereto and made a part hereof and signed by the Company and the Placement Agent (the “Disbursement Instructions”). 

 

(c)If by 5:00 P.M. Eastern time on the Final Termination Date, the Escrow Agent has not received written Disbursement Instructions from the Company and Placement Agent regarding the disbursement of the Escrow Funds in the Escrow Account, if any, then the Escrow Agent shall promptly return such Escrow Funds, if any, to the Investors without interest or offset. The Escrow Funds returned to the Investors shall be free and clear of any and all claims of the Escrow Agent. 

 

(d)The Escrow Agent shall not be required to pay any uncollected funds or any funds that are not available for withdrawal. 

 

(e)The Placement Agent or the Company will provide the Escrow Agent with the payment instructions for each Investor, to whom the funds should be returned in accordance with this section. 

 

(f)In the event that Escrow Agent makes any payment to any other party pursuant to this Escrow Agreement and for any reason such payment (or any portion thereof) is required to be returned to the Escrow Account or another party or is subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a receiver, trustee or other party under any bankruptcy or insolvency law, other federal or state law, common law or equitable doctrine, then the recipient party shall repay to the Escrow Agent upon written request the amount so paid to it. 

 

(g)The Escrow Agent shall, in its sole discretion, comply with judgments or orders issued or process entered by any court with respect to the Escrow Amount, including without limitation any attachment, levy or garnishment, without any obligation to determine such court's jurisdiction in the matter and in accordance with its normal business practices. If the Escrow Agent complies with any such judgment, order or process, then it shall not be liable to any of the Parties or any other person by reason of such compliance, regardless of the final disposition of any such judgment, order or process. 


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(h)Each Party understands and agrees that Escrow Agent shall have no obligation or duty to act upon a written direction delivered to Escrow Agent for the disbursement of all or part of the Escrow Amount under this Agreement (a “Written Direction”) if such Written Direction is not 

 

(i)in writing, 

 

(ii)signed by representatives of both Parties listed in Schedule I to this Agreement, (in each case, each such individual an “Authorized Representative” of such Party), and 

 

(iii)delivered to, and able to be authenticated by, Escrow Agent in accordance with Section 1.4 below. 

 

(i)Upon request by any Party, the Escrow Agent will set up each Party with on-line access to the account(s) established pursuant to this Agreement, which each Party can use to view and verify transaction on such account(s). 

 

(j)A Party may specify in a Written Direction whether such Escrow Amount shall be disbursed by way of wire transfer or check. If the written notice for the disbursement of funds does not so specify the disbursement means, Escrow Agent may disburse the Escrow Amount by wire transfer. 

 

Section 1.3 Written Direction and Other Instruction.

 

(a)With respect to any Written Direction or any other notice, direction or other instruction required to be delivered by a Party to Escrow Agent under this Agreement, Escrow Agent is authorized to follow and rely upon any and all such instructions given to it from time to time if the Escrow Agent believes, in good faith, that such instruction is genuine and to have been signed by an Authorized Representative of such Party. Escrow Agent shall have no duty or obligation to verify that the person who sent such instruction is, in fact, a person duly authorized to give instructions on behalf of a Party, other than to verify that the signature of the Authorized Representative on any such instruction appears to be the signature of such person. Each Party acknowledges and agrees that it is fully informed of the protections and risks associated with the various methods of transmitting instructions to Escrow Agent, and that there may be more secure methods of transmitting instructions other than the method selected by such Party. Escrow Agent shall have no responsibility or liability for any loss which may result from (i) any action taken or not taken by Escrow Agent in good faith reliance on any such signatures or instructions, (ii) as a result of a Party’s reliance upon or use of any particular method of delivering instructions to Escrow Agent, including the risk of interception of such instruction and misuse by third parties, or (iii) any officer or Authorized Representative of a Party named in Schedule II delivered hereunder prior to actual receipt by Escrow Agent of a more current incumbency certificate or an updated Schedule II and a reasonable time for Escrow Agent to act upon such updated or more current certificate or Schedule. 


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(b)Each Party may, at any time, update Schedule II by signing and submitting to Escrow Agent an update of such Schedule. Any updated Schedule shall not be effective unless Escrow Agent countersigns a copy thereof. Escrow Agent shall be entitled to a reasonable time to act to implement any changes on an updated Schedule II. 

 

Section 1.4 Delivery and Authentication of Written Direction.

 

(a)A Written Direction must be delivered to Escrow Agent by one of the delivery methods set forth in Section 4.3. 

 

(b)Each Party and Escrow Agent hereby agree that the following security procedures will be used to verify the authenticity of a Written Direction with regard to fund transfer instructions delivered by any Party to Escrow Agent under this Agreement: 

 

(i)The Written Direction must include the name and signature of the person delivering the disbursement request to Escrow Agent. Escrow Agent will check that the name and signature of the person identified on the Written Direction appears to be the same as the name and signature of an Authorized Representative of such Party; 

 

(ii)Escrow Agent shall seek confirmation of such instructions by telephone call-back to an Authorized Representative (in the case of the Company) or other authorized person, and Escrow Agent may rely upon the confirmations of anyone purporting to be the Authorized Representative or other authorized person so designated. Escrow Agent and the beneficiary’s bank in any funds transfer may rely solely upon any account numbers or similar identifying numbers provided by the Company to identify (i) the beneficiary, (ii) the beneficiary’s bank, or (iii) an intermediary bank. Escrow Agent may apply any of the Escrow Funds for any payment order it executes using any such identifying number, even when its use may result in a person other than the beneficiary being paid, or the transfer of funds to a bank other than the beneficiary’s bank or an intermediary bank designated. The parties to this Agreement acknowledge that such security procedure is commercially reasonable. 

 

(c)Each Party acknowledges and agrees that given its particular circumstances, including the nature of its business, the size, type and frequency of its instructions, transactions and files, internal procedures and systems, the alternative security procedures offered by Escrow Agent and the security procedures in general use by other customers and banks similarly situated, the security procedures set forth in this Section 1.4 are a commercially reasonable method of verifying the authenticity of a payment order in a Written Direction. 


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(d)Escrow Agent is authorized to execute, and each Party expressly agrees to be bound by any payment order in a Written Direction issued in its name (and associated funds transfer) (i) that is accepted by Escrow Agent in accordance with the security procedures set forth in this Section 1.4 , whether or not authorized by such Party and/or (ii) that is authorized by or on behalf of such Party or for which such Party is otherwise bound under the law of agency, whether or not the security procedures set forth in this Section 1.4 were followed, and to debit the Escrow Account for the amount of the payment order. Notwithstanding anything else, Escrow Agent shall be deemed to have acted in good faith and without negligence, gross negligence or misconduct if Escrow Agent is authorized to execute the payment order under this Section 1.4 . Any action taken by Escrow Agent pursuant to this paragraph prior to Escrow Agent’s actual receipt and acknowledgement of a notice of revocation, cancellation or amendment of a Written Direction shall not be affected by such notice. 

 

(e)The security procedures set forth in this Section 1.4 are intended to verify the authenticity of payment orders provided to Escrow Agent and are not designed to, and do not, detect errors in the transmission or content of any payment order. Escrow Agent is not responsible for detecting an error in the payment order, regardless of whether any of the Parties believes the error was apparent, and Escrow Agent is not liable for any damages arising from any failure to detect an error. 

 

(f)When instructed to credit or pay a party by both name and a unique numeric or alpha-numeric identifier (e.g. ABA number or account number), Escrow Agent, and any other banks participating in the funds transfer, may rely solely on the unique identifier, even if it identifies a party different than the party named. Each Party agrees to be bound by the rules of any funds transfer network used in connection with any payment order accepted by Escrow Agent hereunder. 

 

(g)Escrow Agent shall not be obliged to make any payment requested under this Escrow Agreement if it is unable to validate the authenticity of the request by the security procedures set forth in this Section 1.4 . Escrow Agent’s inability to confirm a payment order may result in a delay or failure to act on that payment order. Notwithstanding anything else in this Agreement, Escrow Agent shall not be required to treat a payment order as having been received until Escrow Agent has authenticated it pursuant to the security procedures in this Section 2.3 and shall not be liable or responsible for any losses arising in relation to such delay or failure to act. 


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ARTICLE 2

PROVISIONS CONCERNING THE ESCROW AGENT

 

Section 2.1Acceptance by Escrow Agent. The Escrow Agent hereby accepts and agrees to perform its obligations hereunder, provided that: 

 

(a)The Escrow Agent shall be entitled to rely upon any order, judgment, opinion, or other writing delivered to it in compliance with the provisions of this Agreement without being required to determine the authenticity or the correctness of any fact stated therein or the propriety or validity of service thereof. 

 

(b)The Escrow Agent shall be entitled to rely on and shall not be liable for any action taken or omitted to be taken by the Escrow Agent in accordance with the advice of counsel or other professionals retained or consulted by the Escrow Agent. The Escrow Agent shall be reimbursed as set forth in Section 2.2 and Section 2.6 for any and all compensation (fees, expenses and other costs) paid and/or reimbursed to such counsel and/or professionals. The Escrow Agent may perform any and all of its duties through its agents, representatives, attorneys, custodians, and/or nominees and shall not be responsible for the acts or omissions of such agents, representatives, attorneys, custodians or nominees appointed with due care. 

 

(c)In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder or conflicting demands are made or notice served upon the Escrow Agent, the Escrow Agent shall be entitled to (i) refrain from taking any action other than to keep safely the Escrow Funds until it shall be directed otherwise by a court of competent jurisdiction, (ii) deliver the Escrow Funds to a court of competent jurisdiction, and/or (iii) file a suit in interpleader and obtain an order from the court requiring the parties to litigate their several claims and rights among themselves. In the event such interpleader suit is brought, Escrow Agent shall be fully released from any obligation to perform any further duties imposed upon it hereunder, and the Company shall pay Escrow Agent actual costs, expenses and reasonable attorney’s fees expended or incurred by Escrow Agent, the amount thereof to be fixed and a judgment thereof to be rendered by the court in such suit. 

 

(d)The Escrow Agent shall have no duty, responsibility or obligation to interpret or enforce the terms of any agreement other than Escrow Agent’s obligations hereunder, and the Escrow Agent shall not be required to make a request that any monies be delivered to the Escrow Account. The Escrow Agent makes no representation as to the validity, value, genuineness or collectability of any security or other document or instrument held by or delivered to it. 

 

(e)The Escrow Agent shall be obligated to perform only such duties as are expressly set forth in this Agreement. No implied covenants or obligations shall be inferred from this Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the provisions of any agreement by the Company beyond the specific terms hereof. Escrow Agent’s duties and obligations are purely contractual and ministerial in nature, and nothing in this Agreement shall be construed to give rise to any fiduciary obligations of Escrow Agent with respect to the Investors or to the Parties to this Agreement. Without limiting the foregoing, the Escrow Agent shall dispose of the Escrow Funds in accordance with the express provisions of this Agreement, and has not reviewed and shall not make,  


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be required to make or be liable in any manner for its failure to make, any determination under any other document, or any other agreement.

 

(f)No term or provision of this Agreement is intended to create, nor shall any such term or provision be deemed to have created, any trust, joint venture, partnership, between or among the Escrow Agent and any of the Parties. 

 

(g)The Company and Placement Agent represent and warrant and covenant to the Escrow Agent that they have not indicated and will not indicate to any individual or entity that the Escrow Agent’s duties will include anything other than those duties stated in this Agreement. 

 

(h)THE COMPANY AND THE PLACEMENT AGENT UNDERSTAND THAT THE ESCROW AGENT, BY ACCEPTING THE APPOINTMENT AND DESIGNATION AS ESCROW AGENT HEREUNDER, IN NO WAY ENDORSES THE MERITS OF THE OFFERING OF THE SECURITIES. 

 

(i)Neither the Company nor the Placement Agent shall make any reference to East West Bank in connection with any offering, disclosure or other documents used in the Offering, or the transactions contemplated thereby except with respect to its role as the escrow agent hereunder, and in no event may Company or the Placement Agent state or imply that Escrow Agent has investigated or endorsed the Offering, or any offering, disclosure or other documents used in the Offering, or the transactions contemplated thereby in any manner whatsoever.. 

 

(j)Without limiting the generality of the foregoing, Escrow Agent is not charged with any duties or responsibilities with respect to any documentation associated with the Offering and shall not otherwise be concerned with the terms thereof. Escrow Agent shall have no responsibility to ensure the Company’s or the Placement Agent’s compliance with any laws in connection with the Offering or otherwise. 

 

Section 2.2. Indemnification. The Company agrees to defend, indemnify and hold the Escrow Agent and its affiliates and their respective employees, officers, directors and agents (the “Indemnified Parties”) harmless from any and against all liabilities, losses, actions, suits or proceedings at law or in equity, and any other expenses, fees or charges of any character or nature, (including, without limitation, negative interest, attorney's fees and expenses and the costs of enforcement of this Escrow Agreement or any provision thereof), which an Indemnified Party may incur or with which it may be threatened by reason of acting as or on behalf of the Escrow Agent under this Escrow Agreement or related to or arising out of the existence of the Escrow Account or Escrow Agent’s services or duties hereunder, and will reimburse the Indemnified Parties for all expenses (including attorneys’ fees) as they are incurred by the Indemnified Parties in connection with investigating, preparing or defending any such action or claim whether or not in connection with pending or threatened litigation in which the Indemnified Parties is or are a party, except to the extent the same shall be have been finally adjudicated to have been directly caused by the Escrow Agent's gross negligence or willful misconduct. The Company agrees, jointly and severally, to pay or reimburse the Escrow Agent upon request for any transfer taxes or other taxes relating to the Escrow Funds incurred in connection herewith and shall indemnify and hold harmless the Escrow Agent with respect to any amounts that it


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is obligated to pay in the way of such taxes. The terms of this paragraph shall survive termination of this Agreement.

 

Section 2.3.Limitation of Liability. THE ESCROW AGENT SHALL NOT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (I) DAMAGES, LOSSES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES, LOSSES OR EXPENSES WHICH HAVE BEEN FINALLY ADJUDICATED TO HAVE DIRECTLY RESULTED FROM THE ESCROW AGENT’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR (II) SPECIAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES OR LOSSES OF ANY KIND WHATSOEVER (INCLUDING WITHOUT LIMITATION LOST PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM OF ACTION, OR (III) AMOUNT IN EXCESS OF THE ESCROW FUNDS. THE TERMS OF THIS PARAGRAPH SHALL SURVIVE TERMINATION OF THIS AGREEMENT. 

 

Section 2.4. Resignation and Termination of the Escrow Agent. The Escrow Agent may resign at any time by giving 20 (twenty) days’ prior written notice of such resignation to Placement Agent and the Company. Upon providing such notice, the Escrow Agent shall have no further obligation hereunder except to hold as depositary the Escrow Funds that it receives until the end of such 20-day period. In such event, the Escrow Agent shall not take any action, other than receiving and depositing the Investor’s payments in accordance with this Agreement, until the Company has designated a banking corporation, trust company, attorney or other person as successor. Upon receipt of such written designation signed by Placement Agent and the Company, the Escrow Agent shall promptly deliver the Escrow Funds to such successor and shall thereafter have no further obligations hereunder. If the Company and Placement Agent have failed to appoint a successor escrow agent prior to the expiration of twenty (20) days following the delivery of such notice of resignation or removal, the Escrow Agent shall be entitled, at its sole discretion and at the expense of the Company to (a) return the Escrow Funds to the Company, or (b) petition any court of competent jurisdiction for the appointment of a successor escrow agent or for other appropriate relief, and any such resulting appointment shall be binding upon the parties. In either case provided for in this paragraph, the Escrow Agent shall be relieved of all further obligations and released from all liability thereafter arising with respect to the Escrow Funds.

 

Section 2.5 Termination. The Company and Placement Agent may terminate the appointment of the Escrow Agent hereunder upon written notice specifying the date upon which such termination shall take effect, which date shall be at least 30 days from the date of such notice. In the event of such termination, the Company and Placement Agent shall, within 30 days of such notice, appoint a successor escrow agent and the Escrow Agent shall, upon receipt of written instructions signed by the Company and Placement Agent, turn over to such successor escrow agent all of the Escrow Funds Upon receipt of the Escrow Funds, the successor escrow agent shall become the escrow agent hereunder and shall be bound by all of the provisions hereof and the Escrow Agent shall be relieved of all further obligations and released from all liability thereafter arising with respect to the Escrow Funds and under this Agreement. If the Company has failed to appoint a successor escrow agent prior to the expiration of thirty (30) days following the delivery of the notice of termination, the Escrow Agent shall be entitled, at its sole discretion and at the expense of the Company, to (a) return the


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Escrow Funds to the Company, or (b) petition any court of competent jurisdiction for the appointment of a successor escrow agent or for other appropriate relief, and any such resulting appointment shall be binding upon the parties.

 

Section 2.6 Compensation; Reimbursement. Escrow Agent shall be entitled, for the duties to be performed by it hereunder, to compensation as stated in the schedule attached hereto as Schedule III, which fee shall be paid by the Company upon the signing of this Agreement. In addition, the Company shall be obligated to reimburse Escrow Agent for all fees, costs and expenses incurred or that become due in connection with this Agreement or the Escrow Account, including attorney’s fees. Neither the modification, cancellation, termination, resignation or rescission of this Agreement nor the resignation or termination of the Escrow Agent shall affect the right of Escrow Agent to retain the amount of any fee which has been paid, or to be reimbursed or paid any amount which has been incurred or becomes due, prior to the effective date of any such modification, cancellation, termination, resignation or rescission. To the extent the Escrow Agent has incurred any such expenses, or any such fee becomes due, prior to any closing, the Escrow Agent shall advise the Company and the Company shall direct all such amounts to be paid directly at any such closing. As security for the due and punctual performance of any and all of the Company’s obligations to the Escrow Agent hereunder, now or hereafter arising, the Company, hereby pledges, assigns and grants to the Escrow Agent a continuing security interest in, and a lien on and right of setoff against, the Escrow Funds and all distributions thereon, investments thereof or additions thereto. If any fees, expenses or costs incurred by, or any obligations owed to, the Escrow Agent hereunder are not promptly paid when due, the Escrow Agent may reimburse itself therefor from the Escrow Funds, and may sell, convey or otherwise dispose of any Escrow Funds for such purpose. The security interest and setoff rights of the Escrow Agent shall at all times be valid, perfected and enforceable by the Escrow Agent against the Parties and all third parties in accordance with the terms of this Escrow Agreement. The terms of this paragraph shall survive termination of this Agreement.

 

Section 2.7. Merger or Consolidation. Any corporation or association into which the Escrow Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer all or substantially all of its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which the Escrow Agent is a party, shall be and become the successor escrow agent under this Agreement and shall have and succeed to the rights, powers, duties, immunities and privileges as its predecessor, without the execution or filing of any instrument or paper or the performance of any further act.

 

Section 2.8. Attachment of Escrow Funds; Compliance with Legal Orders. In the event that any Escrow Amount shall be attached, garnished or levied upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the Escrow Funds, the Escrow Agent is hereby expressly authorized, in its sole discretion, to respond as it deems appropriate or to comply with all writs, orders or decrees so entered or issued, or which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction. In the event that the Escrow Agent obeys or complies with any such writ, order or decree it shall not be liable to any Party or to any other person, firm or corporation, should, by reason of such compliance notwithstanding, such writ, order or decree be subsequently reversed, modified, annulled, set aside or vacated.


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Section 2.9 Force Majeure. The Escrow Agent shall not be responsible or liable for any failure or delay in the performance of its obligation under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; wars; acts of terrorism; civil or military disturbances; sabotage; epidemic; pandemics; riots; interruptions, loss or malfunctions of utilities, computer (hardware or software) or communications services; accidents; labor disputes; acts of civil or military authority or governmental action; hacking, cyber-attacks or other unauthorized infiltration of Escrow Agent’s information technology infrastructure it being understood that the Escrow Agent shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as reasonably practicable under the circumstances.

 

Section 2.10 No Financial Obligation. Escrow Agent shall not be required to use its own funds in the performance of any of its obligations or duties or the exercise of any of its rights or powers, and shall not be required to take any action which, in Escrow Agent's sole and absolute judgment, could involve it in expense or liability unless furnished with security and indemnity which it deems, in its sole and absolute discretion, to be satisfactory.

 

Section 2.11Exculpation. Escrow Agent’s duties hereunder shall be strictly limited to the safekeeping of monies, instruments or other documents received by Escrow Agent and any further responsibilities expressly provided in this Agreement. Escrow Agent will not be liable for: 

 

(a)the genuineness, sufficiency, correctness as to form, manner or execution or validity of any instrument deposited in the Escrow, nor the identity, authority or rights of any person executing the same; 

(b)any misrepresentation or omission in any documentation associated with the Offering or any failure to keep or comply with any of the provisions of any agreement, contract, or other instrument referred to therein; or 

(c)the failure of any Investor to transmit, or any delay in transmitting, any Investor’s funds to Escrow Agent. 

ARTICLE 3
MISCELLANEOUS

Section 3.1. Successors and Assigns. This Agreement shall be binding on and inure to the benefit of each Party and the Escrow Agent and their respective successors and permitted assigns. No other persons shall have any rights under this Agreement. No assignment of the interest of any of the Parties shall be binding unless and until written notice of such assignment shall be delivered to the other Parties and Escrow Agent and shall require the prior written consent of the other Parties and Escrow Agent (such consent not to be unreasonably withheld).

 

Section 3.2. Escheat. Each Party is aware that under applicable state law, property which is presumed abandoned may under certain circumstances escheat to the applicable state. The Escrow Agent shall have no liability to any of the Parties, their respective heirs, legal representatives, successors and assigns, or any other party, should any or all of the Escrow Funds escheat by operation of law.


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Section 3.3. Notices. All notices, requests, demands, and other communications required under this Escrow Agreement shall be in writing, in English, and shall be deemed to have been duly given if delivered (i) by overnight delivery with a reputable national overnight delivery service; or (ii) by electronic transmission; including by way of e-mail (as long as such email is accompanied by a PDF or similar version of the relevant document bearing the signature of an Authorized Representative for the Party sending the notice). If notice is given to a party, it shall be given at the address for such party set forth below. It shall be the responsibility of the Company to notify the Escrow Agent in writing of any name or address changes. In the case of communications delivered to the Escrow Agent, such communications shall be deemed to have been given on the date received by the Escrow Agent:

 

If to Placement Agent:

 

Castle Placement, LLC

1460 Broadway, New York, NY 10036

(212) 418-1181

Attention: Richard Luftig, Managing Partner rluftig@castleplacement.com

 

 

If to the Company:

 

Majestic Funding Partners, LLC

13945 E. Vallejo Street, Chandler, AZ 85249 Phone: 480-286-0003

Attention: Vince Guarnieri Principal

vguarnieri@majesticfundingpartners.com

 

If to Escrow Agent:

 

East West Bank

Attn: Specialized Deposit Services, Escrow

Email: scott.armstrong@eastwestbank.com

Address: 9090 Katy Fwy., 3rd Fl.

Houston, TX 77024

 

Section 3.4. Governing Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Each Party and Escrow Agent hereby consents to the exclusive personal jurisdiction of the courts located in the State of California in the event of a dispute arising out of or under this Agreement. Each Party and Escrow Agent hereby irrevocably waives any objection to the laying of the venue of any suit, action or proceeding and irrevocably submits to the exclusive jurisdiction of such court in such suit, action or proceeding.


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Section 3.5.Entire Agreement. This Agreement and the Exhibits attached hereto (as updated from time to time in accordance herewith) set forth the entire agreement and understanding of the parties related to the Escrow Amount. If a court of competent jurisdiction declares a provision invalid, it will be ineffective only to the extent of the invalidity, so that the remainder of the provision and Escrow Agreement will continue in full force and effect. 

 

Section 3.6. Amendment. This Agreement may be amended, modified, superseded, rescinded, or canceled only by a written instrument executed by each of the Parties and the Escrow Agent.

 

Section 3.7. Waivers. The failure of any party to this Agreement at any time or times to require performance of any provision under this Agreement shall in no manner affect the right at a later time to enforce the same performance. A waiver by any party to this Agreement of any such condition or breach of any term, covenant, representation, or warranty contained in this Agreement, in any one or more instances, shall neither be construed as a further or continuing waiver of any such condition or breach nor a waiver of any other condition or breach of any other term, covenant, representation, or warranty contained in this Agreement.

 

Section 3.8. Headings. Section headings of this Agreement have been inserted for convenience of reference only and shall in no way restrict or otherwise modify any of the terms or provisions of this Escrow Agreement.

 

Section 3.9. Electronic Signatures; Facsimile Signatures; Counterparts. This Escrow Agreement may be executed in one or more counterparts. Such execution of counterparts may occur by manual signature, electronic signature, facsimile signature, manual signature transmitted by means of facsimile transmission or manual signature contained in an imaged document attached to an email transmission, and any such execution that is not by manual signature shall have the same legal effect, validity and enforceability as a manual signature. Each such counterpart executed in accordance with the foregoing shall be deemed an original, with all such counterparts together constituting one and the same instrument. The exchange of executed copies of this Escrow Agreement or of executed signature pages to this Escrow Agreement by electronic transmission, facsimile transmission or as an imaged document attached to an email transmission shall constitute effective execution and delivery hereof. Any copy of this Escrow Agreement which is fully executed and transmitted in accordance with the terms hereof may be used for all purposes in lieu of a manually executed copy of this Escrow Agreement and shall have the same legal effect, validity and enforceability as if executed by manual signature.

 

Section 3.10. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH PARTY HEREBY EXPRESSLY, INTENTIONALLY, AND DELIBERATELY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING IN WHOLE OR IN PART UNDER, RELATED TO, BASED ON OR IN CONNECTION WITH THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE (EACH, A “CLAIM”). ANY PARTY HERETO MAY


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FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 4.11 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. In the event that the waiver of jury trial set forth in the previous sentence is not enforceable under the law applicable to this Agreement, the parties to this Agreement agree that any Claim, including any question of law or fact relating thereto, shall, at the written request of any party, be determined by judicial reference pursuant to California law. The parties shall select a single neutral referee, who shall be a retired state or federal judge. In the event that the parties cannot agree upon a referee, the court shall appoint the referee. The referee shall report a statement of decision to the court. Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral or obtain provisional remedies. The parties shall bear the fees and expenses of the referee equally, unless the referee orders otherwise. The referee shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph. The parties acknowledge that if a referee is selected to determine the Claims, then the Claims will not be decided by a jury.

 

Section 3.11 Termination. This Agreement will terminate upon the Final Termination Date.

 

Section 3.12 Anti-Terrorism/Anti-Money Laundering Laws.

 

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT - To help the United States government fight the funding of terrorism or money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens a new account. What this means for the parties to this Agreement: the Escrow Agent will ask for your name, address, date of birth, and other information that will allow the Escrow Agent to identify you (e.g., your social security number or tax identification number.) The Escrow Agent may also ask to see your driver’s license or other identifying documents (e.g., passport, evidence of formation of corporation, limited liability company, limited partnership, etc., certificate of good standing.)

 

 

[The balance of this page intentionally left blank – signature page follows]


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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first set forth above.

 

Majestic Funding Partners, LLC

 

Castle Placement, LLC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

By:

 

Name: Vince Guarnieri

 

Name: Richard Luftig

Title: Principal

 

Title: Managing Partner

 

 

 

 

 

 

 

 

 

 

EAST WEST BANK

 

 

 

as Escrow Agent

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name: Scott K. Armstrong

 

 

 

Title: SVP – Director of Specialty Deposits

 

 

 

 

 

 

 

 


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Schedule I

Form 1 a


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SCHEDULE II

 

 

CERTIFICATE AS TO AUTHORIZED SIGNATURES OF

[COMPANY]/[PLACEMENT AGENT]

 

[Company]/[Placement Agent] hereby designates each of the following persons as its Authorized Representative for purposes of this Agreement, and confirms that the title, contact information and specimen signature of each such person as set forth below is true and correct. Each such Authorized Representative is authorized to initiate and approve transactions of all types for the Escrow Account[s] established under the Agreement to which this Exhibit A is attached, on behalf of [Company]/[Placement Agent].

 

 

Name (print):

 

Specimen Signature:

 

Title:

 

Telephone Number

(required):

If more than one, list all applicable telephone numbers.

Office: Cell:

E-mail (required):

If more than one, list all applicable email addresses.

Email 1:

Email 2:

 

 

Name (print):

 

Specimen Signature:

 

Title:

 

Telephone Number

(required):

If more than one, list all applicable telephone numbers.

Office: Cell:

E-mail (required):

If more than one, list all applicable email addresses.

Email 1:

Email 2:


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Name (print):

 

Specimen Signature:

 

Title:

 

Telephone Number

(required):

If more than one, list all applicable telephone numbers.

Office: Cell:

E-mail (required):

If more than one, list all applicable email addresses.

Email 1:

Email 2:

 

Additional Email Addresses:

The following additional email addresses also may be used by Escrow Agent to verify the email address used to send any Payment Notice to Escrow Agent:

Email 1:   Email 2:  Email 3:  

 

 

COMPLETE BELOW TO UPDATE EXHIBIT A

If Company wishes to update this Exhibit A, Company must complete, sign and send to Escrow Agent an updated copy of this Exhibit A with such changes. Any updated Exhibit A shall be effective once signed by Company and Escrow Agent and shall entirely supersede and replace any prior Exhibit A to this Agreement.

[  ] By:   

Name:

Title:

Date:

 

 

EAST WEST BANK (as Escrow Agent)

 

By:  Name: 

Title: Date:


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Schedule III

 

ESCROW AGENT SCHEDULE OF FEES

 

Acceptance Fee:

$ 0.00

Administration Fee (12-months):

$1,500.00

Check Preparation and Mailing

$ 10.00 each

1099 Preparation and Reporting

$ 10.00 each ($250 annual minimum if any 1099s required)

Third Party Legal Review

$ 450.00 per hr.

 

Any out-of-pocket expenses, and extraordinary fees or expenses, such as attorneys’ fees or messenger costs, of East West Bank are additional, are not included in the above schedule, and will be invoiced when incurred.

 

NOTE: All other standard bank fees apply. Please see current fee schedule for a summary of all bank fees.

 

*Escrow fees due upon account opening. Disbursement fees may apply

 

The Escrow Account Servicing Fee, if not paid at the time of final disbursement of the funds, may be debited by Escrow Agent from the balance remaining in the Escrow Account upon final disbursement of the funds.


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Exhibit A

 

FORM OF ESCROW DISBURSEMENT INSTRUCTIONS

AND RELEASE NOTICE

 

To Escrow Agent:

 

East West Bank, Escrow

Attn: Specialized Deposit Services

 

[DATE]

 

Re:Escrow Account No.   Dear Escrow Agent: 

1. Reference is made to that certain Escrow Agreement dated as of , 202_ (the “Escrow Agreement”) by and among , a (the “Company”), , a (the “Placement Agent”) and EAST WEST BANK (in its capacity as escrow holder, the “Escrow Agent”). All terms used but not defined herein shall have the respective meanings given such terms in the Escrow Agreement. 

 

2. The Company hereby certifies that the Company has received and accepted subscriptions with gross proceeds of at least $ 

 

3. You are hereby directed to disburse Escrow Funds in the amount of $ to the Company as follows: 

 

 

[SIGNATURE PAGE FOLLOWS]


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IN WITNESS WHEREOF, the undersigned has executed this statement as of the date first hereinabove set forth.

 

 

Company:

 

 

 

 

 

 

 

 

 

 

 

By:

 

Its:

 

Tax ID:

 

 

 

 

 

Placement Agent:

 

 

 

 

 

 

 

 

 

 

 

By:

 

Its:

 

Tax ID:


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EXHIBIT B

 

FORM OF DISBURSEMENT / TERMINATION NOTICE

 

 

 

 

To Escrow Agent:

 

East West Bank

 

Attn: Specialized Deposit Services, Escrow

 

 

[DATE]

 

Re:Escrow Account No. 

 

Dear Escrow Agent:

 

1. Reference is made to that certain Escrow Agreement dated as of , 202  (the “Escrow Agreement”)  by and among , a (the “Company”),     , a  (the “Placement Agent”) and EAST WEST BANK (in its capacity as escrow holder, the “Escrow Agent”). All terms used but not defined herein shall have the respective meanings given such terms in the Escrow Agreement. 

 

2. The Company has terminated the Offering prior to the disbursement of offering proceeds.

 

3. You are hereby directed to disburse the Escrow Funds to the Investors in accordance with Section 1.2(a) of the Escrow Agreement.

 

IN WITNESS WHEREOF, the undersigned has executed this notice as of the date first hereinabove set forth.

 

 

Company:

 

 

 

 

 

 

 

 

 

 

 

By:

 

Its:


-1-

 

 


 

August 28, 2023

Fruci & Associates II, PLLC

Spokane, Washington

 

This representation letter is provided in connection with your audit of the financial statements of Majestic Funding Partners, LLC which comprise the balance sheet as of December 31, 2022, and the related statements of operations, changes in members’ equity, and cash flows for the period from October 26, 2022 (inception) to December 31, 2022 and the disclosures (collectively referred to as the “financial statements”), for the purpose of expressing an opinion as to whether the financial statements present fairly, in all material respects, in accordance with accounting principles generally accepted in the United States (U.S. GAAP).

Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. An omission or misstatement that is monetarily small in amount could be considered material as a result of qualitative factors.

We confirm, to the best of our knowledge and belief, as of August 28, 2023, the following representations made to you during your audit.

Financial Statements

1)   We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated April 26, 2023, including our responsibility for the preparation and fair presentation of the financial statements.

2)   The financial statements referred to above are fairly presented in conformity with U.S. GAAP.

3)   We acknowledge our responsibility for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

4)   We acknowledge our responsibility for the design, implementation, and maintenance of internal control to prevent and detect fraud.

5)   Significant assumptions we used in making accounting estimates, including those measured at fair value, are reasonable.

6)   Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with U.S. GAAP.

7)   All events subsequent to the date of the financial statements and for which U.S. GAAP requires adjustment or disclosure have been adjusted or disclosed.


 


 


8)   The effects of all known actual or possible litigation, claims, and assessments have been accounted for and disclosed in accordance with U.S. GAAP.

9)   Note 2 to the financial statements discloses all of the matters of which we are aware that are relevant to the Company’s ability to continue as a going concern within a one-year period after the date the financial statements are available to be issued, including significant conditions or events, and management’s plans.

Information Provided

10)   We have provided you with:

a)   Access to all information, of which we are aware, that is relevant to the preparation and fair presentation of the financial statements, such as records (including information obtained from outside of the general and subsidiary ledgers), documentation, and other matters.

b)   Additional information that you have requested from us for the purpose of the audit.

c)   Unrestricted access to persons within the Company from whom you determined it necessary to obtain audit evidence.

d)   All minutes of the meetings of stockholders, directors, and committees of directors, or summaries of actions of recent meetings for which minutes were not yet prepared and/or resolutions in lieu of meetings.

e)   Communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices.

11)   All material transactions have been recorded in the accounting records and are reflected in the financial statements.

12)   We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud.

13)   We have no knowledge of any fraud or suspected fraud that affects the Company and involves:

a)   Management,

b)   Employees who have significant roles in internal control, or

c)   Others where the fraud could have a material effect on the financial statements.

14)   We have no knowledge of any allegations of fraud or suspected fraud affecting the Company’s financial statements communicated by employees, former employees, analysts, regulators, or others.

15)   We have no knowledge of any instances of noncompliance or suspected noncompliance with laws and regulations whose effects should be considered when preparing financial statements.


 


 


16)   We are not aware of any pending or threatened litigation, claims, or assessments, or unasserted claims or assessments that are required to be accrued or disclosed in the financial statements in accordance with U.S. GAAP, and we have not consulted a lawyer concerning litigation, claims, or assessments.

17)   We have disclosed to you the names of all of the Company’s related parties and all the related party relationships and transactions, including any side agreements.

18)   The Company has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset been pledged as collateral.

19)   We have provided you with all of the information that is relevant to our plans to mitigate the adverse effects of conditions or events that indicate there is substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date the financial statements are available to be issued, including our evaluation of the likelihood that those plans can be effectively implemented.

Except as disclosed in Note 2 to the financial statements, no events have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to, or disclosure in, the financial statements.

 

Charles Bongiovanni

Print Name, Chief Executive Officer

 

_________________________________________

Signature, Chief Executive Officer

 

Joshua Smith   

Print Name, Chief Financial Officer

 

___________________________________________

Signature, Chief Financial Officer


 

WALLACE A. GLAUSI

ATTORNEY AT LAW

1575 SKYLINE BLVD., SUITE 25

PORTLAND, OR 97205

(503) 515-3657

 

October 15, 2023

 

Re: Qualification Statement for Majestic Funding Partners on Form 1-A

 

To whom it may concern:

 

We have been retained by Majestic Funding Partners, LLC (the "Company"), in connection with the preparation and filing with the Securities and Exchange Commission, under the Securities Act of 1933, as amended, of the Company's Offering Statement on Form 1-A (the "Offering Statement").  The Offering Statement covers 4,500,000 Class A Common Units in the Company (the "Units"), at a purchase price of $10 per Unit, for a total offering amount of $45,000,000.

 

In our capacity as such counsel, we have examined and relied upon the originals or copies, certified or otherwise identified to our satisfaction, of the following:

 

1. Certificate of Formation of the Company; 

2. Operating Agreement of the Company; 

3. The Offering Circular and Statement; and 

4. The form of Subscription Agreement. 

 

We have also examined such other corporate records, documents, certificates, and other agreements and instruments, and have made such other examinations, as we have deemed relevant, necessary or appropriate to enable us to render the opinions hereinafter expressed.

 

Based on that examination, we are of the opinion that:

 

1. The Company is duly authorized to issue the Units. 

2. When issued and sold by the Company pursuant to the terms of the Subscription Agreement, the Units will be validly issued Class A Common Units in the Company, fully paid and non-assessable. 

 

We hereby consent to the filing of this opinion as an exhibit and to the Offering Statement and to the use of our name in the Offering Statement. In giving the foregoing consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and regulations of the Securities and Exchange Commission.

 

Sincerely,

WAG SIGNATURE new.png 

Attorney at Law