0001214659-19-004745.txt : 20190725 0001214659-19-004745.hdr.sgml : 20190725 20190725154701 ACCESSION NUMBER: 0001214659-19-004745 CONFORMED SUBMISSION TYPE: 1-A/A PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20190725 DATE AS OF CHANGE: 20190725 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC. CENTRAL INDEX KEY: 0001746666 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 000000000 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 1-A/A SEC ACT: 1933 Act SEC FILE NUMBER: 024-10945 FILM NUMBER: 19974349 BUSINESS ADDRESS: STREET 1: 189 SOUTH ORANGE AVENUE STREET 2: SUITE 1650 CITY: ORLANDO STATE: FL ZIP: 32801 BUSINESS PHONE: 4072066577 MAIL ADDRESS: STREET 1: 189 SOUTH ORANGE AVENUE STREET 2: SUITE 1650 CITY: ORLANDO STATE: FL ZIP: 32801 1-A/A 1 primary_doc.xml 1-A/A LIVE 0001746666 XXXXXXXX 024-10945 true TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC. FL 2018 0001746666 6500 38-4088423 0 5 189 South Orange Ave Suite 1650 Orlando FL 32801 4072066577 William Johnston Other 50000.00 0.00 0.00 0.00 50000.00 0.00 0.00 0.00 50000.00 50000.00 0.00 0.00 0.00 0.00 0.00 0.00 Grennan Fender Hess & Poparad LLP Voting, $1.00 Par Value 50000 000000N/A N/A Class A Non-Voting $1,000 Par 0 000000N/A N/A N/A 0 000000N/A N/A true true Tier2 Audited Equity (common or preferred stock) N N N Y N N 50000 0 1000.0000 50000000.00 0.00 0.00 0.00 50000000.00 TBD 5250000.00 Grennan Fender Hess & Poparad LLP 6500.00 Pino Nicholson PLLC 350000.00 44750000.00 Placement Agents' Commissions have been quantified but Placement Agents have not yet been appointed. true AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA PR RI SC SD TN TX UT VT VA WA WV WI WY A0 A1 A2 A3 A4 A5 A6 A7 A8 A9 B0 Z4 AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA PR RI SC SD TN TX UT VT VA WA WV WI WY A0 A1 A2 A3 A4 A5 A6 A7 A8 A9 B0 Z4 Tuscan Gardens Senior Living Fund, LLC Preferred Multi-Class Units of Membership Interes 2410000 0 2410000 Tuscan Gardens Growth & Income Fund, LLC Preferred Multi-Class Units of Membership Interest 180000 0 180000 Tuscan Gardens Income Fund II, LLC Preferred Multi-Class Units of Membership Interest 50000 0 50000 Rule 506 of Regulation D PART II AND III 2 partiiandiii.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 1

TO

FORM 1-A

 

 

OFFERING STATEMENT UNDER THE SECURITIES ACT OF 1933 CURRENT REPORT 

 

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

Date: August 1, 2019

 

Florida 6500 38-4088423

(State or Other Jurisdiction

of Incorporation)

(Primary Standard Classification Code)

(IRS Employer

Identification No.)

 

Larry Pino

Chief Executive Officer 

189 S. Orange Ave, Suite 1650

Orlando, FL 32801

Telephone: 407-206-6577

 

(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

 

Please send copies of all correspondence to:

 

Pino Nicholson PLLC

189 S. Orange Ave, Suite 1650

Orlando, FL 32801

Telephone: 407-206-6577

Email: ljp@PinoNicholsonLaw.com

 

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

 

THIS OFFERING STATEMENT SHALL ONLY BE QUALIFIED UPON ORDER OF THE COMMISSION, UNLESS A SUBSEQUENT AMENDMENT IS FILED INDICATING THE INTENTION TO BECOME QUALIFIED BY OPERATION OF THE TERMS OF REGULATION A.

 

PART I - NOTIFICATION

 

Part I should be read in conjunction with the attached XML Document for Items 1-6

 

PART I – END

 

 

 

 1 of 79 
 

 

PART II – OFFERING CIRCULAR 

 

 

SUBJECT TO COMPLETION, August 1, 2019

 

An offering statement pursuant to Regulation A relating to these securities has been filed with the United States Securities and Exchange Commission (the “SEC”). Information contained in this preliminary offering circular (“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 SEC 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. The Company may elect to satisfy its obligation to deliver a final offering circular (“Final Offering Circular”) by sending you a notice within two business days after the completion of a 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.

 

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

 

$50,000,000 OF CLASS A NON-VOTING PREFERRED SHARES

$1,000 PAR VALUE PER SHARE

 

Tuscan Gardens Senior Living Communities, Inc. (“Company”) is a newly formed Florida corporation, was organized on July 20, 2018, to invest in wholly-owned subsidiaries that develop (“Development Projects”), acquire (“Acquisition Projects”), and convert other real estate properties including hotels (“Conversion Projects”) into senior living rental communities ranging from $15,000,000 to $100,000,000 per community, consisting of independent living, assisted living and/or memory care for approximately fifty (50) to two-hundred and fifty (250) residents (“Company Properties”). The Company’s primary focus for purposes of Development Projects will be on southeastern markets, and for purposes of Acquisition Projects and Conversion Projects will be on national markets, that it considers to have favorable risk-return characteristics. The Company, operating through wholly-owned special purpose entities (“SPE”) as real estate owner-operators, intends to create, operate and hold a portfolio of Company Properties on a long-term basis, approximating seven years, and ultimately dispose of them to generate revenue for the Company. The Company is not a registered broker-dealer, an investment adviser, or a funding platform.

 

This is an initial offering (“Offering”) being conducted by the Company on a “best efforts” basis for its Class A Non-Voting Preferred Shares (“Preferred Shares”). The Company seeks to raise $50,000,000 from the Offering of Preferred Shares. The Company will seek to pursue Development Projects, Acquisition Projects, and Conversion Projects that have the potential to provide ongoing income to investors in the Preferred Shares (“Investors”), paid or accrued monthly based on an 8.0% cumulative, non-compounded annual return on par value (“Preferred Dividend”), plus potential capital appreciation through additional dividends based on fifty (50%) percent of the net proceeds generated by the Company from the disposition of Company Properties (“Special Dividends”). However, as the Offering is a blind pool and the Company has no track record, there can be no guarantee that such returns can or will be achieved or any dividends will be paid.

 

The Preferred Shares have no public market and will not be listed on any national securities exchange or on the over-the counter inter-dealer quotation system. For a description of the principal terms, see “The Offering” section beginning on page 17. The proposed sale of the Preferred Shares will begin as soon as practicable after the offering statement, of which this Offering Circular forms a part, has been qualified by the SEC and will terminate September 30, 2020 (“Offering Period”). The Offering Period may be extended, or the Offering terminated at any time by the Company in its sole discretion. The Preferred Shares are being offered pursuant to Regulation A (“Regulation A”) under the Securities Act of 1933, as amended (“Securities Act”), for Tier 2 offerings. The Preferred Shares will only be issued to purchasers who satisfy the requirements set forth in Regulation A. Funds from this Offering will be made available to the Company once it raises a minimum of $500,000 excluding sales to Company affiliates (“Minimum Offering Amount”). There are no provisions for the return of funds once the Minimum Offering Amount is sold.

 

    Per Share(1)     Minimum
Offering
Amount
  Maximum
Offering Amount
Price to public     $ 1000.00     $ 500,000.00     $ 50,000,000.00  
Underwriting discounts and commissions(1)     $ (90.00 - 100.00 )   $ (50,000.00 )   $ (4,500,000.00 )
Proceeds, before expenses, to the Company     $ 900.00 – 910.00     $ 450,000.00     $ 45,500,000.00  
Proceeds to other persons     $ N/A      $ N/A     $ N/A  

  

 2 of 79 
 

 

Note 1 - The Preferred Shares are being offered hereby by the Company through Sutter Securities Clearing, LLC, appointed by the Company as its Managing Broker-Dealer (“MBD”). Additionally, the Company intends to conduct its operations so that neither the Company, nor any of its subsidiaries, will meet the definition of investment company under Section 3(a)(1) of the Investment Company Act of 1940, as amended (the “Investment Company Act”) and, accordingly, neither the Company nor any of its subsidiaries intend to register as an investment company under the Investment Company Act.

 

Investors will pay upfront selling commissions in connection with the purchase of Preferred Shares. The Company has entered into, or will enter into arrangements for compensation and fees (“Placement Fees”) to its MBD, which, for Gross Offering Proceeds (“Total Sales”) up to $20,000,000 shall include i) a MBD fee equal to 1.5% of the Total Sales sold by the Company or its affiliates, sold by the MBD or sold by affiliated or unaffiliated Dealers under Participating Dealer Agreements in good standing; plus ii) a selling commission equal to 7.5% of Total Sales, that will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ payment of commissions to FINRA registered representatives on sales of the Offering; provided, however, that the MBD shall be entitled to retain any selling commissions with regard to Securities the MBD directly places to investors in the Offering, plus iii) subject to the Company’s prior approval on a case by case basis, which may be withheld at the Company’s sole discretion, a marketing support fee equal to 1.0% of the Total Sales will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ marketing of the Offering by FINRA registered representatives. For Total Sales in excess of $20,000,000 or more Placement Fees shall include: i) a MBD fee equal to 0.75% of the Total Sales sold by the Company or its affiliates, sold by the MBD or sold by affiliated or unaffiliated Dealers under Participating Dealer Agreements in good standing; plus ii) a selling commission equal to 7.25% of Total Sales, that will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ payment of commissions to FINRA registered representatives on sales of the Offering; provided, however, that the MBD shall be entitled to retain any selling commissions with regard to Securities the MBD directly places to investors in the Offering, plus iii) subject to the Company’s prior approval on a case by case basis, which may be withheld at the Company’s sole discretion, a marketing support fee equal to 1.0% of the Total Sales will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ marketing of the Offering by FINRA registered representatives.

 

The Company has agreed to reimburse up to $35,000 to the MBD for the MBD’s legal counsel expense, and to pay the MBD a non-accountable due diligence fee equal to $25,000, plus an additional $7,500 per additional Company Property in excess of two diligences by the MBD.  

 

INVESTMENT IN SHARES OF THE COMPANY INVOLVES SIGNIFICANT RISK, AND YOU MAY BE REQUIRED TO HOLD YOUR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. YOU SHOULD PURCHASE THIS SECURITY ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE “RISK FACTORS” BEGINNING ON PAGE 19 OF THIS OFFERING CIRCULAR.  

 

THE UNITED STATES 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 HEREUNDER ARE EXEMPT FROM REGISTRATION.

 

GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10 PERCENT 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, THE COMPANY ENCOURAGES YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, THE COMPANY ENCOURAGES YOU TO REFER TO WWW.INVESTOR.GOV. 

 

The Company is following the “Offering Circular” format of disclosure under Regulation A.

 

The date of this Offering Circular is August 1, 2019.

 

 3 of 79 
 

 

IMPORTANT NOTICES TO INVESTORS

 

INVESTMENT IN REAL ESTATE INVOLVES A HIGH DEGREE OF RISK, AND INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.

 

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER MADE BY THIS OFFERING CIRCULAR, NOR HAS ANY PERSON BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS OFFERING CIRCULAR, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR ANY PERSON TO WHO IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER SINCE THE DATE HEREOF.

 

THIS OFFERING CIRCULAR MAY NOT BE REPRODUCED IN WHOLE OR IN PART. THE USE OF THIS OFFERING CIRCULAR FOR ANY PURPOSE OTHER THAN AN INVESTMENT IN SECURITIES DESCRIBED HEREIN IS NOT AUTHORIZED AND IS PROHIBITED.

 

THE OFFERING PRICE OF THE SECURITIES IN WHICH THIS OFFERING CIRCULAR RELATES HAS BEEN DETERMINED BY THE ISSUER AND DOES NOT NECESSARILY BEAR ANY SPECIFIC RELATION TO THE ASSETS, BOOK VALUE OR POTENTIAL EARNINGS OF THE ISSUER OR ANY OTHER RECOGNIZED CRITERIA OF VALUE.

 

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

 

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

THE COMPANY WILL BE PERMITTED TO MAKE A DETERMINATION THAT THE PURCHASERS OF SHARES IN THIS OFFERING ARE “QUALIFIED PURCHASERS” IN RELIANCE ON THE INFORMATION AND REPRESENTATIONS PROVIDED BY THE PURCHASERS REGARDING THE PURCHASERS’ FINANCIAL SITUATION. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, THE COMPANY ENCOURAGES YOU TO REVIEW RULE 251(D)(2)(I)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, THE COMPANY ENCOURAGES YOU TO REFER TO WWW.INVESTOR.GOV. 

 

 4 of 79 
 

 

STATE LAW EXEMPTION AND INVESTOR SUITABILITY REQUIREMENTS

 

The Preferred Shares are being offered and 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 the Preferred Shares offered hereby are offered and sold only to “qualified purchasers” or at a time when the Preferred Shares 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 in the Preferred Shares 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, the Company reserves the right to reject any investor’s subscription in whole or in part for any reason, including if the Company determines in its sole and absolute discretion such investor is not a “qualified purchaser” for purposes of Regulation A. 

 

To determine whether a potential investor is an “accredited investor” for purposes of satisfying one of the tests in the “qualified purchaser” definition, the investor must be a natural person who has:

 

1.an individual net worth, or joint net worth with the person’s spouse, that exceeds $1,000,000 at the time of the purchase, excluding the value of the primary residence of such person; or

 

2.earned income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

 

 

If the investor is not a natural person, different standards apply. See Rule 501 of Regulation D for more details.

 

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The following table of contents has been designed to help you find important information contained in this Offering Circular.

The Company encourages you to read the entire Offering Circular.

 

TABLE OF CONTENTS

 

IMPORTANT NOTICES TO INVESTORS 4
STATE LAW EXEMPTION AND INVESTOR SUITABILITY REQUIREMENTS 5
TABLE OF CONTENTS 6
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 7
OFFERING CIRCULAR SUMMARY 10
THE OFFERING 17
RISK FACTORS 19
PLAN OF DISTRIBUTION 27
USE OF PROCEEDS 29
DESCRIPTION OF BUSINESS 34
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 44
PLAN OF OPERATIONS 45
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES 50
COMPENSATION OF MANAGEMENT AND DIRECTORS 53
PRINCIPAL SHAREHOLDERS 53
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 54
SHAREHOLDER RIGHTS UNDER THE COMPANY’S ARTICLES OF INCORPORATION AND BYLAWS 60
FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE COMPANY 65
LEGAL MATTERS 67
EXPERTS 67
ADDITIONAL INFORMATION 68
PART FS - INDEPENDENT AUDITOR'S REPORT 71

PART FS - AUDITED FINANCIAL STATEMENT AS OF DECEMBER 31, 2018

73

PART FS - NOTES TO AUDITED FINANCIAL STATEMENT AS OF DECEMBER 31, 2018

76
PART III - EXHIBITS 78
SIGNATURES 79

Exhibit 1 – Managing Broker Dealer Agreement

Exhibit 2 – Articles of Incorporation and ByLaws

Exhibit 4 – Form of Subscription Agreement

Exhibit 6A(i) – Advisory Agreement

Exhibit 6A(ii) – Asset Management Agreement

Exhibit 11(i) – Consent to Use Legal Opinion

Exhibit 11(ii) – Consent of Independent Auditor

 

Exhibit 12 – Legal Opinion

 

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 

 

Some of the statements under “Offering Circular Summary,” “Risk Factors,” “Description of Business”, “Plan of Operations,” and elsewhere in this Offering Circular constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” or the negatives of these terms or other comparable terminology. In this Offering Circular, unless the context indicates otherwise, references to “we”, “our”, and “the Company” refer to Tuscan Gardens Senior Living Communities, Inc.

 

The forward-looking statements are based on the Company’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to the Company. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to the Company or are within its control. If a change occurs, its business, financial condition, liquidity and results of operations may vary materially from those expressed in its forward-looking statements. You should carefully consider these risks before you make an investment decision with respect to the Preferred Shares, along with the following factors that could cause actual results to vary from the Company’s forward-looking statements:

 

· This is a blind pool offering as the Company has yet to identify any specific assets to acquire with the Net Proceeds of this Offering.

 

·The Company has no track record, and has yet to commence operations.

 

· While Company affiliates have ownership interests in a variety of senior living facilities, none of the Company Affiliates’ referenced investments in the “Company Affiliates’ Ownership Interests in Senior Living Facilities” section offer conclusive predictive validation of management’s ability to realize target returns for the Company as none have been liquidated and are all still in lease-up or transition.

 

·The Company’s activities have been limited to developing its business and financial plans. The Company will not have the necessary capital to develop or execute its business plan until it is able to secure financing. There can be no assurance that such financing will be available on suitable terms. Even if it raises 100% of the Offering, the Company may not have sufficient capital to execute its business plan or begin generating substantial revenues from operations.

 

·The Company’s business plan is untested, and its management team has a limited track record. If the Company is unable to execute its business plan, it will not be able to generate any revenues and its results of operations would be adversely affected.

 

·The Company’s management team has limited experience or track record in real estate financing, development, and acquisition of projects.

 

· The Preferred Shares are non-voting shares.

 

·The Company’s revenue is based on the successful launch and exit of its projects. If the Company is unable to attract sufficient investor interest in its projects, it will not be able to launch its projects and generate revenue.

  

·You will not have any interest in, and your investment will not be secured by any Company Properties. Any returns on your investment will depend solely on the results of operations of the Company Properties.

 

·Your returns on an investment will depend on the successful development or acquisition, results of operations, and profitable disposition of Company Properties.

 

·The Company’s assessment of the merits of any identified projects under consideration may be inaccurate, which may negatively affect its results of operations.

 

·The Company will not proceed to release funds unless it is successful in raising the specified Minimum Offering Amount.

 

·Timing of development in real estate-related projects is inherently uncertain and any delays in the development or acquisitions of Company Properties will adversely affect your investment.

 

·There is no current basis for you to evaluate the possible merits or risks of the Company’s business.

 

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·The Company may not successfully implement the exit strategy, in which case investors may not experience any capital appreciation from the sale of their Preferred Shares.

 

·The Company may not generate sufficient income to fund Preferred Dividends and there is a risk that the Company may never pay any dividend. Additionally, the Company may use other sources including borrowings and sales of assets. If it pays Preferred Dividends from sources other than its cash flow from operations, it will have less funds available for investments and your overall return may be reduced.

 

·The Company’s investments in real estate will be subject to the risks typically associated with real estate.

 

·The Company’s future performance is difficult to evaluate as it has not commenced operations.

 

· As Tuscan Gardens Capital Partners, LLC (“Sponsor”) will exercise complete control over the Company, it will have the ability to make decisions regarding (i) changes to share classes without shareholder notice or consent, (ii) making changes to the Company’s Articles of Incorporation as to the issuance of additional common stock and preferred stock, including to itself, (iii) employment decisions, including compensation arrangements; and (iv) the decision to enter into material transactions with related parties.

 

· The Company’s Articles of Incorporation, Bylaws, and Subscription Agreement, all provide mandatory binding arbitration provisions that, unlike in judicial proceedings, are subject to determination by an arbitrator, not a judge, who is not necessarily governed by the same standards. In light of that, there is a risk that an arbitrator will not view the contract or the law in the same way a judge would and may grant a remedy or award relief that the arbitrator deems just and equitable and within the scope of the agreement of the parties or based on simple notions of equity, rather than the facts or the relevant law. Furthermore, there is a risk that an arbitrator may interpret the relevant agreements or facts without regard to legal precedent. That risk is exacerbated by the fact that it is more difficult to overturn or vacate an arbitration award, because the law supports confirmation of an arbitration decision which is not otherwise arbitrary or capricious; therefore, investors should consider the difficulty of reversing an arbitration award, once made.

 

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·The Company’s long-term growth depends upon its ability to retain and grow its investor base by successfully identifying and acquiring projects with attractive returns on investment. If the Company is unable to find such projects or if Company Properties do not produce the expected returns, it may be unable to retain or grow its investor base, and its operations and business could be adversely affected.

 

· The amount of capital to be raised by the Company through this Offering comprises approximately ten percent (10%) of the total amount needed to fund the acquisition, development, construction, and operation of Company Properties. The Company does not have a credit facility to finance the acquisition of real estate. It will use best efforts to obtain funds from one or more third parties to finance the acquisition, development, construction, and operation of Company Properties. Obtaining funds from third parties requires an increase in the amount of financing the Company will be obligated to repay. In addition, there is no certainty that funds from third parties will be available upon reasonable terms, if available at all.

 

·There has been no public market for the securities of the Company. The Preferred Shares will not be listed on any securities exchange. There will be no active market for the Preferred Shares.
 9 of 79 
 

 

OFFERING CIRCULAR SUMMARY

 

This summary highlights selected information contained elsewhere in this Offering Circular. This summary is not complete and does not contain all the information that you should consider before investing in Preferred Shares. You should carefully read the entire Offering Circular including the risks associated with an investment in the specific securities you are offered, which are discussed under the “Risk Factors” section of this Offering Circular, before making an investment decision. Some of the statements in this Offering Circular are forward-looking statements. See the section of this Offering Circular entitled “Cautionary Statement Regarding Forward-Looking Statements.” In this Offering Circular, unless the context indicates otherwise, references to “we”, “our”, and “the Company” refer to Tuscan Gardens Senior Living Communities, Inc.

 

Overview

 

Tuscan Gardens Senior Living Communities, Inc. (“Company”) is a newly formed Florida corporation, was organized on July 20, 2018. The Company expects to commence operations as soon as practicable after the information statement, of which this Offering Circular forms a part, has been qualified by the SEC.

 

The Company intends to invest in wholly-owned subsidiaries that develop (“Development Projects”), acquire (“Acquisition Projects”), or convert other real estate properties including hotels (“Conversion Projects”) into senior living rental communities ranging from $15,000,000 to $100,000,000 per community, consisting of independent living, assisted living and/or memory care for approximately fifty (50) to two-hundred and fifty (250) residents (“Company Properties”). The Company’s primary focus for purposes of Development Projects will be on southeastern markets, and for purposes of Acquisition Projects and Conversion Projects, will be on national markets, that it considers to have favorable risk-return characteristics. The Company, operating through wholly-owned special purpose entities (“SPE”) as real estate owner-operators, intends to create, operate and hold a portfolio of Company Properties on a long-term basis, approximating seven years, intends to create and operate a portfolio of Company Properties on a long-term basis, approximating seven years, and ultimately dispose of them to generate revenue for the Company. The Company is not a registered broker-dealer, an investment adviser, or a funding platform.

 

This is an initial offering by the Company on a “best efforts” basis for its Class A Non-Voting Preferred Shares (“Preferred Shares”). Company management (“Management”) will be making the investment decisions for the Company based on the management and business recommendations of an affiliate entity, Tuscan Gardens Advisor, LLC (“Advisor”). The ongoing operation of Company Properties will be overseen by an affiliate entity, Tuscan Gardens Senior Living Communities Asset Manager, LLC (“Asset Manager”). The Asset Manager and Advisor are both Florida limited liability companies. Tuscan Gardens Management Corporation (the “Management Corporation”), an affiliate entity is the manager of the Asset Manager and the manager of the Advisor and will be making the business decisions for the Asset Manager and Advisor.

 

Substantially all of the Company’s assets will be indirectly held by, and substantially all of its operations will be indirectly conducted through, wholly-owned community-specific limited liability subsidiaries (“Holdco”) which will be the beneficial owners of Company Properties through each Holdco’s investment in community-specific limited liability companies that will hold fee simple title to the real property (“Propco”), and community-specific limited liability companies that will operate the Company Property (“Opco”).

 

Under this structure, Tuscan Gardens Capital Partners, LLC (“Sponsor”), an affiliate of the Company, will be the sole common member (“Common Member”) of the Company, the Company will receive common membership units (“Common Units”) in each Holdco, and the Company will also invest as a preferred member, and receive preferred membership units (“Preferred Units”) in each Holdco. The Management Corporation will be the manager of all Holdco’s, Propco’s, and Opco’s. Each of the Company’s investments will be structured similarly.

 

The proceeds from the Offering may be used to (i) pay fees and expenses relating to the organization of the Company and the sale of the Preferred Shares, (ii) invest in community-specific Holdco’s which will invest in the development and acquisition of Company Properties, and pay expenses related to the acquisition of such investments, and (iii) establish working capital reserves for the Company to fund operating and other expenses of the Company. The Company expects to use the Offering proceeds to pay such amounts at such time and in such order as the Management deems, in its sole and absolute discretion, to be in the best interest of the Company.

 

The expenses of this Offering, including the preparation of this Offering Circular and the filing of this Offering Statement, estimated at $350,000, are being paid for on behalf of the Company by the Sponsor, and will be repaid to Sponsor from the Company’s working capital reserves, the timing of which shall be as Management deems, in its sole and absolute discretion, to be in the best interest of the Company. Until such time as Gross Offering Proceeds of $2,500,000.00 have been achieved, this repayment shall occur at a rate of i) 10.0% of Gross Offering Proceeds up to $1,500,000.00, and ii) 20% of Gross Offering Proceeds in excess of $1,500,000.00.

 

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Project Selection, Due Diligence and Feasibility Assessment

 

The Company intends to perform due diligence in variety of areas to assess the viability of potential projects. The Company’s diligence includes an evaluation of a potential project’s desirability based on: (1) overall market depth for senior living communities based on the age, need, and income qualified population in the property’s primary market area, (2) current and future market penetration based on current and forecast supply relative to the market depth, (3) household income and average home sale prices as these are the primary sources from which residents of Company Properties fund their living expenses, (4) five year forecast growth rate for senior population, and (5) the market position of the potential project relative to competitor price and quality. Once a project passes the Company’s preliminary due diligence, financial risks and returns are modeled to determine if the project is able to meet its financial projections and achieve Company return targets. This includes stress testing and sensitivity analyses on projected cash flows using financial models to gauge the project’s financial strength, rate sensitivity, occupancy and lease-up sensitivity, and exit capitalization rate sensitivity.

 

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Class A Non-Voting Preferred Shares  

 

The Company has established a preferred non-voting class of shares referred to as Class A Non-Voting Preferred Shares with $1,000 par value per share (“Preferred Shares”) and seeks to raise $50,000,000 through the sale of 50,000 Preferred Shares.  Preferred Shares will have the right to Preferred Dividends and Special Dividends. See “SHAREHOLDER RIGHTS UNTER THE COMPANY’S ARTICLES OF INCORPORATION AND BYLAWS”.

 

No dividends to holders of Preferred Shares are assured, nor are any returns on, or of, a purchaser’s investment guaranteed.  Dividends are subject to the Company’s ability to generate positive cash flow from operations.  All dividends are further subject to the discretion of the board of directors.  It is possible that the Company may have cash available for dividends, but the board of directors could determine that the reservation, and not distribution, of such cash by the Company would be in its best interest.

 

Services Performed by, and Compensation Paid to Affiliates

 

The Asset Manager, Advisor and other Sponsor affiliates (collectively “Company Affiliates”) will be engaged by the Company and its affiliates to perform various value add services for Management’s day to day management of the Company including the investment of its assets, the acquisition, development, financing and disposition of properties, and offering placement services. Company Affiliates will receive fees and compensation for such services as described in this section. None of the agreements for such services are the result of arm’s-length negotiations. The Company believes, however, that the terms of such arrangements are reasonable and are comparable to those that could be obtained from unaffiliated entities. The timing and nature of these fees could create a conflict between and among the interests of the Company Affiliates, the Company, and those of the Investors. Services performed by Company Affiliates include the following:

 

Property Management Services to the Company. Company’s affiliate, Tuscan Gardens Management Corporation (“Community Manager”), will be responsible for the day to day operation and management decisions for Company Properties under a community management agreement (“Community Management Agreement”) for each Company Property. Community Management Agreements will provide the Community Manager with a monthly community management fee equal to 5.0% of monthly Company Property revenue, plus reimbursement for various corporate resource costs including accounting, sales & marketing, information technology, and payroll processing.

 

Asset Manager Services to the Company. The Asset Manager is responsible for the oversight of day to day Company Property management decisions by the Community Manager, pursuant to an agreement between the Asset Manager and the Company (“Asset Management Agreement”). Under the Asset Management Agreement, the Company will pay the Asset Manager, on a monthly basis, an annual Asset Management Fee (the “Asset Management Fee”) equal to two (2.0%) percent of gross assets under management. In the event the Asset Management Fee is paid to the Asset Manager in connection with any community that is not ultimately acquired by the Company, such Asset Management Fee shall be promptly repaid by the Asset Manager to the Company. These amounts are expected to be funded with working capital reserves established with net offering proceeds prior to such time as the Company receives distributions from the Holdcos in amounts sufficient to pay such fees.

 

Placement Agent Services to the Company. Maitland Securities Inc. (“MSI”), a FINRA-registered broker-dealer, is a Sponsor Affiliate by virtue of it being owned by the Company’s Corporate Equity Officer and Director, Mr. Sean Casterline. MSI has entered into, or will enter into arrangements with the MBD for compensation and fees as a participating FINRA-registered broker-dealer under the MBD’s standard Participating Dealer Agreement attached as Exhibit 1. The compensations and fees paid to MSI will be consistent with those paid by the MBD to participating broker-dealers who are not Affiliates of the Company.

 

Organizational and Offering Expenses. The Company will reimburse the Asset Manager, the Advisor, or Company Affiliates for Organizational and Offering Expenses up to five (5.0%) percent of Maximum Offering Amount. As used herein, “Organizational and Offering Expenses” means any and all costs and expenses, exclusive of the Placement Fee, the Marketing Support Fee, the Dealer Manager Fee, and the Acquisition Fees incurred by the Company, the Asset Manager, the Advisor or any Company Affiliate in connection with the formation, qualification, organization and registration of the Company and the marketing, distribution and issuance of Preferred Shares, including, without limitation, the following: legal, accounting and escrow fees, costs of printing, amending, supplementing, mailing, and distribution costs; filing, registration, and qualification fees and taxes; personnel costs associated with processing Investor subscriptions, the preparation and dissemination of organizational and Offering documents and sales materials, and the attendance by the Company or Company Affiliates at sales meetings; telecopy and telephone costs, all advertising, promotional and marketing expenses, including the costs related to Investor and broker-dealer sales meetings or events paid or reimbursed by the Company; and bona fide due diligence expenses incurred by the Placement Agent and Participating Brokers. Approximately One Hundred Fifty Thousand ($150,000.00) Dollars of Organizational and Offering Expenses have been incurred by the Asset Manager and will be reimbursed by the Company from Offering Proceeds. The Company’s accounting policy, which complies with U.S. GAAP, Financial Accounting Standards Codification 720, provides that Organizational and Offering Expenses will be expensed as incurred.

 

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Advisor Services to the Company. In order to achieve its investment objectives, the Company will engage an advisor to oversee the Company’s acquisitions, developments, financing, and disposition activities including without limitation the negotiation and execution of all agreements pertaining to development, acquisition, financing, and disposition of the Company’s assets. Tuscan Gardens Advisors, LLC (the “Advisor”) will serve as the management and business advisor to the Company pursuant to an advisory agreement with the Company (the “Advisory Agreement”) to advise on all business matters of the Company pursuant to the Advisory Agreement. The Advisor is a wholly-owned, captive affiliate of Tuscan Gardens Management Group, LLC (“TGMG”), a Florida limited liability company, is not a registered investment advisor under the Investment Advisers Act of 1940, and exclusively provides management and business consulting, rather than investment advisory services, to the Company and its majority-owned affiliates which include Tuscan Gardens Senior Living Fund, LLC and Tuscan Gardens Senior Living Income Fund, LLC. TGMG is a real estate private equity company specializing in senior living community development and acquisitions. TGMG’s leadership has over 100 years of collective experience investing in income producing real estate including senior living communities, hospitality, retail, multifamily, industrial, restaurant and other real estate sectors. TGMG’s strategy is to hire the Community Manager to operate the senior living communities that it builds or acquires. TGMG, through its affiliates, manages assets for investors through various investment vehicles on behalf of retail investors, high net worth individuals and private equity investors. The Advisor may terminate the Advisory Agreement with or without cause and without penalty, by giving sixty (60) days’ prior written notice to the Company. Under the Advisory Agreement, the Advisor will receive the following compensation for its services:

 

Acquisition Fees. The Company will cause each respective Holdco to pay the Advisor acquisition fees (the “Acquisition Fees”) for the selection, purchase, underwriting, financing, development or construction of the communities equal to three (3.0%) percent of the Company’s prorata percentage of total Holdco preferred ownership interests multiplied by estimated Total Project Costs, as defined herein, upon the acquisition of each Company Property. In the event the Acquisition Fees are paid to the Advisor in connection with any property that is not ultimately acquired by the Company, such Acquisition Fees shall be promptly repaid by the Advisor to the Company.

 

Financial Guarantee Fee. The Company will cause each respective Holdco to pay the Advisor, on a monthly basis, an annual guarantee fee (the “Financial Guarantee Fee”) equal to three quarters of one (0.75%) percent of guaranteed amounts under total aggregate financing (“Guaranteed Amount”) for each Company Property for which Advisor or its affiliates provide financial or carve-out guarantees. The Company will pay the Advisor the Financial Guarantee Fee earned with respect to the Guaranteed Amount upon the execution of guarantees by Advisor or its affiliates at each Company Property. In the event the Financial Guarantee Fee is paid to the Advisor in connection with any Company Property that is not ultimately developed or acquired by the Company, such Financial Guarantee Fee shall be promptly repaid by the Advisor to the Company. These amounts are expected to be funded with working capital reserves established with Net Proceeds prior to such time as the Company receives distributions from the Holdcos in amounts sufficient to pay such fees.

 

Disposition Fees. The Company will cause each respective Holdco to pay the Advisor disposition fees (the “Disposition Fees”) for the disposition, recapitalization, or sale of Communities equal to three (3.0%) percent of the Company’s prorata percentage of total Holdco preferred ownership interests multiplied by the actual selling price or recapitalized amount, as defined herein, upon the sale or recapitalization of each Company Property. In the event the Disposition Fees are paid to the Advisor in connection with any Company Property that is not ultimately sold or recapitalized by the Company, such Disposition Fees shall be promptly repaid by the Advisor to the Company.

 

Reimbursement of Advisor Operating Expenses. The Management Corporation will cause each respective Holdco to pay the Advisor and its Affiliates, as applicable, for Advisor’s ongoing operating expenses incurred on behalf of the Company, the Holdcos or their affiliates. These amounts are expected to be funded with working capital reserves established with Offering proceeds prior to such time as the Company receives distributions from the Holdcos in amounts sufficient to pay such operating expenses. These amounts are estimated to be two (2.0%) percent of the Company’s prorata percentage of total Holdco preferred ownership interests multiplied by Total Project Costs.

 

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Development Services to the Company. The Company relies upon dedicated, affiliate development entities (“Devco”) to achieve on-time, on-budget completion of each Company Property it develops. These Devcos are responsible for the successful engagement with sellers, regulatory officials, and other parties necessary to secure land use entitlements, requisite development approvals and permits, as well as the oversight of general contractors. In consideration for these services, the Company will cause each respective Propco to pay the applicable Devco a site development fee in an amount equal to five (5.0%) to seven (7.0%) percent of Total Project Costs (including financing costs and interest expense, pre-opening operating expenses and working capital reserves) for design and development services. Upon commencement of construction at each site, or sooner as provided for under the applicable development agreement between each respective Propco and the applicable Devco, an amount not to exceed seventy-five (75%) percent of this fee will be due and payable for the respective Company Property, with the balance paid in installments over the projected site construction period, which is typically eighteen (18) to twenty-four (24) months, subject to any additional lender requirements.

 

Conflicts of Interest

 

There are conflicts of interest between and among the Company, the Asset Manager, the Advisor, the Sponsor, the Devco, and other Company Affiliates. Asset Manager and Advisor may provide services to other affiliate companies in addition to the Company. All of the agreements and arrangements between and among Company Affiliates and the Company, including those related to compensation, are not the result of arm’s-length negotiations. The Company will try to balance the interests of Company Affiliates with the interests of the Company. However, to the extent that the Company takes actions that are more favorable to Company Affiliates than the Company, these actions could have a negative impact on the Company’s financial performance and, consequently, on the dividends to holders of Preferred Shares and the value of those securities. The Company has not adopted, and does not intend to adopt in the future, either a conflicts of interest policy or a conflicts resolution policy.

 

The Company relies on key real estate professionals including Larry Pino, William N. Johnston, and Christopher P. Young (collectively “Management”), for the day-to-day operation of its business. As a result of their interests in other Company Affiliates, their obligations to other investors, and the fact that they engage in and will continue to engage in other business activities on behalf of themselves and others, Management will face conflicts of interest in allocating their time among us, the Asset Manager, the Advisor, other Company Affiliates, and other business activities in which they are involved. However, the Company believes that the Asset Manager, Advisor, and their respective affiliates have sufficient real estate professionals to fully discharge their responsibilities to the Company.

  

Demographics of Senior Living

 

The demographic shift in the United States is noteworthy. Over the next twenty years, the 65-or-over age cohort is anticipated to grow some sixty-five percent (65%) from 55 million to 79 million seniors. That will result in over 50 million households headed up by someone in the 65-or-over age category. By 2035, that number will morph to one out of every three American households headed up by somebody who is over the age of 65 (JCHS, 2016). Noteworthy is not only the significance of the projections recently made, but that it is tracking earlier estimates provided by the Administration on Aging (AoA, 2009), suggesting that the 85-and-older age cohort will increase from 4.2 million in 2007 to 5.7 million in 2010 (a 6% increase) (Yokum & Wagner, 2011).

 

To the extent that the leading edge of this tsunami of the senior population is driven by the coming of age of the large baby boom generation (born 1946-1964), more than half of that growth will occur in just the next decade alone (JCHS 2016). As those baby boomers pass the age of 80, between 2025 and 2035, the 80-and-over population will swell one-hundred percent from 12 million to 24 million with 70% of that growth spawned during the last decade. That explosive growth will shift the age distribution in the United States to 1 in 5 – 20% -- of the population aged 65 and over by 2035, a 40% percent increase from the distribution the country currently experiences (JCHS 2016). The following charts provide a graphic portrayal of the above (JCHS, 2016).

 

To put the growth of the senior population in perspective, it is sufficient to simply compare more recent populations against historical ones. For example, the population of the 65-75 age cohort in 2007, was 8.8 times greater than in 1990; the population of the 75-84 age cohort in 2007 was 17 times greater than in 1990; and the population of the 85-and-older age cohort in 2007 was 45 times greater than in 1990 (Yokum & Wagner, 2011).

 

The simple size of the baby boom generation is certainly a critical factor in the graying of America; however, it is not the only factor. Increasing life expectancy precipitated by advances in medical care, more attention to healthier lifestyles, and ongoing successful outcomes in treating chronic and fatal diseases have all had a cumulative effect on increasing life expectancy. Life expectancy for individuals born in 2003 reached an all-time high of 77.3 years. Punctuating the divergence between the two is the life expectancy of an individual who reaches the age of 65 in 2002 who can expect an additional 18.2 years, for a consolidated total of 83.2 (AoA 2005). However, an individual reaching the age of 85 has an additional life expectancy of 6.0 years (AoA 2003), for a consolidated total of 91 (AoA, 2003; Yokum & Wagner, 2011).

 

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Along the same lines as the increases in demographics of an aging population, the incidence of cognitive impairment affecting the elderly will also continue to grow, which is self-evident inasmuch as dementia and other forms of cognitive impairment primarily affect populations above 65 and become pronounced above the age of 85. While it is good news for everyone that the per capita rate of dementia prevalence has declined over the past several decades, that bright light is dimmed by the simple reality of the hypergrowth in the 65-or-over population through 2035.

 

For instance, if dementia rates continue to climb at half the rate they did from 2000-2012, we would still have some 6 million people over age 65 with dementia and another 14 million having some form of cognitive impairment. In fact, it is estimated that based on current rates, the number of older adults with dementia may reach 7.6 million and the number with cognitive impairment – broad forms of Criteria for Dementia (CIND) – will reach 15.5 million by 2035.

 

According to the Commission on Long-Term Care Report to the Congress (2013) U.S. Census Bureau, Federal Reserve Survey of Consumer Finances, the number of Americans needing long-term care is expected to grow from its 2010 level of twelve million people, to twenty-seven million people by the year 2050. Additionally, this report concluded that sixty-nine percent of Americans aged sixty-five and older will require some degree of Long-Term Care.

 

In the recent book Big Shifts Ahead: Demographic Clarity for Business (Advantage Media Group, Copyright © 2016 by John Burns Real Estate Consulting, LLC) demographic researcher John Burns predicted that by 2025, the number of people aged 65 or older will increase 38% over a ten-year period from 48 million in 2015 to 66 million in 2025. Furthermore, he concluded that the number of people turning 65 each year is trending higher, with 3.5 million people turning 65 compared in 2016 compared to 2.2 million turning 65 in 2006.

 

According to the 2017 National Investment Center Data Service (“NIC”) ASHA 50 report, the market’s ability to absorb senior housing inventory growth (new construction) has remained relatively consistent over the five-year period from Q2 2014 to Q3 2017 as Senior Housing Occupancy has ranged from 89% to 91%, with average assisted living and memory care annual rental growth ranging from 2% to 3%.

 

Given the increasing rate at which Americans are turning 65 years old each year, and the forecast growth to twenty-seven million Americans expected to need long-term care by 2050, the Company believes that the industry demographics are compelling.

 

Competitive Strengths

 

The Company’s competitive strengths stem from the Management’s experience and understanding of the compelling growth trends in the senior housing market, and proven ability to successfully develop and acquire senior living communities that address this growing need based on the aging of Americans, especially the baby boomers who currently represent the country’s largest demographic segment.

 

As of the date of this Offering Circular, total senior living communities developed or acquired by Company Affiliates consist of three Class A luxury communities totaling approximately $150 million developed under the Tuscan Gardens® brand in Venice, Florida (opened November 2016), Palm Coast, Florida (opening December 2018), and Delray Beach, Florida (opening January 2020). Additionally, Company Affiliates hold a 15% interest in a $100 million portfolio of Class A luxury communities known as the Living Well Lodges that were acquired in January 2016 for approximately $100 million.

 

Expansion of Company Focus to include the Mid-Market in Addition to the Class A Luxury Segment 

 

The Company intends to build upon Management’s experience developing, acquiring, and operating Sponsor Affiliate luxury Class A senior living communities, by continuing to focus on the development of luxury, Class A senior living communities in southeastern markets, as well as expanding on a national basis into the underserved mid-market segment that offers greater affordability in response to an emerging social crisis for aging Americans unable to afford $5,000 or more for senior living communities.

 

This growing, underserved mid-market segment known as “the missing middle” represents a demographic segment that can neither afford Class A luxury senior living communities, nor is eligible for government income-based subsidies that are available to residents of low-income senior living communities. By pursuing cost-effective acquisitions, and conversions of other real estate properties including hotels for adaptive reuse into senior living rental communities to serve this market segment on a national basis, Management believes it can provide a compelling, differentiated offering to residents that i) satisfies their need for safety and care, ii) provides a positive resident experience at more affordable levels than the development or acquisition of purpose-built senior living communities, and iii) achieves operating margins that are consistent with Sponsor Affiliate properties through reduced marketing costs due to shorter lease-up periods driven by favorable demand elasticity at lower monthly rates.

 

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Corporate Information

 

The Company’s executive offices are located at 189 S. Orange Ave, Suite 1650, Orlando, FL 32801. The Company’s telephone number is (407) 206-6577. 

 

Reporting Requirements Under Tier 2 of Regulation A

 

Following this Tier 2 Regulation A offering, the Company will be required to comply with certain ongoing disclosure requirements under Regulation A. The Company will be required to file (i) an annual report with the SEC on Form 1-K, (ii) a semi-annual report with the SEC on Form 1-SA, (iii) current reports with the SEC on Form 1-U, and (iv) a notice under cover of Form 1-Z. The necessity to file current reports will be triggered by certain corporate events. Parts I and II of Form 1-Z will be filed by the Company if and when it decides to and is no longer obligated to file and provide annual reports pursuant to the requirements of Regulation A.

 

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THE OFFERING

 

Issuer: Tuscan Gardens Senior Living Communities, Inc.
   
Securities Offered: Class A Non-Voting Preferred Shares (“Preferred Shares”)
   
Par Value: $1,000.00 per share
   
Minimum Purchase: Ten (10) Preferred Shares or Ten Thousand ($10,000.00) Dollars
   
Minimum Offering
Amount:
500 Preferred Shares ($500,000)
   
Maximum Offering
Amount:
50,000 Preferred Shares ($50,000,000)
   
Escrow: Proceeds received from Investors will be escrowed by Securities Transfer Corporation, 2901 N. Dallas Parkway, Suite 380, Plano, Texas 75093 (“Escrow Agent”) until a minimum of $500,000 has been received for the Preferred Shares.
   
  In the event that the Minimum Offering Amount is not sold within 180 days, all funds will be refunded by the Escrow Agent to Investors without interest or deduction.
   
Offering Price: $1,000 per Preferred Share (“Offering Price”)
   
Offering Period: To begin as soon as practicable after the offering statement, of which this Offering Circular forms a part, has been qualified by the SEC, and will terminate September 30, 2020 (“Offering Period”).
   
  The Offering Period may be extended, or the Offering terminated at any time by the Company in its sole discretion.  
   
Dividend Rights:

No dividends to holders of Preferred Shares are assured, nor are any returns on, or of, a purchaser’s investment guaranteed.  Dividends are subject to the Company’s ability to generate positive cash flow from operations.  All dividends are further subject to the discretion of the board of directors.  It is possible that the Company may have cash available for dividends, but the board of directors could determine that the reservation, and not distribution, of such cash by the Company would be in its best interest.

 

Subject to declaration by the Board of Directors on no less than a quarterly basis, acting in its sole discretion based on the best interests of the Company, the Company will seek to provide ongoing income to Investors in the Preferred Shares, paid or accrued monthly based on an 8.0% cumulative, non-compounded annual return on $1,000.00 par value (“Preferred Dividend”), plus potential capital appreciation through additional dividends (“Special Dividends”) based on fifty (50%) percent participation in the net proceeds generated by the Company from the Holdco disposition of Company Properties.

   
 

Any unpaid Preferred Dividends will accrue monthly at a non-compounded rate based on an 8.0% cumulative, annual return on par value, in whole or in part, if and when a distribution or dividend is declared by the Board of Directors, acting in its sole discretion based on the best interests of the Company, and as more specifically set out in THE COMPANY’S ARTICLES OF INCORPORATION and BYLAWS, attached as Exhibit 2.

 

In addition, Special Dividends may be declared and authorized for payment by the Board of Directors, acting in its sole discretion based on the best interests of the Company, and as more specifically set out in THE COMPANY’S ARTICLES OF INCORPORATION and BYLAWS, attached as Exhibit 2.

   
Voting Rights:  None
   
Dilution:  Not applicable
   
Liquidation Rights: As set out in THE COMPANY’S ARTICLES OF INCORPORATION and BYLAWS, attached as Exhibit 2.  
   
Conversion Rights: None
   
Pre-emptive Rights: None
   
Sinking Fund Provision: None

 

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Liability for Further
Calls:
None
   
Gross Proceeds: The proceeds from this Offering prior to the payment of any commission, offering expenses, Advisor operating expenses, legal fees, fund management, supervisory and accounting services, and other working capital reserves (“Gross Proceeds”).
   
Net Proceeds: Gross Proceeds, less selling commission (10.0% of Gross Proceeds up to $20,000,000 and 9.0% of Gross Proceeds above $20,000,000), organization and offering expenses (5% of Maximum Offering Amount), Advisor operating expenses (2% of Gross Proceeds) (“Net Proceeds”).
   
Net Proceeds Allocation: Based on raising the Maximum Offering Amount, the Company intends to initially allocate 95% of Net Proceeds to the acquisition, development and construction of Company Properties, and 5% of Net Proceeds to legal fees, fund management, supervisory and accounting services, and other working capital reserves.  Management may change this allocation at any time based on the actual Net Proceeds of the Offering and Management’s sole determination of what is in the best interests of the Company.
   
Risk Factors: Investing in the Preferred Shares involves a high degree of risk.  See “Risk Factors” beginning on page 19.
   
Transfer Agent: Securities Transfer Corporation will act as the Company’s transfer agent, registrar and paying agent.
   
Liquidity: There is no public market for the Preferred Shares.

 

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RISK FACTORS

 

An investment in Preferred Shares of the Company involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this Offering Circular, before purchasing securities offered by the Company. Any of the following factors could harm the Company’s business and future results of operations and could result in a partial or complete loss of your investment. This could cause the value of Preferred Shares to decline significantly, and you could lose part or all of your investment. Some statements in this Offering Circular, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”

 

RISKS RELATED TO THE OFFERING

 

This Offering is being made pursuant to the rules and regulations under Regulation A of the Securities Act.

 

The legal and compliance requirements of these rules and regulations, including ongoing reporting requirements related thereto, are relatively untested. 

 

Arbitrary Determination of the Offering Price.

 

The Offering Price has been arbitrarily determined by the Company and may not bear any relationship to assets acquired or to be acquired or the book value of the Company or any other established criteria or quantifiable indicia for valuing a business. Neither the Company nor Sponsor represents that the Preferred Shares have or will have a market value equal to their Offering Price or that the Preferred Shares could be resold (if at all) at their original Offering Price.

 

No market currently exists for the Preferred Shares.

 

There is a risk that no market for the Preferred Shares will ever exist and as a result, an investment in the Company would be illiquid in the event investors were to desire to liquidate their Preferred Share interests. While the Company may attempt to effectuate a liquidity event within approximately seven to ten years from the completion of this Offering, it is not required to effectuate a liquidity event by any specific date. If investors were to attempt to sell their Preferred Shares prior to the dissolution of the Company through secondary market sales or otherwise, they might have to sell them at a discount to their fair value as there is no certainty that they can be sold for full market value or that the Preferred Shares may be sold at any price.

 

RISKS RELATED TO THE COMPANY’S BUSINESS PLAN

 

General Risk of Investment in the Company.

 

The economic success of the Company will depend upon the results of operations of the Company Properties. The results of operations are subject to those risks typically associated with the operation of senior and assisted living facilities, including significant regulation and legislation of senior care facilities, expenses associated with specialized services and staffing and risk of liability with respect to the daily care of residents, assistance performing everyday functions and the administration of medication. No assurance can be given that the Opcos will successfully operate the Company Properties or will be able to pay rents under their leases with Propcos. Ultimately the success of the Company Properties will depend on the ability of the facility tenants to pay rents and fees to the Opcos operating the Company Properties. Fluctuations in occupancy rates, rent schedules and operating expenses can adversely affect operating results, which could result in reduced cash flows at one or more Company Properties and defaults under one or more of the Propcos’ leases and under the Propcos’ financing arrangements. If an Opco defaults on a lease or a Propco defaults under a financing arrangement, the Company’s investment in the underlying Company Property and the value of your investment in the Company. In addition, even if adverse operating results do not result in lease or financing defaults, they will likely reduce the ability of the Company to pay Preferred Dividends and will make the sale or refinancing of a Company Property more difficult, reducing the Company’s ability to pay Special Dividends.

 

Preferred Shares Have No Voting Rights.

 

Management will have sole power and authority over the business and management of the Company. Investors will not have the right to vote on any matters, and, therefore, Investors will not have an active role in the Company’s management and will be unable to implement a change in the Management team or the Management team’s decisions.

 

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Dividend Payments on the Preferred Shares are Not Guaranteed.

 

Although dividends on the Preferred Shares are cumulative (but non-compounding), the Company’s board of directors must approve the actual payment of the distributions. The board of directors can elect at any time or from time to time, and for an indefinite duration, not to pay any or all accrued distributions. The board of directors could do so for any reason, and may be prohibited from doing so in the following instances:

 

•       poor historical or projected cash flows;

 

•       the need to make payments on the Company’s indebtedness;

 

•       concluding that payment of distributions on the Preferred Shares would cause the Company to breach the terms of any indebtedness or other instrument or agreement; or

 

•       determining that the payment of distributions would violate applicable law regarding unlawful distributions.

 

Adverse economic conditions may negatively affect the Company’s results of operations and, as a result, its ability to make distributions to Investors or to realize appreciation in the value of Company Properties.

 

The Company’s operating results may be adversely affected by market and economic challenges, which may negatively affect its returns and profitability and, as a result, its ability to make distributions to Investors and the value of an investment in the Company. These market and economic challenges include, but are not limited to, any future downturn in the U.S. economy and the related uncertainty in the financial and credit markets.

 

The length and severity of any economic slow-down or downturn cannot be predicted. The Company’s operations and, as a result, its ability to make distributions to holders of the Preferred Shares could be materially and adversely affected to the extent that an economic slow-down or downturn is prolonged or becomes severe.

 

The Company is a Blind Pool Investment without Operation and has no Track Record.

 

The Company has yet to identify any specific assets to acquire with the Net Proceeds of this Offering, has no track record, and has yet to commence operations. While Company Affiliates have ownership interests in a variety of senior living facilities, none of the Company Affiliates’ referenced investments in the “Company Affiliates’ Ownership Interests in Senior Living Facilities” section offer conclusive predictive validation of Management’s ability to realize target returns for the Company as none have been liquidated and are all still in lease-up or transition.

 

Risks of Paying Development Fees Prior to Stabilization of the Company Properties.

 

The Development Agreements provide for payment of a portion of the Development Fees from the Company to the community specific Devco upon commencement of construction or sooner, as provided for under the applicable development agreement between each respective Propco and the applicable Developer Entity, and payment of the balance of the Development Fees from the Company to the community specific Devco evenly over the construction periods. If construction commences, the community specific Devco will receive Development Fees. If the Company is unable to raise enough capital or obtain permanent financing to complete the development of a Company Property, the community specific Devco is not required to repay the Company for Development Fees it has received pursuant to the applicable Development Agreement. In addition, pursuant to the Development Agreements, the Propco’s are obligated to pay such remaining fees. If the Company does not have sufficient capital to fund capital contributions to the Holdcos for such purposes, the Company may be required to liquidate assets to meet the Holdco and Propco obligations.

 

Investment Risk.

 

There can be no assurance that the Company will be able to achieve its investment objectives or that investors will receive any dividend or any return of their capital. Investment results may vary substantially over time, and as a result, investors should understand that the results of a particular period will not necessarily be indicative of results in future periods.

 

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Business Plan is Dependent Upon the Company’s use of Leverage.

 

Even if it raises the Maximum Offering Amount pursuant to this Offering, the Company will raise only ten percent (10%) of the total funds necessary to execute its business plan, including the acquisition, development, construction and operation of the Company Properties. Therefore, the Company must seek additional financing in order to acquire Company Properties, and the Company Properties will be leveraged. The Company does not a have a credit facility to finance the property acquisitions and has not secured commitments for any loans. There is no guarantee additional financing will be available on terms suitable to the Company and its Investors. If the company is able to secure additional financings, no assurance can be given that future cash flow will be sufficient to make the debt service payments on any loans and to cover all operating expenses. If the revenues from Company Properties are insufficient to pay debt service and operating costs, the Company may be required to seek additional working capital, and there can be no assurance that such additional funds will be available. In the event additional funds are not available, a lender may foreclose on Company Property and Investors could lose their investment. In addition, the degree to which the Company is leveraged could have an adverse impact on the Company, including (i) increased vulnerability to adverse general economic and market conditions, (ii) impaired ability to expand and to respond to increased competition, (iii) impaired ability to obtain additional financing for future working capital, capital expenditures, or general corporate or other purposes and (iv) requiring that a significant portion of cash provided by operating activities be used for the payment of debt obligations, thereby reducing funds available for operations and distributions to Investors.

 

Dependence Upon Key Management Personnel.

 

The Company will depend upon the efforts, experience, diligence, skill and network of business contacts of the Management team; therefore, the Company’s success will depend on their continued service. The departure of any of the Company’s key Management personnel could have a material adverse effect on performance. If any of the Company’s key personnel were to cease their employment, the Company’s operating results could suffer.

 

The Company believes its future success depends upon Management’s ability to hire and retain highly skilled managerial, operational and marketing personnel. Competition for such personnel is intense, and the Company cannot assure that it will be successful in attracting and retaining such skilled personnel. If the Company loses or is unable to obtain the services of key personnel, the Company’s ability to implement its investment strategies could be delayed or hindered, and the value of an investment in the Company may decline.

 

Reliance on Management.

 

The Company’s ability to achieve its investment objectives is largely dependent upon the performance of Management, the Sponsor, the Advisor and the Asset Manager in selecting additional investments for the Holdcos to acquire, securing financing arrangements, developing the Company Properties and operating the Company Properties. The investors generally have no opportunity to evaluate the terms of transactions or other economic or financial data concerning any investments and must rely entirely on the ability of Management and the Advisor. Management and the Advisor may not be successful in identifying suitable investments on financially attractive terms, and the Company may not be successful in achieving its investment objectives.

 

RISKS RELATED TO INVESTMENTS IN REAL ESTATE

Competition in the Market.

 

Providers of senior housing and services compete for residents primarily on the basis of quality of care, price, reputation, physical appearance of the communities, services offered, family and physician preferences and location. While the Company believes that the Company Properties will be successful in attracting residents, there can be no assurance that the Opcos and the Management Corporation will successfully market them or maintain occupancy. The Company Properties’ potential competitors in this industry include national, regional and local operators of assisted living communities, long-term care residences, rehabilitation hospitals, extended care centers and skilled nursing facilities, retirement communities, independent living communities, and home healthcare providers. Competing senior living facilities in the market and submarket surrounding the Company Properties may reduce demand for the Company Properties, decrease occupancy rates and adversely affect the financial performance of the Company Properties, which would ultimately affect the Opcos’ ability to pay rent to the Propcos, the Propcos’ ability to meet debt service on their financings, and cash flow available for distribution to Investors.

 

Availability of Future Financing and Market Conditions.

 

In order to fund the acquisition, development, construction and operation of Company Properties, the Company and the Propcos must secure financing from one or more third party lenders. Market fluctuations in real estate financing may affect the availability and cost of funds needed for the acquisition, development, construction and operation of Company Properties. Moreover, credit availability has been restricted in the past and may become restricted again in the future. Restrictions upon the availability of financing or high interest rates for loans could adversely affect the ability of the Company and the Propcos to finance the business plan on terms agreeable to the Company and the Investors. In addition, if acquisition financing for senior living facilities were to become restricted in the future, opportunities to sell the Company Properties and potential sale prices may be reduced, adversely affecting the ability of the Company to pay Special Dividends.

 

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Tenant Defaults.

 

The Opcos are special-purpose entities with limited capitalization whose sole assets will be their leasehold interests in the Company Properties and their agreements to operate the applicable Company Property. Therefore, the Propcos’ abilities to pay rent under their leases with the Company will depend solely on the operations of their respective Company Property. If the operations of the Company Properties do not support the rent payments under the leases, then it is unlikely the Opcos will have another source of revenue sufficient to support the payment of the rent. If one or more of the Opcos are unable to pay rent to the applicable Propco(s), then it is likely that the Propco(s) affected would be unable to pay the debt service on their financings and the Company’s investment in the applicable Company Property(ies) would be materially and adversely affected.

 

Development or Construction Difficulties or Delays.

 

Some Company Properties will require development and construction, and the Company’s ability to complete the development and construction will depend upon a variety of factors, most of which will be outside the Company’s control or the control of the entity supervising the construction. These factors include, but are not limited to:

 

· difficulties or delays in obtaining building, occupancy, licensing and other required governmental permits and approvals;
· failure to complete construction on budget and on schedule;
· unforeseen engineering, environmental or geological problems;
· failure of third-party contractors and subcontractors to perform under their contracts;
· shortages of labor or materials that could delay construction or make it more expensive than budgeted;
· adverse weather conditions that could cause delays;
· unionization or work stoppages;
· force majeure events or other acts of God;
· increased costs resulting from changes in general economic conditions or increases in the costs of materials; and
· increased costs as a result of addressing changes in laws and regulations or how existing laws and regulations are applied.

 

Development or Construction Defects.

 

The Company Properties may contain newly constructed improvements and may be subject to construction defect claims that only reveal themselves over time. To the extent that warranties from contractors do not cover any such defects and the Company is not successful recovering damages from such contractors, it is possible that the Company would be responsible to repair any such defects. If the Company is required to pay for the repair of any construction defects, the projected return to the Company and therefore the Investors may be reduced.

  

 

RISKS RELATED TO INVESTMENTS IN SENIOR LIVING FACILITIES

 

All Governmental Approvals May Not Be In Place With Respect To The Management Of The Company Properties.

 

State laws in the jurisdictions of the Company Properties will generally require licensing and permits in order to run and manage senior care facilities. In some cases, the Holdcos may not have these licenses in their name when acquiring the properties and in those cases, will continue to use the previous owners’ licenses until the Holdcos receives licenses in their name. The Company has no control over the timely issuing of licenses by the state.

 

Owning and Operating Senior Care Facility Poses Significant Regulatory Uncertainties.

 

Owning and operating senior care facilities carries unique risks related to the senior care and healthcare industries. Such risks include: (i) the uncertainty of the regulatory environment and costs of providing care; (ii) uncertainty of reimbursement levels from government and private health insurance providers; (iii) lawsuits and liability regarding adequacy of care; and (iv) fluctuations in occupancy. All of these risks may make consistent revenue difficult to achieve or maintain.

 

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The Company May be Subject to Healthcare Reimbursement Law Liability.

 

Federal laws governing healthcare reimbursement programs provide for civil monetary penalties in the event of fraud or abuse with respect to billing submitted to such reimbursement programs. In the event of fraud or abuse by any management companies that the Company has engaged, such civil monetary penalties may be levied against the Company Properties and the Company.

 

Company Properties Are Subject to Extensive Regulatory Requirements.

 

The Company Properties may contain undiscovered violations of federal, state, or local laws, ordinances, or regulations affecting the Company Properties could subject the Company to significant liabilities. Numerous laws establish various health and environmental quality standards and provide penalties for violations thereof. Under certain laws and regulations, a current or previous owner or operator of real property may be liable for the cost of removal and remediation of hazardous or toxic substances or wastes on, under, in or emanating from such property. Such laws typically impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances or wastes. Certain laws, ordinances, and regulations may impose penalties on discharges into waters of the state, including groundwater. Under certain other laws, generators of hazardous or toxic substances or wastes that send such substances or wastes to disposal, recycling or treatment facilities may be liable for remediation of contamination at such Company Property. Other laws, ordinances, and regulations govern the generation, handling, storage, transportation, and disposal of hazardous and toxic substances and wastes, the operation and removal of underground storage tanks, the discharge of pollutants and employee health and safety. The business operations will be subject to numerous laws, ordinances, and regulations.

 

Certain laws and regulations, including those governing air emissions and underground storage tanks, are amended periodically to require compliance with new or more stringent standards as of future dates. The Company cannot predict what other environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist in the future. Compliance with new or more stringent laws or regulations, stricter interpretation of existing laws, or the future discovery of environmental conditions may require expenditures, all of which may be material.

 

General Affect of Economic Conditions and Government Reimbursement Programs upon Seniors.

 

While the Company intends only to operate private-pay Company Properties, nonetheless, Government reimbursement programs such as Medicare and Medicaid limit the costs that can be paid for senior living services in general. Economic downturns, softness in the housing market, lower levels of consumer confidence, reductions or declining growth of government entitlement programs, such as social security benefits, stock market volatility and changes in demographics could adversely affect the ability of seniors to afford the monthly resident fees or entrance fees for senior housing facilities. There may be limited ability for the Company to increase the underlying rents generated at the Company Properties. If the Company is unable to retain and attract seniors with sufficient income, assets or other resources required to pay the fees associated with senior living services and other services provided by the Company at the Company Properties, the occupancy rates could decline, which would adversely affect the financial condition and operating results of the Company Properties.

 

Limited Use of the Properties.

 

The Company Properties are designed for use as senior living facilities. In the event that a Company Property loses any licenses or permits required to operate as a senior living facility, or laws, rules, regulations or the interpretations thereof restrict the ability of the Company Property to operate as a senior living facility, the value of the Company Property could be adversely affected.

 

Volatility of Senior Living Industry.

 

The Company Properties are designed for use as senior living facilities. The senior living industry is a volatile industry and subject to greater risk than that typically associated with an investment in real estate. Applicable regulations governing senior living facilities generally require written resident lease agreements with each resident. Most of these regulations also require that each resident have the right to terminate the resident lease agreement for any reason on reasonable notice or upon the death of the resident. The Company cannot contract with residents to stay for longer periods of time, unlike typical apartment leasing arrangements with terms of up to one year or longer. In addition, the resident turnover rate in a senior living facility such as the Company Properties may be difficult to predict. If a large number of resident lease agreements at a Company Property terminate at or around the same time, and if the units remain unoccupied, then revenues and earnings could be adversely affected.

 

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Amenities as Potential Liabilities.

 

The Company Properties are improved with certain amenities. Because the residents at the Company Properties will be seniors, there is a higher risk of injury than for other real estate investments. Certain claims could arise in the event that a personal injury, death or injury to property should occur in, on, or around any of these improvements. There can be no assurance that particular risks pertaining to these improvements that currently may be insured will continue to be insurable on an economical basis or that current levels of coverage will continue to be available. The Company may be liable for any uninsured or underinsured personal injury, death or property damage claims.

 

Healthcare Legislation.

 

Each year, legislative proposals are introduced or proposed in Congress and in some state legislatures that could cause major changes in the health care system, nationally or at the state level. Healthcare, including the senior living sector, remains a dynamic, evolving industry. Returns to Investors could be adversely affected by any new governmental initiatives.

 

LEGAL, TAX AND REGULATORY RISKS 

 

Legal, tax and regulatory changes could occur during the lifetime of the Company that may adversely impact the Company’s and Company Affiliates’ taxation status and any distributions from Holdcos to the Company, and Preferred Dividends or Special Dividends to Investors.

  

Risk of Obtaining and Maintaining Licensure of Senior Housing Communities

 

State regulations require government approval for the necessary authorizations and permits to open and accept assisted living and memory care residents. Regulators regularly inspect facilities to ensure applicable standards are being maintained for the welfare of residents. Although the Sponsor has been successful in receiving and maintaining licensure for its Sponsor Affiliate facilities, there can be no assurance that such approvals will be obtained in a timely fashion or that regulatory changes which may result in additional costs, would not be occur.

 

Based on their inspections, regulators may revoke or suspend a license for a number of reasons, including: (a) an intentional or negligent act seriously affecting a facility resident’s health, safety or welfare; (b) misappropriation or conversion of resident property; (c) a determination by the regulator that the project owner lacks the financial ability to provide continuing adequate care to residents; or (d) a licensee’s failure during re-licensure to meet minimum licensing standards or applicable rules. Furthermore, regulators may seek an injunction in various circumstances, including to enforce applicable requirements against an assisted living community when a violation has not been corrected by the imposition of administrative fines or when the violation materially affects resident health, safety or welfare.

 

Risk of Arbitration.

 

The Company’s Articles of Incorporation, Bylaws, and Subscription Agreement, all provide mandatory binding arbitration provisions that, unlike in judicial proceedings, are subject to determination by an arbitrator, not a judge, who is not necessarily governed by the same standards. In light of that, there is a risk that an arbitrator will not view the contract or the law in the same way a judge would and may grant a remedy or award relief that the arbitrator deems just and equitable and within the scope of the agreement of the parties or based on simple notions of equity, rather than the facts or the relevant law. Furthermore, there is a risk that an arbitrator may interpret the relevant agreements or facts without regard to legal precedent. That risk is exacerbated by the fact that it is more difficult to overturn or vacate an arbitration award, because the law supports confirmation of an arbitration decision which is not otherwise arbitrary or capricious; therefore, investors should consider the difficulty of reversing an arbitration award, once made.

 

The Company believes that binding arbitration is legally enforceable based on case law provisions as applicable to claims in connection with this offering (including secondary transactions whereunder Preferred Shares are resold by initial investors, and subsequent, secondary investors are governed by the Company’s Articles of Incorporation, and Bylaws) under federal law, state law, and U.S. federal securities laws. The legal enforceability based on case law as upheld by U.S. Supreme Court rulings, which, for the Commission’s reference, include but are not limited to the following: Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991); Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989); Shearson/American Express v. McMahon, 482 U.S. 220 (1987); and Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985).

 

As a result of this mandatory binding arbitration provision, Investors may incur increased costs to bring a claim, have limited access to information, and these provisions can discourage claims or limit investors’ ability to bring a claim in a judicial forum that they find favorable, In the event of arbitration these clauses would limit the legal remedies available to holders of Preferred Shares to arbitration for any claims they may have, however by agreeing to be subject to these arbitration provisions, investors will not be deemed to waive the company’s compliance with the federal securities laws and the rules and regulations promulgated thereunder. Notwithstanding case law supporting the enforceability of arbitration, there does appear to be a split of authority suggesting that arbitration provisions are not always enforceable under federal and state law. Nonetheless, to the extent any arbitration provisions are ruled unenforceable, the Company would abide by such ruling.

 

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Risk that the Company’s Holdcos may fail to qualify as a disregarded entity for U.S. federal income tax purposes. 

 

If any of the Company’s Holdcos fail to qualify as a disregarded entity for U.S. federal income tax purposes and no relief provisions apply, that Holdco would be subject to entity-level federal income tax. As a result, the Holdco cash available for Preferred Dividend payments to the Company, and as a result the Company’s ability to pay Preferred Dividends as well as the value of Preferred Shares, could materially decrease.

 

Risk of Tax Liability arising from the Allocation of Holdco Income, Gain, Loss and Deduction.

 

The Holdco operating agreements provide for the allocation of income and gain to both the Common Members and Preferred Members of each Holdco, and 100% of the Holdco losses to the Holdco Common Members. The Company believes that all material allocations to the Members of each Holdco may or may not be respected for U.S. federal income tax purposes. The rules regarding partnership allocations are complex and no assurance can be given that the IRS will not successfully challenge the allocations in each Holdco operating agreement, and reallocate items of income, gain, loss or deduction in a manner which adversely increases the income allocable to the Members of each Holdco.

 

Risk that Holdco Tax liability may exceed cash distribution from dispositions.

 

There is a risk that on the disposition of the Company Properties the Holdco tax liability may exceed the distributable cash available. In the event of a foreclosure, or other involuntary disposition of the Company Properties, there is the possibility that the Company may have a larger tax liability than the amount of cash available at the time of the event, or at any time in the future.

 

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Risk of audit of Individual Investor returns.

 

There is a risk that an audit of the Company's records could trigger an audit of the individual investor’s tax records. 

 

RISK RELATED TO CONFLICTS OF INTEREST

 

Management, Asset Manager or Advisor May be Involved in Similar Investments.

 

Management, the Asset Manager, Advisor, or their affiliates, may act as asset managers or advisors for other companies engaged in making similar investments, and intend to act as the asset managers and advisors of new yet to be formed companies.

 

Management, Asset Manager or Advisor May Have Interests in Similar Properties.

 

Management, the Asset Manager, Advisor, or their affiliates, own or may come to own an interest in properties that may compete with the Company Properties.

 

Management, Asset Manager or Advisor May Act on Behalf of Others.

 

Management, the Asset Manager, Advisor, or their affiliates, who may act as asset managers for the Company, may act in such capacities for other investors, companies, partnerships or entities that may compete with the Properties.

 

Management, Asset Manager or Advisor May Raise Capital for Others.

 

Management, the Asset Manager, Advisor, or their affiliates, who will raise investment funds, may act in the same capacity for other investors, companies, partnerships or entities that may compete with the Company Properties.

 

Management, Asset Manager's or Advisor's Compensation May be a Conflict.

 

The compensation plan for Management, the Asset Manager and Advisor may create a conflict among the interests of Management, the Asset Manager, the Advisor, and the interests of the Company.

 

Management, Asset Manager or Advisor Allocating Time and Resources to Company Affiliates.

 

Management, the Asset Manager, Advisor, and their affiliates may have a conflict in allocating their time and resources between the Company and other business activities they are involved with, including without limitation Company Affiliates. The Company does not require any minimum amount of time or attention that Management, the Asset Manager, or Advisor devote to the Company. 

 

Potential Conflict between Company and its Legal Advisor and Company Attorney.

 

Larry Pino (“Pino”) is the managing partner of Pino Nicholson PLLC (“PNL”), the law firm which represents the Company. As a result there may be conflicts of interest created by Pino’s interests in PNL, Asset Manager, Sponsor, Advisor, and Company Affiliates including time constraints, compensation arrangements, and allocation of investment opportunities among the aforementioned parties.

 

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PLAN OF DISTRIBUTION

 

This Offering Circular will be furnished to prospective investors upon their request via electronic PDF format and will be available for viewing and download from Company’s web platform, as well as on the SEC’s website at www.sec.gov.

 

The Preferred Shares are being offered by the Company through Sutter Securities Clearing, LLC appointed by the Company as its Managing Broker-Dealer (“MBD”).

 

Additionally, the Company intends to conduct its operations so that neither the Company, nor any of its subsidiaries, will meet the definition of investment company under Section 3(a)(1) of the Investment Company Act of 1940, as amended (the “Investment Company Act”) and, accordingly, neither the Company nor any of its subsidiaries intend to register as an investment company under the Investment Company Act.

 

Investors will pay upfront selling commissions in connection with the purchase of Preferred Shares. The Company has entered into, or will enter into arrangements for compensation and fees (“Placement Fees”) to its MBD, which, for Gross Offering Proceeds (“Total Sales”) up to $20,000,000 shall include i) a MBD fee equal to 1.5% of the Total Sales sold by the Company or its affiliates, sold by the MBD or sold by affiliated or unaffiliated Dealers under Participating Dealer Agreements in good standing; plus ii) a selling commission equal to 7.5% of Total Sales, that will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ payment of commissions to FINRA registered representatives on sales of the Offering; provided, however, that the MBD shall be entitled to retain any selling commissions with regard to Securities the MBD directly places to investors in the Offering, plus iii) subject to the Company’s prior approval on a case by case basis, which may be withheld at the Company’s sole discretion, a marketing support fee equal to 1.0% of the Total Sales will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ marketing of the Offering by FINRA registered representatives. For Total Sales in excess of $20,000,000 or more Placement Fees shall include: i) a MBD fee equal to 0.75% of the Total Sales sold by the Company or its affiliates, sold by the MBD or sold by affiliated or unaffiliated Dealers under Participating Dealer Agreements in good standing; plus ii) a selling commission equal to 7.25% of Total Sales, that will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ payment of commissions to FINRA registered representatives on sales of the Offering; provided, however, that the MBD shall be entitled to retain any selling commissions with regard to Securities the MBD directly places to investors in the Offering, plus iii) subject to the Company’s prior approval on a case by case basis, which may be withheld at the Company’s sole discretion, a marketing support fee equal to 1.0% of the Total Sales will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ marketing of the Offering by FINRA registered representatives.

 

The Company has agreed to reimburse up to $35,000 to the MBD for the MBD’s legal counsel expense, and to pay the MBD a non-accountable due diligence fee equal to $25,000, plus an additional $7,500 per additional Company Property in excess of two diligences by the MBD.

 

In order to subscribe to purchase this Offering, a prospective investor must either electronically or manually complete, sign and deliver an executed purchase agreement for the Preferred Shares (“Subscription Agreement”), and submit payment through i) www.CrowdStreet.com, a funding platform operated by CrowdStreet, Inc., 610 SW Broadway, Suite 600, Portland, OR 97205 (the “Platform”) in accordance with the instructions provided therein, or alternatively ii) by way of check or wire transfer payable to “Tuscan Gardens Senior Living Communities, Inc. Escrow Account” established for the benefit of the Investors with Securities Transfer Corporation, 2901 N. Dallas Parkway, Suite 380, Plano, Texas 75093 (“Escrow Agent”) at a national bank or trust company (“Escrow Account”). The Offering will remain open from the date on which the Offering statement is qualified until September 30, 2020. All investor funds will be deposited by the Escrow Agent into the Escrow Account. Investor funds will be released from the Escrow Account only once the Minimum Offering Amount is reached. If the Offering fails to meet the Minimum Offering Amount, investor funds will be returned promptly by the Escrow Agent to Investors without interest.

  

There is currently no trading market for the Preferred Shares and no trading market is expected to ever develop. As a result, Investors should be prepared to retain this Offering for as long as this Offering remain outstanding and should not expect to benefit from any Preferred Share price appreciation.

 

In compliance with Rule 253(e) of Regulation A, the Company will revise the Offering statement, of which this Offering Circular forms a part, during the course of the Offering whenever information herein has become false or misleading in light of existing circumstances, material developments have occurred, or there has been a fundamental change in the information initially presented. Such updates will not only correct such misleading information but shall also provide update financial statements and shall be filed as an exhibit to the Offering statement, of which this Offering Circular forms a part, and be requalified under Rule 252 of Regulation A.

 

Determination of Offering Price

 

The Offering Price is arbitrary with no relation to the value of the Company. Since the Preferred Shares are not listed or quoted on any exchange or quotation system, the Offering Price of the Preferred Shares was arbitrarily determined. The Offering Price was determined by the Company and is based on its own assessment of its financial condition and prospects, limited offering history and the general condition of the securities market. It does not necessarily bear any relationship to book value, assets, past operating results, financial condition or any other established criteria of value.

 

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Subscription Process

 

Investors seeking to purchase Preferred Shares should proceed as follows:

 

·Read this entire Offering Circular and any supplements accompanying this Offering Circular.

 

·Electronically or manually complete and execute a copy of the Subscription Agreement.

 

·Electronically provide the required Subscription Agreement information and any additional information to CrowdStreet, Inc., (the “Platform”) at www.CrowdStreet.com, or manually provide the required Subscription Agreement information and any additional information to Tuscan Gardens Senior Living Communities, Inc., 189 S. Orange Ave, Suite 1650, Orlando, FL 32801, Attention: Subscription Agreement Department. 

 

By executing the Subscription Agreement and paying the total purchase price for the Preferred Shares you are interested in purchasing, which payment is made through the Platform’s system, you will be deemed to (i) agree to all of the provisions of the Subscription Agreement attached hereto as Exhibit 4, (ii) agree to all of the provisions of the Company Articles of Incorporation attached hereto as Exhibit 2, (iii) agree to all of the provisions of the Company Bylaws attached hereto as Exhibit 2, (iv) agree to the relevant restrictions outlined herein, and (v) attest that you meet the minimum standards of a “qualified purchaser,” and that, if you are not an “accredited investor,” such subscription for this Offering does not exceed 10% of the greater of your 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). Subscriptions will be irrevocable, and effective only upon the Company’s acceptance and the Company reserves the right to reject any subscription in whole or in part.

 

The specified Minimum Offering Amount must be reached in order for the Offering to proceed. Following the date on which the Minimum Offering Amount has been achieved, subscriptions will be accepted or rejected within 10 business days of receipt by the Company. The Company has until the date that is twelve months after the date of this Offering Circular to achieve the Minimum Offering Amount. The Company will not draw funds from any subscriber until the date it achieves the Minimum Offering Amount or the date your subscription is accepted, whichever is later. If the Company accepts your subscription, it will email you a confirmation.

 

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USE OF PROCEEDS

 

The estimated use of proceeds from this Offering will be dependent upon the amount and timing of the capital raised in this Offering. Assuming the Maximum Offering Amount is raised, the Company expects to use the proceeds from this Offering of Preferred Shares to (i) pay fees and expenses relating to the organization of the Company and the sale of the Preferred Shares, (ii) invest in community-specific Holdco’s which will invest in the development and acquisition of Company Properties, pay expenses related to the acquisition of such investments, and (iii) establish working capital reserves for the Company to fund operating and other expenses of the Company. The Company expects to use the Offering proceeds to pay such amounts at such time and in such order as Management deems, in its sole and absolute discretion, to be in the best interest of the Company.

 

The expenses of this Offering, including the preparation of this Offering Circular and the filing of this Offering Statement, estimated at $350,000, are being paid for on behalf of the Company by the Sponsor, and will be repaid to Sponsor from the Company’s working capital reserves, the timing of which shall be as Management deems, in its sole and absolute discretion, to be in the best interest of the Company. Until such time as Gross Offering Proceeds of $2,500,000.00 have been achieved, this repayment shall occur at a rate of i) 10.0% of Gross Offering Proceeds up to $1,500,000.00, and ii) 20% of Gross Offering Proceeds in excess of $1,500,000.00.

 

The following table shows a summary of the use of Minimum Offering Amount and Maximum Offering Amount generated through the sale of Preferred Shares:

 

 

Minimum

Offering

Amount

Percent

Maximum

Offering

Amount

Percent
Gross Offering Proceeds $500,000 100.00% $50,000,000 100.00%
Less: Commissions(1): ($50,000) -10.00% ($4,500,000) -9.00%
Available Proceeds $450,000 90.00% $45,500,000 91.00%
Less Offering Expenses:        
Organization and Offering Expenses(2,3) ($110,000) -22.00% ($2,500,000) -5.00%
Advisor Operating Expenses ($10,000) -2.00% ($1,000,000) -2.00%
Net Proceeds to Company from
Offering(4)
$330,000 66.00% $42,000,000 84.00%
Net Proceeds to other persons N/A N/A N/A N/A

  

1) Investors will pay upfront selling commissions in connection with the purchase of Preferred Shares. The Company has entered into, or will enter into arrangements for compensation and fees (“Placement Fees”) to its MBD, which, for Gross Offering Proceeds (“Total Sales”) up to $20,000,000 shall include i) a MBD fee equal to 1.5% of the Total Sales sold by the Company or its affiliates, sold by the MBD or sold by affiliated or unaffiliated Dealers under Participating Dealer Agreements in good standing; plus ii) a selling commission equal to 7.5% of Total Sales, that will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ payment of commissions to FINRA registered representatives on sales of the Offering; provided, however, that the MBD shall be entitled to retain any selling commissions with regard to Securities the MBD directly places to investors in the Offering, plus iii) subject to the Company’s prior approval on a case by case basis, which may be withheld at the Company’s sole discretion, a marketing support fee equal to 1.0% of the Total Sales will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ marketing of the Offering by FINRA registered representatives. For Total Sales in excess of $20,000,000 or more Placement Fees shall include: i) a MBD fee equal to 0.75% of the Total Sales sold by the Company or its affiliates, sold by the MBD or sold by affiliated or unaffiliated Dealers under Participating Dealer Agreements in good standing; plus ii) a selling commission equal to 7.25% of Total Sales, that will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ payment of commissions to FINRA registered representatives on sales of the Offering; provided, however, that the MBD shall be entitled to retain any selling commissions with regard to Securities the MBD directly places to investors in the Offering, plus iii) subject to the Company’s prior approval on a case by case basis, which may be withheld at the Company’s sole discretion, a marketing support fee equal to 1.0% of the Total Sales will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ marketing of the Offering by FINRA registered representatives.

 

2)The Company will pay or reimburse the Asset Manager for organization and offering expenses in an amount up to 5% of the Maximum Offering Amount (and up to 5% of the Maximum Offering Amount of any future offerings), which, if the Company raises the Maximum Offering Amount, will equal up to $2,500,000.

 

3) Includes all expenses to be paid by the Company in connection with its formation and the qualification of the Offering, and the marketing and distribution of Preferred Shares, including, without limitation, expenses for printing, engraving and amending offering statements or supplementing Offering Circulars, mailing and distributing costs, telephones, internet and other telecommunications costs, all advertising and marketing expenses, charges of experts and fees, expenses and taxes related to the filing, registration and qualification of the sale of Preferred Shares under federal and state laws, including taxes and fees and accountants’ and attorneys’ fees. See “Plan of Distribution.” Until such time as Gross Offering Proceeds of $2,500,000.00 have been achieved, this repayment shall occur at a rate of i) 10.0% of Gross Offering Proceeds up to $1,500,000.00, and ii) 20% of Gross Offering Proceeds in excess of $1,500,000.00. Organization and Offering Expenses for the Minimum Offering Amount includes amounts that the Company has agreed to reimburse up to $35,000 to the MBD for the MBD’s legal counsel expense, and to pay the MBD a non-accountable due diligence fee equal to $25,000.

 

4) Assuming the Maximum Offering Amount is achieved, the Company expects to allocate (a) 95% ($39,900,000) of the Net Proceeds to the Company to Property Acquisition, Development, and Construction, and (b) 5% ($2,100,000) of the Net Proceeds to the Company to Legal Fees, Fund Management, Supervisory and Accounting Services and Other Working Capital Reserve. Should the Minimum Offering Amount be achieved 100% of the Net Proceeds to the Company ($330,000) would be allocated to Legal Fees, Fund Management, Supervisory and Accounting Services and Other Working Capital Reserve.

 

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INVESTMENTS IN COMPANY PROPERTIES

 

Substantially all of the Company’s assets will be indirectly held by, and substantially all of its operations will be indirectly conducted through, community-specific, wholly-owned limited liability subsidiaries (“Holdco”) which will be the beneficial owners of Company Properties through each Holdco’s investment in wholly-owned, community-specific limited liability companies that will hold fee simple title to the real property (“Propco”), and wholly-owned community-specific limited liability companies that will operate the Company Property (“Opco”).

 

Under this structure, Tuscan Gardens Capital Partners, LLC (“Sponsor”), an affiliate of the Company, will, be the sole common member (“Common Member”) of the Company, the Company will receive common membership units (“Common Units”) in each Holdco, and the Company will invest as preferred member and receive preferred membership units (“Preferred Units”) in each Holdco. The Management Corporation will be the manager of all Holdco’s, Propco’s, and Opco’s. Each of the Company’s investments will be structured similarly.

 

Total project costs including financing costs and interest expense, pre-opening operating expenses and working capital reserves (“Total Project Costs”) for each Company Property will differ materially based on multiple factors including, but not limited to land cost, site conditions, impact fees, government entitlement processes, regional construction wages, size of project, land size, and any number of additional factors.

 

That notwithstanding, the following tables set out Management’s current view of hypothetical capital structures based on its industry experience and publicly available information regarding the potential economics of Development Projects, Acquisition Projects, and Conversion Projects.

 

As the table below indicates, the pursuit of Development Projects, Acquisition Projects, and Conversion Projects have significantly different project costs, financing costs, and timelines which have significant impacts on the Company’s intended business operations. 

 

Type of Project Project Cost

%

Development

Project Cost

Financing Cost

%

Development

Financing

Cost

Estimated
Time to

Licensure

(Months)

Estimated

Stabilization

Period

(Months)

Development Project $     50,789,256 100% $     11,507,038 100% 18 24
Acquisition Project $     32,985,995 65% $      4,359,095 38% 3 18
Conversion Project $     19,545,249 38% $      2,781,213 24% 6 12

 

Development Projects and Conversion Projects are notably similar in that both types of investments require the establishment of startup operations that require the establishment of effective staff and operational practices, and de novo rate structures. The Company believes that Conversion Projects provide greater opportunity to more rapidly capture market share given that total project costs are anticipated to be approximately 38% of Development Projects, and licensure and renovation can be accomplished in approximately one-third of the time required to construct and license a Development Project.

 

The time and cost savings that Conversion Projects offer over Development Projects provide the Company with an opportunity to access the growing, underserved mid-market segment known as “the missing middle” that represents a demographic segment that can neither afford Class A luxury senior living communities, nor is eligible for government income-based subsidies that are available to residents of low-income senior living communities. By pursuing cost-effective conversion of other real estate properties including hotels for adaptive reuse into senior living rental communities to serve this market segment on a national basis, Management believes it can provide a compelling, differentiated offering to residents that i) satisfies their need for safety and care, ii) provides a positive resident experience at more affordable levels than the development or acquisition of purpose-built senior living communities, and iii) achieves operating margins that are consistent with Sponsor Affiliate properties through reduced marketing costs due to shorter lease-up periods driven by favorable demand elasticity at lower monthly rates.

 

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Acquisition Projects offer advantages in terms of time to licensure over Development Projects (3 rather than 18 months) and Conversion Projects (3 rather than 6 months), but are typically turnarounds rather than startups and therefore require greater operational resources to identify and eliminate ineffective staff and operational practices prior to the establishment of effective alternatives.

 

Hypothetical Community-Specific Company Property Capital Structure for Development Projects

 

The table below illustrates the indicative uses of invested proceeds for a hypothetical Development Project, recognizing that in actuality each particular Development Project is unique and would vary materially based on the factors mentioned herein above.

 

Development Projects are estimated to take 18 months to build and 24 months to attain stabilized occupancy. The aggregate 42 months timeline and significant ($39.3mm) pre-finance project cost compound to produce a significantly higher ($11.5mm) financing cost relative to Acquisition Projects and Conversion Projects.

 

Use of Funds:

Pre-Finance Project Cost      
Building Construction   $ 24,466,300  
Land and Site Improvements Note 1   $ 5,450,000  
Architectural, Engineering, Permits & Impact Fees   $ 3,060,000  
Computers, Furniture Fixtures & Equipment   $ 1,100,000  
Developer Fees   $ 2,500,000  
Project Management Fees   $ 900,000  
Lease-up Marketing Costs   $ 417,000  
Working Capital to fund operations until reaching breakeven   $ 1,388,918  
Contingency   $ -  
Pre-Finance Project Cost   $ 39,282,218  
Capitalized Interest   $ 7,873,132  
Construction Contingency and Operating Expense Reserve   $ 1,422,099  
Capital Sourcing Fees and Lender Origination Fees   $ 2,211,807  
Financing Cost   $ 11,507,038  
Total Project Cost   $ 50,789,256  

 

Source of Funds:

 

Sources of Funds            
Senior Debt   $ 35,552,479       70.0 %
Subordinate Debt   $ 11,173,636       22.0 %
Holdco Equity Note 1   $ 4,063,140       8.0 %
Total Source of Funds   $ 50,789,256       100 %

 

Note 1 – Offering Proceeds will be used to fund Holdco Equity, which typically represents 8% of Total Project Cost. Prior to obtaining debt financing this equity is used by Holdco for land deposits and pre-construction costs for architectural design and any requisite approvals necessary for construction permitting. The remaining Ninety-Two (92.0%) of Total Project Costs would be financed by Senior Debt and Subordinate Debt representing Seventy (70.0%) Percent and Twenty-Two (22.0%) Percent of Total Project Costs respectively.

 

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Hypothetical Community-Specific Company Property Capital Structure for Acquisition Projects

 

The table below illustrates the indicative uses of invested proceeds for a hypothetical Acquisition Project, recognizing that in actuality each particular Acquisition Project is unique and would vary materially based on the factors mentioned herein above.

 

Acquisition Projects are estimated to take 3 months to transition and 18 months to turnaround and attain stabilized occupancy. The aggregate 21 months timeline and lower ($28.6mm) pre-finance project cost compound to produce a significantly lower ($4.4mm) financing cost relative to Development Projects.  

 

Use of Funds:

Pre-Finance Project Cost      
Purchase Price Note 2   $ 26,943,566  
Renovation Costs   $ 1,283,333  
Lease-up Startup Marketing Costs   $ 150,000  
Working Capital to fund operations until reaching breakeven   $ 250,000  
Contingency   $  -  
Pre-Finance Project Cost   $ 28,626,900  
Capitalized Interest   $ 2,947,500  
Brokerage and Restructuring Fees   $ 866,667  
Capital Sourcing Fees and Lender Origination Issuance Fees   $ 544,928  
Financing Cost   $ 4,359,095  
Total Project Cost   $ 32,985,995  

 

 

Source of Funds:

 

Sources of Funds            
Senior Debt   $ 23,090,196       70.0 %
Subordinate Debt   $ 7,256,919       22.0 %
Holdco Equity Note 2   $ 2,638,880       8.0 %
Total Source of Funds   $ 32,985,995       100 %

 

Note 2 – Offering Proceeds will be used to fund Holdco Equity, which typically represents 8% of Total Project Cost. Prior to obtaining debt financing this equity is used by Holdco for acquisition deposits and legal costs. The remaining Ninety-Two (92.0%) of Total Project Costs would be financed by Senior Debt and Subordinate Debt representing Seventy (70.0%) Percent and Twenty-Two (22.0%) Percent of Total Project Costs respectively.

 

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Hypothetical Community-Specific Company Property Capital Structure for Conversion Projects

 

The table below illustrates the indicative uses of invested proceeds for a hypothetical Conversion Project, recognizing that in actuality each particular Conversion Project is unique and would vary materially based on the factors mentioned herein above.

 

Conversion Projects are estimated to take 6 months to renovate and 12 months to attain stabilized occupancy due to a much lower monthly rental rate that offers access to a much larger need and income qualified population. The aggregate 18 month timeline and much reduced ($16.8mm) pre-finance project cost compound to produce a dramatically lower ($2.8mm) financing cost relative to Development Projects and Acquisition Projects.

 

Use of Funds:

Pre-Finance Project Cost      
Hotel Purchase Price Note 3   $  7,500,000  
Renovation and Conversion Costs   $  4,500,000  
Architectural, Engineering, Permits & Impact Fees   $  1,390,000  
Computers, Furniture Fixtures & Equipment   $  450,000  
Developer Fees   $  877,262  
Project Management Fees   $  219,316  
Lease-up Startup Marketing Costs   $  324,000  
Working Capital to fund operations until reaching breakeven   $  1,503,458  
Contingency   $  -  
Pre-Finance Project Cost   $ 16,764,036  
Capitalized Interest   $  1,480,800  
Construction Contingency and Operating Expense Reserve   $  505,303  
Capital Sourcing Fees and Lender Origination Issuance Fees   $  795,110  
Financing Cost   $ 2,781,213  
Total Project Cost   $ 19,545,249  

 

Source of Funds:

 

Sources of Funds            
Senior Debt   $ 13,681,674       70.0 %
Subordinate Debt   $ 4,299,955       22.0 %
Holdco Equity Note 3   $ 1,563,620       8.0 %
Total Source of Funds   $ 19,545,249       100 %

 

Note 3 – Offering Proceeds will be used to fund Holdco Equity, which typically represents 8% of Total Project Cost. Prior to obtaining debt financing this equity is used by Holdco for acquisition deposits and pre-construction costs for architectural design and any requisite approvals necessary for construction permitting. The remaining Ninety-Two (92.0%) of Total Project Costs would be financed by Senior Debt and Subordinate Debt representing Seventy (70.0%) Percent and Twenty-Two (22.0%) Percent of Total Project Costs respectively.

 

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DESCRIPTION OF BUSINESS

 

Company Structure

 

Tuscan Gardens Capital Partners, LLC (the “Sponsor”) a Florida limited liability corporation, is the sole common shareholder (“Common Shareholder”) of Tuscan Gardens Senior Living Communities, Inc. (the “Company”), the issuer of the Preferred Shares offered by this Offering Circular. The Company is a newly formed Florida corporation that was organized on July 20, 2018. The Company currently has two authorized share classes: common voting shares with a $1.00 par value per share (“Common Shares”) and Class A Non-Voting Preferred Shares with $1,000.00 par value per share (“Preferred Shares”). 

 

The charts below show the typical relationship among the various affiliates and the Company (“Company Affiliates”) as of the date of this Offering Circular. The Company, with two authorized share classes as noted above, will own and control, through its 100% ownership of common membership units each wholly-owned community specific Holdco, which will in turn own and control each wholly-owned community specific Propco, and Opco.

 

 

Company Structure (Chart I of 2) Tuscan Gardens Senior Living Communities, Inc. ("Company") or ("TGSLCI") Tuscan Gardens Capital Partners, LLC ("TGCP") 100% 100% Owned by Tuscan Gardens Management Group, LLC ("TGMG") Common Common (Voting) Shares Shares Tuscan Gardens Capital Partners, LLC ("TGCP") or "Sponsor" Receives all tax benefits and all Profits after Preferred Dividends and Special Dividends Preferred (Non-Voting) Shares Individual Qualified Investors Receive 8% Preferred Divid nds on Par Value +50% of Holdo Net Liquidity proceeds after r turn of capital, less Fund expenses ("Special Dividends") TGSLCI owns 100% of Hakim Preferred Member receives 8% Preferred Distribution Common Membership Units plus 100% Holdco Net Liquidity Proceeds Community Specific Holdco Tuscan Gardens of [Community Name] , LLC ("Holdco") Common Member TGSLCI Receives all profits after Preferred Member Distributio ns Manager of Holdco. Ooco. and Propco Tuscan Gardens Management Corporation ("TGMC") Preferred Member(s) Receive 8% Preferred Distribution + 100% of Net Liquidity Proceeds after return of capital, less Holdco expenses Tenant/Operator ("Opco") Community-Specific Opco Tuscan Gardens of [Community Name] Management Company, LLC 9%, Community Expenses include Commmunity Management fee (5% of revenue) Lessor ("Propco") Community-Specific Propco 1% Tuscan Gardens of [Community Name] Properties, LLC 99%

 

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Company Structure (Chart 2 of 2) Tuscan Gardens Senior Living Communities, Inc. ("Company") or ("TGSLCI") Asset Manager Tuscan Gardens Senior Living Communities Asset Manager, LLC ("Asset Manager") Common (Voting) Shares Owned 99% by TGMG and I% by Tuscan Gardens Management Corporation ("TGMC") Tuscan Gardens Capital Partners, LLC ("TGCP") or "Sponsor" Earns Asset Management Fee on Gross Assets under Management Receives all tax benefits and all Profits after Preferred Dividends and Special Dividends Advisor Tuscan Gardens Advisors, LLC ("Advisor") Earns Origination, Acquisition, and Disposition Fees Preferred (Non-Voting) Shares Owned 99% by TGMG and I% by Tuscan Gardens Management Corporation ("TGMC") Individual Qualified Investors Receive 8% Preferred Divid nds on Par Value Placement Agents +50% ofHoldo Net Liquidity proceeds oiler r turn of capital, less Fund expenses ("Special Dividends"L_, Affiliated and Non-Affiliated Entities and Individuals Earn Placement, Marketing Support, and Dealer Manager Fees TGSLCI owns 100% of Holdco Preferred Member receives 8% Preferred Distributio Common Membership Units plus 100% Holdco Net Liquidity Proceeds Community Developer Entities Tuscan Gardens of [Community Name] Development Company, LLC ("Devco") Community Specif c Holdco 99% Owned by TGMG, 1% by TGDC Tuscan Gardens of [Community Name] , LLC ("Holdco") Earns Development Fee Common Member TGSLCI Receives all profits after Preferred Member Distributions Preferred Member(s) Receive 8% Preferred Distribution + 100% of Net Liquidity Proceeds after return of capital, less Holdco expenses Tenant/Operator ("Opeo") Community-Specific Opco Tuscan Gardens of [Community Name] Management Company, LLC Community Expenses include Commmunity Management fee (5 frevenue) Lessor ("Promo") Community-Specific Propco Tuscan Gardens of [Community Name] Properties, LLC

 

Management and Company Affiliates’ Roles in Business Operations

 

Company Management will be making the business and management decisions for the Company based on the recommendations of an affiliate entity, Tuscan Gardens Advisor, LLC (“Advisor”). The ongoing operation of Company Properties will be overseen by an affiliate entity, Tuscan Gardens Senior Living Communities Asset Manager, LLC (“Asset Manager”). The Asset Manager and Advisor are both Florida limited liability companies.

 

Tuscan Gardens Management Corporation (the “Management Corporation”), an affiliate entity, is the manager of the Asset Manager and the manager of the Advisor and will be making the business decisions for the Asset Manager and Advisor. 

 

Tuscan Gardens Management Group, LLC is the beneficial owner of Tuscan Gardens Capital Partners, LLC (“TGCP”). TGCP will be the sole holder of Company common equity, and the Company will be the sole holder of Holdco common equity.

 

Additionally, the Company relies upon dedicated, affiliate community specific development entities (“Devco”) to achieve on-time, on-budget completion of each Company Property it develops.

 

For a more detailed explanation of Company Affiliates’ roles in the Company’s business operations, please refer to “Certain Relationships and Related Party Transactions” section.

 

Company Affiliates’ Current Ownership Interests in Senior Living Facilities

 

Company Affiliates have ownership interests in a variety of senior living facilities that are more fully outlined below. Other than what is disclosed below, individual members of the Company’s Management have no prior involvement with any programs as identified by Item 8 of Industry Guide 5, which defines a program as a three phase investment fund or a syndication involving (i) an offering or organization phase in which “the sponsor (who also serves as promoter and, later, general partner) organizes and registers the offering;” (ii) a second “operational phase of the program which commences with the acquisition of properties;” and (iii) a third phase in which “depending on the investment objectives of the program, the program is ‘completed’ as the partnerships are liquidated and wound down.”

 

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While none of the Company’s officers, directors, or affiliates has sponsored a completed “program” as defined under the Guide, the Company has provided expanded disclosure under CF Disclosure Guidance Topic No. 6. outlining Management’s experience with prior programs with respect to Management’s ability to i) operate, develop, and acquire senior living communities, ii) raise capital, and iii) exercise real estate investment control, along with additional details describing the ownership structures, ownership percentages, and equity Company Management has raised for six senior living community transactions. The only prior program experience that our officers and directors as individuals and as a team have is at an “offering stage” for Tuscan Gardens of Venetia Bay, which is in lease-up, and Tuscan Gardens of Palm Coast, which has yet to commence operations; hence, inclusion of lease-up results would be confusing and potentially misleading to Investors as it would not offer any predictive value to investment returns as neither of these properties has achieved stabilized occupancy or been liquidated.

 

The Company, however, has provided narrative and references to existing reporting under the Municipal Securities Rulemaking Board (“MSRB”) Electronic Municipal Market Access (“EMMA”) website for both wholly-owned affiliates (Tuscan Gardens of Venetia Bay, Tuscan Gardens of Palm Coast, and Tuscan Gardens of Delray Beach) that have third party limited partners that have invested in preferred, non-voting preferred membership interests as well as minority-owned affiliate investment in the Living Well Lodges in order to provide potential Investors with an improved understanding of the state of Management’s prior projects. The Company believes this disclosure is both sufficient and relevant, and any additional disclosure would be misleading and confusing to Investors due to the inconclusive nature of Tuscan Gardens of Venetia Bay (still in lease-up), Tuscan Gardens of Palm Coast (yet to commence operations), Tuscan Gardens of Delray Beach (yet to commence operations), and Living Well Lodges (minority-owned) as part of a potential investor’s evaluation of an investment in the Company.

 

Summaries of these senior living facilities and prior programs follow below.

 

Tuscan Gardens of Delray Beach.

 

Wholly-owned affiliates of the Sponsor (“Sponsor Affiliates”) control the special purpose entities that own 100% of the voting, common membership interests in, and operate Tuscan Gardens of Delray Beach, LLC (“Delray”), an assisted living and memory care facility that commenced construction November 30, 2018 and is anticipated to open Q1 2020. Delray is a $58,207,545 project that consists of 138 units, including 88 assisted living units and 50 memory care units, and related common areas on property located on an approximately 7.57-acre site at the southwest corner of Frost Lane and Sims Road in Palm Beach County, Florida. The wholly-owned Sponsor Affiliates raised $6,368,828 in the form of non-voting, preferred membership interests from unaffiliated accredited investors which were in turn invested in non-voting, preferred membership interests in Delray. Tuscan Gardens of Delray Beach Capital Partners, LLC, a wholly-owned and controlled affiliate owns and controls 100% of the voting, common membership interests in Delray, the community-specific Holdco. Delray in turn is the sole investor that owns and controls 100% of the community-specific Opco and Propco. Debt financing for Delray in the amount of $51,450,000 was closed on November 30, 2018 in the form of Series 2018 Palm Beach County, Florida Revenue Bonds, and secured by a Master Trust Indenture recorded in the public records. As of November 30, 2018 the wholly-owned Sponsor Affiliates are in compliance with all financing arrangements for the facility. Delray utilizes the same design builder that is associated with other wholly-owned Sponsor Affiliate projects. Day to day operations for Delray will be managed by the Community Manager. Details of this project are available on the Municipal Securities Rulemaking Board (“MSRB”) Electronic Municipal Market Access (“EMMA”) Website https://emma.msrb.org/IssueView/Details/ES391373

 

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Tuscan Gardens of Palm Coast.

 

Wholly-owned Sponsor Affiliates control the special purpose entities that own 100% of the voting, common membership interests in, and operate Tuscan Gardens of Palm Coast, LLC (“Palm Coast”), a $50,425,993 assisted living and memory care facility that was received its certificate of occupancy November 28, 2018 and received its license from AHCA on December 4, 2018, representing an on-time, on-budget construction completion in spite of Hurricane Irma, which made landfall in late August 2017 and delayed completion of Palm Coast by approximately twenty (20) days. Palm Coast consists of 130 units (and 166 beds), including 86 assisted living units comprising 110 licensed beds, 44 memory care units comprising 56 licensed beds, and related common areas on property to be located on an approximately 16-acre site at the southwest corner of Colbert Lane and Blare Drive in Palm Coast, Florida. The wholly-owned Sponsor Affiliates raised $7,700,000 in the form of non-voting, preferred membership interests from unaffiliated accredited investors which were in turn invested in non-voting, preferred membership interests in in Tuscan Gardens of Palm Coast Capital Partners, LLC, a wholly-owned and controlled affiliate which in turn owns and controls 100% of the voting, common membership interests in Palm Coast, the community-specific Holdco. Palm Coast in turn is the sole investor that owns and controls 100% of the community-specific Opco and Propco. Debt financing for Palm Coast in the amount of $43,775,000 was closed on June 1, 2017 in the form of Series 2017 Capital Trust Agency Revenue Bonds , and secured by a Master Trust Indenture recorded in the public records. As of November 30, 2018 the wholly-owned Sponsor Affiliates are in compliance with all financing arrangements for the facility. Palm Coast utilizes the same design builder that is associated with other wholly-owned Sponsor Affiliate projects. Day to day operations of Palm Coast are currently managed by the Community Manager. Details of this project are available on the Municipal Securities Rulemaking Board (“MSRB”) Electronic Municipal Market Access (“EMMA”) Website https://emma.msrb.org/IssueView/Details/ER380611

 

Tuscan Gardens of Venetia Bay.

 

Wholly-owned Sponsor Affiliates control the special purpose entities that own 100% of the voting, common membership interests in, and operate Tuscan Gardens of Venetia Bay, LLC (“Venetia Bay”), a $41,049,765 assisted living and memory care facility that opened in October 2016. Venetia Bay consists of 136 units, including 78 assisted living units comprising 90 licensed beds, 58 memory care units, and related common areas on property located at 841 Venetia Bay Boulevard, in the City of Venice, Sarasota County, Florida. The wholly-owned Sponsor Affiliates raised $6,400,000 in the form of non-voting, preferred membership interests from unaffiliated accredited investors which were in turn invested in non-voting, preferred membership interests in Tuscan Gardens of Venetia Bay Capital Partners, LLC, a wholly-owned and controlled affiliate which in turn owns and controls 100% of Venetia Bay, the community-specific Holdco. Venetia Bay in turn is the sole investor that owns and controls 100% of the community-specific Opco and Propco. Debt financing for Venetia Bay in the amount of $35,510,000 was closed on May 1, 2015 in the form of Series 2015 Capital Trust Agency Revenue Bonds, and secured by a Master Trust Indenture recorded in the public records.. As of November 30, 2018 the wholly-owned Sponsor Affiliates are in compliance with all financing arrangements for the facility. Construction for Venetia Bay was completed on schedule in September 2016, materially meeting its construction budget and utilizing the same general contractor that is associated with other wholly-owned Sponsor Affiliate projects. Venetia Bay received its license from the AHCA on October 24, 2016. As of November 30, 2018, 99 of the 136 units (housing 115 residents) at Venetia Bay are occupied. Day to day operations of Venetia Bay are currently managed by the Community Manager. Details of this project are available on the Municipal Securities Rulemaking Board (“MSRB”) Electronic Municipal Market Access (“EMMA”) Website https://emma.msrb.org/IssueView/Details/EA357818

 

Living Well Lodges.

 

In December 2015, Living Well Lodges Capital Partners, LLC, a wholly-owned Sponsor Affiliate acquired a 15% passive investment interest (“LWL Investment”) in three additional senior living facilities as described below from unrelated sellers. The communities were constructed in 2011, 2012, and 2013, respectively. Each community used the proceeds of certain tax-exempt and taxable revenue bonds to provide a portion of the funds to acquire, construct, install, and equip those communities and therefore, each community is subject to affordability restrictions similar to the Project. At the time of purchase by the Company Affiliates, these communities were in financial distress and were in default of certain of their financial and operating covenants. The Company Affiliates led a $96,778,352 recapitalization through the tender and purchase of the outstanding bonds, and invested new capital comprised of a $65,955,000 secured bank loan and $23,124,669 from third party institutional investors in the form of preferred equity. Additionally, wholly-owned Sponsor Affiliates raised $7,698,683 in the form of non-voting, preferred membership interests from unaffiliated accredited investors which were in turn invested in non-voting, preferred membership interests in Living Well Lodges Capital Partners, LLC, the wholly-owned Sponsor Affiliate that holds the LWL Investment. The bondholders for these communities received principal payments in the amount of the original issue price of these revenue bonds plus accrued interest to the date of purchase. As of November 30, 2018 the Sponsor Affiliates are in compliance with all financing arrangements for the facility.

 

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Osprey Lodge at Lakeview Crest.

 

Osprey Lodge at Lakeview Crest is a senior living community consisting of 76 assisted living units and related improvements and 48 memory care units and related improvements (the “Osprey Project”), located in Tavares, Lake County, Florida. The Osprey Project was completed and occupancy by residents began in September 2012. As of November 30, 2018, the Osprey Project has 116 total residents. The Osprey Project is currently managed by Allegro Senior Living. The Affiliates own a minority interest in the Osprey Project. The majority owner is a private equity firm and such firm exercises major decision making with respect to the Osprey Project. Details of this project is available on the Municipal Securities Rulemaking Board (“MSRB”) Electronic Municipal Market Access (“EMMA”) Website https://emma.msrb.org//IssueView/Details/ER342542

 

Crane’s View Lodge.

 

Crane’s View Lodge is a senior living community consisting of 80 assisted living units and related improvements and 48 memory care units and related improvements (the “Crane’s View Project”), located in Clermont, Lake County, Florida. The Crane’s View Project was completed and occupancy by residents began in August 2014. As of November 30, 2018, the Crane’s View Project has 96 total residents. The Crane’s View Project is currently managed by Allegro Senior Living. The Affiliates own a minority interest in the Crane’s View Project. The majority owner is a private equity firm and such firm exercises major decision making with respect to the Crane’s View Project. Details of this project is available on the Municipal Securities Rulemaking Board (“MSRB”) Electronic Municipal Market Access (“EMMA”) Website https://emma.msrb.org/IssueView/Details/EP358747

 

Stuart Lodge.

 

Stuart Lodge is a senior living community consisting of 95 assisted living units and related improvements located in Stuart, Martin County, Florida (the “Stuart Project”). The Stuart Project was completed and occupancy by residents began in June 2014. As of November 30, 2018, the Stuart Project has 98 total residents.. The Stuart Project is currently managed by American House Senior Living Communities. The Affiliates own a minority interest in the Stuart Project. The majority owner is a private equity firm and such firm exercises major decision making with respect to the Stuart Project. Details of this project is available on the Municipal Securities Rulemaking Board (“MSRB”) Electronic Municipal Market Access (“EMMA”) Website https://emma.msrb.org/IssueView/Details/EP360096

 

The prior performance of the Sponsor, Sponsor Affiliates, and their respective affiliated entities may not predict the future performance of the Company and its affiliated entities or the return on an investment in the Company or the Preferred Shares. Therefore, there is no assurance that the Company will achieve its investment objectives or that the Preferred Dividend and/or cash distributions will be paid to the holders of Preferred Shares.

 

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Typical Services Provided to Residents

 

The proceeds of this Offering are for the purpose of financing all or a portion of the costs of investing in entities that develop (“Development Projects”), acquire (“Acquisition Projects”), or convert other real estate properties including hotels (“Conversion Projects”) into senior living rental communities ranging from $15,000,000 to $100,000,000 per community, consisting of independent living, assisted living and/or memory care for approximately fifty (50) to two-hundred and fifty (250) residents (“Company Properties”). The Company’s primary focus for Development Projects will be on southeastern markets, and for purposes of Acquisition Projects and Conversion Projects will be on national markets, that it considers to have favorable risk-return characteristics. The Company, operating through wholly-owned special purpose entities (“SPE”) as real estate owner-operators, intends to create, operate and hold a portfolio of Company Properties on a long-term basis, approximating seven years, and ultimately dispose of them to generate revenue for the Company. The Company is not a registered broker-dealer, an investment adviser, or a funding platform.

 

The Assisted Living Units typically include a full bathroom and a kitchenette with a microwave, a refrigerator, and a sink. Independent Living Units typically contain the appointments of Assistant Living Units, plus a stove and oven. Memory Care Units typically include a full bathroom and furniture for storing clothing, dry food, and other personal effects. Each Independent Living Unit, Assisted Living Unit and Memory Care Unit typically include contain cable television, individually controlled heating and air conditioning systems and a closet. Washing and drying machines are typically provided on each floor for resident use.

 

Residents typically receive three meals a day in the dining room to resident of the Assisted Living Units, weekly linens and housekeeping service, medical transportation if appointments are scheduled, Wi-Fi service throughout the building, use of resident laundry facilities on each floor, and activity programs including shopping and recreational trips. Opco plans for additional charges for physician services, physical therapy, oxygen, medications, laboratory, medical equipment, and medical supplies and incontinence products. The staff in the Memory Care Units will typically carry smartphones to promptly communicate resident problems with a resident of a Memory Care Unit.

 

Assisted Living Units. The Assisted Living Units provide a level of care between Independent Living Units, which are more like multifamily apartments, and a skilled nursing facility. The Company typically provides residents with three meals a day, activities seven days a week, and individualized service plans as developed by the Community Manager’s staff. The Community Manager’s staff also typically provides assistance to persons who need occasional help with some or all of the following: dressing, self-care, and other activities of daily living, assistance in attending meals, increased assistance in housekeeping, and assistance with monitoring personal status, medication reminding, and cueing. Company Properties typically include licensed nurses on duty to provide limited, periodic nursing services. There is expected to be a nurse call system in each Assisted Living Unit, which alerts the nurse that the resident needs assistance. The following is a more detailed description of services expected to be provided to residents of the Assisted Living Units.

 

1)Personal Care Assistance
a)Bathing, grooming, and dressing
b)Toileting and incontinence care
c)Transferring and ambulation, one person assist. Resident must be capable to propel his or her own wheelchair.
d)Staff/services available 24-hours per day
e)Temporary or intermittent nursing services accessible 24-hours a day
f)Coordination of care with supplementary service providers
g)Supervision of mildly cognitively impaired focusing on abilities and preservation of dignity

 

2)Medication Assistance
a)Monitoring of residents who self-administer medications
b)Medication reminders and supervision
c)Medication administration (if permitted)
d)Disposal of medications
e)Coordination with family to help maintain medication supply

 

3)Meals and Nutrition
a)Three meals prepared and served daily
b)Supplemental snacks/beverages
c)Therapeutic diets (as allowed)
d)Registered dietitian consultation
e)Hydration program

 

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4)Life Enrichment Program
a)Lifestyle programming designed to include daily routines
b)Health maintenance and promotion programs
c)Socialization programs
d)Choice and Empowerment practices
e)Coping strategies
f)Cognitive enhancement programs
g)End of life care strategies
h)Self-actualization interventions
i)Depression Management
j)Therapeutic Recreation
k)Social Services
l)Transportation to Medical Appointments

 

5)Housekeeping/Maintenance
a)Weekly cleaning of apartment
b)Laundering of personal laundry (additional fee)
c)Weekly linen change
d)Apartment and community maintenance

 

6)Security/Safety
a)Fire and smoke detection, notification and containment systems
b)Staff accessible 24-hours a day, trained in emergency response procedures
c)Risk Management program
d)Fall prevention strategies
e)Door alarms, monitoring, and secured access
f)Hazard Management

 

Memory Care Units. The Memory Care portion of the Project typically consists of individual neighborhoods, each with a dining area, a designated activity and recreational space, and a country kitchen where residents may also prepare their own light meals and snacks. The planned Memory Care Units are designed to offer a safe environment as well as an activity focused therapeutic program for residents suffering from dementia, Alzheimer’s disease, and other related disorders.

 

Memory Care residents may exhibit symptoms of mild to severe cognitive impairment caused by Alzheimer’s disease, Parkinson’s Disease, Multi-infarct Dementia, Pick’s Disease, Lewy Body Disease, or other conditions that may cause dementia. Residents in the Memory Care Units will typically exhibit at least two symptoms that include, but are not limited to: memory loss, confusion, disorientation, emotional outbursts, depression, loss of social restraint, wandering, loss of control of intellectual functioning or body movements, and loss of speech or communicative ability. Residents in the Memory Care Units are expected to need periodic assistance with bathing, dressing, grooming, oral care, toileting or incontinence, or reminders to help prevent incontinence, medication supervision/administration, movement/transferring/ambulation, routine skin care, temporary, intermittent, or unscheduled nursing care, meals and/or cueing of eating, behavior management, socialization, participation in purposeful activities, and supervision for maintaining safety.

 

The services provided in the Memory Care Units are typically similar to those that are provided in the Assisted Living Units but offer specific therapeutic interventions to meet the needs of residents with dementia. The goal of the Project will be to maintain the resident’s independence, function ability, and personhood for as long as possible. The following is a more detailed description of services the Company typically provides its Memory Care residents.

 

1)Personal Care Assistance
a)Bathing, dressing, grooming, transfers and mobility, toileting, and incontinence care
b)Temporary or intermittent nursing care and coordination of services
c)Monitoring of residents’ medical condition
d)Staff and services available 24-hours a day
e)Supervision of the cognitively impaired focusing on abilities, preservation of dignity, and natural life flow

 

2)Medication Assistance
a)Medication Administration
b)Observation and monitoring of resident’s conditions
c)Disposal of medications
d)Coordination with family to help maintain medication supply

 

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3)Meals and Nutrition
a)Modified Food to Meet Needs
b)Family Style Dining
c)Therapeutic Nutrition and Hydration
d)Dietitian Counseling

 

4)Life Enrichment Program
a)24-hour daily individualized schedule
b)Health maintenance and promotion
c)Socialization environment
d)Choice and empowerment practices
e)Person-centered care
f)Coping strategies
g)Activity-focused program
h)Validation therapy
i)End of life care strategies
j)Therapeutic recreation designed for dementia residents
k)Social Services
l)Natural life flow environment
m)Outdoor therapeutic/healing gardens
n)Transportation to medical appointments

 

5)Housekeeping/Maintenance
a)Weekly cleaning of apartment
b)Daily bed-making
c)Laundering of personal laundry
d)Weekly linen change
e)Apartment and community maintenance

 

6)Security/Safety
a)Staff available 24-hours a day, trained in emergency response procedures
b)Risk management program
c)Fall prevention strategies
d)Door alarms, monitoring, and secured access
e)Hazard management
f)Exposure control plan
g)Fire and smoke detection, notification, and containment systems

 

The pricing for the Memory Care Units is planned to be all-inclusive with no additional level-of-care expenses even when residents may require more care. 

 

Competition

 

The senior living real estate industry is highly competitive on an international, national and regional level. The Company’s projects face competition from REITs, institutional pension plans, and other public and private real estate companies and private real estate investors for the acquisition of properties, development of properties, and for raising capital to make these acquisitions. Competition may prevent the Company from acquiring desirable properties or increase the price the Company must pay for real estate. If the Company pays higher prices for properties, Investors may experience a lower return on investment and be less inclined to invest in the Company’s next project which may decrease its profitability. Increased competition for properties may also preclude the Company from acquiring properties that would generate the most attractive returns to Investors or may reduce the number of properties the Company could acquire, which could have an adverse effect on its business.

 

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Regulation

 

The Company’s business practices and projects, and those of the Sponsor Affiliates are subject to regulation by numerous federal, state and local authorities including but not limited to the following:

 

U.S. and State Laws Regulating the Licensure of Senior Housing Communities

 

State regulations require government approval for the necessary authorizations and permits to open and accept assisted living and memory care residents. Regulators regularly inspect facilities to ensure applicable standards are being maintained for the welfare of residents. Although the Sponsor has been successful in receiving and maintaining licensure for its Sponsor Affiliate facilities, there can be no assurance that such approvals will be obtained in a timely fashion or that regulatory changes which may result in additional costs, would not be occur.

 

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Based on their inspections, regulators may revoke or suspend a license for a number of reasons, including: (a) an intentional or negligent act seriously affecting a facility resident’s health, safety or welfare; (b) misappropriation or conversion of resident property; (c) a determination by the regulator that the project owner lacks the financial ability to provide continuing adequate care to residents; or (d) a licensee’s failure during re-licensure to meet minimum licensing standards or applicable rules. Furthermore, regulators may seek an injunction in various circumstances, including to enforce applicable requirements against an assisted living community when a violation has not been corrected by the imposition of administrative fines or when the violation materially affects resident health, safety or welfare.

 

U.S. and State Securities Laws

 

The Preferred Shares offered hereby are “securities,” as defined in the Securities Act and under state securities laws. The Securities Act provides, among other things, that no sale of any securities may be made except pursuant to a registration statement that has been filed with the SEC, and has become effective, unless such sale (or the security sold) is specifically exempted from registration. State securities laws have analogous provisions.

 

The Preferred Shares being offered hereby have not been registered under the Securities Act. Neither the SEC nor any state securities commission or regulatory authority approved, passed upon or endorsed the merits of this Offering. The Offering and proposed sale of the Preferred Shares described herein shall be made pursuant to an exemption from registration with the SEC pursuant to Regulation A and shall only be offered in states in which the registration of the offer and sale of the Preferred Shares has been declared effective.

 

Environmental Regulations

 

Federal, state and local laws and regulations impose environmental controls, disclosure rules and zoning restrictions that directly impact the management, development, use, and/or sale of real estate. Such laws and regulations tend to discourage sales and leasing activities with respect to some properties, and may therefore adversely affect the Company specifically, and the real estate industry in general. The Company’s failure to uncover and adequately protect against environmental issues in connection with the target purchase of real estate may subject the Company to liability as buyer of such property or asset. Environmental laws and regulations impose liability on current or previous real property owners or operators for the cost of investigating, cleaning up or removing contamination caused by hazardous or toxic substances at the property. The Company may be held liable for such costs as a subsequent owner of such property. Liability can be imposed even if the original actions were legal and the Company had no knowledge of, or were not responsible for, the presence of the hazardous or toxic substances. Further, the Company may also be held responsible for the entire payment of the liability if it is subject to joint and several liability and the other responsible parties are unable to pay. The Company may also be liable under common law to third parties for damages and injuries resulting from environmental contamination emanating from the site, including the presence of asbestos containing materials. Insurance for such matters may not be available. Additionally, new or modified environmental regulations could develop in a manner that could adversely affect the Company.

 

Certain laws and regulations govern the removal, encapsulation or disturbance of asbestos containing materials (“ACMs”), when those materials are in poor condition or in the event of building renovation or demolition, impose certain worker protection and notification requirements and govern emissions of and exposure to asbestos fibers in the air. These laws may also impose liability for a release of ACMs and may enable third parties to seek recovery against the Company for personal injury associated with ACMs.

 

Americans with Disabilities Act

 

Under the ADA, all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. The Company’s projects must comply with the ADA to the extent that they are considered “public accommodations” as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in public areas of properties where such removal is readily achievable. The Company believes that its projects are or will be in substantial compliance with the ADA and that it will not be required to make substantial capital expenditures to address the requirements of the ADA after completion of the redevelopment. In addition, it will continue to assess compliance with the ADA and to make alterations to the Company’s projects as required.

 

Other Laws and Regulations

 

The Company is required to operate its projects in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to the Company’s projects. The Company is also required to comply with labor laws and laws which prohibit unfair and deceptive business practices with consumers. The Company’s projects will also be subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning fair housing and real estate transactions in general. These laws may result in delays if the Company’s projects are re-developed. Additionally, these laws might cause the Company to incur substantial compliance and other costs. The Company may be required to make substantial capital expenditures to comply with those requirements and these expenditures could have a material adverse effect on its ability to pay dividends to shareholders at historical levels or at all.

 

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

 

The Company expects to commence operations as soon as practicable after the information statement, of which this Offering Circular forms a part, has been qualified by the SEC. As the Company has not yet commenced operations, it has no employees that receive compensation, and has no Results from Operations for which it can provide Management Discussion and Analysis or Trend Information.

 

As the Company has insufficient liquidity and capital reserves to commence operations, it will rely entirely on the proceeds from this Offering for the liquidity and capital reserves necessary to commence operations.

 

PLAN OF OPERATIONS.

 

See “PLAN OF OPERATIONS” section.

 

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PLAN OF OPERATIONS

 

Overview

 

The Company was organized to invest in wholly-owned subsidiaries that develop (“Development Projects”), acquire (“Acquisition Projects”), or convert other real estate properties including hotels (“Conversion Projects”) into senior living rental communities ranging from $15,000,000 to $100,000,000 per community, consisting of independent living, assisted living and/or memory care for approximately fifty (50) to two-hundred and fifty (250) residents (“Company Properties”). The Company’s primary focus for purposes of Development Projects will be on southeastern markets, and for purposes of Acquisition Projects and Conversion Projects will be on national markets, that it considers to have favorable risk-return characteristics. The Company, operating through wholly-owned special purpose entities (“SPE”) as real estate owner-operators, intends to create, operate and hold a portfolio of Company Properties on a long-term basis, approximating seven years, and ultimately dispose of them to generate revenue for the Company. The Company is not a registered broker-dealer, an investment adviser, or a funding platform.

 

In order to achieve this objective, the Company regularly reviews opportunities for the acquisition or development of Company Properties.

 

Project Evaluation Criteria

 

The Company’s development focus on southeastern domestic markets, and acquisition and conversion focus on national markets, where demographics and competitive supply, offer the potential to achieve attractive returns. The Company intends to identify opportunities that financially benefit from the favorable demographic shift associated with the “aging of America”.

 

The Company’s diligence includes an evaluation of a potential project’s desirability based on: (1) overall market depth for senior living communities based on the age, need, and income qualified population in the property’s primary market area, (2) current and future market penetration based on current and forecast supply relative to the market depth, (3) household income and average home sale prices as these are the primary sources from which residents of Company Properties fund their living expenses, (4) five year forecast growth rate for senior population, and (5) the market position of the potential project relative to competitor price and quality. Once a project passes the Company’s preliminary due diligence, financial risks and returns are modeled to determine if the project is able to meet its financial projections and achieve Company return targets. This includes stress testing and sensitivity analyses on projected cash flows using financial models to gauge the project’s financial strength, rate sensitivity, occupancy and lease-up sensitivity, and exit capitalization rate sensitivity.

 

Other project evaluation criteria include the following: 

 

·Geography: Urban and suburban neighborhood throughout i) the southeastern United States for purposes of development, and ii) the United States for purposes of acquisition and conversion.

 

·Investment target size (per project): Senior living rental communities ranging from $15,000,000 to $100,000,000 per community, consisting of independent living, assisted living and/or memory care for approximately fifty (50) to two-hundred and fifty (250) residents.

 

· Maturity: Maturity is flexible and may range between three and seven years, at which point the ownership interest is intended to be liquidated (equity) or the principal is expected to be repaid in full (debt). In some cases, equity products may include contractual mechanisms in order to facilitate an earlier exit for Investors.

 

· Returns: The Company will seek to pursue Development Projects, Acquisition Projects, and Conversion Projects that have the potential to provide ongoing income to Investors in the Preferred Shares, paid or accrued monthly based on an 8.0% cumulative, non-compounded annual return on $1,000.00 par value (“Preferred Dividend”), plus potential capital appreciation through additional dividends (“Special Dividends”) based on fifty (50%) percent participation in the net proceeds generated by the Company from the Holdco disposition of Company Properties. However, as the Offering is a blind pool and the Company has no track record, there can be no guarantee that such returns can or will be achieved.

 

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In order to achieve targeted returns, the Company typically seeks to develop to a stabilized unleveraged yield of 250 basis points greater than underwritten exit capitalization rates, acquire properties with an underwritten stabilized net operating income at anticipated disposition of 200 basis points greater than underwritten exit capitalization rates, and convert other real estate properties including hotels with an underwritten stabilized net operating income at anticipated disposition of 225 basis points greater than underwritten exit capitalization rates.

 

Expansion of Company Focus to include the Mid-Market in Addition to the Class A Luxury Segment

 

The Company intends to build upon Management’s experience developing, acquiring, and operating Sponsor Affiliate luxury Clas A senior living communities, by continuing to focus on the development of luxury, Class A senior living communities in southeastern markets, as well as expanding on a national basis into the underserved mid-market segment that offers greater affordability in response to an emerging social crisis for aging Americans unable to afford $5,000 or more for senior living communities.

 

This growing, underserved mid-market segment known as “the missing middle” represents a demographic segment that can neither afford Class A luxury senior living communities, nor is eligible for government income-based subsidies that are available to residents of low-income senior living communities. By pursuing cost-effective acquisitions, and conversions of other real estate properties including hotels for adaptive reuse into senior living rental communities to serve this market segment on a national basis, Management believes it can provide a compelling, differentiated offering to residents that i) satisfies their need for safety and care, ii) provides a positive resident experience at more affordable levels than the development or acquisition of purpose-built senior living communities, and iii) achieves operating margins that are consistent with Sponsor Affiliate properties through reduced marketing costs due to shorter lease-up periods driven by favorable demand elasticity at lower monthly rates.

 

Leverage of Strategic Relationships

 

The Sponsor, Asset Manager and Advisor have forged numerous strategic relationships with market leaders in the senior living arena that will be engaged by the Company as appropriate on a community specific basis. This group of highly-qualified, key strategic vendors includes but is not limited to, the following:

 

(i)Bessolo Design Group. Bessolo Design Group is the Architect for Tuscan Gardens of Venetia Bay. Its services included architectural design of the memory care and assisted living facilities, as well as the design of the fountains, landscape and irrigation, the low voltage system, Security, Cable Television, Computer Audiovisual system, as well as mechanical, plumbing and structural engineering.

 

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(ii)Baker Barrios Architects. Baker Barrios Architects is among the most innovative commercial architecture and design firms in the Southeast. The company has been in business over two decades and has offices in downtown Orlando. The company provides architecture, interior design, planning, landscape architecture, brand strategy and communications, and structural engineering. The company is currently providing services with respect to Tuscan Gardens of Palm Coast.

 

(iii)5G Studio Collaborative. 5G Studio Collaborative is the architecture firm for Tuscan Gardens of Delray Beach. The company was founded in 2005 to expand the parameters of design beyond traditional architectural practice. With projects in over 10 different countries, the company provides an array of design services.

 

(iv)Mosaic Design Studio. Mosaic Design Studio specializes in design projects related to senior living and independent care communities. Mosaic developed its own line of furniture especially for these types of facilities and designs interiors to suit the needs of the residents and to positively influence all who use the space. Mosaic designed the furniture plans and decorative lighting plans for the Tuscan Gardens of Venetia Bay Welcome Center and the Office. 

 

(v) Core Construction Services. Core Construction Services provides the high-quality services of a nationwide leader while using a local workforce to create customized buildings. The company constructed Crane’s View Lodge and is the contractor for Tuscan Gardens of Venetia Bay, Tuscan Gardens of Palm Coast, and Tuscan Gardens of Forest Acres.

 

(vi) SageAge Strategies. SageAge Strategies is a senior living marketing and business consulting firm. Having been in business for 30 years, it has produced results for more than 400 retirement communities and senior service providers. As a result, SageAge has received numerous national and international honors for excellence and achievement from a variety of organizations. Its services include consulting, market research, creative, technology, online marketing, and media and direct marketing. SageAge is currently providing strategic branding, marketing, public relations, online marketing and sales management support services for affiliates of the Company.

 

(vii) Oracle Healthcare Property Advisers. Oracle Healthcare Property Advisors provides objective and reliable appraisals and market studies to the seniors housing and healthcare real estate industry. Its market feasibility services are used by the Company for market selection, competitive analysis, rate/pricing determination, and appraisals.

 

Operation of Company Properties

 

The Company’s Management will rely on the Advisor’s recommendations for the acquisition and purchase of Company Properties. The Asset Manager will oversee the day to day operation of communities by the Community Manager to ensure underwritten operational quality and financial results are achieved.

 

In order to assure the successful operation of Company Properties, the Asset Manager, in its capacity as asset manager for the Company, typically focuses on the following areas on an ongoing basis following licensure of Development Projects, Acquisition Projects, or Acquired Projects:

 

1.Immediately identify issues and prioritize areas to improve overall performance of the properties

 

2. Deploy three-pronged transformation plan (staff evaluation, resident experience, marketing effectiveness) through full-time Regional Director(s) of Operations working with the Community Manager

 

3.Ongoing data-driven performance improvement though Key Performance Indicator (“KPI”) management systems to ensure effectiveness of staff, resident satisfaction, and marketing performance.

 

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Specific Improvement Initiatives include:

 

Staffing Reorganization

1.Evaluate Current Staff and Facility Needs
a. Evaluate current levels of staffing and augment, reduce, replace as necessary
b.Execution bolstered by a dedicated, full-time Regional Director of Operations reporting to Asset Manager

 

2.Update Staff Processes and Protocols
a.Regular on-site meetings to align and update staff on the needs of the facility
b.Monthly review of menus, proposed activities, community association suggestions, and audit of Roundtable Resident Synopsis
c.Quarterly employee review process
d.Daily Care Incident Reporting Reviews
e.Weekly engagement with TG corporate office including consistent TG management presence ,daily review of Flash Reports and weekly on-site sales and marketing reviews

 

3.Organizational Development
a.Annual market compensation review and annual calibration
b.New associate orientation programming
c.Quarterly associate training programs
d.Performance agreements and evaluations
e.Re-training all senior leadership on clinical acuity assessment, empathy training, and hospitality protocols to ensure an optimum balance of care delivery and resident experience

 

4.Differentiate through Resident Experience
a.Research-Based Memory Care
b.Implement research-based proprietary memory care programming and add a dedicated MC Director and MC Program Manager
c.Ongoing Review of Level of Care
d.Ongoing conversations (vs. periodic evaluations) with residents and their adult children as well as assessments to identify changes in level of care and properly charge for services to eliminate revenue leakage and management risk
e.Improve medication regimens, reduce falls, evaluate acuity levels, and reduce recidivism rate to hospitals and rehabilitation facilities
f.Improve Programming and Dietary Offerings
g.Implement resident satisfaction (and adult children decision makers) assessments to generate leading-indicators in areas that need management attention
h.Increase care service offerings to include hospice and respite
i.Incorporate exceptional programming such as monthly food-based experiences and field trips to dinner, theaters or other venues, all day dining, lifelong learning opportunities, yoga, performing arts etc. (constantly evolving based on each community residents’ preferences)
j.Leverage local community for monthly events such as fine arts exhibit, recitals, piano recitals, car shows
k.Highlight resident stories for community engagement and involvement
l.Incorporate monthly community town hall meetings with local residents, referral network, and key stakeholders (i.e. medical community and caregivers) to enhance market presence and receive feedback on opportunities for improvement

 

5.One-time Capex – typically $200,000 per acquired property will be required to rejuvenate the assets. A more detailed assessment will be made by Mosaic Ltd., a recognized FF&E and interior design leader in the senior living space

 

6.Marketing Strategy
a.Branded Event Marketing
b.Incorporate aggressive branded event marketing
c.Monthly events directed to community referral sources (i.e. medical community and caregivers)
d.Monthly events directed to local residents, prospects, Power of Attorney (POA) and family members
e.Associate and Resident Referral Program
f.Implement associate and resident referral program
g.Monthly associate and resident community referral award event
h.$1,000 cash referral bonus (doubles as a resident activity of interest)
i.Community Networking
j.Realtor Targeting

 

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7.Other Improvements
a.Revenue Enhancement
i.Additional focus on increasing and expanding revenue from the resident and associate population
ii.Accelerate collection of accounts and implement auto-pay with all past-due residents
iii.Suite Configuration
iv.Review pricing strategy based on market demand/occupancy for each suite type (e.g. 1 BDR vs. 2 BDR)
v.Address “Friendship Suite” rate strategy (combining residents into semi-private rooms) immediately to shift these deeply discounted rates (up to 48% off published rates) to 20% premiums
b.Synergies
i.As the Company continues to scale its platform, it will benefit from synergies from management systems, Regional Director(s) of Operations and outside vendors
1.Use of regional vendors to enhance resident experience (e.g. farm to table) and referrals
2.Staff cross training, interim coverage (holidays, turnover) and best practice pollination
3.Retention though a culture of family feel vs. institutional employment
c.Management Systems
i. Additional clinical, CRM, and accounting systems assessment will be provided as part of the detailed due diligence plan to be prepared with Sage Age, and the Asset Manager prior to closing

 

Financial Performance of Company Properties

 

The Company targets developments and acquisitions that generate a leveraged internal rate of return (“IRR”) of 20% or more based on underwritten occupancy of 93%, annual rate growth (3%), and operating margins (35-36%). Based on market demand and competitiveness of each Company Property, the Company incentives its regional community manager to outperform against underwriting and is bonused on the achievement of stretch goals typically set at 95%+ occupancy, and 4-6% annual rate growth, and target operating margins of 40%.

 

Risk Analysis

 

Prior to proceeding to acquire or develop a potential property, the Company reviews the following potential risks:

 

  1. Contingencies: Environmental, Zoning, Title, and Survey contingencies. Full review financial of performance through rent rolls etc.
  2. Property Condition Report: A PCR is typically ordered as part of due diligence.
  3. FF&E Improvements: assess and recommend improvements to the FF&E.
  4. Financing: A financing contingency for each transaction is typically provided.
  5. Appraisal: Typically required by lender, provides additional comfort to underwriting.
  6. Supply Risk – based on increasing land prices and entitlement challenges in the PMA and vicinity, the risk of a new entrant coming in at a market basis and seeking development returns would result in rates well in excess of those currently forecast for the next five years.
  7. Occupancy Risks: Average length of stay, departures per month due to natural causes.
  8. Rental Rate Risk: Market occupancy and rates may result in short-term pricing premiums or challenges at any given time.
  9. Interest Rate Risk: If there is a significant rise in LIBOR rates the returns could be lower than projected.
  10. Execution Risk: project specific concerns, if any.

 

Ongoing Operations

 

Based on the foregoing, the Company intends to operate Company Properties through a Community Manager in a manner which is consistent with Sponsor and Sponsor Affilates’ operation of Tuscan Gardens at Venetia Bay. Details of this project are available on the Municipal Securities Rulemaking Board (“MSRB”) Electronic Municipal Market Access (“EMMA”) Website https://emma.msrb.org/IssueView/Details/EA357818

 

Notwithstanding this objective, the prior performance of the Sponsor, Sponsor Affiliates, and their respective affiliated entities may not predict the future performance of the Company and its affiliated entities or the return on an investment in the Preferred Shares. Therefore, there is no assurance that the Company will achieve its investment objectives or that the Preferred Dividend and/or cash distributions will be paid to the holders of Preferred Shares.

 

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DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

 

Below the Company provides information regarding the executive officers and significant employees of the Company. The Company does not have any other employees at this time as it relies on Company Affiliates to provide Asset Management under the Asset Management Agreement, Advisory Services under the Advisory Agreement, and other Company Affiliates to provide all administrative and other services to the Company at fair market value.

 

(a)Directors, Executive Officers and Significant Employees of the Company

 

Name   Age   Title   Term of OfficeNote 1 Approximate Hours Per Week
Larry Pino, Esq.   67   Director, President and Chief Executive Officer   July 2018 20
William N. Johnston   57   Director, Secretary Treasurer, Chief Investment Officer and Chief Financial Officer   July 2018 20
Christopher P. Young   60   Director, Chief Development Officer   July 2018 20
Charles C. Smith   71   Director, Director of Special Projects   July 2018 20
Sean D. Casterline   46   Corporate Equity Officer and Director   July 2018 10

 

Note 1 – The Company expects each Executive Officer to continue in the same capacity as their predecessor Company Affiliate roles outlined below, not all Company Executive Officers will be focused on all aspects of the Company’s business initiatives, but will rather focus on specific business initiatives in accordance with their area(s) of expertise.

 

Prior service with a Tuscan Gardens Management Corporation, a Company Affiliate:

 

Name   Age   Title   Term of Office  
Larry Pino, Esq.   67   Chief Executive Officer   January 2012  
William N. Johnston   57   Chief Investment Officer and Chief Financial Officer   January 2015  
Christopher P. Young   60   Chief Development Officer   January 2015  
Charles C. Smith   71   Director of Special Projects   November 2012  
Sean D. Casterline   46   Corporate Equity Officer   November 2012  

 

(b)Family relationships.

 

None

 

(c)Business experience.

 

The Company’s Management, each of which reside in Orlando, Florida, has experience in the finance, development and acquisition of senior living projects, commercial mixed use projects, shopping centers, office buildings, and single and multi-family residential properties. Management has also been involved in the formation, development, and growth of companies in the healthcare, finance, and insurance industries. The following are Management’s biographies:

 

Larry Pino, Esquire, Chairman and CEO. Mr. Pino is responsible for establishing the overall strategic of the Company and ensuring that the Company achieves its financial and operational goals and objectives. Prior to founding the company, Mr. Pino was the Founder and CEO of a private equity development and management company focused on starting, developing and growing business enterprises. He has served as Chairman or Board Member for many of those investments. By background, Mr. Pino is a commercial litigation attorney specializing in business and investment law. He graduated with a Bachelor’s Degree from the University of Notre Dame and a J.D. degree from New York University Law School. He has received Certificates of Study from the University of Madrid, L’Alliance Francaise in Paris, and the Centro Linquistico Italiano Dante Alighieri in Rome. Subsequently, he was admitted to practice law and is in good standing as a member of the bars in Florida, New York, and California, as well as in various federal courts across the country. Mr. Pino currently teaches a course as an Adjunct Professor on Rapid Enterprise Development for the Hamilton Holt School at Rollins College in Winter Park, Florida, and he is pursuing a Doctorate in Business Administration at the Warrington College of Business at the University of Florida. In the last thirty years, Mr. Pino has conducted some 5,500 speaking engagements, speaking to over one million people and appearing on 140 radio and television talk shows. Mr. Pino has authored twelve books including among others: Finding Your Niche (Berkley-Putnam Publishing), Finding Your E-Niche, The Desktop Lawyer, Cash In On Cash Flow (Simon & Schuster), and Reinventing Senior Living: The Art of Living With Purpose, Passion & Joy (Impact Publishing). He also co-authored Morphing: Radical Evolution for Revolutionary Times with Dr. Craig McAllaster, retired Acting President Emeritus of Rollins College.

 

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William N. Johnston, Chief Investment Officer and Chief Financial Officer. In his role, Mr. Johnston provides financial oversight of the Company, and is responsible for institutional investor relations and capital allocation. Over the course of his career, Mr. Johnston has raised and invested more than $1.5 billion of capital in various forms ranging from private equity to structured debt and has multi-sector institutional real estate finance, development, and operations experience. Mr. Johnston’s domestic and international leadership background leading high-growth teams as a strategic partner to Fortune 50 companies brings relevant growth expertise to the Sponsor. Prior to joining the Sponsor, Mr. Johnston served as Chief Investment Officer at Unicorp National Developments, a leading developer of retail, mixed use, and multifamily properties, EVP Corporate Development and Interim Chief Operating Officer at Digital Risk, LLC, where he delivered over $11million of annual operating margin growth through operational improvements and supported the 2012 sale for $175 billion to Mphasis Ltd., (an HP Company), and Chief Operating Officer at Liberty Investment Properties, Inc., where he led national hotel development programs with Goldman Sachs and Angelo Gordon. Mr. Johnston started his public accounting career as a financial modeling specialist and IT systems specialist at PriceWaterhouseCoopers, LLC. He has held various global corporate finance roles which include North American Chief Financial Officer, Managing Director of Global Financial Services and head of North American Real Estate for London-based multinational Tibbett & Britten Group, PLC through the growth of its North American operation from a startup to over 11,000 team members handling $35 billion of goods annually. Mr. Johnston holds an Executive MBA from Harvard University, Master of Accountancy, and Bachelor of Commerce degrees from McGill University. He is a Certified Public Accountant (Illinois) and Chartered Professional Accountant (Canada).

 

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Christopher P. Young, Chief Development Officer. Mr. Young is responsible for the on-time, on-budget delivery of the Company’s development projects. He has previously served as the chief operating officer for a regional senior living developer based in central Florida, where he was in charge of the day-to-day operations of the companies and the development of assisted living division. As chief operating officer, he created the business model for the site acquisition and market penetration criteria. While there, he was responsible for the development of three assisted living facilities with an approximate value of $100 million. He has over thirty years of operational and executive-level experience with small and large corporations, including General Motors and General Dynamics. This experience also includes small and large-scale construction projects, with up to $300 million in total construction cost. Mr. Young earned a Bachelor of Arts degree in administration and pre-law from Michigan State University and is finishing his Master of Science in acquisition and contracts from the University of West Florida. Mr. Young resides in Orlando, Florida.

 

Charles C. Smith, Jr., Director of Special Projects. Prior to joining the company in 2012, Mr. Smith was the CEO and Founder of Delta Advisory Group, Inc., a federally registered investment advisory firm and a Co-Founder and Partner of Delta Realty Advisors, Inc. a real estate investment company. During his 40-year business career, he has been a principal party in the formation, capitalization and operational aspects of an extensive number of business enterprises. These ventures have spanned a wide range of sectors including banking, retail, multifamily residential development, commercial retail development, marina services, and radio station syndication. He has organized and served as a managing partner in real estate projects with capitalization in excess of $200 million and as a managing principal of market equities in excess of $150 million. Mr. Smith is an alumnus of the University of South Carolina in Columbia where he served as an intern in the Office of Dean of Student Affairs and a Page in the South Carolina State Senate. Post-graduation, he engaged in studies of philosophy and apologetics at L’Abri Fellowship in Huemoz, Switzerland under the leadership of founder Dr. Francis A. Schaeffer.

 

Sean D. Casterline, Corporate Equity Officer. Mr. Casterline began his career with Delta First Financial as an asset manager. During his time at Delta, he progressed through the company to eventually land as the Senior Portfolio Manager with the firm. In 1998, he left for an opportunity to work with Wealth Management Financial Group as their Senior Portfolio Manager. While there, Mr. Casterline managed client assets totaling over $200 million and co-hosted a syndicated financial radio show, which was broadcast nationwide in such cities as New York, San Francisco, and Dallas. Mr. Casterline earned both his Bachelor’s Degree in Finance and Master’s Degree in Business Administration from the University of Florida. He also has the distinction of being a CFA Charter holder and was an Arbitrator for the NASD. Mr. Casterline is an active member at the University of Florida Alumni Association and has also served as a Director for the CFA-Orlando Society. He has been involved with other charitable organizations such as the Fellowship of Christian Athletes, Big Brothers/Big Sisters of Gainesville and Habitat for Humanity. He is a member of YPO (Young Presidents’ Organization) and The CFA (Chartered Financial Analysts) Institute.

 

Sponsor Affiliates have raised $22.4mm of capital from unaffiliated accredited investors for the development and acquisition of a variety of Sponsor Affiliate senior living communities under exemption from the registration provisions of Rule 506 of Regulation D of the Securities Act through the following affiliated funds: (1) Tuscan Gardens Senior Living Fund, LLC, (2) Tuscan Garden Real Estate Fund, LLC, (3) Tuscan Gardens Income Fund, LLC, (4) Tuscan Gardens Income Fund II, LLC, (5) Tuscan Gardens Income Fund III, LLC (6) Tuscan Gardens Growth & Income Fund, LLC, and (7) Living Well Lodges Capital Partners, LLC. Management of the Sponsor maintains control over the corporate and business matters affecting Company Properties, the Sponsor, and the funds described above.

 

(d)Legal proceedings.

 

None

 

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COMPENSATION OF MANAGEMENT AND DIRECTORS

 

Compensation of Management

 

Currently, each member of the Company Management is an employee of Company Affiliates and the Company does not currently have any plans to hire additional employees who will be compensated directly by the Company. Each member of Management receives compensation for his or her services, including services performed for the Company, from Company Affiliates. These individuals will serve to manage the Company’s day-to-day affairs. Although the Company will indirectly bear some of the costs of the compensation paid to these individuals through fees that the Company pays to Company Affiliates, the Company does not intend to pay any compensation directly to these individuals.

 

Consequently, the Net Proceeds will not be used to compensate or otherwise make payments to Management in their role as officers or directors of the Company. Should the Company, in the future choose to hire additional employees, it may need to offer substantial cash compensation to attract qualified individuals, and may, depending on market conditions, be required to provide equity incentive awards as part of their compensation packages.

 

 

PRINCIPAL SHAREHOLDERS

 

The Company is a newly-formed entity organized on July 20, 2018. Tuscan Gardens Capital Partners, LLC (the “Sponsor”) a Florida limited liability corporation, is the sole common shareholder having purchased 50,000 Common Shares for a cash consideration of $50,000.00 on August 7, 2018.

 

No other Common Shares or Preferred Shares have been issued.

 

The following table displays, as of December 31, 2018, the voting and non-voting securities of the Company:

 

Title of Class   Name and Address of
Beneficial Owner
  Amount and Nature of
Beneficial Ownership
    Percent of
Class
    Percent of
Company
Total Voting
Power
 
Common Voting Shares ($1.00 par value)   Tuscan Gardens Capital Partners, LLCNote 1   $ 50,000.00       100.0 %     100.0 %

Class A Non-Voting Preferred Shares

($1,000.00 par value)

  None issued     N/A       N/A       0.00 %
Total       $ 50,000.00               100.00 %

 

 

 Note 1 - Tuscan Gardens Capital Partners, LLC (“Sponsor”) is a Management controlled Company Affiliate.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

  

The Asset Manager, Advisor and other Sponsor affiliates (collectively “Company Affiliates”) will be engaged by the Company and its affiliates to perform various value add services for day to day management of the Company including the investment of its assets, the acquisition, development, financing and disposition of properties, and offering placement services. Company Affiliates will receive fees and compensation for such services as described in this section. None of the agreements for such services are the result of arm’s-length negotiations. The Company believes, however, that the terms of such arrangements are reasonable and are comparable to those that could be obtained from unaffiliated entities. The timing and nature of these fees could create a conflict between and among the interests of the Community Manager, Asset Manager, the Advisor, the Sponsor, the Company, and those of the Investors. 

 

Property Management Services to the Company. Tuscan Gardens Management Corporation (“Community Manager”), will be responsible for the day to day operation and management decisions for Company Properties under a community management agreement (“Community Management Agreement”) for each Company Property. Community Management Agreements will provide the Community Manager with a monthly community management fee equal to 5.0% of monthly Company Property revenue, plus reimbursement for various corporate resource costs including accounting, sales & marketing, information technology, and payroll processing.

 

Asset Manager Services to the Company. In order to ensure the generation of revenue for the Company, ongoing operation of Company Properties will be overseen by an affiliate entity, Tuscan Gardens Senior Living Communities Asset Manager, LLC (“Asset Manager”) pursuant to an agreement between the Asset Manager and the Company (“Asset Management Agreement”). The Company’s strategy is to hire its affiliate, Tuscan Gardens Management Corporation (“Community Manager”) to operate the senior living communities that it builds or acquires, and to leverage the Asset Manager’s expertise and oversight of the Community Manager to ensure operational and financial performance objectives are achieved by the Community Manager.

 

Advisor Services to the Company. In order to achieve its investment objectives, the Company will engage an advisor to oversee the Company’s acquisitions, developments, financing, and disposition activities including without limitation the negotiation and execution of all agreements pertaining to development, acquisition, financing, and disposition of the Company’s assets. Tuscan Gardens Advisors, LLC (the “Advisor”) will serve as the management and business advisor to the Company pursuant to an advisory agreement with the Company (the “Advisory Agreement”) to advise on all business matters of the Company pursuant to the Advisory Agreement. The Advisor is a wholly-owned, captive affiliate of Tuscan Gardens Management Group, LLC (“TGMG”), a Florida limited liability company, is not a registered investment advisor under the Investment Advisers Act of 1940, and exclusively provides management and business consulting, rather than investment advisory services, to the Company and its majority-owned affiliates which include Tuscan Gardens Senior Living Fund, LLC and Tuscan Gardens Senior Living Income Fund, LLC. TGMG is a real estate private equity company specializing in senior living community development and acquisitions. TGMG’s leadership has over 100 years of collective experience investing in income producing real estate including senior living communities, hospitality, retail, multifamily, industrial, restaurant and other real estate sectors. The Advisor may terminate the Advisory Agreement with or without cause and without penalty, by giving sixty (60) days’ prior written notice to the Company.

 

Services performed by Company Affiliates include the following:

 

Service   Determination of Amount   Estimated Amount
    Organization and Offering Stage    
         
Organizational and Offering
Expenses
  The Company will reimburse the Asset Manager, the Advisor, or Company Affiliates for Organizational and Offering Expenses up to five (5.0%) percent of Maximum Offering Amount.  As used herein, “Organizational and Offering Expenses” means any and all costs and expenses, exclusive of the Placement Fee, the Marketing Support Fee, the Dealer Manager Fee, and the Acquisition Fees incurred by the Company, the Asset Manager, the Advisor or any Company Affiliate in connection with the formation, qualification, organization and registration of the Company and the marketing, distribution and issuance of Preferred Shares, including, without limitation, the following:  legal, accounting and escrow fees, costs of printing, amending, supplementing, mailing, and distribution costs; filing, registration, and qualification fees and taxes; personnel costs associated with processing Investor subscriptions, the preparation and dissemination of organizational and Offering documents and sales materials, and the attendance by the Company or Company Affiliates at sales meetings; telecopy and telephone costs, all advertising, promotional and marketing expenses, including the costs related to Investor and broker-dealer sales meetings or events paid or reimbursed by the Company; and bona fide due diligence expenses incurred by the Placement Agent and Participating Brokers.   If the Company raises the Maximum Offering Amount, Organizational and Offering Expenses will equal $2,500,000.

 

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Service   Determination of Amount   Estimated Amount
    Organization and Offering Stage    
         

 

Reimbursement of Advisor
Operating Expenses
  The Company will cause each respective Holdco to pay the Advisor and its Affiliates, as applicable, for Advisor’s ongoing operating expenses incurred on behalf of the Company, the Holdcos or their affiliates.  These amounts are expected to be funded with working capital reserves established with Offering proceeds prior to such time as the Company receives distributions from the Holdcos in amounts sufficient to pay such operating expenses. These amounts are estimated to be two (2.0%) percent of the Company’s prorata percentage of total Holdco preferred ownership interests multiplied by Total Project Costs.       As actual amounts are dependent upon the Offering proceeds the Company raises, any leverage it employs, and the costs of the Advisor’s operations, the Company cannot determine these amounts at the present time.
         
Placement Agent Services   Maitland Securities Inc. (“MSI”), a FINRA-registered broker-dealer, is a Sponsor Affiliate by virtue of it being owned by the Company’s Corporate Equity Officer and Director, Mr. Sean Casterline.  MSI has entered into, or will enter into arrangements with the MBD for compensation and fees as a participating FINRA-registered broker-dealer under the MBD’s standard Participating Dealer Agreement attached as Exhibit 1.  The compensations and fees paid to MSI will be consistent with those paid by the MBD to participating broker-dealers who are not Affiliates of the Company.   As actual amounts are dependent upon the Offering proceeds raised by MSI, the Company cannot determine these amounts at the present time.

 

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Service   Determination of Amount   Estimated Amount
    Acquisition and Development Stage    
         
Acquisition Services   The Company will cause each respective Holdco to pay the Advisor acquisition fees (the “Acquisition Fees”) for the selection, purchase, underwriting, financing, development or construction of the Communities equal to three (3.0%) percent of the Company’s prorata percentage of total Holdco preferred ownership interests multiplied by estimated Total Project Costs, as defined herein, upon the acquisition of each Company Property.  In the event the Acquisition Fees are paid to the Advisor in connection with any property that is not ultimately acquired by the Company, such Acquisition Fees shall be promptly repaid by the Advisor to the Company.     As actual amounts are dependent upon the Offering proceeds the Company raises, any leverage it employs, and the Total Project Costs of Company Properties, the Company cannot determine these amounts at the present time.
         
Development Services   The Company relies upon dedicated, affiliated community specific development entities (“Devco”) to achieve on-time, on-budget completion of each Company Property it develops.  These Devcos are responsible for the successful engagement with sellers, regulatory officials, and other parties necessary to secure land use entitlements, requisite development approvals and permits, as well as the oversight of general contractors.  In consideration for these services, the Company will cause each respective Propco to pay the applicable Developer Entity a site development fee in an amount equal to five (5.0%) to seven (7.0%) percent of Total Project Costs (including financing costs and interest expense, pre-opening operating expenses and working capital reserves) for design and development services.  Upon commencement of construction at each site, or sooner as provided for under the applicable development agreement between each respective Propco and the applicable Developer Entity, an amount not to exceed seventy-five (75%) percent of this fee will be due and payable for the respective Company Property, with the balance paid in installments over the projected site construction period, which is typically eighteen (18) to twenty-four (24) months, subject to any additional lender requirements.   As actual amounts are dependent upon the Offering proceeds the Company raises, any leverage it employs, and the Total Project Costs of Company Properties, the Company cannot determine these amounts at the present time.

 

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Service   Determination of Amount   Estimated Amount
    Acquisition and Development Stage    
         

 

Asset Manager Acquisition
Expenses
  The Company will reimburse the Asset Manager for actual expenses incurred in connection with the selection or acquisition of an investment, whether or not it ultimately acquires the investment.   As actual amounts are dependent upon the Offering proceeds the Company raises, any leverage it employs, and the costs and frequency of the Asset Manager’s selection or acquisition of investments, the Company cannot determine these amounts at the present time.
         
Financial Guarantee   The Company will cause each respective Holdco to pay the Advisor, on a monthly basis, an annual Guarantee Fee (the “Financial Guarantee Fee”) equal to three quarters of one (0.75%) percent of guaranteed amounts under total aggregate financing (“Guaranteed Amount”) for each Company Property for which Advisor or its affiliates provide financial or carve-out guarantees.  The Company will pay the Advisor the Financial Guarantee Fee earned with respect to the Guaranteed Amount upon the execution of guarantees by Advisor or its affiliates at each Company Property. In the event the Financial Guarantee Fee is paid to the Advisor in connection with any Company Property that is not ultimately developed or acquired by the Company, such Financial Guarantee Fee shall be promptly repaid by the Advisor to the Company.  These amounts are expected to be funded with working capital reserves established with Net Proceeds prior to such time as the Company receives distributions from the Holdcos in amounts sufficient to pay such fees.   As actual amounts are dependent upon the Offering proceeds the Company raises, any leverage it employs, the Total Project Costs of Company Properties, and the frequency and magnitude of lender requirements for financial guarantees, the Company cannot determine these amounts at the present time.

 

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Service   Determination of Amount   Estimated Amount
    Operational Stage    
         
Asset Management   The Asset Manager is responsible for the oversight of day to day Company Property management decisions by the Community Manager pursuant to an agreement between the Asset Manager and the Company (“Asset Management Agreement”). Under the Asset Management Agreement, the Company will pay the Asset Manager, on a monthly basis, an annual Asset Management Fee (the “Asset Management Fee”) equal to two (2.0%) percent of Gross Assets under management.  In the event the Asset Management Fee is paid to the Asset Manager in connection with any community that is not ultimately acquired by the Company, such Asset Management Fee shall be promptly repaid by the Asset Manager to the Company.  These amounts are expected to be funded with working capital reserves established with Net Offering Proceeds prior to such time as the Company receives distributions from the Holdcos in amounts sufficient to pay such fees.   As actual amounts are dependent upon the Offering proceeds the Company raises, any leverage it employs, and the costs and frequency of the Asset Manager’s selection or acquisition of investments, the Company cannot determine these amounts at the present time.
         

 

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Service   Determination of Amount   Estimated Amount
    Operational Stage    
         
Disposition Services   The Company will cause each respective Holdco to pay the Advisor disposition fees (the “Disposition Fees”) for the disposition, recapitalization, or sale of Communities equal to three (3.0%) percent of the Company’s prorata percentage of total Holdco preferred ownership interests multiplied by the actual selling price or recapitalized amount, as defined herein, upon the sale or recapitalization of each Company Property.  In the event the Disposition Fees are paid to the Advisor in connection with any Company Property that is not ultimately sold or recapitalized by the Company, such Disposition Fees shall be promptly repaid by the Advisor to the Company.     As actual amounts are dependent upon the Offering proceeds the Company raises, any leverage it employs, the frequency and magnitude of dispositions of Company Properties, the Company cannot determine these amounts at the present time.

 

Conflicts of Interest

 

There are conflicts of interest between and among the Company, the Asset Manager, the Advisor, the Sponsor, the Development Entities, and other Company Affiliates. Asset Manager and Advisor may provide services to other affiliate companies in addition to the Company. All of the agreements and arrangements between Company Affiliates and the Company, including those related to compensation, are not the result of arm’s-length negotiations. The Company will try to balance the interests of Company Affiliates with the interests of the Company. However, to the extent that the Company takes actions that are more favorable to Company Affiliates than the Company, these actions could have a negative impact on the Company’s financial performance and, consequently, on the dividends to holders of Preferred Shares and the value of those securities. The Company has not adopted, and does not intend to adopt in the future, either a conflicts of interest policy or a conflicts resolution policy.

 

The Company relies on key real estate professionals, including Larry Pino, William N. Johnston, and Christopher P. Young (collectively “Management”), for the day-to-day operation of its business. As a result of their interests in other Company Affiliates, their obligations to other investors, and the fact that they engage in and will continue to engage in other business activities on behalf of themselves and others, Management will face conflicts of interest in allocating their time among us, the Asset Manager, the Advisor, other Company Affiliates, and other business activities in which they are involved. However, the Company believes that the Asset Manager, Advisor, and their respective affiliates have sufficient real estate professionals to fully discharge their responsibilities to the Company.

 

There are no other material relationships or related party transactions.

 

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SHAREHOLDER RIGHTS UNDER THE COMPANY’S ARTICLES OF INCORPORATION AND BYLAWS 

 

The following is a summary of the material provisions of the Company’s Articles of Incorporation dated July 20, 2018 (“Company Articles of Incorporation”) and Bylaws dated July 20, 2018 (“Company Bylaws”) attached hereto as Exhibit 2 (collectively “Governing Documents”), as they pertain to the rights and obligations of Shareholders thereunder.

 

The following description does not purport to be complete and is subject to and qualified in its entirety by reference to (i) applicable provisions of the laws of the State of Florida, (ii) the entirety of the Governing Documents.

 

The Company encourages you to read the entire Governing Documents attached hereto as Exhibit 2.

 

All capitalized terms appearing but not defined in this section will have the meanings set forth in the Governing Documents.

 

Class A Non-Voting $1,000 Par Value Preferred Shares

 

The Preferred Shares being offered pursuant to this Offering Circular are Preferred Shares representing preferred non-voting interests in the Company. Purchasers of the Preferred Shares (“Preferred Shareholders”) have no rights to direct or vote on any matter concerning the Company or the management of the Company, including whether or not the Company should dissolve.

 

Preferred Shareholders have the right to receive dividends as set forth in the Governing Documents, as amended from time to time at the sole discretion of Management based on its determination of what is in the best interests of the Company. See the section entitled “Preferred Dividends” below.

 

The Governing Documents

 

This Company shall be governed by and construed in accordance with the laws of the state of Florida.

 

“Shareholder” means a person who has been admitted as a shareholder of the Company and has an ownership interest in the Company with rights, obligations and preferences and limitations specified in the Governing Documents and pursuant to the Florida Business Corporations Act (“FBCA”). Shareholders include voting Common Shareholders and non-voting Preferred Shareholders.

 

Management, Voting and Governance

 

Except as otherwise provided in the Governing Documents, Company Management will conduct, direct and exercise full control over all major activities of the Company, including all decisions relating to the issuance of Preferred Shares. The Company will have two classes of shares, common voting shares with $1.00 par value per share (“Common Shares”) and Class A Non-Voting Preferred Shares with $1,000.00 par value per share (“Preferred Shares”). Tuscan Gardens Capital Partners, LLC (“Sponsor”) will be the only Common Shareholder. All other shareholders will be Preferred Shareholders and will have no voting rights. Unless otherwise specifically provided in this Agreement, no action may be taken or authorized on the part of the shareholders without the approval of the Common Shareholder. Management will have the sole power and authority to bind or take any action on behalf of the Company, or to exercise any rights and powers granted to the Company under Company’s Articles of Incorporation, Bylaws, or any other agreement, instrument, or other document to which the Company is a party. Except as otherwise required by law, the Preferred Shareholders will have no voting rights or governance rights.

 

The approval of the Board of Directors is required in connection with:

 

(a)The admission of an additional Common Shareholder;

 

(b)The initiation of a proceeding for the bankruptcy of the Company;

 

(c)The change in the business or purpose of the Company;

 

(d)The approval of a merger, conversion or the application of any statute (the application of which is elective) to the Company;

 

(e)Trading for or in the Company’s proprietary account, except for any normal operating error account;

 

(f)The amendment of this Agreement or any action taken in violation of this Agreement;

 

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(g)The determination of the amount of, and the making of, Dividends;

 

(h)The determination of the amount of, and the making of, the transfer of any Fund Company Property to any person or entity;

 

(i)Assumption of debt by the Company or its affiliates; including but not limited to, the borrowing of money and issuing of evidences of mortgage and subordinate institutional indebtedness in an amount equal to ninety-two (92.0%) or more of the total fair market value of the Company Properties once completed, as is necessary, convenient, or incidental to the accomplishment of the purposes of the Company, and securing the same by mortgage, pledge, or other lien thereon;

 

(j)The institution, prosecution, and defense of any Proceeding in the Company's name;

 

(k)The investment and reinvestment of the Company's funds, and receipt and holding of Company Property as security for repayment;

 

(l)The sale, exchange, transfer, Distribution, or other Disposition of all, or substantially all, of the Company Property; and

 

(m)The redemption of all or any portion of the Preferred Shareholder’s Preferred Shares. 

 

 

Management is authorized under the Governing Documents to oversee and make decisions regarding:

 

(a)The conduct of the Company's business, the establishment of Company offices, and the exercise of the powers of the Company within or without Florida;

 

(b)The appointment of employees and agents of the Company, the defining of their duties, and the establishment of their annual compensation;

 

(c)The payment of compensation, or additional compensation to a Shareholder and employees on account of services previously rendered to the Company, whether or not an agreement to pay such compensation was made before such services were rendered;

 

(d)The purchase of liability and other insurance to protect the Company's Property and business and the purchase of insurance on the life of any of the Shareholders or employees for the benefit of the Company;

 

(e)The employment of accountants, legal counsel, managing agents, or other experts to perform services for the Company and to compensate them from Fund funds; and

 

(f)The doing and performing of all other acts as may be necessary or appropriate to carry out the Company's day to day business.

 

(g)The negotiation and execution of contracts, partnerships, and joint venture relationships with other parties in order to facilitate the successful acquisition, construction, development, and operation of Company Properties; and

 

(h)Negotiate and receive advances that are required to address economic or financial shortfalls on behalf of the Company and its affiliates, including without limitation advances from the Asset Manager or its Affiliates (“Affiliate Advances”). In the event of Affiliate Advances, any such Affiliate Advances shall be reimbursed to the advancing party by the Company, or its affiliate with accrued interest at a monthly rate of one (1.0%) percent on such advances prior to any return of any shareholder capital.

 

As the Sponsor will exercise complete control over the Company, it will have the ability to make decisions regarding (i) changes to share classes without shareholder notice or consent, (ii) making changes to the Company’s Articles of Incorporation whether to issue additional common stock and preferred stock, including to itself, (iii) employment decisions, including compensation arrangements; and (iv) whether to enter into material transactions with related parties.

 

Standard of Care of the Board of Directors

 

The Board of Directors’ duty of care in the discharge of its duties to the Company is limited to refraining from engaging in grossly negligent or reckless conduct, willful or intentional misconduct, or a knowing violation of law. In discharging its’ duties, the Board of Directors shall be fully protected in relying in good faith upon the records required to be maintained by the Company and upon such information, opinions, reports, or statements by any of its agents, or by any other Person, as to matters the Board of Directors reasonably believe are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports, or statements as to the value and amount of the assets, liabilities, profits, or losses of the Company or any other facts pertinent to the existence and amount of assets from which Preferred Dividends or Special Dividends to the shareholders, including Manager might properly be paid.

 

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Books, Records and Accounting

 

During the Term of the Governing Documents and for one (1) year thereafter, the Company shall maintain proper records and books of account prepared using consistent accounting principles relating to the computation of payments owed and costs charged to the Company. The Company, for accounting and income tax purposes, shall operate on a Fiscal Year ending December 31 of each year, and shall make such income tax elections and use such methods of depreciation as shall be determined by the Company. The books and records of the Company shall be maintained at the principal place of business of the Company. The Company shall make the Company books and records available for inspection and copying by any Shareholder at reasonable times during normal business hours upon at least 10 days prior notice.

 

Conflicts of Interest

 

The Asset Manager, Advisor, and the Management Corporation are comprised of individuals who are also principals of the Company, other affiliated entities and the law firm which represents all of the above identified entities. One or more principals of the Asset Manager, Advisor, and the Management Corporation will also operate as the developers of the properties to be purchased, developed and constructed by the Company and will receive development fees associated therewith. One or more principals of the Asset Manager, Advisor, and the Management Corporation will also operate as advisors to the Company and will receive fees for their services. One or more principals of the Asset Manager, Advisor, and Management Corporation may provide additional or subsequent private Offerings or terms of offer different than herein for the construction, development and/or operation of Company Properties. In addition, one or more principals or affiliates of the Asset Manager, Advisor, and Management Corporation own the Trademarks and other Intellectual Property associated with Tuscan Gardens and have licensed the Intellectual Property to the Projects associated with the Company Properties

 

The Asset Manager, Advisor, and Company Affiliates do not violate a duty or obligation to the Company merely because their conduct furthers their own interest. The Asset Manager, Advisor, and Company Affiliates may lend money to and transact other business with the Company. The rights and obligations of the Asset Manager, Advisor, and Company Affiliates who lends money to or transacts business with the Company are the same as those of an arm’s length Person, subject to other applicable law. No transaction with the Company shall be voidable solely because the Asset Manager, Advisor, or Company Affiliates has a direct or indirect interest in the transaction if either the transaction is fair to the Company or the Asset Manager with knowledge of the interest and transaction of the Asset Manager. Moreover, all documents and legal work associated with the creation of the entities associated herewith, including the Company, Asset Manager, Advisor, and Company Affiliates, have been provided by the law firm of Pino Nicholson PLLC (“PNL”). A principal of PNL is also a principal herein. The Shareholders, Asset Manager, Advisor, and Company Affiliates intentionally waive any and all objections to PNL continuing to represent the Asset Manager and the Company regardless of any conflict of interest considerations.

 

Preferred Dividend

 

Subject to declaration by the Board of Directors on no less than a quarterly basis, acting in its sole discretion based on the best interests of the Company, the Company will seek to provide ongoing income to Investors in the Preferred Shares, paid or accrued monthly based on an 8.0% cumulative, non-compounded annual return on $1,000.00 par value (“Preferred Dividend”).

 

Any unpaid Preferred Dividends will accrue monthly at a non-compounded rate of eight (8.0%) percent per annum on the Preferred Share’s $1,000.00 par value.

 

For purposes of calculating the Preferred Dividend, all capital contributions and dividends occurring during a given month will be deemed to have occurred on the first day of the month. Such dividends will be made from available cash that remains following the payment of Company obligations as more fully described in Article IV D of the Articles of Incorporation. Payment of the Preferred Dividend is further contingent upon the Company retaining available cash to offset any losses in the event the Company is operating at a loss. In the event the Company does not have available cash to distribute, an investor will neither receive nor be entitled to payment of the Preferred Dividend.

 

Special Dividends

 

Once any one of the Company Properties reaches Stabilization, which is typically twenty-four (24) months from the commencement of operations. the Company may elect to pay additional dividends to the Preferred Shareholders from the distributions it receives from the respective Holdco, less certain expenses and reserves (see “Net Operating Cash Flow”). The amount of Net Operating Cash Flow of the Company to be paid as Special Dividends shall be determined by the Company, in its sole and absolute discretion.

 

The Company does not expect to receive distributions from the Holdcos and, therefore, commence the payment of Special Dividends based on Net Operating Cash Flow to Preferred Shareholders, until one or more of the Company Properties have begun to generate sufficient cash flow in excess of any debt service and reserve requirements. As a result there can be no assurance as to the date on which distributions will commence or the timing or amount of such distributions, if any, from the Net Operating Cash Flow. Any unpaid Special Dividends shall accrue until such time as the Board of Directors authorizes payment, acting in its sole discretion based on the best interests of the Company.

 

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The Company expects to pay dividends to the holders of Preferred Shares and holders of Common Shares from distributions it receives from the Holdcos in connection with any sale, refinancing, redemption or other disposition of the Communities, less certain expenses (“Net Disposition Proceeds”).

 

Dividends shall accrue monthly, but shall be payable only when, as and if declared by the Company’s Board of Directors under Article IV D of the Company’s Articles of Incorporation. Dividends resulting from Net Disposition Proceeds received by the Company from Holdcos shall be determined as follows:

 

a)First, to the Preferred Shareholders to the extent of and in proportion to their respective unpaid eight (8.0%) percent Preferred Return until such Preferred Shareholders' unpaid eight (8.0%) percent Preferred Return has been paid in full;
b)Second, fifty (50%) percent of the Net Distribution Proceeds to the Preferred Shareholders’ Special Dividends allocated among Preferred Shareholders in proportion to the amount and duration of each Preferred Shareholder’s invested capital; and
c)Third, any remaining Net Distribution Proceeds to the Common Shareholders. 

 

Liquidating Dividends

 

The proceeds from the liquidation of the Company will be distributed within Ninety (90) days of the date of liquidation in the following order and priority:

 

a)First, to creditors of the Company, including Shareholders who are creditors, to the extent otherwise permitted by law, in satisfaction of all debts, liabilities, obligations and expenses of the Company, including, without limitation, the expenses incurred in connection with the liquidation of the Company; and
b)Second, to the Preferred Shareholders to the extent of and in proportion to their invested capital until the aggregate amount paid to such Preferred Shareholders is sufficient to provide for a complete return of such Preferred Shareholders invested capital; and
c)Third, to the Preferred Shareholders to the extent of and in proportion to their respective unpaid eight (8.0%) percent Preferred Return until such Preferred Shareholders' unpaid eight (8.0%) percent Preferred Return has been paid in full; and
d)Fourth, fifty (50%) percent of any remaining proceeds from the liquidation of the Company to the Preferred Shareholders’ Liquidating Dividends allocated among Preferred Shareholders in proportion to the amount and duration of each Preferred Shareholder’s invested capital; and
e)Fifth, to the Common Shareholders.

 

Allocation of Profits and Losses

 

The Holdco operating agreements provide for the allocation of income and gain to both the Holdco Common Members and Holdco Preferred Members, and the losses to the Holdco Common Members. The Company believes that all material allocations to the Shareholders as Preferred Members of each Holdco may or may not be respected for U.S. federal income tax purposes. The rules regarding allocations are complex and no assurance can be given that the IRS will not successfully challenge the allocations in the Governing Documents and/or the Holdco operating agreements, and reallocate items of income, gain, loss or deduction in a manner which adversely increases the income allocable to the Shareholders of the Company. 

 

Exculpation and Indemnification of the Common Shareholder, Asset Manager, Advisor and Company Affiliates

 

Neither the Common Shareholder, Asset Manager, Advisor or Company Affiliates shall be liable for the liabilities of the Company to third parties. The failure of the Company to observe any formalities or requirements relating to the exercise of its powers or management of its business or affairs under this Agreement or the Act shall not be grounds for imposing personal liability on the Common Shareholder, Asset Manager, Advisor or Company Affiliates for liabilities of the Company.

 

The Company shall indemnify the Common Shareholder, Asset Manager, Advisor or Company Affiliates for all costs, losses, liabilities, and damages paid or accrued by the Common Shareholder, Asset Manager, Advisor or Company Affiliates (either as Common Shareholder, Asset Manager, Advisor or, or agent) or because it is a Common Shareholder, Asset Manager, Advisor or Company Affiliate, to the fullest extent provided or allowed by the law of Florida. To the extent the Company is required to indemnify the Common Shareholder, Asset Manager, Advisor or Company Affiliates , as set forth herein, the Common Shareholder, Asset Manager, Advisor or Company Affiliates shall cause the Company to advance costs of participation in any Proceeding to the Common Shareholder, Asset Manager, Advisor or Company Affiliates. The Common Shareholder, Asset Manager, Advisor or Company Affiliates may, based on its sole discretion, indemnify all other employees and agents of the Company for all costs, losses, liabilities, and damages paid or accrued by the agent or employee in connection with the business of the Company or because such Person is an agent or employee, to the fullest extent provided or allowed by the laws of Florida. 

 

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Additional Rights and Obligations Considerations

 

There are no conversion, pre-emptive, sinking fund, or liability for further call rights or obligations associated with the Common Shares or Preferred Shares.

 

Amendment

 

The Governing Documents may not be amended except with the consent of the Common Shareholder.

 

Dissolution

 

The Common Shareholder must consent to dissolve the Company, which it may elect to do at any time without the consent of the Preferred Shareholders. Upon dissolution of the Company, Management will wind up the Company’s affairs and make all liquidating dividends in accordance with Article IV D of the Articles of Incorporation.

 

Mandatory Binding Arbitration

 

The Company’s Articles of Incorporation, Bylaws, and Subscription Agreement, all provide mandatory binding arbitration provisions that, unlike in judicial proceedings, are subject to determination by an arbitrator, not a judge, who is not necessarily governed by the same standards. In light of that, there is a risk that an arbitrator will not view the contract or the law in the same way a judge would and may grant a remedy or award relief that the arbitrator deems just and equitable and within the scope of the agreement of the parties or based on simple notions of equity, rather than the facts or the relevant law. Furthermore, there is a risk that an arbitrator may interpret the relevant agreements or facts without regard to legal precedent. That risk is exacerbated by the fact that it is more difficult to overturn or vacate an arbitration award, because the law supports confirmation of an arbitration decision which is not otherwise arbitrary or capricious; therefore, Investors should consider the difficulty of reversing an arbitration award, once made.

 

The Company believes that binding arbitration is legally enforceable based on case law provisions as applicable to claims in connection with this offering (including secondary transactions whereunder Preferred Shares are resold by initial Investors, and subsequent, secondary Investors are governed by the Company’s Articles of Incorporation, and Bylaws) under federal law, state law, and U.S. federal securities laws. The legal enforceability based on case law as upheld by U.S. Supreme Court rulings, which, for the Commission’s reference, include but are not limited to the following: Arthur Andersen LLP v. Carlisle, 556 U.S. 624 (2009); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991); Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989); Shearson/American Express v. McMahon, 482 U.S. 220 (1987); and Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985). 

 

As a result of this mandatory binding arbitration provision, Investors may incur increased costs to bring a claim, have limited access to information, and these provisions can discourage claims or limit Investors’ ability to bring a claim in a judicial forum that they find favorable, In the event of arbitration these clauses would limit the legal remedies available to holders of Preferred Shares to arbitration for any claims they may have, however by agreeing to be subject to these arbitration provisions, Investors will not be deemed to waive the company’s compliance with the federal securities laws and the rules and regulations promulgated thereunder. Notwithstanding case law supporting the enforceability of arbitration, there does appear to be a split of authority suggesting that arbitration provisions are not always enforceable under federal and state law. Nonetheless, to the extent any arbitration provisions are ruled unenforceable, the Company would abide by such ruling.

 

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FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE COMPANY

 

The following is a discussion of certain U.S. federal income tax considerations relevant to an investment in Preferred Shares of the Company. This discussion does not address all U.S. tax considerations that may be relevant to an investment in Preferred Shares, and it does not cover every aspect of U.S. federal income taxation that may be relevant to a particular taxpayer in light of their particular circumstances or to Investors having a special legal status (such as tax-exempt Investors, dealers in securities, banks, thrifts, trusts, insurance companies, corporations that may be treated as personal holding companies under the Internal Revenue Code of 1986, as amended (the “Code”), or persons who acquire interests in the Company in connection with the performance of services), or to Investors holding their interest in the Company other than as a capital asset. In addition, except as expressly indicated below, the discussion does not address state or local income tax considerations, nor does it address taxes other than income taxes. The following discussion also does not address tax considerations that may be relevant under the laws of jurisdictions other than the United States.

 

IN VIEW OF THE SUMMARY NATURE OF THIS DISCUSSION, EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT THEIR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO SUCH PROSPECTIVE INVESTOR OF AN INVESTMENT IN PREFERRED SHARES OF THE COMPANY.

 

The following discussion of certain U.S. federal income tax considerations relevant to an investment in the Company is based on the Code and other currently applicable legal authorities such as the regulations promulgated under the Code (the “Treasury Regulations”), administrative rulings and judicial decisions. The Code and other legal authorities are subject to change at any time, possibly on a retroactive basis, by legislative, judicial or administrative action. No rulings have been or are expected to be requested from the U.S. Internal Revenue Service (the “IRS”) or any other tax authority as to any matter, and no assurance can be provided that any such authorities will not successfully assert a position contrary to one or more of the legal conclusions discussed herein.

 

This discussion assumes each investor (a “Shareholder”) is a “U.S. Holder.” A “U.S. Holder” is an individual or entity that is, for purposes of the Code: (i) a citizen or resident of the United States; (ii) a corporation or other entity taxable as a corporation created or organized under the laws of the United States or any political subdivision of the United States; (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source; (iv) a trust (1) the administration of which is subject to primary supervision by a court within the United States and as to which one or more U.S. persons have the authority to control all substantial decisions, or (2) which was in existence on August 20, 1996, and has properly elected to be treated as a “United States person” for federal income tax purposes; or (v) otherwise subject to U.S. federal income tax on a net income basis with respect to its income from The Company. No discussion is provided herein concerning the eligibility requirements applicable to a Shareholder that is not a U.S. Holder.

 

If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) is the beneficial owner of an interest in Preferred Shares, the U.S. federal income tax treatment of a partner in the partnership (or owner of such entity) will generally depend on the status of the partner (or other owner) and the activities of the partnership (or entity). Investors that are treated as partnerships for U.S. federal income tax purposes and their owners should each consult their own tax advisors about potential U.S. federal income tax consequences of an investment in The Company.

 

General Matters Relevant to Investment in the Company

 

 

Taxation of Shareholders

 

Taxation of Proceeds and Dividends in General. Shareholders are required to declare all proceeds received in connection with dividends or proceeds from sale of their Preferred Shares. The recognition of such receipts as income or capital gain will depend on multiple factors including without limitation the Shareholder’s basis for tax purposes and whether dividends qualify as ordinary or qualified under IRS guidelines. The rules governing basis adjustments and the taxation of proceeds and dividends are complex, and Investors are urged to consult with their own U.S. tax advisors concerning these rules 

 

Property Held Primarily for Sale. If the Company is deemed for tax purposes to be a “dealer” in real property, defined as one who holds real estate primarily for sale to customers in the ordinary course of business, any gain recognized upon a sale of such real property (commonly referred to as “Dealer Property”) will be taxable as ordinary income, rather than as capital gain, and will constitute “unrelated business taxable income” (“UBTI”). Furthermore, all of such property would be treated as “inventory items”. Under existing law, whether property is held primarily for sale to customers in the ordinary course of business must be determined from all the facts and circumstances surrounding the particular property and sale in question. Accordingly, it is possible that the Company could be deemed to be a dealer in real estate, and that the Company’s share of profits from its disposition of real property would therefore be considered ordinary income.

 

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Liquidation. Upon the dissolution and liquidation of the Company, the Company will pay its debts and liabilities, and the Shareholders will be entitled to receive dividends as provided in the Governing Documents. The Company’s sale of its assets and the liquidation will generally be recognition events for U.S. federal income tax purposes. If a Shareholder recognizes gain upon the liquidation of their Preferred Shares, the gain may consist of both ordinary income and capital gain components. If a Shareholder realizes a loss upon the liquidation of the Company, the Shareholder will be entitled to recognize such loss for tax purposes only if the Company’s liquidating distribution consists solely of cash, or of cash and “unrealized receivables” (as defined in the Code).

 

Tax Information and Tax Audits. The Company will file a U.S. federal tax return reporting its annual operations and will provide each Shareholder with the information for Preferred Dividends, Special Dividends, or redemptions of Preferred Shares by the Company needed to file their U.S. federal income tax return. However, the Company may not be able to provide U.S. tax information to its Shareholders in time to prevent such Shareholders from having to obtain extensions of the filing dates of applicable tax returns. The Company is not obligated to provide tax information to persons who are not Shareholders of record. The Code imposes certain penalties in the event of failure to make various filings in a timely manner and in the event of various understatements of income tax. The Company intends to comply fully with all applicable filing and reporting requirements.

 

 FATCA

 

The Foreign Account Tax Compliance Act (“FATCA”) generally imposes a withholding tax of 30% on “withholdable payments” made to a “foreign financial institution” unless the foreign financial institution enters into an agreement with the IRS to collect and provide to the IRS on an annual basis substantial information regarding its U.S. account holders or an exception applies. If a foreign financial institution enters into such an agreement but is unable to obtain the relevant information from its direct and indirect account holders or owners on an annual basis, the foreign financial institution will be required to withhold 30% of any withholdable payment allocable to such account holders, and there is a risk that the IRS may determine that the foreign financial institution is not in compliance with its agreement, resulting in the foreign financial institution becoming subject to the 30% withholding tax on all of the withholdable payments made to it. The term “withholdable payment” includes any payment of (i) interest or dividends, (ii) the gross proceeds of a disposition of shares or of debt instruments, and (iii) “foreign pass-thru payments,” in each case with respect to any U.S. investment. It is not yet clear whether and to what extent the gross proceeds from the disposition of an interest in a partnership or limited liability company will be treated as a withholdable payment. The legislation also generally imposes a withholding tax of 30% on withholdable payments made to a non-U.S. entity that is not a foreign financial institution unless such entity provides the withholding agent with a certification identifying the substantial U.S. owners of the entity, which are generally defined as any U.S. persons who directly or indirectly own more than 10% of the entity, or unless an exception applies. Withholding on gross proceeds and “foreign pass-thru payments” will not apply until after December 31, 2018. A generally will be required to withhold 30% of withholdable payments received thereby that are distributable to any Shareholder thereof that is a foreign financial institution or other non-U.S. entity unless such investor complies with the applicable requirements discussed above. Accordingly, the Investors may be required to provide certain information to the Company in order to avoid the imposition of the 30% withholding tax on any withholdable payments made by the Company.

 

The foregoing is only a general summary of certain provisions of FATCA. Prospective Investors are urged to consult with their own tax advisers regarding the application of FATCA to their investment in the Company.

 

Reportable Transactions Regulations. Regulations impose special reporting rules for “reportable transactions.” A reportable transaction includes, among other things: (i) a transaction in which an advisor limits the disclosure of the tax treatment or tax structure of the transaction and receives a fee in excess of certain thresholds, and (ii) a “transaction of interest” that the IRS believes has a potential for tax avoidance or evasion, but for which the IRS lack enough information to determine whether the transaction should be identified specifically as a tax avoidance transaction. The Company intends to take the position that no investment in the Company constitutes a reportable transaction, that the Company does not engage in transactions which themselves constitute reportable transactions, and that neither the Company nor any of its respective Shareholders are participants in a transaction of interest by virtue of their investment in the Company. If any of these transactions were determined to constitute a reportable transaction, then the Company, or each Shareholder may be required to complete and file IRS Form 8886 with their respective tax returns for the applicable tax year. The Company reserves the right to disclose certain information about the Company’s Shareholders on Form 8886, including the Shareholders’ capital commitments, tax identification numbers (if any), and dates of admission to the Company, to facilitate compliance with the reportable transaction rules if necessary. Certain legislation imposes substantial excise taxes and additional reporting requirements and penalties on certain tax-exempt Investors (and, in some cases, the managers of tax-exempt Investors), that are, directly or in some cases indirectly, parties to certain types of reportable transactions. In addition, certain states have similar reporting requirements and may impose penalties for failure to report. Shareholders should consult their tax advisors for advice concerning compliance with the reportable transaction regulations.

 

EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISORS WITH RESPECT TO THE LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO SUCH INVESTOR OF THE PURCHASE AND OWNERSHIP OF AN INTEREST IN THE COMPANY.

 

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LEGAL MATTERS

 

The validity of the issuance of the Preferred Shares offered by this Offering Circular has been passed upon as of August 1, 2019 by Pino Nicholson PLLC.

 

EXPERTS

 

The Balance Sheet of the Company as of December 31, 2018 has been included in this Offering in reliance upon the report of Grennan Fender Hess & Poparad LLP, and independent registered public accounting firm, and upon the authority of said firm as experts in accounting and auditing.

 

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ADDITIONAL INFORMATION

 

The Company has filed with the SEC an offering statement under the Securities Act on Form 1-A regarding this Offering. This Offering circular, which is part of the Offering statement, does not contain all the information set forth in the Offering statement and the exhibits related thereto filed with the SEC, reference to which is hereby made. Upon the qualification of the Offering statement, The Company will be subject to the informational reporting requirements of the Securities Act that are applicable to Tier 2 companies whose securities are registered pursuant to Regulation A, and accordingly, The Company will file annual reports, semi-annual reports and other information with the SEC. You may read and copy the Offering statement, the related exhibits and the reports and other information The Company files with the SEC at the SEC’s public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, DC 20549. You can also request copies of those documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information regarding the operation of the public reference rooms. The SEC also maintains a website at www.sec.gov that contains reports, information statements and other information regarding issuers that file with the SEC.

 

You may also request a copy of these filings at no cost, by writing, emailing or telephoning The Company at:

 

Tuscan Gardens Senior Living Communities, Inc.

189 S. Orange Ave, Suite 1650

Orlando, FL 32801

Telephone: 407-206-6577
Attention: Investor Relations
email: InvestorRelations@TuscanGardensSLC.com

 

The Company will file (i) an annual report with the SEC on Form 1-K, (ii) a semi-annual report with the SEC on Form 1-SA, (iii) current reports with the SEC on Form 1-U, and (iv) a notice under cover of Form 1-Z. The necessity to file current reports will be triggered by certain corporate events. Parts I and II of Form 1-Z will be filed by the Company if and when it decides to and is no longer obligated to file and provide annual reports pursuant to the requirements of Regulation A. The Company’s annual report will contain audited financial statements and certain other financial and narrative information that the Company is required to provide to holders of Preferred Shares.

 

The Company maintains a website at www.TuscanInvestor.com, where there may be additional information about the Company’s business, but the contents of that site are not incorporated by reference in or otherwise a part of this Offering circular.

 

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PART FS - INDEPENDENT AUDITOR'S REPORT

  

TUSCAN GARDENS SENIOR LIVING

COMMUNITIES, INC.

 

Financial Statements

and

Independent Auditor’s Report

 

As of December 31, 2018

And for the period from Inception (July 20, 2018) to

December 31, 2018

 

 

 

 

 

 

 

 

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TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

 

Table of Contents

 

   
  Page
   
Independent Auditor’s Report 71
   
Financial Statements:  
   
Balance Sheet 73
   
Statement of Operations and Changes in Equity 74
   
Statement of Cash Flows 75
   
Notes to Financial Statements 76

 

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INDEPENDENT AUDITOR’S REPORT

 

 

To the Shareholders of

 

Tuscan Gardens Senior Living Communities, Inc.

 

 

We have audited the accompanying financial statements of Tuscan Gardens Senior Living Communities, Inc. (a Florida Corporation, the “Company”), which comprise the balance sheet as of December 31, 2018, and the related statements of operations and changes in equity, and cash flows for the period from inception (July 20, 2018) to December 31, 2018, and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

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

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

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An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statements 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 the entity’s internal controls. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

 

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tuscan Gardens Senior Living Communities, Inc.as of December 31, 2018, and the results of their operations and their cash flows for the period from July 20, 2018 (inception) to December 31, 2018 in accordance with accounting principles generally accepted in the United States of America.

 

 

 

/s/GRENNAN FENDER HESS & POPARAD LLP

 

Orlando, Florida

July 12, 2019

 

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PART FS - AUDITED FINANCIAL STATEMENT AS OF DECEMBER 31, 2018

 

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.
 
BALANCE SHEET
 
DECEMBER 31, 2018
 
ASSETS
CURRENT ASSETS:     
Cash  $50,000 
      
TOTAL ASSETS  $50,000 
      
LIABILITIES AND EQUITY     
CURRENT LIABILITIES:     
Accounts payable and other accrued liabilities  $ 
      
TOTAL LIABILITIES    
      
EQUITY     
Common shares - 50,000 shares issued and outstanding ($1 par value)   50,000 
Class A Non-Voting Preferred Shares ($1,000 par value) - 50,000 authorized    
      
 TOTAL EQUITY   50,000 
      
 TOTAL LIABILITIES AND EQUITY  $50,000 

 

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TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.
 
STATEMENT OF OPERATIONS AND CHANGES IN EQUITY
 
FOR THE PERIOD FROM INCEPTION (JULY 20, 2018) TO DECEMBER 31, 2018
 
REVENUE:
 
Revenues  $ 
      
TOTAL REVENUE    
      
OPERATING EXPENSES:     
Expenses    
      
TOTAL OPERATING EXPENSES    
      
NET INCOME  $ 
      
 EQUITY, JULY 20, 2018 (INCEPTION)  $ 
      
 Purchase of common stock   50,000 
      
 EQUITY, END OF PERIOD (DECEMBER 31, 2018)  $50,000 

 

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TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.
 
STATEMENT OF CASH FLOWS
 
FOR THE PERIOD FROM INCEPTION (JULY 20, 2018) TO DECEMBER 31, 2018
 
CASH FLOWS FROM OPERATING ACTIVITIES:     
Net income  $ 
      
NET CASH PROVIDED BY OPERATING ACTIVITIES    
      
 CASH FLOWS FROM FINANCING ACTIVITIES:     
Proceeds from issuance of common stock   50,000 
      
NET CASH PROVIDED BY FINANCING ACTIVITIES   50,000 
      
NET INCREASE IN CASH   50,000 
      
CASH, INCEPTION (JULY 20, 2018)    
      
CASH, END OF PERIOD (DECEMBER 31, 2018)  $50,000 

 

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NOTE 1 – DESCRIPTION OF BUSINESS

 

Tuscan Gardens Senior Living Communities, Inc. (the “Company”) was organized on July 20, 2018 and is a Florida Corporation. The Company was formed to invest in wholly-owned subsidiaries that develop (“Development Projects”), acquire (“Acquisition Projects”), or convert other real estate properties including hotels (“Conversion Projects”) into senior living rental communities ranging from $15,000,000 to $100,000,000 per community, consisting of independent living, assisted living and/or memory care. The Company’s primary focus for purposes of Development Projects will be on southeastern markets, and for purposes of Acquisition Projects and Conversion Projects will be on national markets, that it considers to have favorable risk-return characteristics The Company, operating through wholly-owned special purpose entities (“SPE”) as real estate owner-operators, intends to create, operate and hold a portfolio of Company Properties on a long-term basis, approximating seven years, and ultimately dispose of them to generate revenue for the Company.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting

 

The accounting policies of the Company conform to accounting principles generally accepted in the United States of America.

 

Cash

 

The Company maintains its cash deposits at a bank. Cash deposits could, at times, exceed federally insured limits. As of December 31, 2018 there was no uninsured balance.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Income Taxes

 

There are no open federal or state tax years under audit. Financial Accounting Standards Board issued ASC 740-10 (Accounting for Uncertainty in Income Taxes), which prescribed a comprehensive model for how a company should measure, recognize, present, and disclose in its financial statements uncertain tax positions that an organization has taken or expects to take. The Company adopted ASC 740-10 and has not taken any uncertain tax positions that require disclosure in the financial statements.

 

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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Fair Value of Financial Instruments

 

The FASB ASC Topic "Financial Instruments" clarifies the definition of fair value for financial reporting, establishing a framework for measuring fair value, and requires additional disclosure about the use of fair value measurements in an effort to make the measurement of fair value more consistent and comparable. The carrying amount of cash approximates fair value due to the short maturity of this financial instruments.

 

NOTE 3 – EQUITY AND FUTURE EQUITY

 

The Company currently has two authorized share classes: common voting shares with $1.00 par value per share (“Common Shares”) and Class A Non-Voting Preferred Shares with $1,000.00 par value per share (“Preferred Shares”). On August 10, 2018, the Company established an equity basis in 50,000 shares of $1.00 par value Common Shares.

  

The Company intends to issue an initial offering (“Offering”) on a “best efforts” basis to raise capital using its Class A Non-Voting Preferred Shares. The Company seeks to raise $50,000,000 from the Offering of Preferred Shares. The Company will seek to pursue Development Projects, Acquisition Projects, and Conversion Projects that have the potential to provide a ongoing income to Investors in the Preferred Shares, paid or accrued monthly based on an 8.0% cumulative, non-compounded annual return on $1,000.00 par value (“Preferred Dividend”), plus potential capital appreciation through additional dividends (“Special Dividends”) based on fifty (50%) percent participation in the net proceeds generated by the Company from the Holdco disposition of Company Properties. However, as that the Offering is a blind pool and the Company has no track record, there can be no guarantee that such returns can or will be achieved.

 

The Preferred Shares have no public market and will not be listed on any national securities exchange or on the over-the counter inter-dealer quotation system. The proposed sale of the Preferred Shares will begin as soon as practicable after the information statement has been qualified by the SEC and will terminate June 30, 2020. The Preferred Shares are being offered pursuant to Regulation A under the Securities Act of 1933, as amended, for Tier 2 offerings. The Preferred Shares will only be issued to purchasers who satisfy the requirements set forth in Regulation A. Funds from the Offering will be made available to the Company once the Offering raises a minimum of $500,000 excluding sales to Company affiliates (“Minimum Offering Amount”). There are no provisions for the return of funds once the Minimum Offering Amount is sold.

 

NOTE 4 – SUBSEQUENT EVENTS

 

In preparing the financial statements, the Company has evaluated events and transactions for potential recognition through July 12, 2019, the date the financial statements were originally available to be issued.

 

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PART III - EXHIBITS

 

Index to Exhibits

 

Exhibit No.   Exhibit Description
1   Managing Broker Dealer Agreement between the Company and Sutter Securities Clearing, LLC
     
2   Articles of Incorporation of the Company dated July 20, 2018 and Bylaws of the Company dated July 20, 2018
     
4   Form of Subscription Agreement
     
6A(i)   Advisory Agreement between the Advisor and the Company
     
6A(ii)   Asset Management Agreement between the Asset Manager and the Company
     
11(i)   Consent of Pino Nicholson PLLC to use Legal Opinion
     
11(ii)   Consent of Grennan, Fender, Hess & Poparad LLP to use Audit Opinion
     
12  

Pino Nicholson PLLC Legal Opinion concerning the Issuance of Preferred Shares

 

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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 Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Orlando, State of Florida, on July 25, 2019.  

 

  TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.
   
  Signed:
     
  By: /s/ Larry Pino
    Name:  Larry Pino
    Title:    Chief Executive Officer and Director

 

 

  By: /s/ William N. Johnston
    Name:  William N. Johnston
    Title:    Chief Financial Officer and Director 
     
     
  By: /s/ Christopher P. Young
    Name:  Christopher P. Young
    Title:    Director

 

 

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EX1A-1 UNDR AGMT 3 ex1a_1.htm EXHIBIT 1A-1

 

Exhibit 1A-1

 

Exhibit 1 – Managing Broker Dealer Agreement

 

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

 

 

 

Tuscan Senior Living Communities, Inc.

189 S. Orange Ave., Suite 1650

Orland, Florida 32801

 

June __, 2019

Sutter Securities Clearing, LLC

6 Venture, Suite 265

Irvine, CA 92618

 

Re: Amended and Restated Managing Broker-Dealer Agreement

 

 

Ladies and Gentlemen:

 

 

Tuscan Senior Living Communities, Inc., a Florida corporation (the “Company”), is offering for sale up to $50,000,000 (the “Maximum Offering Amount”) of Series A Preferred Shares (each a “Security,” and collectively, the “Securities”) for a public offering price of $1,000.00 per Security (the “Offering”), pursuant to an exemption from registration pursuant to: (i) Tier II of Regulation A (“Regulation A+”) promulgated by the Securities and Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”); and (ii) applicable blue sky exemptions. The Company desires to appoint Sutter Securities Clearing, LLC, a California limited liability company (“Sutter”), as managing broker-dealer for the Offering (the “Managing Broker-Dealer”) on the terms and conditions described herein. The Managing Broker-Dealer shall have the right to enter into Participating Dealer Agreements substantially in the form attached to this Managing Broker-Dealer Agreement (this “Agreement”) as “Exhibit A” (a “Participating Dealer Agreement”) with other members of the Financial Industry Regulatory Authority (“FINRA”) acceptable to the Company to sell the Securities (each broker-dealer entering into a Participating Dealer Agreement being referred to herein as a “Dealer” and said broker-dealers being collectively referred to herein as the “Dealers”). The Company shall have the right to approve any material modifications or addendums to the form of the Participating Dealer Agreement. The indemnities, representations and warranties to the Company in Section 3 herein shall be required of each Dealer entering into a Participating Dealer Agreement and becoming a Dealer. The Company shall have the right to approve any material modification. This Amended and Restated Managing Broker-Dealer Agreement (this “Agreement”) supersedes, amends and restates in its entirety that certain Managing Broker-Dealer Agreement dated as of April 15, 2019 between the Company and the Managing Broker-Dealer. Terms not defined herein shall have the same meaning as in the Form 1-A prepared by the Company for use in connection with the Offering, as it may be amended from time to time in the future by the Company. In connection with the Offering, the Company hereby agrees with the Managing Broker-Dealer, as follows:

 

1.         Representations and Warranties of the Company

 

The Company represents and warrants to the Managing Broker-Dealer and each Dealer with whom the Managing Broker-Dealer enters into a Participating Dealer Agreement that:

 

1.1         An offering statement with respect to the Securities has been prepared by the Company in accordance with the requirements the Securities Act, Regulation A+ promulgated thereunder and any other rules and regulations (as applicable) of the SEC (the “Rules and Regulations”) applicable to the Offering and sale of the Securities.

 

1.2         The Company has been duly organized and is validly existing as a corporation under the laws of the State of Florida, and has, and at all times during the Offering will have, the power and authority to conduct its business as described in the Form 1-A. The Company can conduct its business, as described in the Form 1-A, except where the failure to do so would not have a material adverse effect on the condition, financial or otherwise, results of operations or cash flows of the Company (a “Material Adverse Effect”).

 

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1.3         The Form 1-A will comply with the Securities Act and the Rules and Regulations, and the Form 1-A and any and all authorized printed sales literature or other sales materials prepared and authorized by the Company for use with potential investors in connection with the Offering (“Authorized Sales Materials”) when used in conjunction with the Form 1-A, do not contain any untrue statements of material facts or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; provided, however, that the foregoing provisions of this Section 1.3 will not extend to such statements contained in or omitted from the Form 1-A or Authorized Sales Materials as are primarily within the knowledge of the Managing Broker-Dealer, or any of the Dealers and are based upon information either (a) furnished by a Dealer in writing to the Managing Broker-Dealer or the Company, or (b) furnished by the Managing Broker-Dealer in writing to the Company specifically for inclusion therein.

 

1.4         The Company intends to use the funds received from the sale of the Securities as set forth in the Form 1-A.

 

1.5         No consent, approval, authorization or other order of any governmental authority is required in connection with the execution or delivery by the Company of this Agreement or the issuance and sale by the Company of the Securities, except such as have been or are to be obtained under the Securities Act, or where the failure to obtain such consent, approval, authorization or other order of any governmental authority would not have a Material Adverse Effect.

 

1.6         Unless otherwise described in the Form 1-A, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against the Company at law or in equity or before or by any federal or state commission, regulatory body or administrative agency or other governmental body, domestic or foreign, which would be reasonably expected to have a Material Adverse Effect.

 

1.7         There are no contracts or other documents required by the Securities Act or the Rules and Regulations to be described in or incorporated by reference into the Form 1-A which have not been accurately described in all material respects in the Form 1-A or incorporated or filed as required.

 

1.8         The execution and delivery of this Agreement, the consummation of the transactions herein contemplated and compliance with the terms of this Agreement by the Company will not conflict with or constitute a default under any operating agreement or any other document, or, to the Company’s knowledge, under any rule, regulation, writ, injunction or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Company, except (i) to the extent that the enforceability of the indemnity provisions contained in Section 6 of this Agreement may be limited under applicable securities laws, and (ii) for such conflicts or defaults that would not reasonably be expected to have a Material Adverse Effect.

 

1.9         The Company has full legal right, power and authority to enter into this Agreement and to perform the transactions contemplated hereby, except to the extent that the enforceability of the indemnity provisions contained in Section 6 of this Agreement may be limited under applicable securities laws.

 

1.10       Since the respective dates as of which information is given in the Form 1-A and solely through the closing of the Offering, there has not been any Material Adverse Effect, except as set forth in or contemplated in the Form 1-A, (a) there has not been any change in the capitalization of the Company, or in the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company, arising for any reason whatsoever other than in the ordinary course of business and (b) the Company has not incurred and will not incur any material liabilities or obligations, direct or contingent.

 

1.11       Neither the Company, nor any predecessor of the Company; nor any other issuer affiliated with the Company; nor any director or executive officer of the Company or other officer of the Company participating in the Offering, nor any beneficial owner of 20% or more of the Company's outstanding voting equity securities, nor any promoter connected with the Company, is subject to the disqualification provisions of any federal or state securities laws.

 

1.12       The issuance and sale of the Securities have been duly authorized by the Company, and, when issued and paid for in accordance with this Agreement and the Form 1-A, will be duly and validly issued, fully paid and nonassessable and will not be subject to preemptive or similar rights. The holders of the Securities will not be subject to personal liability by reason of being such holders. The Securities, when issued, will conform to the description thereof set forth in the final Form 1-A in all material respects.

 

1.13       The financial statements and the related notes included in the Form 1-A present fairly, in all material respects, the financial condition of the Company and its subsidiaries as of the dates thereof and the results of operations and cash flows at the dates and for the periods covered thereby in conformity with United States generally accepted accounting principles (“GAAP”), except as may be stated in the related notes thereto. No other financial statements or schedules of the Company, any subsidiary or any other entity are required by the Securities Act or the Rules and Regulations to be included in the Form 1-A. There are no off-balance sheet arrangements that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

 

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1.14       Grennan Fender Hess & Poparad, LLP (the “Accountants”), who have reported on the financial statements and schedules described in Section 1.13, are registered independent public accounting firm with respect to the Company as required by the Securities Act and the Rules and Regulations and by the rules of the Public Company Accounting Oversight Board. The financial statements of the Company and the related notes and schedules included in the Form 1-A comply as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations and present fairly the information shown therein.

 

1.15       Since the date of the most recent financial statements of the Company included or incorporated by reference in the most recent Form 1-A and prior to Closing, other than as described in the final Form 1-A (A) there has not been and will not have been any change in the capital stock of the Company or long-term debt of the Company or any subsidiary or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock or equity interests, or any material adverse change, or any development that would reasonably be expected to result in a Material Adverse Effect and (B) neither the Company nor any subsidiary has sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case as otherwise disclosed in the Form 1-A.

 

1.16       On the Closing Date, all stock transfer or other taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Securities to be sold hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with.

 

1.17       Neither the Company nor its subsidiaries, nor any director, officer, agent or employee of either the Company or any subsidiary has directly or indirectly, (1) made any unlawful contribution to any federal, state, local and foreign candidate for public office, or failed to disclose fully any contribution in violation of law, (2) made any payment to any federal, state, local and foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof, (3) violated or is in violation of any provisions of the U.S. Foreign Corrupt Practices Act of 1977, or (4) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

 

1.18       The operations of the Company and its subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no material action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

1.19       Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent or employee of the Company or any of its subsidiaries is currently subject to any U.S. sanctions (the “Sanctions Regulations”) administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC or listed on the OFAC Specially Designated Nationals and Blocked Persons List. Neither the Company nor, to the knowledge of the Company, any director, officer, agent or employee of the Company, is named on any denied party or entity list administered by the Bureau of Industry and Security of the U.S. Department of Commerce pursuant to the Export Administration Regulations (“EAR”); and the Company will not, directly or indirectly, use the proceeds of the offering of the Securities hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any Sanctions Regulations or to support activities in or with countries sanctioned by said authorities, or for engaging in transactions that violate the EAR.

 

1.20       The Company is not, nor upon completion of the transactions contemplated herein will it be, an “investment company” or an “affiliated person” of, or “promoter” or “principal Managing Broker-Dealer” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company is not a development stage company or a “business development company” as defined in Section 2(a)(48) of the Investment Company Act. The Company is not a blank check company and is not an issuer of fractional undivided interests in oil or gas rights or similar interests in other mineral rights. The Company is not blank check company and is not an issuer of asset-backed securities as defined in Item 1101(c) of Regulation AB.

 

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2.          Covenants of the Company

 

The Company covenants and agrees with the Managing Broker-Dealer that:

 

2.1         It will furnish the Managing Broker-Dealer, at no expense to the Managing Broker-Dealer, with such number of printed copies of the Form 1-A, including all amendments thereto, and all other relevant documents related to the Offering, as the Managing Broker-Dealer may reasonably request.

 

2.2         It will prepare and file with the appropriate regulatory authorities, as may be required, by law or regulation, at no expense to the Managing Broker-Dealer, the Authorized Sales Materials; provided, however that all filings of any kind with FINRA, including filings under FINRA Rules, shall be the sole responsibility of the Managing Broker-Dealer; provided, further, that the Company shall pay all filing fees associated with any such FINRA filings. In addition, it will furnish the Managing Broker-Dealer, at no expense to the Managing Broker-Dealer, with such number of printed copies of Authorized Sales Materials as the Managing Broker-Dealer may reasonably request.

 

2.3         It will not use any Form 1-A or sales materials for the Offering which have not been approved by the Managing Broker-Dealer prior to use, and shall make such modifications, amendments or supplements to the Form 1-A and Authorized Sales Materials as reasonably requested by the Managing Broker-Dealer to eliminate any materially inaccurate or misleading statement contained therein, but no failure to make any objection or to request any modification, amendment or supplement shall constitute any representation by the Managing Broker-Dealer regarding the accuracy or completeness of the Form 1-A or Authorized Sales Materials prepared by the Company. If at any time when an Form 1-A is required to be delivered under the Securities Act any event occurs as a result of which, in the opinion of either the Company or the Managing Broker-Dealer, the Form 1-A or Authorized Sales Materials would include an untrue statement of a material fact or, in view of the circumstances under which they were made, omit to state any material fact necessary to make the statements therein not misleading, the Company will promptly notify the Managing Broker-Dealer thereof (unless the information shall have been received from the Managing Broker-Dealer) and will affect the preparation of an amended or supplemental Form 1-A and Authorized Sales Materials which will correct such statement or omission and file such amended or supplemental Form 1-A and Authorized Sales Materials as required under federal law.

 

2.4         Neither the Company nor any of its affiliates shall make any written or oral representations or statements to investors that contradict or are inconsistent with the statements made in the Form 1-A or the Authorized Sales Material, as then amended or supplemented.

 

2.5         The Company will, as long as any Securities placed by the Managing Broker-Dealer or any Dealer remain held by investors purchasing them in the Offering, furnish directly to the Managing Broker-Dealer one (1) copy of each report furnished to investors in the Securities at the time such report is furnished to the investors.

 

2.6         The Company will not at any time, directly or indirectly, take any action intended, or which might reasonably be expected, to cause or result in, or which will constitute, stabilization of the price of the Securities to facilitate the sale or resale of any of the Securities.

 

2.7         Each of the representations and warranties contained in this Agreement are true and correct and the Company will comply with each covenant and agreement contained in this Agreement.

 

3.           Agreements and Representations of Managing Broker-Dealer

 

3.1         The Company hereby appoints the Managing Broker-Dealer as its agent and principal distributor for the purpose of selling the Securities for cash, on a “minimum/maximum, best efforts” basis, either alone or through one or more Dealers. The Managing Broker-Dealer may also sell Securities for cash directly to its own clients and customers at the public offering price and subject to the terms and conditions stated in the Form 1-A. The Managing Broker-Dealer hereby accepts such agency and distributorship and agrees to use its commercially reasonable efforts to sell the Securities on said terms and conditions. Under no circumstances will the Managing Broker-Dealer be obligated to underwrite or purchase any of the Securities for its own account or otherwise provide any financing. The Managing Broker-Dealer represents to the Company that it is a member of FINRA, that it and its employees and representatives have all required licenses and registrations to act under this Agreement, and that each shall remain a member or duly licensed, as the case may be, during the Offering.

 

3.2         It is understood that no sale of the Securities shall be regarded as effective unless and until accepted by the Company and that the Company reserves the right, in its sole discretion, to reject any subscription for Securities (a “Subscription Agreement”) in whole or in part. The Securities will be offered during a period commencing on the date that the Offering is qualified by the SEC, and continuing until the earliest of: (i) the date specified in the Form 1-A as the date of the termination of the Offering (the “Outside Date”), or (ii) a determination by the Company’s board of directors to terminate the Offering (the “Offering Termination Date”). If subscriptions for at least $500,000.00 in Securities (the “Minimum Offering Amount”) have not been received and accepted by the Company by the date specified in the Form 1-A for termination of the Offering if the Minimum Offering Amount is not reached (the “Minimum Termination Date”), none of the Securities will be sold and all funds tendered for the purchase of the Securities will be refunded in full to cash subscribers without deductions or charges.

 

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3.3         The Company, the Managing Broker Dealer and Securities Transfer Corporation (the “Escrow Agent”) will enter into an Escrow Agreement substantially in the form included as an exhibit to the Form 1-A (the “Escrow Agreement”), pursuant to which an escrow account will be established, at the Company’s expense, for the benefit of the investors (the “Escrow Account”). Prior to the Closing Date (defined below), (i) the Managing Broker Dealer will provide specific wire instructions for the Escrow Account to the investors, and each investor will promptly transfer an amount equal to no less than the Minimum Investment Amount as specified in the Form 1-A to the Escrow Account in compliance with Rule 15c2-4 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (ii) the Escrow Agent will notify the Company and the Managing Broker Dealer in writing whether the Escrow Account is fully funded in the amount equal to at least the Minimum Offering Amount (the “Requisite Funds”). If the Escrow Agent shall have received all of the Requisite Funds by 1:00 p.m., New York City time, on the Minimum Termination Date, or at such other time on such other date as may be agreed upon by the Company and the Managing Broker Dealer (such date is hereinafter referred to as the “Initial Closing Date”), the Escrow Agent will release the Requisite Funds less applicable escrow expenses from the Escrow Account for collection by the Company and the Managing Broker Dealer as provided in the Escrow Agreement and the Company shall deliver the Securities to the investors, which delivery may be made through the facilities of the Depository Trust Company (“DTC”), if available. The initial closing (the “Initial Closing”) shall take place at the office of the Company or at such other place as may be mutually agreed to by the Company and the Managing Broker Dealer. All actions taken at the Closing shall be deemed to have occurred simultaneously. If the Requisite Funds have not been received immediately prior to the Initial Closing Date, the offering will not proceed and the Escrow Agent will promptly return all funds deposited by investors to such investors without interest. If at the time of the Initial Closing the Maximum Offering Amount has not been fully funded, then additional closings (the Initial Closing and each additional Closing being a “Closing” and, collectively, the “Closings”) may occur in accordance with the Escrow Agreement until the earlier of the date that the Maximum Offering Amount has been fully funded or the Outside Date. As specified above, the Company and the Managing Broker-Dealer have agreed to comply with the provisions of SEC Rule 15c2-4 as to all funds provided by investors for the purchase of Securities.

 

3.4         The Managing Broker-Dealer and the Dealers shall commence the offering of the Securities in jurisdictions in which the Securities are qualified for sale or in which such offering is otherwise permitted. The Managing Broker-Dealer and the Dealers will suspend or terminate offering of the Securities upon request of the Company at any time and will resume offering the Securities upon subsequent request of the Company. Subject to the Company’s compliance with its obligations hereunder, the Managing Broker-Dealer will comply with all applicable federal securities laws, including the Securities Act, Exchange Act, and the applicable rules and regulations of FINRA (the “FINRA Rules”).

 

3.5         The Managing Broker-Dealer represents and warrants to the Company that it will not use any sales literature not authorized and approved by the Company, use any “broker-dealer use only” materials with members of the public, or make any unauthorized verbal representations or verbal representations which contradict or are inconsistent with the statements made in the Form 1-A or the Authorized Sales Material in connection with offers or sales or the Securities.

 

3.6         The Managing Broker-Dealer is a duly organized and validly existing limited liability company under the laws of the State of California.

 

3.7         No consent, approval, authorization or other order of any governmental authority is required in connection with the execution or delivery by the Managing Broker-Dealer of this Agreement, except such as may be required under the Securities Act.

 

3.8         There are no actions, suits or proceedings pending or to the knowledge of the Managing Broker-Dealer, threatened against the Managing Broker-Dealer at law or in equity or before or by any federal or state commission, regulatory body or administrative agency or other governmental body, domestic or foreign, which could be reasonably expected to have a material adverse effect on the Managing Broker-Dealer or the ability of the Managing Broker-Dealer to perform its obligations under this Agreement or to participate in the Offering as contemplated by the Form 1-A.

 

3.9         The execution and delivery of this Agreement, the consummation of the transactions herein contemplated and compliance with the terms of this Agreement by the Managing Broker-Dealer will not conflict with or constitute a default under any operating agreement or other similar agreement to the Managing Broker-Dealer’s knowledge, under any rule, regulation, writ, injunction or decree of any government, governmental instrumentality or court, domestic or foreign, having jurisdiction over the Managing Broker-Dealer, except to the extent that the enforceability of the indemnity provisions contained in Section 6 of this Agreement may be limited under applicable securities laws.

 

3.10       The Managing Broker-Dealer has full legal right, power and authority to enter into this Agreement and to perform the transactions contemplated hereby, except to the extent that the enforceability of the indemnity provisions contained in Section 6 of this Agreement may be limited under applicable securities laws.

 

3.11       Except for Participating Dealer Agreements, no agreement will be made by the Managing Broker-Dealer with any person permitting the resale, repurchase or distribution of any Securities purchased by such person.

 

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3.12       Neither the Managing Broker-Dealer, nor any Dealer, nor any managing member of the Managing Broker- Dealer, or any Dealer, nor any director or executive officer of the Managing Broker-Dealer or any Dealer or other officer of the Managing Broker-Dealer, or any Dealer participating in the Offering is subject to the disqualification provisions of Rule 262 of the Rules and Regulations. No registered representative of the Managing Broker-Dealer, or any Dealer, or any other person being compensated by or through the Managing Broker-Dealer, or any Dealer for the solicitation of investors, is subject to the disqualification provisions of Rule 262 of the Rules and Regulations.

 

3.13       If and to the extent that the Managing Broker-Dealer directly places any of the Securities sold to investors in the Offering, the Managing Broker-Dealer shall be deemed to have made the representations, warranties and covenants of a Dealer as contained in the Participating-Dealer Agreement as if it had entered into a Participating Dealer Agreement, as a Dealer, with the Company.

 

3.14       The Managing Broker-Dealer is and during the term of this Agreement will be, duly registered as a broker-dealer pursuant to the provisions of the Exchange Act, a member in good standing of FINRA, and a broker or dealer duly registered as such in any state where offers are made by the Managing Broker-Dealer. The Managing Broker-Dealer will comply with all applicable laws, regulations and requirements of the Securities Act, the Exchange Act, applicable state law and FINRA. The Managing Broker-Dealer has all required licenses and permits.

 

3.15       The Managing Broker-Dealer has established and implemented anti-money-laundering compliance programs, in accordance with FINRA Rule 3310 and Section 352 of the Money Laundering Abatement Act and Section 326 of the Patriot Act of 2001, which are reasonably expected to detect and cause reporting of suspicious transactions in connection with the sale of the Securities.

 

4.           Compensation and Expenses. As compensation for services rendered by the Managing Broker-Dealer under this Agreement, the Managing Broker-Dealer will be entitled to receive from the Company:

 

4.1         A non-refundable due diligence fee of $25,000 (“Due Diligence Fee”) payable in two equal installments of $12,500, the first of which shall be due upon the execution of this agreement, and the second of which shall be due and payable within five business days of completion of the initial platform due diligence work. The Due Diligence Fee will include all due diligence work in connection with Sutter Securities Clearing, LLC or its affiliates under this agreement, and shall further include all due diligence work for the first two properties (or entities) (“Acquisitions”) to be acquired by the Company. The third and subsequent Acquisitions’ Due Diligence Fee will be at a rate of $7,500 per property (or entity) thereafter.

 

4.2         Underwriters’ counsel fees as incurred, not to exceed $35,000.

 

4.3         With respect to total gross proceeds of Securities sold in the Offering (“Total Sales”) of up to $20,000,000:

 

•              A Managing Broker-Dealer fee equal to 1.5% of the Total Sales sold by the Company or its affiliates, sold by the Managing Broker-Dealer or sold by affiliated or unaffiliated Dealers under Participating Dealer Agreements in good standing;

•              A selling commission equal to 7.5% of Total Sales, that will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ payment of commissions to FINRA registered representatives on sales of the Offering; provided, however, that the Managing Broker-Dealer shall be entitled to retain any selling commissions with regard to Securities the Managing Broker-Dealer directly places to investors in the Offering;

 

•              Subject to the Company’s prior approval on a case by case basis, which may be withheld at the Company’s sole discretion, a marketing support fee equal to 1.0% of the Total Sales will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ marketing of the Offering by FINRA registered representatives.

 

4.4         With respect to Total Sales in excess of $20,000,000:

 

•              A Managing Broker-Dealer fee equal to 0.75% of the Total Sales sold by the Company or its affiliates, sold by the Managing Broker-Dealer or sold by affiliated or unaffiliated Dealers under Participating Dealer Agreements in good standing;

 

•              A selling commission equal to 7.25% of Total Sales, that will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ payment of commissions to FINRA registered representatives on sales of the Offering; provided, however, that the Managing Broker-Dealer shall be entitled to retain any selling commissions with regard to Securities the Managing Broker-Dealer directly places to investors in the Offering; and

 

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•              Subject to the Company’s prior approval on a case by case basis, which may be withheld at the Company’s sole discretion, a marketing support fee equal to 1.0% of the Total Sales will be re-allowed and fully paid in its entirety to Dealers without deduction, setoff, or arbitrage for such Dealers’ marketing of the Offering by FINRA registered representatives.

 

 

The Company also agrees to reimburse Sutter, promptly when invoiced, for all other pre-approved out-of-pocket expenses. Upon the earlier of the termination of this Agreement or a Closing, the Company agrees to pay promptly in any unreimbursed expenses that have accrued as of such date. In accordance with FINRA Rule 5110(f)(2)(D)(i), the Managing Broker-Dealer hereby agrees that, in the event the Initial Closing does not occur, the Managing Broker-Dealer shall not receive any compensation hereunder other than the reimbursement of out-of-pocket, accountable bona fide expenses actually incurred by the Managing Broker-Dealer, a Dealer, or any of their respective associated persons.

 

 

5.         Conditions of the Obligations of the Managing Broker-Dealer. The obligations of the Managing Broker-Dealer hereunder are subject to the following conditions, which are to be satisfied at the Initial Closing and each subsequent Closing, unless otherwise specified below:

 

5.1         (A) No stop order suspending the Form 1-A shall have been issued, and no proceedings for that purpose shall be pending or threatened by any securities or other governmental authority (including, without limitation, the SEC), (b) no order suspending the exemption of the Securities under the securities or Blue Sky laws of any jurisdiction shall be in effect and no proceeding for such purpose shall be pending before, or threatened or contemplated by, any securities or other governmental authority (including, without limitation, the SEC), (c) any request for additional information on the part of the staff of any securities or other governmental authority (including, without limitation, the SEC) shall have been complied with to the satisfaction of the staff of the SEC or such authorities and (d) after the date hereof no amendment or supplement to the Form 1-A shall have been used unless a copy thereof was first submitted to the Managing Broker-Dealer and the Managing Broker-Dealer did not object thereto in good faith, and the Managing Broker-Dealer shall have received certificates of the Company, dated each Closing Date and signed by the Chief Executive Officer of the Company, and the Chief Financial Officer of the Company, to the effect of clauses (a), (b) and (c).

 

5.2         Since the respective dates as of which information is given in the Form 1-A, (a) there shall not have been a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, in each case other than as set forth in or contemplated by the Form 1-A and (b) the Company shall not have sustained any material loss or interference with its business or properties from fire, explosion, flood or other casualty, whether or not covered by insurance, or from any court or legislative or other governmental action, order or decree, which is not set forth in the Form 1-A, if in the reasonable judgment of the Managing Broker-Dealer any such development makes it impracticable or inadvisable to consummate the sale and delivery of the Securities to investors.

 

5.3         Since the respective dates as of which information is given in the Form 1-A, there shall have been no litigation or other proceeding instituted against the Company or any of its officers or directors in their capacities as such, before or by any federal, state or local or foreign court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign, which litigation or proceeding, in the reasonable judgment of the Managing Broker-Dealer, would reasonably be expected to have a Material Adverse Effect.

 

5.4         Each of the representations and warranties of the Company contained herein shall be true and correct at each Closing Date in all respects for those representations and warranties qualified by materiality and in all material respects for those representations and warranties that are not qualified by materiality, as if made on such date, and all covenants and agreements herein contained to be performed on the part of the Company and all conditions herein contained to be fulfilled or complied with by the Company at or prior to each Closing Date shall have been duly performed, fulfilled or complied with in all material respects.

 

5.5         The Managing Broker-Dealer shall have received an opinion letter, dated the Closing Date of the Initial Closing, from Pino Nicholson PLLC, as counsel to the Company, in form reasonably satisfactory to the Managing Broker-Dealer. There shall be no obligation to deliver an opinion letter in respect of subsequent Closings.

 

5.6         The Company shall have furnished or caused to be furnished to the Managing Broker-Dealer such certificates, in addition to those specifically mentioned herein, as the Managing Broker-Dealer may have reasonably requested as to the accuracy and completeness on each Closing Date of any statement in the Form 1-A or the Authorized Sales Materials, as to the accuracy on the Closing Date of the representations and warranties of the Company as to the performance by the Company of its obligations hereunder, or as to the fulfillment of the conditions concurrent and precedent to the obligations hereunder of the Managing Broker-Dealer.

 

5.7         The Company shall have furnished or caused to be furnished to the Managing Broker-Dealer on the Initial Closing Date satisfactory evidence of the good standing of the Company and the subsidiaries in their respective jurisdiction of organization and their good standing as foreign entities in such other jurisdictions as the Managing Broker-Dealer may reasonably request, in each case in writing or any standard form of telecommunication from the appropriate governmental authorities of such jurisdictions. If requested by Managing Broker-Dealer, an officer of the Company will certify the continued existence and good standing of the Company and its subsidiaries on or prior to each subsequent Closing Date; provided, however that the Company shall have no obligation to procure certificates from any governmental authority relative to good standing or existence on any Closing Date other than the Initial Closing Date.

 

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5.8         FINRA shall not have raised any objection with respect to the fairness or reasonableness of the plan of distribution, or other arrangements of the transactions, contemplated hereby.

 

6.            Indemnification.

 

The Company agrees to indemnify Sutter as set forth in Exhibit B annexed hereto and made a part hereof.

 

7.           Applicable Law; Venue and Dispute Resolution.

 

7.1         This Agreement was executed and delivered in, and its validity, interpretation and construction shall be governed by, the laws of the State of California. The Company, the Managing Broker-Dealer and each Dealer hereby agree that venue for any action brought in connection with this Managing Broker-Dealer Agreement shall lie exclusively in the state and federal courts residing in Orange County, CA.

 

7.2         Arbitration.

 

(a)         Agreement to Arbitrate. Except as provided in Section 7.2(c), any controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance or breach of this Agreement or to the transactions contemplated hereby, including any claim based on contract, tort or statute, shall be adjudicated at the request of either party by arbitration conducted in Orange County, CA, or such other location upon which the parties may agree, before a single arbitrator, selected in accordance with Section 7.2(b) and in accordance with the Arbitration Rules of FINRA and judgment upon any award rendered by the arbitrator may be entered by any state or federal court having jurisdiction of the parties. Any controversy concerning whether a dispute is an arbitrable dispute shall be determined by the arbitrator. The designation of situs or specifically governing law for this Agreement or the arbitration shall not be deemed an election to preclude application of the Federal Arbitration Act, if it is applicable.

 

(b)         Selection of Arbitrator. The sole arbitrator shall be selected in accordance with the procedures of FINRA.

 

(c)         Aid to Arbitration. Either party hereto may request a court of competent jurisdiction residing in to render assistance in the arbitration as is permitted by the Arbitration Rules of FINRA or to grant provisional injunctive relief to either party solely for the purpose of maintaining the status quo until the arbitrator can render an award on the matter at hand or in question and such award can be confirmed by a court having jurisdiction thereof.

 

8.         Counterparts

 

This Agreement may be executed in any number of counterparts. Each counterpart, when executed and delivered, shall be an original contract, but all counterparts, when taken together, shall constitute one and the same agreement.

 

9.         Successors and Amendment

 

9.1         This Agreement shall inure to the benefit of and be binding upon the Managing Broker-Dealer and the Company and their respective successors, and to the benefit of the Dealers as applicable. Nothing in this Agreement is intended or shall be construed to give to any other person any right, remedy or claim, except as otherwise specifically provided herein.

9.2         This Agreement may be amended solely by the written agreement of the Managing Broker-Dealer and the Company.

 

10.         Term

 

This Agreement may be terminated by either party (a) immediately upon notice to the other party in the event that the other party shall have materially failed to comply with any of the material provisions of this Agreement on its part to be performed during the term of this Agreement or if any of the representations, warranties, covenants or agreements of such party contained herein shall not have been materially complied with or satisfied within the times specified or (b) by either party on 30 days’ prior written notice.

 

In any case, this Agreement shall expire at the close of business on the Offering Termination Date. In addition, the Managing Broker-Dealer, upon the expiration or termination of this Agreement, shall (1) promptly deposit any and all funds in its possession which were received from investors for the sale of Securities into such account as the Company may designate; and (2) promptly deliver to the Company all records and documents in its possession which relate to the Offering which are not designated as dealer copies. The Managing Broker-Dealer, at its sole expense, may make and retain copies of all such records and documents, but shall keep all such information confidential. The Managing Broker-Dealer shall use its commercially reasonable efforts to cooperate with the Company to accomplish any orderly transfer of management of the Offering to a party designated by the Company. Upon expiration or termination of this Agreement, the Company shall pay to the Managing Broker-Dealer all commissions and expense reimbursements to which the Managing Broker-Dealer is or becomes entitled under Section 4 at such time as such commissions and expense reimbursements become payable.

 

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11.         Notice

 

Any notice in this Agreement permitted to be given, made or accepted by either party to the other, must be in writing and may be given or served by (1) overnight courier, (2) depositing the same in the United States mail, postpaid, certified, return receipt requested, or (3) facsimile transmission. Notice deposited in the United States mail shall be deemed given three (3) business days after mailing. Notice given in any other manner shall be effective when received at the address of the addressee. For purposes hereof the addresses of the parties, until changed as hereafter provided, shall be as follows:

 

To the Company:

 

Laurence Pino, CEO

Tuscan Senior Living Communities, Inc.

189 S. Orange Ave., Suite 1650

Orlando, Florida 32801

Telephone: 407-206-6577

Email: LJP@TuscanGardens.com

 

 

To the Managing Broker-Dealer:

 

Keith Moore, CEO

Sutter Securities Clearing, LLC

6 Venture, Suite 265

Irvine, CA 92618

Telephone: 929-295-1580

Email: keith@boustead1828.com

 

12.         Severability

 

In the event that any court of competent jurisdiction declares any provision of this Agreement invalid, such invalidity shall have no effect on the other provisions hereof, which shall remain valid and binding and in full force and effect, and to that end the provisions of this Agreement shall be considered severable.

 

13.         Survivability

 

Except as the context otherwise requires, all representations, warranties and agreements contained in this Agreement shall be deemed to be representations, warranties and agreements at and as of the Offering Termination Date, and such representations, warranties and agreements by the Managing Broker-Dealer or the Company, including the indemnity agreements contained in Section 6, shall remain operative and in full force and effect regardless of any investigation made by the Managing Broker-Dealer, the Company and/or any controlling person, and shall survive the sale of, and payment for, the Securities.

 

14.         No Waiver

 

Failure by either party to promptly insist upon strict compliance with any of the obligations of the other party under this Agreement shall not be deemed to constitute a waiver of the right to enforce strict compliance with respect to any obligation hereunder.

 

15.         Recovery of Costs

 

If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding (and any additional proceeding for the enforcement of a judgment) in addition to any other relief to which it or they may be entitled.

 

16.         Assignment

 

This Agreement may not be assigned by either party, except with the prior written consent of the other party. This Agreement shall be binding upon the parties hereto, their heirs, legal representatives, successors and permitted assigns.

 

17.         Counterparts.

 

This Agreement may be executed in 2 or more counterparts, each of which shall be deemed to be an original, and together shall constitute one and the same instrument.

 

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18.         Entire Agreement.

 

This Agreement constitutes the entire understanding between the parties hereto and supersedes any prior understandings or written or oral agreements between them respecting the subject matter hereof.

 

19.         Confirmation

 

The Company agrees to confirm all orders for purchase of Securities that are accepted by the Company and provide such confirmation to the Managing Broker-Dealer and the Dealers. To the extent practicable and permitted by law, all such confirmations may be provided electronically.

 

20.         Privacy Act

 

To protect Customer Information (as defined below) and to comply as may be necessary with the requirements of the Gramm-Leach-Bliley Act, the relevant state and federal regulations pursuant thereto and state privacy laws, the Managing Broker-Dealer hereby agrees to the confidentiality and non-disclosure obligations set forth herein.

 

20.1       “Customer Information” means any information contained on a customer’s application or other form and all nonpublic personal information about a customer that a party receives from the other party. “Customer Information” shall include, but not be limited to, name, address, telephone number, social security number, health information and personal financial information (which may include consumer account number).

 

20.2       The Managing Broker-Dealer understands and acknowledges that it may be financial institutions subject to applicable federal and state customer and consumer privacy laws and regulations, including Title V of the Gramm-Leach-Bliley Act (15 U.S.C. 6801, et seq.) and regulations promulgated thereunder (collectively, the “Privacy Laws”), and any Customer Information received by the Managing Broker-Dealer is received with limitations on its use and disclosure. The Managing Broker-Dealer agrees that it is prohibited from using the Customer Information received other than (i) as required by law, regulation or rule, or (ii) to carry out the purposes for which one party discloses Customer Information to the other party pursuant to this Agreement, as permitted under the “use in the ordinary course of business” exception to the Privacy Laws.

 

20.3       The Managing Broker-Dealer shall establish and maintain safeguards against the unauthorized access, destruction, loss, or alteration of Customer Information in its control which are no less rigorous than those maintained by the Managing Broker-Dealer for its own information of a similar nature. In the event of any improper disclosure of any Customer Information, the Managing Broker-Dealer will immediately notify the Company.

 

If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this letter and your acceptance shall constitute a binding agreement between us as of the date first above written.

 

Accepted and agreed as of the date first above written.

 

 

Tuscan Senior Living Communities, Inc. (The Company)

 

 

 

By: Laurence Pino

Title: CEO

 

 

MANAGING BROKER-DEALER

 

 

Sutter Securities Clearing, LLC

 

 

 

Keith Moore

CEO

 

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Exhibit A PARTICIPATING DEALER AGREEMENT

 

SUTTER SECURITIES CLEARING, LLC

6 Venture, Suite 325

Irvine, California 92618

949.295.1580

PARTICIPATING DEALER AGREEMENT

for Shares in

Tuscan Gardens Senior Living Communities, Inc.

, 20

Ladies and Gentlemen:

 

The undersigned, Sutter Securities Clearing, LLC, a California limited liability company (the “Managing Broker-Dealer”), has entered into that certain Managing Broker-Dealer Agreement, dated ______________, 2019 (the “MBD Agreement”), by and between itself and Tuscan Gardens Senior Living Communities, Inc., a __________ corporation (the “Company”). The MBD Agreement provides the terms for the sale (the “Offering”) of up to $50,000,000 of shares of Series A Preferred stock (the “Shares”) in the Company, pursuant to which the Managing Broker-Dealer has agreed to use its best efforts to form and manage, as the Managing Broker-Dealer, a group of securities dealers (the “Dealers”) for the purpose of soliciting offers for the purchase of the Shares. The MBD Agreement is attached as Exhibit A. The Assignment is attached as Exhibit B. The Company has prepared and filed an Offering Statement on Form 1-A, File No.: ___________________ (together with all amendments thereto, the “Offering Statement”) with the Securities and Exchange Commission (“SEC”). The date the Offering Statement is qualified by SEC shall be referred to herein as the “Qualification Date.” The Shares will be offered during a period commencing on the Qualification Date, and continuing until the earliest of: (i) the sale of $50,000,000 of Shares, (ii) ____________________, or (iii) a determination by the Company’s board of directors to terminate the Offering (the “Offering Termination Date”); provided, however, that the Company in its sole discretion may terminate the Offering at any time. Terms used but not otherwise defined in this Participating Dealer Agreement (this “Agreement”) have the same meanings as set forth in the MBD Agreement. The Shares will be offered at a price of $1,000.00 per Share.

You are invited to become a Dealer and by your confirmation hereof you agree to act in such capacity and to use your best efforts, in accordance with the following terms and conditions, to find qualified investors (the “Investors”) for the Shares. By your acceptance of this Agreement, you will become one of the Dealers and will be entitled to and subject to the indemnification and contribution provisions contained in the MBD Agreement, including the provisions of the MBD Agreement wherein the Dealers severally agree to indemnify and hold harmless the Company and the Managing Broker-Dealer for certain actions.

1. Dealer Representations.

1.1 You hereby confirm that you (i) are a member in good standing of the Financial Industry Regulatory Authority, Inc. (“FINRA”), (ii) are qualified and duly registered to act as a broker-dealer within all states in which you will sell the Shares, (iii) are a broker-dealer duly registered with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (iv) will maintain all such registrations and qualifications in good standing for the duration of your involvement in the Offering. You agree to immediately notify the Managing Broker-Dealer if you cease to be a member of FINRA in good standing.

1.2 You hereby agree to solicit, as an independent contractor, and not as the Managing Broker-Dealer’s agent, or as an agent of the Company or its affiliates, persons acceptable to the Company to purchase the Shares pursuant to the Subscription Agreement (the “Subscription Agreement”) in the form attached to the Offering Statement and in accordance with the terms of the Offering Statement and to diligently make inquiries as required by this Agreement, the Offering Statement or applicable law with respect to prospective Investors in order to ascertain whether a purchase of the Shares is suitable for the Investor. In accordance with the instructions set forth in the Subscription Agreement, all the Subscription Agreements shall be transmitted to the Managing Broker-Dealer. If you receive any funds from a subscriber with respect to any Subscription Agreement, you shall immediately transmit such funds to the Escrow Account. To the extent received by the Managing Broker-Dealer, the Managing Broker-Dealer will be responsible for the transmittal of such funds for the purchase of Shares to the Escrow Account. The Company and the Managing Broker-Dealer have agreed to comply with the provisions of SEC Rule 15c2-4 as to all funds provided by Investors for the purchase of Shares. The Managing Broker-Dealer and the Company may, however, choose to comply with SEC Rule 15c2-4 by using a a broker-dealer capitalized and authorized to maintain customer accounts (“Clearing BD”), to process subscriptions and conduct Closings. If the Managing Broker-Dealer uses ta Clearing BD, then in lieu of placing Investor funds in the Escrow Account, those funds may be deposited by Investors into their own investment accounts that are cleared by Clearing BD (a “Clearing Investor Account”) where they will stay until a Closing or termination or cancellation of the Offering. At a Closing, the funds in a Clearing Investor Account, minus applicable expenses, will be delivered to the Company. If no Closing occurs or the Offering is cancelled or otherwise terminated, no funds will be provided to the Company from the Clearing Investor Account and the funds will remain in the Clearing Investor Account. Funds held in a Clearing Investor Account shall be added to the Requisite Amount and counted toward the achievement of the Minimum Offering Amount. No Subscription Agreement shall be effective unless and until accepted by the Company, it being understood that the Company may accept or reject any Investor in its sole discretion and that the Company may terminate the Offering at any time for any reason.

 

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1.3 You understand that the offering of Shares is made on an “minimum/maximum, best-efforts” basis, as described in the Offering Circular. You further understand and agree that your compensation under this Agreement for the sale of Shares is conditioned upon the sale of at least $500,000 in Shares before the Minimum Offering Termination Date, and the Company’s acceptance of sales by you, and that the failure to sell at least $500,000 in Shares or the failure to accept a purchase for Shares shall relieve the Managing Broker-Dealer or any other party of any obligation to pay you for any services rendered by you in connection with the sale of Shares under this Agreement or otherwise.

1.4 You agree that before participating in the Offering, you will have reasonable grounds to believe, based on information made available to you by the Managing Broker-Dealer and/or the Company through the Offering Circular, that all material facts are adequately and accurately disclosed in the Offering Circular and provide a basis for evaluating the Company and the Shares.

1.5 You agree not to execute any transaction in which an Investor invests in the Shares in a discretionary account without prior written approval of the transaction by the Investor and the Managing Broker-Dealer.

1.6 You agree to comply in all respects with the purchase procedures and plan of distribution set forth in the Offering Circular. Further, you agree that although you may receive due diligence regarding the Offering from the Company in electronic form, you will not distribute to any prospective Investor or any other person any such due diligence material.

1.7 All subscriptions solicited by you will be strictly subject to confirmation by the Managing Broker-Dealer and acceptance thereof by the Company. The Managing Broker-Dealer and the Company reserve the right in their absolute discretion to reject any such subscription and to accept or reject subscriptions in the order of their receipt by the Company, as appropriate or otherwise. Neither you nor any other person is authorized to, and neither you nor any of your employees, agents or representatives shall give any information or make any representation other than those contained in the Offering Circular or in any supplemental sales literature furnished by the Managing Broker-Dealer or the Company for use in making solicitations in connection with the offer and sale of the Shares.

 

1.8 Upon authorization by the Managing Broker-Dealer, you may offer the Shares at the Offering price set forth in the Offering Circular, subject to the terms and conditions thereof.

1.9 The Company or the Managing Broker-Dealer will provide you with such number of copies of the Offering Circular as you may reasonably request. You will be solely responsible for correctly placing orders of such materials, and will reimburse the Managing Broker-Dealer for any costs incurred in connection with unreasonable or mistaken orders. The Managing Broker-Dealer also understands that the Company may provide you with certain supplemental sales material to be used by you in connection with the solicitation of purchases of the Shares. If you elect to use such supplemental sales material, you agree that such material shall not be used in connection with the solicitation or purchase of the Shares unless accompanied or preceded by the Offering Circular, as then currently in effect, and as it may be amended or supplemented in the future.

1.10 The Managing Broker-Dealer shall have full authority to take such action as it may deem advisable with respect to all matters pertaining to the Offering. The Managing Broker-Dealer shall be under no liability to you except for lack of good faith and for obligations expressly assumed by it in this Agreement. Nothing contained in this Section is intended to operate as, and the provisions of this Section shall not constitute a waiver by you, of compliance with any provision of the Securities Act, the Exchange Act, other applicable federal law, applicable state law or of the rules and regulations thereunder.

1.11 For the sale of Shares, you will instruct all Investors to make their checks payable to “________________, as Escrow Agent for Tuscan Gardens Senior Living Communities, Inc.” or to deposit funds in their ClearingInvestor Account. If you receive a check that does not conform with the foregoing instructions, you shall return such check directly to such subscriber not later than the end of the next business day following its receipt.

1.12 You will limit the offering of the Shares to persons whom you have reasonable grounds to believe, and in fact believe, meet the financial suitability and other Investor requirements set forth in the Offering Statement.

1.13 After the Offering Statement has been filed with the SEC but prior to the Qualification Date, you are required to provide each prospective Investor with a copy of the Preliminary Offering Circular and any exhibits and appendices thereto (which are contained in the Offering Statement). After the Qualification Date, you are required to provide each prospective Investor with a copy of the final Offering Circular and any exhibits and appendices thereto. If a prospective Investor receives the Preliminary Offering Circular, then you will be required to deliver to the Investor the final Offering Circular at least 48 hours before such Investor will be permitted to acquire Shares. If an Investor purchases Shares within 90 calendar days of the Qualification Date, you will deliver to the Investor, no later than two business days following the completion of such sale, a copy of the final Offering Circular and all exhibits and appendices thereto either by (i) electronic delivery of the final Offering Circular or the uniform resource locator (the “URL”) to where the final Offering Circular may be accessed on the SEC’s Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”), or (ii) mailing the final Offering Circular and all exhibits and appendices thereto to the Investor at the address indicated in the Subscription Agreement.

 

1.14 During the course of the Offering, you will advise each prospective Investor at the time of the initial offering to him or her that the Company and/or its agents and consultants will, during the course of the Offering and prior to any sale, accord said Investor and his or her purchaser representative, if any, the opportunity to ask questions of and to receive answers from the Company and/or its agents and consultants concerning the terms and conditions of the Offering and to obtain any additional information, which information is possessed by the Company or may be obtained by it without unreasonable effort or expense and which is necessary to verify the accuracy of the information contained in the Offering Statement.

1.15 You will immediately bring to the attention of the Company and the Managing Broker-Dealer any circumstance or fact which causes you to believe the Offering Statement, or any other literature distributed pursuant to the Offering, or any information supplied to prospective Investors in their purchase materials, may be inaccurate or misleading.

 

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1.16 You agree that in recommending to an Investor the purchase or sale of the Shares, you shall have reasonable grounds to believe, on the basis of information obtained from the prospective Investor concerning his or her investment objectives, other investments, financial situation and needs, and any other information known by you, that:

1.16.1 The prospective Investor is an accredited investor or is otherwise not investing more than such Investor’s maximum investment as set forth in the Offering Statement and the acquisition of Shares is otherwise a suitable investment for such Investor as may be required by all applicable laws, rules and regulations;

1.16.2 The prospective Investor is or will be in a financial position appropriate to enable him or her to realize to a significant extent the benefits described in the Offering Statement;

1.16.3 The prospective Investor has a fair market net worth sufficient to sustain the risks inherent in an investment in the Shares, including, but not limited to, the total loss of the investment, lack of liquidity and other risks described in the Offering Statement; and

1.16.4 An investment in the Shares is otherwise suitable for the prospective Investor.

1.17 You agree to keep records in compliance with the requirements imposed by (i) federal and state securities laws and the rules and regulations thereunder and (ii) the applicable rules of FINRA. You agree to retain in your records and make available to the Managing Broker-Dealer and to the Company, for a period of at least 6 years following the Offering Termination Date, information establishing that (i) each person who purchases the Shares pursuant to a Subscription Agreement solicited by you is within the permitted class of Investors under the requirements of the jurisdiction in which such Investor is a resident, (ii) each person met the suitability requirements set forth in the Offering Statement and the Subscription Agreement and (iii) each person is suitable for such investment and the basis on which such suitability determination was made. You also agree to make your records regarding suitability available to representatives of the SEC and FINRA and applicable state securities administrators upon the Managing Broker-Dealer’s request.

1.18 You agree that upon request by the Managing Broker-Dealer, you will furnish a complete list of all persons who have been offered the Shares (including the corresponding number of the Offering Statement delivered to such persons) and such persons’ place of residence.

 

1.19 You agree that before executing a purchase transaction in the Shares, you will inform the prospective Investor and his or her purchaser representative, if any, of all pertinent facts relating to the liquidity and marketability of the Shares, as appropriate, during the term of the investment.

1.20 You hereby undertake and agree to comply with all obligations applicable to you as set forth in FINRA rules, including, but not limited to, any new suitability and filing requirements.

1.21 You agree not to rely upon the efforts of the Managing Broker-Dealer in (i) performing due diligence related to the Company (including its members, managers, officers, directors, employees, and Affiliates), the Shares, or the suitability thereof for any Investors and (ii) determining whether the Company has adequately and accurately disclosed all material facts upon which to provide a basis for evaluating the Company to the extent required by federal law, state law and/or FINRA. You further agree that you are solely responsible for performing adequate due diligence, and you agree to perform adequate due diligence as required by federal law, state law, and/or FINRA.

1.22 You will refrain from making any representations to any prospective Investor other than those contained in the Offering Statement, and will not allow any other written materials to be used to describe the potential investment to prospective Investors other than the Offering Statement or factual summaries and sales brochures of the Offering prepared by the Company and distributed by the Managing Broker-Dealer.

1.23 You will refrain from distributing any material to prospective Investors that is marked “Financial Advisor Use Only” or “Broker-Dealer Use Only,” or any other due diligence material related to the Offering received by you.

1.24 Neither you nor any of your managing members, directors, or executive officers, or any of your officers participating in the offering is subject to the disqualification provisions of Rule 262 of the Rules and Regulations. None of your registered representatives or any other person being compensated by or through you for the solicitation of investors, is subject to the disqualification provisions of Rule 262 of the Rules and Regulations.

1.25 You acknowledge that this Offering is being made in reliance on Regulation A promulgated under the Securities Act and that the Company is relying on a certification from you that a potential Investor meets with the suitability requirements set forth in the Offering Statement.

1.26 You will provide the Managing Broker-Dealer with such information relating to the offer and sale of the Shares by you as the Managing Broker-Dealer may from time to time reasonably request.

2. Compensation. Subject to certain conditions, and in consideration of your services hereunder, the Managing Broker-Dealer will pay you sales commissions and marketing allowances as follows:

2.1 You will receive a selling commission in an amount up to 7.5% of the purchase price of the Shares sold by you until gross proceeds of the Offering reach $20,000,000, and at such time the selling commission will be reduced to an amount up to 7.25% of the purchase price of Shares sold by you. The foregoing notwithstanding, this amount will be reduced to the extent the Managing Broker-Dealer negotiates a lower commission rate with you, in which event the commission rate will be the lower agreed upon rate (the above being referred to as the “Commissions”).

2.2 You may, at the sole discretion of the Issuer, receive a non-accountable marketing and due diligence allowance of up to 1% of the purchase price of the Shares sold by you (the “Allowances”).

2.3 Payment of the Commissions and the Allowances shall be subject to the following conditions:

(a) No Commissions or Allowances will be payable with respect to any Subscription Agreements that are rejected by the Company or the Managing Broker-Dealer, or if the Company terminates the Offering for any reason whatsoever.

 

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(b) No Commissions or Allowances will be payable unless and until release to the Company of funds from the Escrow Account or the Clearing Investor Account, as applicable with which, in the aggregate, there is to be deposited the Minimum Offering Amount of $500,000.

(c) No Commissions or Allowances will be payable to you with respect to any sale of the Shares by you unless and until such time as the Company has received the total proceeds of any such sale from the Escrow Account and/or the Folio Investment Accounts and the Managing Broker-Dealer has received the aggregate amount of sales commission to which it is entitled.

 

2.4 All other expenses incurred by you in the performance of your obligations hereunder, including, but not limited to, expenses related to the Offering and any attorneys’ fees, shall be at your sole cost and expense, and the foregoing shall apply notwithstanding the fact that the Offering is not consummated for any reason.

2.5 Once Commissions or Allowances become payable, they will be paid on the first and fifteenth of each month. You agree that, in the event any Commissions or Allowances have been paid to the Managing Broker-Dealer pursuant to the terms of the Managing Broker-Dealer Agreement, you will look solely to the Managing Broker-Dealer for payment of any Commissions or Allowances.

2.6 In the event that a purchase is revoked or rescinded, the Dealer will be obligated to return to the Managing Broker-Dealer any Commissions or Allowances previously paid to the Dealer in connection with such purchase.

3. Solicitation.

3.1 In soliciting persons to acquire the Shares, you agree to comply with any applicable requirements of the Securities Act, the Exchange Act, applicable state securities laws, the published rules and regulations thereunder and FINRA rules and, in particular, you agree that you will not give any information or make any representations other than those contained in the Offering Statement and in any supplemental sales literature furnished to you by the Managing Broker-Dealer or the Company for use in making such solicitations.

3.2 You will conduct all solicitation and sales efforts in conformity with Regulation A promulgated under the Securities Act, and exemptions available under applicable state law and conduct reasonable investigation to ensure that all prospective Investors are not (i) listed on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Asset Control, Department of the Treasury (“OFAC”) pursuant to Executive Order No. 133224, 66 Fed. Reg. 49079 (September 25, 2001) and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable enabling legislation or other Executive Orders in respect thereof (such lists are collectively referred to as “Lists”) or (ii) owned or controlled by, nor act for or on behalf of, any person or entity on the Lists.

3.3 You agree to promptly provide to the Managing Broker-Dealer copies of any written or otherwise documented complaints from customers received by you relating in any way to the Offering (including, but not limited to, the manner in which the Shares are offered by you).

4. Offer and Sale Activities. It is understood that under no circumstances will you engage in any activities hereunder in any state other than those for which permission has been granted by the Managing Broker-Dealer to you, as evidenced by written acknowledgement by the Managing Broker-Dealer that such state has been cleared for offer and sale activity. It is further understood that you shall notify the Company of Subscription Agreements you receive within 2 business days of receipt so that the Company may make any required federal or state law filings.

5. Relationship of Parties. Nothing contained herein shall be construed or interpreted to constitute the Dealer as an employee, agent or representative of, or in association with or in partnership with, the Managing Broker-Dealer or the Company. The Managing Broker-Dealer shall be under no liability to make any payment to you except out of the funds received pursuant to the terms of the Managing Broker-Dealer Agreement as hereinabove provided, and the Managing Broker-Dealer shall not be under any liability for, or in respect of the value or validity of the Subscription Agreement, the Shares or the performance by anyone of any agreement on its part, or for, or in respect of any matter connected with this Agreement, except for lack of good faith by the Managing Broker-Dealer, and for obligations expressly assumed by the Managing Broker-Dealer in this Agreement.

6. Indemnification and Contribution. You hereby agree and acknowledge that you shall be entitled to the rights, and be subject to the obligations and liabilities, of the indemnification and contribution provisions contained in the MBD Agreement, including without limitation, the provisions by which the Dealers shall severally agree to indemnify and hold harmless the Company and the Managing Broker-Dealer and their respective owners, managers, members, trustees, partners, directors, officers, employees, agents, attorneys and accountants.

7. Privacy Act. To protect Customer Information (as defined below) and to comply as may be necessary with the requirements of the Gramm-Leach-Bliley Act, the relevant state and federal regulations pursuant thereto and state privacy laws, the parties wish to include the confidentiality and non-disclosure obligations set forth herein.

7.1 Customer Information. “Customer Information” means any information contained on a customer’s application or other form and all nonpublic personal information about a customer that a party receives from the other party. Customer Information shall include, but not be limited to, name, address, telephone number, social security number, health information and personal financial information (which may include consumer account number).

7.2 Usage and Nondisclosure. The parties understand and acknowledge that they may be financial institutions subject to applicable federal and state customer and consumer privacy laws and regulations, including Title V of the Gramm-Leach-Bliley Act (15 U.S.C. 6801, et seq.) and regulations promulgated thereunder (collectively, the “Privacy Laws”), and any Customer Information that one party receives from the other party is received with limitations on its use and disclosure. The parties agree that they are prohibited from using the Customer Information received from the other party other than (i) as required by law, regulation or rule, or (ii) to carry out the purposes for which one party discloses Customer Information to the other party pursuant to this Agreement, as permitted under the use in the ordinary course of business exception to the Privacy Laws.

 

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7.3 Safeguarding Customer Information. The parties shall establish and maintain safeguards against the unauthorized access, destruction, loss, or alteration of Customer Information in their control which are no less rigorous than those maintained by a party for its own information of a similar nature. In the event of any improper disclosure of any Customer Information, the party responsible for the disclosure will immediately notify the other party.

7.4 Survivability. The provisions of Section 6 and this Section 7 shall survive the termination of this Agreement.

8. Survival of Representations and Warranties. Except as the context otherwise requires, all representations, warranties and agreements contained in this Agreement and in the applicable provisions of the MBD Agreement shall be deemed to be representations, warranties and agreements at and through the Offering Termination Date, and such representations, warranties and agreements by the Managing Broker-Dealer or the Dealers, including the indemnity and contribution agreements contained in Section 5 of the MBD Agreement shall remain operative and in full force and effect regardless of any investigation made by the Managing Broker-Dealer, the Dealers and/or any controlling person, and shall survive the sale of, and payment for, the Shares and the termination of this Agreement.

 

9. Termination. The Dealer will suspend or terminate the Offering upon request of the Company or the Managing Broker-Dealer at any time and will resume the Offering upon the subsequent request of the Company or the Managing Broker-Dealer. This Agreement may be terminated by the Managing Broker-Dealer or a Dealer at any time upon 5 days’ written notice to the other party. If this Agreement is terminated the Dealer is still obligated to fulfill its delivery requirements pursuant to Section 1.13.

10. Managing Broker-Dealer Obligations.

10.1 Notifications. The Managing Broker-Dealer shall provide prompt written notice to the Dealers of any material changes to the Offering Statement that in its judgment could materially and adversely affect a Dealer with respect to this Offering.

10.2 Records. The Managing Broker-Dealer shall retain in its records and make available to the Dealers, for a period of at least 6 years following the Offering Termination Date, any communications and information with respect to a prospective Investor that has otherwise not been provided to a Dealer.

10.3 FINRA Rule 5110. The Managing Broker-Dealer has submitted to FINRA (or will submit no later than one business day after filing with or submitting to the SEC or any state securities commission or other regulatory authority) a copy of the documents to be filed pursuant to FINRA Rule 5110(b)(5) and the information specified in FINRA Rule 5110(b)(6); provided, however, any documents that are filed with the SEC through the SEC’s EDGAR System that are referenced in FINRA’s electronic filing system shall be treated as filed with FINRA (the “FINRA Filing”). No sales of Shares shall commence unless such documents and information have been filed with and reviewed by FINRA and FINRA has provided an opinion that it has no objections to the proposed underwriting and other terms and arrangements.

10.4 Confirmation. The Managing Broker-Dealer hereby acknowledges that it has assumed the duty to confirm on behalf of the Dealers all orders for purchases of Shares accepted by the Company. Such confirmations will comply with the rules of the SEC and FINRA and will comply with the applicable laws of such other jurisdictions to the extent that the Managing Broker-Dealer is advised of such laws in writing by the Dealer.

11. Governing Law. This Agreement shall be governed by, subject to and construed in accordance with the laws of the State of California without regard to conflict of law provisions. The Managing Broker-Dealer and the Dealer agree that any dispute concerning this Agreement shall be resolved exclusively through binding arbitration before FINRA pursuant to its arbitration rules. Arbitration will be venued in Los Angeles, California (the “Agreed Forum”). Each of the Managing Broker-Dealer and the Dealer agree that the Agreed Forum is not an “inconvenient forum” for proceedings hereunder, and each hereby agree to the personal jurisdiction of the Agreed Forum and that service of process by mail to the address for such party as set forth in this Agreement (or such other address as a party hereto shall notify the other in writing) constitute full and valid service for such proceedings.

12. Severability. If any portion of this Agreement shall be held invalid or inoperative, then so far as is reasonable and possible (i) the remainder of this Agreement shall be considered valid and operative and (ii) effect shall be given to the intent manifested by the portion held invalid or inoperative.

13. Counterparts. This Agreement may be executed in 2 or more counterparts, each of which shall be deemed to be an original, and together which shall constitute one and the same instrument.

14. Modification or Amendment. This Agreement may not be modified or amended except by written agreement executed by the parties hereto.

 

15. Notices. All communications hereunder, except as herein otherwise specifically provided, shall be in writing and, (i) if sent to the Managing Broker-Dealer, shall be mailed or delivered to Boustead Securities, LLC, 6 Venture, Suite 325, Irvine, California 92618, (ii) if sent to the Company, shall be mailed or delivered to __________________________, or (iii) if sent to you, shall be mailed or delivered to you at your address set forth below. The notice shall be deemed to be received on the date of its actual receipt by the party entitled thereto.

16. Parties. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto, the persons referred to in Section 5 of the MBD Agreement, their respective successors, legal representatives, heirs and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under, in respect of, or by virtue of, this Agreement or any provision herein contained.

17. Delay. Neither the failure nor any delay on the part of any party to this Agreement to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any subsequent occurrence.

 

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18. Recovery of Costs. If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding (and any additional proceeding for the enforcement of a judgment) in addition to any other relief to which it or they may be entitled.

19. Entire Agreement. This Agreement, along with the applicable provisions of the MBD Agreement, constitute the entire understanding between the parties hereto and supersede any prior understandings or written or oral agreements between them respecting the subject matter hereof.

20. Anti-Money Laundering Compliance Programs. Each Dealer’s acceptance of this Agreement constitutes a representation to the Managing Broker-Dealer that the Dealer has established and implemented an anti-money laundering (“AML”) compliance program (“AML Program”), in accordance with FINRA Rule 3310 and Section 352 of the Money Laundering Abatement Act, the Bank Secrecy Act, as amended, and Section 326 of the Patriot Act of 2001, which are reasonably expected to detect and cause reporting of suspicious transactions in connection with the sale of Shares. In addition, the Dealer represents that it has established and implemented a program (“OFAC Program”) for compliance with OFAC and will continue to maintain its OFAC Program during the term of this Agreement. Upon request by the Managing Broker-Dealer at any time, the Dealer hereby agrees to (i) furnish a copy of its AML Program and OFAC Program to the Managing Broker-Dealer for review and (ii) furnish a copy of the findings and any remedial actions taken in connection with the Dealer’s most recent independent testing of its AML Program and/or its OFAC Program.

The parties acknowledge that for the purposes of the FINRA rules the Investors who purchase Shares through the Dealer are “Customers” of the Dealer and not the Managing Broker-Dealer. Nonetheless, to the extent that the Managing Broker-Dealer deems it prudent, the Dealer shall cooperate with the Managing Broker-Dealer’s auditing and monitoring of the Dealer’s AML Program and its OFAC Program by providing, upon request, information, records, data and exception reports, related to the Company’s investors introduced to, and serviced by, the Dealer (the “Customers”). Such documentation could include, among other things: (i) copies of Dealer’s AML Program and its OFAC Program; (ii) documents maintained pursuant to the Dealer’s AML Program and its OFAC Program related to the Customers; (iii) any suspicious activity reports filed related to the Customers; (iv) audits and any exception reports related to the Dealer’s AML activities; and (v) any other files maintained related to the Customers. In the event that such documents reflect, in the opinion of the Managing Broker-Dealer, a potential violation of the Managing Broker-Dealer’s obligations in respect of its AML or OFAC requirements, the Dealer will permit the Managing Broker-Dealer to further inspect relevant books and records related to the Customers (with respect to the Offering) and/or the Dealer’s compliance with AML or OFAC requirements. Notwithstanding the foregoing, the Dealer shall not be required to provide to the Managing Broker-Dealer any documentation that, in the Dealer’s reasonable judgment, would cause the Dealer to lose the benefit of attorney-client privilege or other privilege which it may be entitled to assert relating to the discoverability of documents in any civil or criminal proceedings. The Dealer hereby represents that it is currently in compliance with all AML rules and all OFAC requirements, specifically including, but not limited to, the Customer Identification Program requirements under Section 326 of the USA PATRIOT Act. The Dealer hereby agrees, upon request by the Managing Broker-Dealer to (i) provide an annual certification to the Managing Broker-Dealer that, as of the date of such certification (A) its AML Program and its OFAC Program are consistent with the AML Rules and OFAC requirements, (B) it has continued to implement its AML Program and its OFAC Program and (C) it is currently in compliance with all AML Rules and OFAC requirements, specifically including, but not limited to, the Customer Identification Program requirements under Section 326 of the USA PATRIOT Act and (ii) perform and carry out, on behalf of both the Managing Broker-Dealer and the Company, the Customer Identification Program requirements in accordance with Section 326 of the USA PATRIOT Act and applicable SEC and Treasury Department Rules thereunder.

21. Managing Broker-Dealer Representations. The Managing Broker-Dealer hereby represents and warrants as of the Effective Date to the Dealer that neither the Managing Broker-Dealer nor any of its managing members, directors, or executive officers, or any of its officers participating in the offering is subject to the disqualification provisions of Rule 262 of the Rules and Regulations. None of the Managing Broker-Dealer’s registered representatives or any other person being compensated by or through the Managing Broker-Dealer for the solicitation of investors, is subject to the disqualification provisions of Rule 262 of the Rules and Regulations.

22. Electronic Delivery of Information; Electronic Processing of Subscriptions. Pursuant to the MBD Agreement, the Company has agreed to confirm all orders for the purchase of Shares accepted by the Company. In addition, the Company, the Managing Broker-Dealer and/or third parties engaged by the Company or the Managing Broker-Dealer may, from time to time, provide to the Dealer copies of investor letters, annual reports and other communications provided to the Company investors. The Dealer agrees that, to the extent practicable and permitted by law, all confirmations, statements, communications and other information provided to or from the Company, the Managing Broker-Dealer, the Dealer and/or their agents or customers may be provided electronically, as a preference but not as a requirement.

 

With respect to Shares held through custodial accounts, the Dealer agrees and acknowledges that to the extent practicable and permitted by law, all confirmations, statements, communications and other information provided from the Company, the Managing Broker-Dealer and/or their agents to Company investors may be provided solely to the custodian that is the registered owner of the Shares, rather than to the beneficial owners of the Shares. In such case it shall be the responsibility of the custodian to distribute the information to the beneficial owners of Shares.

The Dealer agrees and acknowledges that the Managing Broker-Dealer may, as a preference but not as a requirement, use an electronic platform to process subscriptions, including but not limited to the Depository Trust Company (DTC) model. If an electronic platform is used, the Dealer agrees to cooperate with the processing of subscriptions through such an electronic platform if reasonably practical.

 

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23. Third Party Beneficiaries. The Company and its affiliates, successors and assigns shall be express third party beneficiaries of Section 1 of this Agreement.

24. Successors and Assigns. No party shall assign this Agreement or any right, interest or benefit under this Agreement without the prior written consent of the other party. This Agreement shall be binding upon the Managing Broker-Dealer and Dealer and their respective successors and permitted assigns.

Please confirm this Agreement to solicit persons to acquire the Shares on the foregoing terms and conditions by signing and returning the form enclosed herewith.

 

Very truly yours,

 

Sutter Securities Clearing, LLC

a California limited liability company

 

 

By:

Its:

 

 

Sutter Securities Clearing, LLC

6 Venture, Suite 325

Irvine, California

 

 

Re: Offering of Shares in Tuscan Gardens Senior Living Communities, Inc.

Ladies and Gentlemen:

The undersigned confirms its agreement to act as a Dealer as referred to in the foregoing Soliciting Dealer Agreement, subject to the terms and conditions of such Agreement. The undersigned confirms that it is a member in good standing of the Financial Industry Regulatory Authority, Inc., and is qualified under federal law and the laws of the states in which sales are to be made by the undersigned to act as a Dealer.

 

 

Dated:                    , 20    
  (Print Name of Firm)
   
  By:
  (Authorized Representative)
   
  Address:
   
   
   
   
   
  Taxpayer Identification Number:

 

 

Registered as broker-dealer in the following states:

 

                                                 
¨ All States                                            
                         
¨  AL   ¨  AK   ¨  AZ   ¨  AR   ¨  CA   ¨  CO   ¨  CT   ¨  DE   ¨  DC   ¨  FL   ¨  GA   ¨  HI   ¨  ID
                         
¨  IL   ¨  IN   ¨  IA   ¨  KS   ¨  KY   ¨  LA   ¨  ME   ¨  MD   ¨  MA   ¨  MI   ¨  MN   ¨  MS   ¨  MO
                         
¨  MT   ¨  NE   ¨  NV   ¨  NH   ¨  NJ   ¨  NM   ¨  NY   ¨  NC   ¨  ND   ¨  OH   ¨  OK   ¨  OR   ¨  PA
                         
¨  RI   ¨  SC   ¨  SD   ¨  TN   ¨  TX   ¨  UT   ¨  VT   ¨  VA   ¨  WA   ¨  WV   ¨  WI   ¨  WY   ¨  PR

 

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Exhibit B

INDEMNIFICATION

The Company agrees that it shall indemnify and hold harmless, the Managing Broker-Dealer, its members, managers, officers, employees, agents, affiliates and controlling persons within the meaning of Section 20 of the Securities Exchange Act of 1934 and Section 15 of the Securities Act of 1933, each as amended (any and all of whom are referred to as an "Indemnified Party"), from and against any and all losses, claims, damages, liabilities, or expenses, and all actions in respect thereof (including, but not limited to, all legal or other expenses reasonably incurred by an Indemnified Party in connection with the investigation, preparation, defense or settlement of any claim, action or proceeding, whether or not resulting in any liability), incurred by an Indemnified Party with respect to, caused by, or otherwise arising out of any transaction contemplated by this Agreement or the Managing Broker-Dealer’s performing the services contemplated hereunder; provided, however, the Company will not be liable to the extent, and only to the extent, that any loss, claim, damage, liability or expense is finally judicially determined to have resulted primarily from the Managing Broker-Dealer’s gross negligence or bad faith in performing such services.

 

If the indemnification provided for herein is conclusively determined (by an entry of final judgment by a court of competent jurisdiction and the expiration of the time or denial of the right to appeal) to be unavailable or insufficient to hold any Indemnified Party harmless in respect to any losses, claims, damages, liabilities or expenses referred to herein, then the Company, or its owners, whether an entity or individual, shall contribute to the amounts paid or payable by such Indemnified Party in such proportion as is appropriate and equitable under all circumstances taking into account the relative benefits received by the Company on the one hand and the Managing Broker-Dealer on the other, from the transaction or proposed transaction under the Agreement or, if allocation on that basis is not permitted under applicable law, in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and the Managing Broker-Dealer on the other, but also the relative fault of the Company and the Managing Broker-Dealer; provided, however, in no event shall the aggregate contribution of the Managing Broker-Dealer and/or any Indemnified Party be in excess of the net compensation actually received by the Managing Broker-Dealer and/or such Indemnified Party pursuant to this Agreement.

 

The Company shall not settle or compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action, claim, suit or proceeding in which any Indemnified Party is or could be a party and as to which indemnification or contribution could have been sought by such Indemnified Party hereunder (whether or not such Indemnified Party is a party thereto), unless such consent or termination includes an express unconditional release of such Indemnified Party, reasonably satisfactory in form and substance to such Indemnified Party, from all losses, claims, damages, liabilities or expenses arising out of such action, claim, suit or proceeding.

 

In the event any Indemnified Party shall incur any expenses covered by this Exhibit B, the Company shall reimburse the Indemnified Party for such covered expenses within ten (10) business days of the Indemnified Party's delivery to the Company of an invoice therefor, with receipts attached. Such obligation of the Company to so advance funds may be conditioned upon the Company's receipt of a written undertaking from the Indemnified Party to repay such amounts within ten (10) business days after a final, non-appealable judicial determination that such Indemnified Party was not entitled to indemnification hereunder.

 

The foregoing indemnification and contribution provisions are not in lieu of, but in addition to, any rights which any Indemnified Party may have at common law hereunder or otherwise, and shall remain in full force and effect following the expiration or termination of the Managing Broker-Dealer’s engagement and shall be binding on any successors or assigns of the Company and successors or assigns to all or substantially all of the Company's business or assets.

 

 

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EX1A-2A CHARTER 4 ex1a_2a.htm EXHIBIT 1A-2A

 

Exhibit 1A-2A 

 

Exhibit 2 – Articles of Incorporation and Company ByLaws

 

ARTICLES OF INCORPORATION

OF

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

DATED JULY 20, 2018

 

ARTICLE I – NAME

 

The name of this corporation is Tuscan Gardens Senior Living Communities, Inc. (the “Corporation”).

 

ARTICLE II – REGISTERED OFFICE

 

The address of the registered office of the Corporation in the State of Florida is 189 South Orange Avenue, Suite 1650, City of Orlando, County of Orange, 32801. The name of the registered agent at such address is Securities Transfer Corporation.

 

ARTICLE III – PURPOSE

 

The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the Florida Business Corporations Act (the “FBCA”).

 

ARTICLE IV – AUTHORIZED CAPITAL

 

A. Authorized CapitalThe Corporation’s authorized capital shall consist of two classes comprised of voting common shares, and non-voting preferred shares. The total number of shares of all classes of shares which the Corporation shall have authority to issue is 100,000 shares, consisting of 50,000 shares of voting common shares, $1.00 par value per share (the “Common Shares”), and 50,000 shares of Class A Non-Voting Preferred Shares, $1,000.00 par value per share (the “Preferred Shares”). Except as otherwise stated in the Bylaws of the Corporation as may be in effect from time to time, the rights, powers and privileges and the qualifications, limitations or restrictions thereof, in respect of the Common Shares and the Preferred Shares shall be as described in this Article IV.

 

B. Liquidation, Dissolution or Winding Up. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the funds and assets available for distribution will be distributed within Ninety (90) days of the date of liquidation in the following order and priority:

 

a)First, to creditors of the Company, including Shareholders who are creditors, to the extent otherwise permitted by law, in satisfaction of all debts, liabilities, obligations and expenses of the Company, including, without limitation, the expenses incurred in connection with the liquidation of the Company; and
b)Second, to the Preferred Shareholders to the extent of and in proportion to their invested capital until the aggregate amount paid to such Preferred Shareholders is sufficient to provide for a complete return of such Preferred Shareholders invested capital; and
c)Third, to the Preferred Shareholders to the extent of and in proportion to their respective unpaid eight (8.0%) percent Preferred Return until such Preferred Shareholders' unpaid eight (8.0%) percent Preferred Return has been paid in full; and
d)Fourth, fifty (50%) percent of any remaining proceeds from the liquidation of the Company to the Preferred Shareholders’ Liquidating Dividends allocated among Preferred Shareholders in proportion to the amount and duration of each Preferred Shareholder’s invested capital; and
e)Fifth, to the Common Shareholders.

 

C. VotingEach holder of Common Shares shall be entitled to vote at all meetings of the shareholders and shall have one vote for each Common Preferred Share held by such shareholder. The Common Shares shall vote as a single class with respect to all matters submitted to a vote of shareholders of the Corporation. Each holder of Preferred Shares has no right to and shall not vote on any matter submitted to the holders of Common Shares.

 

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D. Dividends. 

 

Preferred Dividend. Each holder of Preferred Shares will be eligible to receive a “Preferred Dividend” that is expected to, with respect to the Preferred Share’s par value (cumulative and not compounded) equal to eight (8.0%) percent per annum, paid or accrued monthly. For purposes of calculating the Preferred Dividend, all capital contributions and dividends occurring during a given month will be deemed to have occurred on the first day of the month. Such dividends will be made from available cash that remains following the payment of Company obligations as more fully described in this Article IV. Payment of the Preferred Dividend is further contingent upon the Company retaining available cash to offset any losses in the event the Company is operating at a loss. In the event the Company does not have available cash to distribute, a holder of Preferred Shares will neither receive nor be entitled to payment of the Preferred Dividend.

 

Special Dividends. Once any one of the Company Properties reaches Stabilization, which is typically twenty-four (24) months from the commencement of operations. the Company may elect to pay additional dividends to the holders of Preferred Shares from the distributions it receives from a respective Holdco, less certain expenses and reserves (see “Net Operating Cash Flow”). The amount of Net Operating Cash Flow of the Company to be paid as Special Dividends shall be determined by the Company, in its sole and absolute discretion.

 

The Company does not expect to receive distributions from the Holdcos and, therefore, commence the payment of Special Dividends based on Net Operating Cash Flow to Preferred Shareholders, until one or more of the Company Properties have begun to generate sufficient cash flow in excess of any debt service and reserve requirements. As a result there can be no assurance as to the date on which distributions will commence or the timing or amount of such distributions, if any, from the Net Operating Cash Flow. The Company expects to pay dividends to the holders of Preferred Shares and holders of Common Shares from distributions it receives from the Holdcos in connection with any sale, refinancing, redemption or other disposition of the Communities, less certain expenses ("Net Disposition Proceeds").

 

Dividends shall be payable only when, as and if declared by the Company's Board of Directors.

 

Dividends resulting from Net Disposition Proceeds received by the Company from Holdcos shall be determined as follows:

 

a)First, to the Preferred Shareholders to the extent of and in proportion to their respective unpaid eight (8.0%) percent Preferred Return until such Preferred Shareholders' unpaid eight (8.0%) percent Preferred Return has been paid in full;
b)Second, fifty (50%) percent of the Net Distribution Proceeds to the Preferred Shareholders’ Special Dividends allocated among Preferred Shareholders in proportion to the amount and duration of each Preferred Shareholder’s invested capital;
c) Third, any remaining Net Distribution Proceeds to the Common Shareholders.

  

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ARTICLE V – DIRECTORS 

 

The number of Directors of the Corporation may be fixed by the Bylaws. Elections of Directors may be, but are not required to be, by written ballot.

 

ARTICLE VI – LIMITATION OF LIABILITY

 

No person who was or is a Director of this Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a Director, except for liability (i) for breach of the duty of loyalty to the Corporation or its shareholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law; (iii) under the FBCA; or (iv) for any transaction from which the Director derived an improper personal benefit. If the FBCA is amended after the effective date of this Article VI to further eliminate or limit, or to authorize further elimination or limitation of, the personal liability of Directors for breach of fiduciary duty as a Director, then the personal liability of a Director to this Corporation or its shareholders shall be eliminated or limited to the full extent permitted by the FBCA, as so amended. For purposes of this Article VI, “fiduciary duty as a Director” shall include any fiduciary duty arising out of serving at the request of this Corporation as a director of another corporation, partnership, joint venture, trust or other enterprise, and “personally liable to the Corporation” shall include any liability to such other corporation, partnership, joint venture, trust or other enterprise, and any liability to this Corporation in its capacity as a security holder, joint venturer, partner, beneficiary, creditor or investor of or in any such other corporation, partnership, joint venture, trust or other enterprise. Any repeal or modification of this Article VI by the shareholders of this Corporation shall not adversely affect the elimination or limitation of the personal liability of a Director for any act or omission occurring prior to the effective date of such repeal or modification. This provision shall not eliminate or limit the liability of a Director for any act or omission occurring prior to the effective date of this Article VI.

  

 

ARTICLE VII – INDEMNITY

 

A. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he/she is or was or has agreed to become a Director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and other expenses (including attorneys’ fees) (“Expenses”), judgments, fines and amount paid in settlement actually and reasonably incurred by him/her in connection with such action, suit or proceeding and any appeal thereof if he/she acted in good faith and in a manner he/she reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his/her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he/she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his/her conduct was unlawful. For purposes of this Article VII, “serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise” shall include any service by a Director or officer of the Corporation as a director, officer, employee, agent or fiduciary of such other corporation, partnership, joint venture, trust or other enterprise, or with respect to any employee benefit plan (or its participants or beneficiaries) of the Corporation or any such other enterprise.

 

B. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he/she is or was or has agreed to become a Director or officer of the Corporation or is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise or by reason of any action alleged to have been taken or omitted in such capacity against Expenses actually and reasonably incurred by him/her in connection with the investigation, defense or settlement of such action or suit and any appeal thereof if he/she acted in good faith and in a manner he/she reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Orange County, Florida or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such Expenses which the Court of Orange County, Florida or such other court shall deem proper. 

 

C. To the extent that any person referred to in paragraphs (A) or (B) of this Article VII has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to therein or in defense of any claim, issue or matter therein, he/she shall be indemnified against Expenses actually and reasonably incurred by him/her in connection therewith.

 

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D. Any indemnification under paragraphs (A) or (B) of this Article VII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director or officer is proper in the circumstances because he/she has met the applicable standard of conduct set forth in paragraphs (A) or (B). Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum (as defined in the By-Laws of the Corporation) consisting of Directors who were not parties to such action, suit or proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (iii) by the shareholders.

 

E. Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding and appeal upon receipt by the Corporation of an undertaking by or on behalf of the Director or officer to repay such amount if it shall ultimately be determined that he/she is not entitled to be indemnified by the Corporation.

 

F. The determination of the entitlement of any person to indemnification under paragraphs (A), (B) or (C) or to advancement of Expenses under paragraph (E) of this Article VII shall be made promptly, and in any event within thirty (30) days after the Corporation has received a written request for payment from or on behalf of a Director or officer and payment of amounts due under such sections shall be made immediately after such determination. If no disposition of such request is made within said thirty (30) days or if payment has not been made within ten (10) days thereafter, or if such request is rejected, the right to indemnification or advancement of Expenses provided by this Article VII shall be enforceable by or on behalf of the Director or officer in any court of competent jurisdiction. In addition to the other amounts due under this Article VII, Expenses incurred by or on behalf of a Director or officer in successfully establishing his/her right to indemnification or advancement of Expenses, in whole or in part, in any such action (or settlement thereof) shall be paid by the Corporation.

 

G. The indemnification and advancement of Expenses provided by this Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of Expenses may be entitled under any law (common or statutory), By-law, agreement, vote of shareholders or disinterested Directors or otherwise, both as to action in his/her official capacity and as to action in another capacity while holding such office, or while employed by or acting as a Director or officer of the Corporation or as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, and shall continue as to a person who has ceased to be a Director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Notwithstanding the provisions of this Article VII, the Corporation shall indemnify or make advancement of Expenses to any person referred to in paragraphs (A) or (B) of this Article VII to the full extent permitted under the laws of Florida and any other applicable laws, as they now exist or as they may be amended in the future. 

 

H. All rights to indemnification and advancement of Expenses provided by this Article VII shall be deemed to be a contract between the Corporation and each Director or officer of the Corporation who serves, served or has agreed to serve in such capacity, or at the request of the Corporation as director or officer of another corporation, partnership, joint venture, trust or other enterprise, at any time while this Article VII and the relevant provisions of the FBCA or other applicable law, if any, are in effect. Any repeal or modification of this Article VII, or any repeal or modification of relevant provisions of the FBCA or any other applicable law, shall not in any way diminish any rights to indemnification of or advancement of Expenses to such Director or officer or the obligations of the Corporation.

 

I. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a Director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him/her and incurred by him/her in any such capacity, or arising out of his/her status as such, whether or not the Corporation would have the power to indemnify him/her against such liability under the provisions of this Article VII.

 

J. The Board of Directors may, by resolution, extend the provisions of this Article VII pertaining to indemnification and advancement of Expenses to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he/she is or was or has agreed to become an employee, agent or fiduciary of the Corporation or is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise or with respect to any employee benefit plan (or its participants or beneficiaries) of the Corporation or any such other enterprise.

 

K. The invalidity or unenforceability of any provision of this Article VII shall not affect the validity or enforceability of the remaining provisions of this Article VII.

 

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ARTICLE VIII – FORUM SELECTION

 

This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. In the event of a dispute regarding this Agreement or the respective rights of the parties hereunder, the parties agree to submit such dispute exclusively to binding arbitration, as legally enforceable based on case law as upheld by the U.S. Supreme Court, in Orlando, Florida before an arbitration panel consisting of three professional arbitrators with each of two arbitrators selected by the parties and the final third arbitrator selected by the selected two arbitrators. Any such arbitration shall be restricted to the party filing the arbitration and shall not be a joint or multiple arbitration reflecting more than one party and shall be commenced within fifteen (15) days of selection of the arbitrator and the discovery rules contained in the Florida Rules of Civil Procedure shall apply to all such proceedings. The arbitrator shall order all remedies permitted by law, award attorney's fees and costs to the prevailing party, and require that the entire proceeding, including the existence of the proceeding, be held confidential by the parties, and shall not be disclosed by any party. Any and all orders issued by the arbitrator shall be enforced by a state court of competent jurisdiction located in Orlando, Orange County, Florida. Notwithstanding the foregoing, by agreeing to the arbitration provision, Investors will not be deemed to have waived the Company’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder.

 

ARTICLE IX – AMENDMENTS

 

A. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend or repeal the Bylaws or adopt new Bylaws without any action on the part of the shareholders; provided that any Bylaw adopted or amended by the Board of Directors, and any powers thereby conferred, may be amended, altered or repealed by the shareholders.

 

B. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Articles of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the shareholders herein are granted subject to this reservation.

 

*      *      *      *

 

 

Page 5 of 5

 

 

EX1A-2B BYLAWS 5 ex1a_2b.htm EXHIBIT 1A-2B

 

 Exhibit 1A-2B

 

Exhibit 2 – Articles of Incorporation and Company Bylaws

 

BY-LAWS

 

OF

 

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

 

a Florida corporation

 

(in effect as of July 20, 2018)

 

 

 

TABLE OF CONTENTS

 

ARTICLE I OFFICES 1
   
Section 1.1 Registered Office and Agent. 1
Section 1.2 Books and Records. 1
     
ARTICLE II MEETINGS OF THE SHAREHOLDERS 1
   
Section 2.1 Annual Meetings. 1
Section 2.2 Special Meetings. 1
Section 2.3 Place of Meetings. 1
Section 2.4 Adjournments. 1
Section 2.5 Notice of Meetings. 1
Section 2.6 Quorum. 1
Section 2.7 Conduct of Meetings. 2
Section 2.8 Voting; Proxies. 2
Section 2.9 Action by Written Consent. 2
Section 2.10 List of Shareholders. 3
Section 2.11 Record Date. 3
     
ARTICLE III BOARD OF DIRECTORS 3
   
Section 3.1 General Powers. 3
Section 3.2 Number; Election; Term of Office. 3
Section 3.3 Vacancies. 4
Section 3.4 Removal; Resignation. 4
Section 3.5 Reliance upon Records. 4
Section 3.6 Compensation. 4
Section 3.7 Meetings. 4
Section 3.8 Place of Meetings. 4
Section 3.9 Adjourned Meetings. 4
Section 3.10 Quorum. 4
Section 3.11 Action by Majority Vote. 4
Section 3.12 Director Action Without a Meeting. 5
Section 3.13 Committees of the Board of Directors. 5
     
ARTICLE IV OFFICERS 5
   
Section 4.1 Generally. 5
Section 4.2 Term; Removal; Vacancy. 5
Section 4.3 The Chair of the Board. 5
Section 4.4 The President. 5
Section 4.5 Vice Presidents. 5
Section 4.6 The Chief Financial Officer. 6

Section 4.7 The Treasurer. 6
Section 4.8 Assistant Treasurers. 6
Section 4.9 The Secretary. 6
Section 4.10 Assistant Secretaries. 6
Section 4.11 Duties of the Officers May be Delegated. 6
Section 4.12 Compensation. 7

  

 i 
 

 

ARTICLE V CERTIFICATES OF SHARES; TRANSFER 8
   
Section 5.1 Certificates; Signatures. 8
Section 5.2 Transfers of Shares. 8
Section 5.3 Transfer Agents and Registrars. 8
Section 5.4 Lost, Stolen or Destroyed Certificates. 8
Section 5.5 Additional Rules and Regulations. 8
Section 5.6

Encumbrance.

8
Section 5.7

Redemption.

8
     
ARTICLE VI NOTICES 8
   
Section 6.1 Manner of Notices. 8
Section 6.2 Waivers. 9
     
ARTICLE VII FORUM SELECTION 9
   
ARTICLE VIII DIVIDENDS 9
   
 ARTICLE IX MISCELLANEOUS 9
   
Section 9.1 Ratification. 9
Section 9.2 Fiscal Year. 9
Section 9.3 Bank Accounts and Drafts. 9
Section 9.4 Contracts. 10
Section 9.5 Corporate Seal. 10
Section 9.6 Inspection of Books. 10
Section 9.7 Section Headings. 10
Section 9.8 Conflict with Applicable Law or Articles of Incorporation. 10
     
ARTICLE X LIMITATION OF LIABILITY; INDEMNITY 10
   
Section 10.1 Limitation of Liability. 10
Section 10.2 Indemnity 10

 

 ii 
 

 

BY-LAWS

 

OF

 

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

 

a Florida Corporation

 

ARTICLE I
OFFICES

 

Section 1.1 Registered Office and Agent.  The registered office of Tuscan Gardens Senior Living Communities, Inc., a Florida corporation (the “Corporation”), shall be located at 189 South Orange Street, City of Orlando, County of Orange, State of Florida 32801. The name of its registered agent at such address isthe Securities Transfer Corporation. The Corporation may have other offices at such places, both within and without of the State of Florida, as the Board of Directors of the Corporation (the “Board of Directors” and each member of the Board of Directors, a “Director”) may from time to time determine or the business of the Corporation may require.

 

Section 1.2 Books and Records.  Any records maintained by the Corporation in the regular course of its business, including its shares ledger, books of account and minute books, may be maintained on any information storage device, third party provider, or method; providedhowever, that any records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall convert any such records within a reasonable timeframe upon the request of any person entitled to inspect such records pursuant to applicable law.

 

ARTICLE II
MEETINGS OF THE SHAREHOLDERS

 

Section 2.1 Annual Meetings.  The annual meeting of the voting shareholders for the election of Directors and for the transaction of such other business as may properly come before the meeting shall be held at such date, time and place, if any, as shall be determined by the Board of Directors and stated in the notice of meeting.

 

Section 2.2 Special Meetings.  Special meetings of voting shareholders for any purpose or purposes shall be called pursuant to a resolution approved by the Board of Directors and may not be called by any other person or persons. The only business which may be conducted at a special meeting shall be the matter or matters set forth in the notice of such meeting.

 

Section 2.3 Place of Meetings.  The Board of Directors may designate any place, either within or without the State of Florida, as the place of meeting for any annual meeting or special meeting. If no such place is designated by the Board of Directors, the place of meeting will be the principal business office of the Corporation. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but will instead be held solely by means of remote communication as provided under Section 211(a)(2) of the Florida Business Corporations Act (the “FBCA”).

  

Section 2.4 Adjournments.  Any meeting of the voting shareholders, annual or special, may be adjourned from time to time to reconvene at the same or some other place, if any, and notice need not be given of any such adjourned meeting if the time and, as applicable, place and means of remote communication are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each voting shareholder of record entitled to vote at the meeting. If after the adjournment a new record date is fixed for voting shareholders entitled to vote at the adjourned meeting, the Board of Directors shall fix a new record date for notice of the adjourned meeting and shall give notice of the adjourned meeting to each shareholder of record entitled to vote at the adjourned meeting as of the record date fixed for notice of the adjourned meeting.

 

Section 2.5 Notice of Meetings.  Notice of the place, if any, date, hour, the record date for determining the voting shareholders entitled to vote at the meeting (if such date is different from the record date for shareholders entitled to notice of the meeting) and means of remote communication, if any, of every meeting of the voting shareholders shall be given by the Corporation in accordance with this Section 2.5 and Article VI of these By-Laws, not less than ten (10) days nor more than sixty (60) days before the meeting (unless a different time is specified by law) to every shareholder entitled to vote at the meeting as of the record date for determining the shareholders entitled to notice of the meeting. Notices of special meetings shall also specify the purpose or purposes for which the meeting has been called.

 

Section 2.6 Quorum.  Unless otherwise required by law, the Corporation’s Articles of Incorporation (the “Articles of Incorporation”) or these By-Laws, at each meeting of the shareholders, holders of a majority of the shares of the Corporation entitled to vote at such meeting, present in person or represented by proxy, shall constitute a quorum. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have the power, by the affirmative vote of a majority in voting power thereof, to adjourn the meeting from time to time, in the manner provided in Section 2.4 of these By-Laws, until a quorum shall be present or represented. At any such adjourned meeting at which there is a quorum, any business may be transacted that might have been transacted at the meeting originally called.

 

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 Section 2.7 Conduct of Meetings.  The Board of Directors may adopt by resolution such rules and regulations for the conduct of meetings of the shareholders as it shall deem appropriate. At every meeting of the shareholders, the Chair of the Board, or in his or her absence or inability to act, President, or, in his or her absence or inability to act, an officer of the Corporation whom the Board of Directors shall appoint, shall act as chair of, and preside at, the meeting. the Secretary or, in his or her absence or inability to act, the person whom the chair of the meeting shall appoint secretary of the meeting, shall act as secretary of the meeting and keep the minutes thereof. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chair of any meeting of the shareholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chair, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chair of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting, (b) the determination of when the polls shall open and close for any given matter to be voted on at the meeting, (c) rules and procedures for maintaining order at the meeting and the safety of those present, (d) limitations on attendance at or participation in the meeting to shareholders of record of the corporation, their duly authorized and constituted proxies or such other persons as the chair of the meeting shall determine, (e) restrictions on entry to the meeting after the time fixed for the commencement thereof and (f) limitations on the time allotted for questions or comments by participants. 

 

Section 2.8 Voting; Proxies.  Except as required by applicable law or the Articles of Incorporation, the vote at any election or upon any question at any meeting of the shareholders need not be by written ballot. Notwithstanding the immediately preceding sentence, the Board of Directors, in its discretion, or the chair presiding at a meeting of the shareholders, in his or her discretion, may require that any votes cast at such meeting shall be cast by written ballot. Except as otherwise required by law, the Articles of Incorporation, the provisions regarding the election of Directors set forth in Section 3.2 of these By-Laws, or the provisions of any shareholders’ agreement between the Corporation and its shareholders, as the same may be established, amended, modified, supplemented or restated from time to time in accordance with the terms of the Governing Documents, any matter brought before any meeting of shareholders shall be decided by the affirmative vote of the majority of the shares of Common Shares, $1.00 par value per share (“Common Shares”) voting as a single class, present in person or represented by proxy at the meeting and entitled to vote on the matter. Each shareholder entitled to vote at a meeting of shareholders or to express consent to corporate action in writing without a meeting may authorize another person or persons to act for such shareholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A shareholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of the proxy or a new proxy bearing a later date.

 

Section 2.9 Action by Written Consent.

 

(a)       Unless otherwise provided in the Articles of Incorporation, any action that is required to or otherwise may be taken at any annual or special meeting of the shareholders of the Corporation, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is (i) signed by the holders of outstanding voting shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and (ii) delivered (by hand or by certified or registered mail, return receipt requested) to the Corporation by delivery to its registered office in the State of Florida, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of shareholders are recorded. Every written consent shall bear the date of signature of each voting shareholder who signs the consent, and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the earliest dated consent delivered in the manner required by this Section 2.9(a), written consents signed by a sufficient number of holders to take action are delivered to the Corporation as aforesaid. A telegram, cablegram, electronic mail or other electronic transmission consenting to an action to be taken and transmitted by a shareholder shall be deemed to be written, signed and dated for purposes of this Section 2.9(a) to the extent permitted by law. Any such consent shall be delivered in accordance with the FBCA. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing. 

 

(b)       Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall, to the extent required by applicable law, be given to those voting shareholders who have not consented in writing, and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation. If the action which is consented to is such as would have required the filing of a certificate under any section of the FBCA if such action had been voted on by shareholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of shareholders, that written notice and written consent have been given as provided in the FBCA.

 

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 Section 2.10 List of Voting Shareholders.  The officer of the Corporation who has charge of the share ledger shall prepare a complete list of the shareholders entitled to vote at any meeting of the voting shareholders (providedhowever, if, pursuant to Section 2.11, the record date for determining the shareholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the shareholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each shareholder and the number of shares of each voting class of authorized capital of the Corporation registered in the name of each shareholder. Such list shall be open to the examination of any voting shareholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting (a) on a reasonably accessible electronic network, provided that the information required to access such list is provided with the notice of meeting; or (b) during ordinary business hours at the principal place of business of the Corporation. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting the whole time thereof and may be inspected by any shareholder who is present. If the meeting is held solely by means of remote communication, the list shall also be open for inspection by any voting shareholder during the whole time of the meeting as provided by applicable law. Except as provided by applicable law, the share ledger of the Corporation shall be the only evidence as to who are the voting shareholders entitled to examine the share ledger and the list of voting shareholders or to vote in person or by proxy at any meeting of the shareholders. 

 

Section 2.11 Record Date.

 

(a)       In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of the voting shareholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the shareholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining shareholders entitled to notice of or to vote at a meeting of the shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of shareholders of record entitled to notice of or to vote at a meeting of the shareholders shall apply to any adjournment of the meeting, provided that the Board of Directors may fix a new record date for the determination of shareholders entitled to vote at the adjourned meeting and in such case shall also fix as the record date for voting shareholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for the determination of shareholders entitled to vote therewith at the adjourned meeting.

 

(b)       In order that the Corporation may determine the voting shareholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining voting shareholders entitled to consent to corporate action in writing without a meeting shall be determined as follows: (i) when no prior action by the Board of Directors is required by law, the record date for such purpose shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery (by hand, or by certified or registered mail, return receipt requested) to its registered office in the State of Florida, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of shareholders are recorded, and (ii) if prior action by the Board of Directors is required by law, the record date for such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

 

(c)       In order that the Corporation may determine the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the shareholders entitled to exercise any rights in respect of any change, conversion or exchange of shares, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. 

 

ARTICLE III
BOARD OF DIRECTORS

 

Section 3.1 General Powers.  The business and affairs of the Corporation shall be managed by and/or under the direction of the Board of Directors. The Board of Directors may adopt such rules and procedures, not inconsistent with the Articles of Incorporation, these By-Laws or applicable law, as it may deem proper for the conduct of its meetings and the management of the Corporation.

 

Section 3.2 Number; Election; Term of Office.  The number of Directors constituting the entire Board of Directors shall be no fewer than (3) nor more than five (5). The exact number of Directors shall be set within such limits from time to time by the affirmative vote of a majority of the voting shareholders or by resolution of the Board of Directors. The number of Directors shall be initially set at three (3) comprised of Larry Pino, William N. Johnston, and Christopher P. Young. Each director shall be elected by a plurality of all the votes cast by the holders of Common Shares, voting together as a single class, at a meeting of shareholders duly called and at which a quorum is present. Directors who are elected at an annual meeting of shareholders, and Directors who are elected in the interim to fill vacancies and newly created Directorships, shall hold office until the next annual meeting of shareholders and until their successors are elected and qualified or until their earlier resignation or removal.

 

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Section 3.3 Vacancies.  A vacancy occurring on the Board of Directors, including, without limitation, a vacancy created by an increase in the authorized number of Directors or resulting from the shareholders’ failure to elect the full authorized number of Directors, may be filled by a vote of a majority of the Directors then in office or, if the Directors remaining in office constitute less than a quorum of the Directors, by the affirmative vote of a majority of all remaining Directors or by the sole remaining Director. If the vacant office was held by a Director elected by a voting group, only the remaining Director or Directors elected by that voting group or the holders of shares of that voting group are entitled to fill the vacancy. A Director elected to fill a vacancy shall be elected for the unexpired term of such Director’s predecessor in office. The shareholders may elect a Director at any time to fill any vacancy not filled by the Directors.

 

Section 3.4 Removal; Resignation.  Directors may be removed from office with or without cause by a vote of shareholders holding a majority of the outstanding voting shares entitled to vote at an election of Directors. If a Director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him. If any Directors are so removed, new Directors may be elected at the same meeting. Any Director may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chair of the Board, the Chief Executive Officer, the President or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later time or upon the happening of some later event. 

 

Section 3.5 Reliance upon Records.  Every Director, and every member of any committee of the Board of Directors, shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors, or by any other person as to matters any Director or member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation, including, but not limited to, such records, information, opinions, reports or statements as to the value and amount of the assets, liabilities and/or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid, or with which the Corporation’s shares might properly be purchased or redeemed.

 

Section 3.6 Compensation.  Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors, a fixed quarterly fee or a stated salary as a Director. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

 

Section 3.7 Meetings.  Regular meetings of the Board of Directors may be held without notice at such times as may be determined from time to time by the Board of Directors. Special meetings of the Board of Directors may be called by or at the request of the Chair of the Board, the President or at least two-thirds of the number of Directors constituting the whole board, on at least three (3) days’ notice to each Director given by one of the means specified in Article VI of these By-Laws (other than by mail), or on at least five (5) days’ notice if given by mail.

 

Section 3.8 Place of Meetings.  Meetings of the Board of Directors may be held at such place within or without the State of Florida as shall be stated in the notice of meeting or waiver thereof or, in the case of a regular meeting of the Board of Directors, as determined by the Board of Directors. Any Director may participate in a meeting of the Board of Directors by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting.

 

Section 3.9 Adjourned Meetings.  A majority of the Directors present at any meeting of the Board of Directors, including an adjourned meeting, whether or not a quorum is present, may adjourn and reconvene such meeting to another time and place. At least three (3) days’ notice of any adjourned meeting of the Board of Directors shall be given to each Director whether or not present at the time of the adjournment. Any business may be transacted at an adjourned meeting that might have been transacted at the meeting as originally called.

 

Section 3.10 Quorum.  At all meetings of the Board of Directors, a majority of the total number of Directors shall constitute a quorum for the transaction of business. If a quorum shall not be present at any meeting of the Board of Directors, then a majority of the Directors present may adjourn the meeting from time to time to another date, place or time, without notice other than announcement at the meeting, until a quorum shall be present. 

 

Section 3.11 Action by Majority Vote.  Except as otherwise expressly required by these By-Laws, the Articles of Incorporation or by applicable law, the vote of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

 

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 Section 3.12 Director Action Without a Meeting.  Unless otherwise restricted by the Articles of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing (which may be by facsimile, electronic mail or other similar transmission), and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.

 

Section 3.13 Committees of the Board of Directors.  The Board of Directors may designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board of Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. If a member of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present at the meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. To the extent permitted by the FBCA, any such committee shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it to the extent so authorized by the Board of Directors. Unless the Board of Directors provides otherwise, at all meetings of such committee, a majority of the then authorized members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meetings. Unless the Board of Directors provides otherwise, each committee designated by the Board of Directors may make, alter and repeal rules and procedures for the conduct of its business. In the absence of such rules and procedures each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to this Article III.

 

ARTICLE IV
OFFICERS

 

Section 4.1 Generally.  The Board of Directors shall elect the officers of the Corporation, and such officers shall consist of the President, and Secretary and Treasurer. The Board of Directors, in its discretion, may also elect a Chair of the Board (who must be a Director), a Chief Financial Officer and one or more Vice Presidents, Assistant Treasurers and Assistant Secretaries. The Board of Directors may appoint such other officers and agents as it shall deem necessary and such other officers and agents shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Any two or more offices may be held by the same person.

 

Section 4.2 Term; Removal; Vacancy.  Each officer of the Corporation shall hold office until such officer’s successor is elected and qualified or until such officer’s earlier death, resignation or removal. Any officer elected and/or appointed by the Board of Directors may be removed by the Board of Directors at any time with or without cause by the majority vote of the members of the Board of Directors then in office. The removal of an officer shall be without prejudice to his or her contract rights, if any. The election or appointment of an officer shall not of itself create contract rights. Any officer of the Corporation may resign at any time by giving written notice of his or her resignation to the President or the Secretary. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Should any vacancy occur among the officers, the position shall be filled for the unexpired portion of the term by appointment made by the Board of Directors.

 

Section 4.3 The Chair of the Board.  The Chair of the Board, if any, shall preside at all meetings of the shareholders and of the Board of Directors and shall have such other powers and duties as the Board of Directors may from time to time prescribe.

 

Section 4.4 The President.  The President of the Corporation shall have general supervision, direction and control of the business and the officers of the Corporation and shall have the general powers and duties of management incident to the office of the President and any other duties as may be from time to time assigned to the President by the Board of Directors.

 

Section 4.5 Vice Presidents.  In the absence of the President or in the event of such person’s inability or refusal to act, the Vice President, if there be any (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their election), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. In addition to the foregoing, the Vice President shall have the general powers and duties usually assumed by the office of Vice President of a corporation and shall have such other powers and perform such other duties as may be specifically prescribed from time to time by the Board of Directors and/or the President.

 

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 Section 4.6 The Chief Financial Officer.  The Chief Financial Officer, if any, shall have overall supervision of the financial operations of the Corporation and shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by the Board of Directors. The Chief Financial Officer shall render to the President and/or the Board of Directors, upon request, an account of his or her transactions as Chief Financial Officer and of the financial condition of the Corporation. In addition to the foregoing, the Chief Financial Officer shall have the general powers and duties usually assumed by the office of chief financial officer of a corporation and shall have such other powers and perform such other duties as may be specifically prescribed from time to time by the Board of Directors and/or the President. 

 

Section 4.7 The Treasurer.  The Treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records with respect to all bank accounts, deposit accounts, cash management accounts and other investment and financial accounts of the Corporation. The books of account shall at all reasonable times be open to inspection by the Board of Directors. The Treasurer shall deposit, or cause to be deposited, all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the Board of Directors. He or she shall disburse the funds of the Corporation as may be ordered by the Board of Directors and shall render to the Chief Financial Officer, the President and/or the Board of Directors, upon request, an account of all his or her transactions as treasurer. In addition to the foregoing, the Treasurer shall have the general powers and duties usually assumed by the office of treasurer of a corporation and shall have such other powers and perform such other duties as may be specifically prescribed from time to time by the Board of Directors and/or the President.

 

Section 4.8 Assistant Treasurers.  The Assistant Treasurer, if any, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event the Treasurer is not able or refuses to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as may be specifically prescribed from time to time by the Board of Directors and/or the President.

 

Section 4.9 The Secretary.  The Secretary shall attend all sessions of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and meetings of the Board of Directors. The Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporation’s transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall keep in safe custody the seal of the Corporation and have authority to affix the seal to all documents requiring it and attest to the same, provided that the Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by such officer’s signature. In addition to the foregoing, the Secretary shall have the general powers and duties usually assumed by the office of secretary of a corporation and shall have such other powers and perform such other duties as may be specifically prescribed from time to time by the Board of Directors and/or the President.

 

Section 4.10 Assistant Secretaries.  The Assistant Secretary, if any, or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event the Secretary is not able or refuses to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as may be specifically prescribed from time to time by the Board of Directors and/or the President. 

 

Section 4.11 Duties of the Officers May be Delegated.  In the absence of any officer of the Corporation, or for any other reason the Board of Directors may deem sufficient, the Board of Directors may delegate the powers or duties, or any of such powers or duties, of any officers or officer to any other officer or to any Director.

 

Accordingly, the approval of the Board of Directors is required in connection with:

 

(a)The admission of an additional Common Shareholder;

 

(b)The initiation of a proceeding for the bankruptcy of the Company;

 

(c)The change in the business or purpose of the Company;

 

(d)The approval of a merger, conversion or the application of any statute (the application of which is elective) to the Company;

 

(e)Trading for or in the Company’s proprietary account, except for any normal operating error account;

 

(f)The amendment of this Agreement or any action taken in violation of this Agreement;

 

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(g)The determination of the amount of, and the making of, Dividends;

 

(h)The determination of the amount of, and the making of, the transfer of any Fund Company Property to any person or entity;

 

(i)Assumption of debt by the Company or its affiliates; including but not limited to, the borrowing of money and issuing of evidences of mortgage and subordinate institutional indebtedness in an amount equal to ninety-two (92.0%) or more of the total fair market value of the Company Properties once completed, as is necessary, convenient, or incidental to the accomplishment of the purposes of the Company, and securing the same by mortgage, pledge, or other lien thereon;

 

(j)The institution, prosecution, and defense of any Proceeding in the Company's name;

 

(k)The investment and reinvestment of the Company's funds, and receipt and holding of Company Property as security for repayment;

 

(l)The sale, exchange, transfer, Distribution, or other Disposition of all, or substantially all, of the Company Property; and

 

(m)The redemption of all or any portion of the Preferred Shareholder’s Preferred Shares. 

 

 

Management is authorized to oversee and make decisions regarding:

 

 

(a)The conduct of the Company's business, the establishment of Company offices, and the exercise of the powers of the Company within or without Florida;

 

(b)The appointment of employees and agents of the Company, the defining of their duties, and the establishment of their annual compensation;

 

(c)The payment of compensation, or additional compensation to a Shareholder and employees on account of services previously rendered to the Company, whether or not an agreement to pay such compensation was made before such services were rendered;

 

(d)The purchase of liability and other insurance to protect the Company's Property and business and the purchase of insurance on the life of any of the Shareholders or employees for the benefit of the Company;

 

(e)The employment of accountants, legal counsel, managing agents, or other experts to perform services for the Company and to compensate them from Fund funds; and

 

(f)The doing and performing of all other acts as may be necessary or appropriate to carry out the Company's day to day business.

 

(g)The negotiation and execution of contracts, partnerships, and joint venture relationships with other parties in order to facilitate the successful acquisition, construction, development, and operation of Company Properties; and

 

(h)Negotiate and receive advances that are required to address economic or financial shortfalls on behalf of the Company or its affiliates, including without limitation advances from the Asset Manager or its Affiliates (“Affiliate Advances”). In the event of Affiliate Advances, any such Affiliate Advances shall be reimbursed to the advancing party by the Company or its affiliates with accrued interest at a monthly rate of one (1.0%) percent on such advances prior to any return of any shareholder capital.

 

Section 4.12 Compensation.  The Board of Directors shall have the authority to establish reasonable compensation of all officers for services to the Corporation. 

 

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ARTICLE V
SHARE CERTIFICATES; TRANSFER

 

Section 5.1 Certificates; Signatures.  The shares of the Corporation shall be represented by certificates; provided that the Board of Directors may provide by resolution that some or all of any class or series shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such shares. Any such resolution shall not apply to shares previously represented by a certificate until such certificate is surrendered to the Corporation. The certificates representing shares of each class shall be signed by, or in the name of, the Corporation by the President or any Vice President, and by the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary. Although any officer, transfer agent or registrar whose manual or facsimile signature is affixed to such a certificate ceases to be such officer, transfer agent or registrar before such certificate has been issued, it may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at the date of its issue. The name of the holder of record of the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation.

 

Section 5.2 Transfers of Shares.  Transfers of shares shall be made on the books of the Corporation only by the holder of record thereof, by such person’s attorney lawfully constituted in writing and, in the case of certificated shares, upon the surrender of the certificate thereof, which shall be cancelled before a new certificate or uncertificated shares shall be issued. No transfer of shares shall be valid as against the Corporation for any purpose until it shall have been entered in the share records of the Corporation by an entry showing from and to whom transferred. To the extent designated by the President, any Vice President or the Treasurer of the Corporation, the Corporation may recognize the transfer of fractional uncertificated shares but shall not otherwise be required to recognize the transfer of fractional shares.

 

Section 5.3 Transfer Agents and Registrars.  The Board of Directors may, in its discretion, appoint responsible banks or trust companies or other qualified institutions to act as transfer agents or registrars of the shares of the Corporation. Any such bank, trust company or other qualified institution appointed to act as transfer agent or registrar of the shares of the Corporation shall transfer shares of the Corporation in accordance with its customary transfer procedures and in accordance with applicable laws and regulations. 

 

Section 5.4 Lost, Stolen or Destroyed Certificates.  The Board of Directors may direct a new certificate or uncertificated shares to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the owner of the allegedly lost, stolen or destroyed certificate. When authorizing such issue of a new certificate or uncertificated shares, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of the lost, stolen or destroyed certificate, or the owner’s legal representative to give the Corporation a bond sufficient to indemnify it against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the issuance of such new certificate or uncertificated shares.

 

Section 5.5 Additional Rules and Regulations.  The Board of Directors may make such additional rules and regulations as it may deem expedient, and not inconsistent with these By-Laws, concerning the issue, transfer and registration of certificated or uncertificated shares of the Corporation. All references to shares in these By-Laws shall refer to either shares represented by certificates or uncertificated shares, and no such reference shall be construed to require certificated shares or to grant additional or different rights or obligations as between the holders of certificated and uncertificated shares of the Corporation.

 

Section 5.6 Encumbrance. Any Shareholder of record holding any Common Shares or Preferred Shares of the Company (collectively, the “Securities”), may pledge or encumber any of the Securities or any interest therein.

 

Section 5.7 Redemption. There are no redemption rights associated with the Common Shares or Preferred Shares.

 

ARTICLE VI
NOTICES

 

Section 6.1 Manner of Notices.

 

(a)       Except as otherwise provided by law, the Articles of Incorporation or these By-Laws, whenever notice is required to be given to any shareholder, Director or member of any committee of the Board of Directors, such notice may be given by (i) personal delivery, (ii) depositing it, in a sealed envelope, in the United States mail, first class postage prepaid, addressed, (iii) delivering by overnight or second day mail or delivery, (iv) delivering it to a telegraph company, charges prepaid, for transmission, or by transmitting it via telecopier or (v) any other reliable means permitted by applicable law (including, subject to this Section 6.1, electronic transmission) to such shareholder, Director or member, either at the address of such shareholder, Director or member as it appears on the records of the Corporation or, in the case of such a Director or member, at his or her business address, and such notice shall be deemed to be given at the time when it is thus personally delivered, deposited, delivered or transmitted, as the case may be.

 

(b)       Without limiting the foregoing, any notice to any shareholder, Director or member of any committee of the Board of Directors given by the Corporation pursuant to these By-Laws shall be effective if given by a form of electronic transmission consented to by such shareholder, Director or member to whom the notice is given. Any such consent shall be revocable by such shareholder, Director or member by written notice to the Corporation and shall also be deemed revoked if (i) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent, and (ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation, the transfer agent or other person responsible for the giving of notice, provided that the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given to any shareholder, Director or member by a form of electronic transmission in accordance with these By-Laws shall be deemed given as follows: (1) if by facsimile telecommunication, when directed to a number at which such shareholder, Director or member has consented to receive notice, (2) if by electronic mail, when directed to an electronic mail address at which such shareholder, Director or member has consented to receive notice, (3) if by a posting on an electronic network, together with separate notice to such shareholder, Director or member of such specific posting, upon the later of such posting and the giving of such separate notice or (4) if by another form of electronic transmission, when directed to such shareholder, Director or member. 

 

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Section 6.2 Waivers.  Whenever any notice is required to be given under applicable requirements of law or pursuant to the Articles of Incorporation or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent thereto. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance by a Director or shareholder at a meeting shall constitute a waiver of notice of such meeting except when such Director or shareholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting has not been lawfully called or convened. Any shareholder or Director so waiving notice of the meeting shall be bound by the proceedings of the meeting in all respects as if due notice thereof had been given.

 

ARTICLE VII
FORUM SELECTION

 

This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. In the event of a dispute regarding this Agreement or the respective rights of the parties hereunder, the parties agree to submit such dispute exclusively to binding arbitration, as legally enforceable based on case law as upheld by the U.S. Supreme Court, in Orlando, Florida before an arbitration panel consisting of three professional arbitrators with each of two arbitrators selected by the parties and the final third arbitrator selected by the selected two arbitrators. Any such arbitration shall be restricted to the party filing the arbitration and shall not be a joint or multiple arbitration reflecting more than one party and shall be commenced within fifteen (15) days of selection of the arbitrator and the discovery rules contained in the Florida Rules of Civil Procedure shall apply to all such proceedings. The arbitrator shall order all remedies permitted by law, award attorney's fees and costs to the prevailing party, and require that the entire proceeding, including the existence of the proceeding, be held confidential by the parties, and shall not be disclosed by any party. Any and all orders issued by the arbitrator shall be enforced by a state court of competent jurisdiction located in Orlando, Orange County, Florida. Notwithstanding the foregoing, by agreeing to the arbitration provision, Investors will not be deemed to have waived the Company’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder.

 

ARTICLE VIII
DIVIDENDS

 

Unless otherwise provided in the Articles of Incorporation and subject to applicable law and pursuant to the Corporation’s dividend policy in place from time to time, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to shareholders. The division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the shareholders as dividends or otherwise. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created. 

 

ARTICLE IX
MISCELLANEOUS

 

Section 9.1 Ratification.  Any transaction, questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of Director, officer or shareholder, non-disclosure, miscomputation or the application of improper principles or practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the shareholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. Such ratification shall be binding upon the Corporation and its shareholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction.

 

Section 9.2 Fiscal Year.  The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be the calendar year.

 

Section 9.3 Bank Accounts and Drafts.  The funds of the Corporation shall be deposited to its credit in such banks, trust companies or other financial institutions as may be determined from time to time by the Board of Directors, the Chief Financial Officer or any other officer designated by the Board of Directors. All checks and drafts on the Corporation’s bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers or agent or agents as shall be thereunto authorized from time to time by the Board of Directors.

 

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Section 9.4 Contracts.  The Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.

 

Section 9.5 Corporate Seal.  The Corporation may have a corporate seal. The corporate seal shall have inscribed thereon the name of the Corporation and the year of its incorporation and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine. The corporate seal may be used by printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile or other reproduction of said corporate seal.

 

Section 9.6 Inspection of Books.  The Board of Directors shall cause to be kept a record containing the minutes of the proceedings of the meetings of the Board of Directors and of the shareholders, appropriate share books and registers and such books of records and accounts as may be necessary for the proper conduct of the business of the Corporation. The Board of Directors shall have power to keep all such books, documents and accounts of the Corporation outside of the State of Florida, except as otherwise expressly provided by law. 

 

Section 9.7 Section Headings.  The headings of the Articles and Sections of these By-Laws are inserted for convenience or reference only and shall not be deemed to be a part thereof or used in the construction or interpretation thereof.

 

Section 9.8 Conflict with Applicable Law or Articles of Incorporation.  These By-Laws are adopted subject to any applicable law and the Articles of Incorporation. Whenever these By-Laws may conflict with any applicable law or the Articles of Incorporation, such conflict shall be resolved in favor of such law or the Articles of Incorporation.

 

ARTICLE X
LIMITATION OF LIABILITY; INDEMNITY

 

Section 10.1 Limitation of Liability.  No person who was or is a Director of this Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a Director, except for liability (a) for breach of the duty of loyalty to the Corporation or its shareholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (c) under the FBCA or (d) for any transaction from which the Director derived an improper personal benefit. If the FBCA is amended after the effective date of this Article to further eliminate or limit, or to authorize further elimination or limitation of, the personal liability of Directors for breach of fiduciary duty as a Director, then the personal liability of a Director to this Corporation or its shareholders shall be eliminated or limited to the full extent permitted by the FBCA, as so amended. For purposes of this Article X, “fiduciary duty as a Director” shall include any fiduciary duty arising out of serving at the request of this Corporation as a Director of another corporation, partnership, joint venture, trust or other enterprise, and “personally liable to the Corporation” shall include any liability to such other Corporation, partnership, joint venture, trust or other enterprise, and any liability to this Corporation in its capacity as a security holder, joint venturer, partner, beneficiary, creditor or investor of or in any such other corporation, partnership, joint venture, trust or other enterprise. Any repeal or modification of this Section 10.1 by the shareholders of this Corporation shall not adversely affect the elimination or limitation of the personal liability of a Director for any act or omission occurring prior to the effective date of such repeal or modification. This provision shall not eliminate or limit the liability of a Director for any act or omission occurring prior to the effective date of this Article X.

 

Section 10.2 Indemnity

 

(a)       The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was or has agreed to become a Director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and other expenses (including reasonable attorneys’ fees) (“Expenses”), judgments, fines and amount paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding and any appeal thereof if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. For purposes of this Section 10.2, “serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise” shall include any service by a Director or officer of the Corporation as a director, officer, employee, agent or fiduciary of such other corporation, partnership, joint venture, trust or other enterprise, or with respect to any employee benefit plan (or its participants or beneficiaries) of the Corporation or any such other enterprise. 

 

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(b)       The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was or has agreed to become a Director or officer of the Corporation or is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise or by reason of any action alleged to have been taken or omitted in such capacity against Expenses actually and reasonably incurred by him or her in connection with the investigation, defense or settlement of such action or suit and any appeal thereof if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Orange of Florida or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such Expenses which the Court of Orange of Florida or such other court shall deem proper.

 

(c)       To the extent that any person referred to in Section 10.2(a) or Section 10.2(b) has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to therein or in defense of any claim, issue or matter therein, he or she shall be indemnified against Expenses actually and reasonably incurred by him or her in connection therewith.

 

(d)       Any indemnification under Section 10.2(a) or Section 10.2(b) (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director or officer is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 10.2(a) or Section 10.2(b). Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion or (iii) by the shareholders. 

 

(e)       Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding and appeal upon receipt by the Corporation of an undertaking by or on behalf of the Director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation.

 

(f)       The determination of the entitlement of any person to indemnification under Section 10.2(a)Section 10.2(b) or Section 10.2(c) or to advancement of Expenses under Section 10.2(e) shall be made promptly, and in any event within thirty (30) days after the Corporation has received a written request for payment from or on behalf of a Director or officer and payment of amounts due under such sections shall be made immediately after such determination. If no disposition of such request is made within said thirty (30) days or if payment has not been made within ten (10) days thereafter, or if such request is rejected, the right to indemnification or advancement of Expenses provided by this Section 10.2 shall be enforceable by or on behalf of the Director or officer in any court of competent jurisdiction. In addition to the other amounts due under this Section 10.2, Expenses incurred by or on behalf of a Director or officer in successfully establishing his or her right to indemnification or advancement of Expenses, in whole or in part, in any such action (or settlement thereof) shall be paid by the Corporation.

 

(g)       The indemnification and advancement of Expenses provided by this Section 10.2 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of Expenses may be entitled under any law (common or statutory), agreement, vote of shareholders or disinterested Directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, or while employed by or acting as a Director or officer of the Corporation or as a Director or officer of another corporation, partnership, joint venture, trust or other enterprise, and shall continue as to a person who has ceased to be a Director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Notwithstanding the provisions of this Section 10.2, the Corporation shall indemnify or make advancement of Expenses to any person referred to in Section 10.2(a) or Section 10.2(b) to the full extent permitted under the laws of Florida and any other applicable laws, as they now exist or as they may be amended in the future.

 

(h)       All rights to indemnification and advancement of Expenses provided by this Section 10.2 shall be deemed to be a contract between the Corporation and each Director or officer of the Corporation who serves, served or has agreed to serve in such capacity, or at the request of the Corporation as director or officer of another corporation, partnership, joint venture, trust or other enterprise, at any time while this Section 10.2 and the relevant provisions of the FBCA or other applicable law, if any, are in effect. Any repeal or modification of this Section 10.2, or any repeal or modification of relevant provisions of the FBCA or any other applicable law, shall not in any way diminish any rights to indemnification of or advancement of Expenses to such Director or officer or the obligations of the Corporation. 

 

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(i)       The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a Director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Section 10.2.

 

(j)       The Board of Directors may, by resolution, extend the provisions of this Section 10.2 pertaining to indemnification and advancement of Expenses to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was or has agreed to become an employee, agent or fiduciary of the Corporation or is or was serving or has agreed to serve at the request of the Corporation as a Director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise or with respect to any employee benefit plan (or its participants or beneficiaries) of the corporation or any such other enterprise.

 

(k)       The invalidity or unenforceability of any provision of this Section 10.2 shall not affect the validity or enforceability of the remaining provisions of this Section 10.2.

 

ARTICLE XI
AMENDMENTS

 

These By-Laws of the Corporation may be amended, altered, changed, adopted and repealed or new By-Laws adopted, in each case, by the shareholders entitled to vote, provided that the Corporation may, in its Articles of Incorporation, confer the power to adopt, amend or repeal these By-Laws upon the Board of Directors. The fact that such power has been so conferred upon the Board of Directors shall not divest the shareholders of the power, nor limit their power to adopt, amend or repeal these By-Laws.

 

*       *       *       *

 

Effective as of this 20th day of July, 2018

 

 

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EX1A-4 SUBS AGMT 6 ex1a_4.htm EXHIBIT 1A-4

 

Exhibit 1A-4

 

Exhibit 4 – Form of Subscription Agreement

 

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 EXISTS FOR THE SECURITIES, AND NO PUBLIC MARKET IS EXPECTED TO DEVELOP FOLLOWING THIS OFFERING.

 

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES 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 SECURITIES ACT AND STATE SECURITIES OR BLUE SKY LAWS. ALTHOUGH AN OFFERING STATEMENT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), THAT OFFERING STATEMENT DOES NOT INCLUDE THE SAME INFORMATION THAT WOULD BE INCLUDED IN A REGISTRATION STATEMENT UNDER THE SECURITIES 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 CROWDSTREET, INC. (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 SECURITIES ACT) ARE SUBJECT TO LIMITATIONS ON THE AMOUNT THEY MAY INVEST, AS SET OUT IN SECTION 4. THE COMPANY IS RELYING ON THE REPRESENTATIONS AND WARRANTIES SET FORTH BY EACH SUBSCRIBER IN THIS SUBSCRIPTION AGREEMENT (THIS “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 SECURITIES ACT.

 

PROSPECTIVE INVESTORS MAY NOT TREAT THE CONTENTS OF THIS AGREEMENT, THE PARTICIPATING PROVIDER 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) 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 ADVISORS 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 DESCRIBED IN THE OFFERING CIRCULAR. 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. 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. 

 

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THE COMPANY IS NOT OFFERING THE SECURITIES IN EVERY STATE. THE OFFERING MATERIALS DO NOT CONSTITUTE AN OFFER TO SELL SECURITIES, NOR DO THEY SEEK AN OFFER TO BUY SECURITIES, IN ANY STATE OR JURISDICTION WHERE THE OFFER OR SALE OF SUCH SECURITIES IS NOT PERMITTED.

 

THE INFORMATION PRESENTED IN THE OFFERING MATERIALS WAS PREPARED BY THE COMPANY SOLELY FOR THE USE BY PROSPECTIVE INVESTORS IN CONNECTION WITH THIS OFFERING. NO REPRESENTATIONS OR WARRANTIES ARE MADE AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN ANY OFFERING MATERIALS, AND 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.

 

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 ANY PROSPECTIVE INVESTMENT IN THE SECURITIES. 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:

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

189 SOUTH ORANGE AVENUE, SUITE 1650

ORLANDO, FLORIDA

32801

 

Ladies and Gentlemen:

  

THE COMPANY ENCOURAGES YOU TO READ THE ENTIRE OFFERING CIRCULAR PRIOR TO INVESTING.

 

1.   Subscription.

 

(a)   The person executing this Agreement (“Subscriber”) hereby subscribes for and agrees (subject to a minimum purchase of ten (10) shares) to purchase shares for a total consideration of $ thousand dollars (“Purchase Price”) of Class A Non-Voting Preferred Shares, $1,000.00 par value per share (such shares, the “Preferred Shares,” and such share, the “Share”), of Tuscan Gardens Senior Living Communities, Inc., a Florida corporation (the “Company”), at a purchase price of $1,000.00 per Preferred Share (the “Subscription Price”), upon the terms and conditions set forth herein.

 

(b)   Subscriber understands that the Preferred Share is being offered pursuant to an offering circular dated August 1, 2019 (the “Offering Circular”), filed with the SEC as part of the Company’s Offering Statement on Form 1-A (the “Offering Statement”) in connection with the Company’s offering of up to $50,000,000 of Class A Non-Voting Preferred Shares (the “Offering”). By executing this Subscription Agreement, Subscriber acknowledges that Subscriber has received this Agreement, copies of the Offering Circular and Offering Statement, including the exhibits thereto, and any other information required by Subscriber to make an investment decision.

 

(c)   Subscriber’s subscription may be accepted or rejected by the Company at its sole discretion. The Company will notify Subscriber whether this subscription is accepted or rejected. If Subscriber’s subscription is rejected, no payment will be made by Subscriber to the Company and all of Subscriber’s obligations hereunder relating to the rejected subscription shall terminate.

 

(d)   The Company may elect at any time to accept all or any portion of this Offering on various dates (each, a “Closing Date”).

 

(e)   In the event of rejection of this subscription, or in the event the sale of the Preferred Share is not consummated for any reason, this Agreement shall have no force or effect.

 

2.   Payment and Delivery.

 

(a)   Payment. Subscriber shall pay the Subscription Price through Subscriber’s account with the Platform prior to the applicable Closing Date. Subscriber hereby authorizes the Platform to debit funds equal to the Subscription Price from Subscriber’s account. In the event of rejection of this subscription, or in the event the sale of the Preferred Share is not consummated for any reason, the Preferred Share will not be sold to Subscriber, and the Subscription Price will remain in Subscriber’s account with the Platform.

 

(b)   Delivery. Upon acceptance by the Company of a subscription on an applicable Closing Date, a confirmation of such acceptance will be sent to Subscriber.

 

3.   Representations and Warranties of the Company. As of the date of the Offering Circular and as of the applicable Closing Date, the Company represents and warrants to Subscriber as follows:

 

(a)   Organization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida and has all requisite power and authority to acquire, develop, own, lease, operate and dispose of its properties and assets and to carry on its business as it is now being conducted.

  

(b)   Authority. The Company has all requisite power and authority to execute and deliver this Agreement, to carry out its obligations hereunder, and to consummate the transactions contemplated hereby. The Company has obtained all necessary corporate approvals for the execution and delivery of this Agreement, the performance of its obligations hereunder, and the consummation of the transactions contemplated hereby. When executed and delivered by the Company, this Agreement shall constitute a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

 

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(c)   No Conflict. The execution and delivery by the Company of this Agreement does not, and the consummation by the Company of the transactions contemplated hereby will not (with or without the giving of notice or the lapse of time or both), contravene, conflict with or result in a breach or violation of, or a default under (i) the organizational documents of the Company, (ii) any judgment, order, decree, statute, rule, regulation or other law applicable to the Company or (iii) in any material respect, any material contract, agreement or instrument by which the Company is bound. No material consent, approval, order or authorization of, or registration, declaration or filing with any court, administrative agency, commission or other governmental authority or instrumentality, domestic or foreign, is required by or with respect to the Company in connection with the execution and delivery by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby, except such filings (if any) as have been made or consents received (if any) prior to the applicable Closing Date.

 

(d)   Purchased Preferred Share. The Preferred Share has been duly authorized and, when issued and paid for in accordance with the terms of this Agreement, will be validly issued, fully paid, except for restrictions on transfer provided for under the organizational documents of the Company or under applicable securities laws and regulations.

 

 4.   Representations and Warranties of Subscriber. As of the date Subscriber executes this Agreement and as of the applicable Closing Date, Subscriber represents and warrants to the Company as follows:

 

(a)   Authority. When executed and delivered by Subscriber, this Agreement shall constitute a legal, valid and binding obligation of Subscriber, enforceable against Subscriber in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). All action on Subscriber’s part required for the lawful execution and delivery of this Agreement and other agreements required hereunder has been or will be effectively taken prior to the applicable Closing Date.

 

(b)   Investment Representations. Subscriber understands that the Preferred Share has not been registered under the Securities Act and that the Offering is being made pursuant to an exemption from registration contained in the Securities Act, based in part on Subscriber’s representations contained herein.

 

(c)   Illiquidity and Restrictions on Transfer or Sale of the Preferred Share. Subscriber acknowledges and agrees that there is no public market for the Preferred Share and that a market for resale of the Preferred Share is not expected to develop. Subscriber understands that he or she must bear the economic risks of the investment in the Preferred Share for an indefinite period of time and acknowledges that he or she is able to bear the economic risk of losing his or her entire investment in the Preferred Share.

  

(d)   Subscriber Eligibility. Subscriber understands that to participate in the Offering, he or she must satisfy the eligibility criteria established by the Company and described in the Offering Circular. These eligibility criteria are also set forth in questions (c) and (d) on the signature pages hereto. Subscriber represents and warrants that:

 

(i)Subscriber is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act; or

 

(ii)The Purchase Price does not exceed 10% of the greater of Subscriber’s annual income or net worth.

 

The information set forth in response to questions (c) and (d) on the signature pages hereto concerning Subscriber’s eligibility to purchase a Preferred Share is true and correct. To the extent Subscriber had any questions with respect to his or her eligibility pursuant to the criteria set forth in such questions (c) and (d), he or she has sought professional advice.

 

(e)   Subscriber Information. The information provided on the signature pages hereto in response to question (e) thereon is true and correct with respect to Subscriber. Within five days after receipt of a request from the Company, Subscriber will provide such information with respect to its status as a shareholder or potential shareholder and 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.

 

(f)   Company Information. With respect to the purchase of the Share, Subscriber (i) has received the Offering Materials and has had answered to Subscriber’s full satisfaction any and all questions regarding such information, (ii) has made such independent investigation of the Company as such Subscriber deems to be necessary or advisable in connection with the purchase of the Preferred Share and is able to bear the economic and financial risk of purchasing the Preferred Share (including the risk that Subscriber could lose the entire value of the Share) and (iii) acknowledges that except as set forth in this Agreement, no representations or warranties have been made to Subscriber or to his or her advisors or representatives by the Company or others with respect to the business or prospects of the Company or its financial condition.

 

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(g)   Domicile. Subscriber maintains his or her domicile (and is not a transient or temporary resident) at the address of record provided on the signature pages hereto.

  

5.   Survival of Representations and Warranties. The representations and warranties of the Company set forth in Section 3 of this Agreement, and the representations and warranties of Subscriber set forth in Section 4 of this Agreement, shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, regardless of any investigation made by any party or any other person on its behalf.

  

6.   Other Agreements.

 

(a)   Concurrently herewith, by executing this Agreement, Subscriber is deemed to have read, and agreed to be bound by the terms of the Articles of Incorporation and ByLaws of the Company (“Governing Documents”) attached hereto as Exhibit 2. Upon such execution and delivery and the acceptance by the Company of Subscriber’s subscription as of a Closing Date, Subscriber shall become bound by the terms and conditions of the Governing Documents as an “Investor” and “Shareholder” thereunder.

  

7.   Miscellaneous.

 

(a)   Notices. All notices and other communications given or made to the Company pursuant to this Agreement must be in writing and will be deemed to have been given upon the earlier of actual receipt or (i) personal delivery to the party to be notified, (ii) the date sent by facsimile, electronic mail or other similar transmission (with confirmation of transmission) during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. Such communications must be sent to the Company at the following address:

 

If to the Company:   With a copy to (which shall not constitute notice):
Tuscan Gardens Senior Living Communities, Inc.   Pino Nicholson PLLC
189 S. Orange Ave, Suite 1650   189 S. Orange Ave, Suite 1650
Orlando, FL 32801   Orlando, FL 32801
    Telephone: 407-206-6577
Attention: Secretary   Email: ljp@PinoNicholsonLaw.com

 

 

In accordance with Section 7(i) below, Subscriber explicitly consents to receive all notices, requests, consents, claims, demands, waivers and other communications by e-mail, sent to Subscriber’s e-mail address of record as set forth in this Agreement or as otherwise from time to time changed or updated and disclosed to the Company.

 

(b)   Entire Agreement. This Agreement, together with the Exhibits attached hereto, constitutes the sole and entire agreement of the parties with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.

  

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

 

(d)   Forum Selection and Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. In the event of a dispute regarding this Agreement or the respective rights of the parties hereunder, the parties agree to submit such dispute exclusively to binding arbitration, as legally enforceable based on case law as upheld by the U.S. Supreme Court, in Orlando, Florida before an arbitration panel consisting of three professional arbitrators with each of two arbitrators selected by the parties and the final third arbitrator selected by the selected two arbitrators. Any such arbitration shall be restricted to the party filing the arbitration and shall not be a joint or multiple arbitration reflecting more than one party and shall be commenced within fifteen (15) days of selection of the arbitrator and the discovery rules contained in the Florida Rules of Civil Procedure shall apply to all such proceedings. The arbitrator shall order all remedies permitted by law, award attorney's fees and costs to the prevailing party, and require that the entire proceeding, including the existence of the proceeding, be held confidential by the parties, and shall not be disclosed by any party. Any and all orders issued by the arbitrator shall be enforced by a state court of competent jurisdiction located in Orlando, Orange County, Florida. Notwithstanding the foregoing, by agreeing to the arbitration provision, Shareholders will not be deemed to have waived the Company’s compliance with the federal securities laws and the rules and regulations promulgated thereunder.

 

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(e)   Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law (i) such provision will be fully severable, (ii) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (iii) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance here from and (iv) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms of such illegal, invalid or unenforceable provision as may be possible.

 

(f)   Third Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns, and there shall be no third-party beneficiaries hereof.

 

(g)   Assignment. This Agreement is not transferable or assignable by Subscriber.

 

(h)   Amendments and Waivers. This Agreement may not be amended, supplemented or modified except by an instrument in writing signed by each party. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion.

 

(i)  Digital Signature.

 

(i)  The mechanics of this Agreement’s electronic signature include the time stamp within an SSL encrypted environment. The Agreement will be available to both Subscriber and the Company, so they can store and access it at any time, and it will be stored and accessible on the Platform. Subscriber hereby consents and agrees that electronically signing this Agreement constitutes his or her signature, acceptance and agreement as if signed in writing by him or her. 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 their signatures or the resulting contract between Subscriber and the Company. Subscriber understands and agrees that his or her electronic signature executed in conjunction with the electronic submission of this Agreement shall be legally binding and such transaction shall be considered authorized by Subscriber. Subscriber agrees that his or her electronic signature is the equivalent of his or her manual signature on this Agreement and consents to be legally bound by the Agreement’s terms and conditions. 

 

(ii)   Subscriber and the Company each hereby agree that all current and future notices, confirmations and other communications regarding this Agreement specifically, and future communications in general between the parties, may be made by e-mail or other electronic communication, sent to the e-mail address of record as 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 recipient’s spam filters by the recipient’s e-mail service provider, or due to a recipient’s change of address, or due to technology issues by the recipient’s service provider, the parties agree that the burden of such failure to receive is on the recipient and not the sender, that the sender is under no obligation to resend communications via any other means, 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 Subscriber, and if Subscriber desires physical documents, then he or she agrees to be satisfied by directly and personally printing, at Subscriber’s own expense, the electronically sent communication(s) and maintaining such physical records in any manner or form that Subscriber desires.

 

(iii)   By signing this Agreement electronically, Subscriber is explicitly agreeing to receive documents electronically, including Subscriber’s copies of this signed Agreement, as well as ongoing disclosures, communications and notices.

 

****

  

By electronically executing this Agreement, Subscriber hereby executes, adopts and agrees to all terms, conditions and representations of this Agreement.

 

(a)  The number of shares of Class A Non-Voting Preferred Shares the undersigned hereby irrevocably subscribes for is: shares
   
(b) The purchase price for the Preferred Share the undersigned hereby irrevocably subscribes for is:   $                             .00

 

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(c) By checking beside the appropriate box(es), Subscriber hereby represents that:  
   

 

he or she is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act because he or she:

 

  is a director or executive officer of the Company; or
     
  had an individual income in excess of $200,000 in each of the most recent two years, or joint income with his or her spouse in excess of $300,000 in each of those two years, and has a reasonable expectation of reaching the same income level in the current year; or
     
 

has individual net worth, or joint net worth with his or her spouse, in excess of $1,000,000 (where for purposes of calculating such net worth (i) his or her primary residence shall not be included as an asset, (ii) indebtedness secured by his or her primary residence, up to the estimated fair market value of such residence at the time of the sale of the Share, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of the sale of the Preferred Share exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and (iii) indebtedness that is secured by his or her primary residence in excess of the estimated fair market value of such residence at the time of the sale of the Preferred Share shall be included as a liability); or

     
$750.00 does not exceed 10% of the greater of Subscriber’s annual income or net worth. 
   
he or she has completed and attached the Investor Suitability Questionnaire provided as Exhibit A to this Subscription Agreement.

 

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Signature Pages to Subscription Agreement 

 

 

 

 

   
Signature  
   
   
Name (Please Print)  
   
   
Social Security Number/EIN  
   
   
Street Address (not a P.O. Box)  
   
   
 City, State, Zip Code  
   
   
Telephone Number  
   
   
E-mail Address  
   
   
Date  

 

* * * * *

 

This Subscription is accepted on _________, 20___.

 

Tuscan Gardens Senior Living Communities, Inc.  
     
By:      
  Name:  
  Title:  

 

Signature Pages to Subscription Agreement 

 

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Subscription Agreement EXHIBIT A

 

SUITABILITY QUESTIONNAIRE

 

 

 

Suitability Questionnaire

 

(Each responding individual must complete his/her own Suitability Questionnaire)

 

 

 

Name of Individual Investor OR Name of Person Answering Questions on behalf of an Entity/Trust/IRA Investor: ______________________________________________________

 

 

 

A. Please list all of the educational institutions you have attended (including colleges, and specialized training schools) and indicate the dates attended and the degree(s) obtained from each (if any).

 

 

From To Institution Degree
       
       
       
       
       
       

 

 

 

B. Please provide the following information concerning your business experience:

 

B-1. Indicate your principal business experience or other occupations during the last ten years. (Please list your present, or most recent, position first and the others in reverse chronological order.)

 

From To

Name and Address

 

of Employer

Position
       
       
       
       
       
       
       
       

 

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B-2. Describe, in greater detail, your present or most recent business or occupation, as listed in your answer to Question B-1. Please indicate such information as the nature of your employment, the principal business of your employer, the principal activities under your management or supervision and the scope (e.g., dollar volume, industry rank, etc.) of such activities.

 

       
       
       
       
       
       
       

 

 

 

B-3. Describe any significant business you engage in or intend to engage in other than as specified above.

 

       
       
       
       
       

 

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C.       Please provide the following information concerning your financial experience:

 

C-1. Indicate by check mark which of the following categories best describes the extent of your prior experience in the areas of investment listed below:

 

 

    Substantial Limited No
         
    Experience Experience Experience
         
         
Stock & Bonds   ¨ ¨ ¨
         
         
         
Penny Stocks   ¨      ¨ ¨
         
         
         
Government Securities   ¨      ¨ ¨
         
         
         
Municipal (tax-exempt) Securities   ¨      ¨ ¨
         
         
         
Stock options   ¨      ¨ ¨
         
         
         
Commodities   ¨      ¨ ¨
         
         
         
Real estate programs   ¨      ¨ ¨
         
         
         
Securities for which   ¨      ¨ ¨
         
no market exists        
         
         
         
Limited partnerships   ¨      ¨ ¨
         
(tax deferred)        
         
         
         
Investments generally   ¨      ¨ ¨

 

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C-2. For those investments for which you indicated “substantial experience” above, please answer the following additional questions by checking the appropriate box:

 

 

 

(a) Do you make your own investment decisions with respect to such investments? (Please check the appropriate box with respect to your involvement in making investment decisions).

 

¨ Always

 

¨ Usually (i.e. most often)

 

¨ Frequently (i.e. regularly)

 

¨ Rarely

 

 

 

(b) What are your principal sources of investment knowledge or advice? (You may check more than one.)

 

¨ First-hand experience with industry

 

¨ Financial publication(s)

 

¨ Trade or industry publication(s)

 

¨ Banker(s)

 

¨ Broker(s)

 

¨ Investment Adviser(s)

 

¨ Attorney(s)

 

¨ Accountant(s)

 

 

 

C-3. Indicate by check mark whether you maintain any of the following types of accounts over which you, rather than a third party, exercise investment discretion, and the length of time you have maintained each type of account.

 

Securities (cash) ¨ ¨ Number of years  
         
Yes No     
         
Securities (margin) ¨ ¨ Number of years  
         
Yes No     
         
Commodities ¨ ¨ Number of years  
         
  Yes No    

 

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C-4. Risk Tolerance:

 

¨ Speculative

 

¨ Aggressive

 

¨ Moderate

 

¨ Low

 

 

 

C-5. Investment Objectives:

 

¨ Investment speculation

 

¨ Steadily accumulate wealth over a long period of time

 

¨ Partially fund my retirement

 

¨ Other

 

 

 

If Other, please provide other investment objective.

 

___________________________________________________.

 

 

 

C-6. Time Horizon:

 

¨ 10 years or more

 

¨ 6-10 years

 

¨ 3-5 years

 

¨ 1-2 years

 

¨ Under 1 year

 

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C-7. Income and Net Worth:

 

 

 

Annual Income (Includes income from sources such as employment, alimony, social

 

security, investment income, etc.).

 

¨ Under $25,000

 

¨ $25,000-$40,000

 

¨ $40,000-$50,000

 

¨ $50,000-$75,000

 

¨ $75,000-$100,000

 

¨ $100,000-$200,000

 

¨ $200,000-$300,000

 

¨ $300,000-$500,000

 

¨ $500,000-$1,200,000

 

¨ Over $1,200,000

 

 

 

 

 

Net Worth (Value of your assets minus your liabilities. For this application, assets include stocks, bonds, mutual funds, other securities, bank accounts and other personal property. Do not include your primary residence among your assets. For liabilities, include any outstanding loans, credit card balances, taxes etc. Do not include your mortgage.

 

¨ Under $25,000

 

¨ $25,000-$50,000

 

¨ $50,000-$65,000

 

¨ $65,000-$100,000

 

¨ $100,000-$150,000

 

¨ $150,000-$200,000

 

¨ $200,000-$250,000

 

¨ $250,000-$500,000

 

¨ $500,000-$1,000,000

 

¨ $1,000,000-$5,000,000

 

¨ Over 5,000,000

 

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My current net worth, after making this investment and exclusive of homes, furnishings, and automobiles is: $_________

 

C-8. Please state the approximate number and total dollar amount of your prior investments in restricted securities (e.g., private placements):

 

Total Number ______________ Total Amount Invested: $________________

 

C-9. What % of your net worth is invested in restricted securities (e.g., private placements): $____________________

 

C-10. Please provide in the space below any additional information which would indicate that you have sufficient knowledge and experience in financial and business matters so that you are capable of evaluating the merits and risks of investing in restricted securities of private or thinly traded enterprise.

 

 

 

C-11. Are you, your spouse, or any other immediate family members, including parents, in-laws, and siblings that are dependents, an officer, director or greater than ten percent (10%) shareholder of the Company?

 

¨ ¨
   
Yes No

 

C-12. Are you, your spouse, or any other immediate family members, including parents, in-laws, and siblings that are dependents, employed by or associated with the securities industry (for example, investment advisor, sole proprietor, partner, officer, director, branch manager or broker at a broker-dealer firm or municipal securities dealer) or a financial regulatory agency, such as FINRA or the New York Stock Exchange?

 

¨ ¨
   
Yes No

 

If Yes, please provide the name and contact information for such firm.

 

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C-13. Are you a senior military, governmental or political official in a non-US country?

 

¨ ¨
   
Yes No

 

If Yes, please provide the name of the country.

 

___________________________________________________.

 

C-14. If you are over 65 years old, please provide the name and contact phone number of a trusted contact:

 

     
     
Name   Contact Number

 

C-15. Time horizon for the investment (# of Months): __________________

 

C-16. Liquidity Needs (check one): ¨ High ¨ Medium ¨ Low

 

C-17. If you are over 65 years old, please provide the name and contact phone number of a trusted contact:

 

     
     
Name   Contact Number

 

 

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EX1A-6 MAT CTRCT 7 ex1a_6ai.htm EXHIBIT 1A-6A.I

 

Exhibit 1A-6A.i

 

Exhibit 6A(i) – Advisory Agreement

 

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

 

ADVISORY AGREEMENT

 

This AGREEMENT is made and entered into this ___ day of _____________, 2018, by and between Tuscan Gardens Senior Living Communities, Inc., a Florida corporation (“Company”), and Tuscan Gardens Advisors, LLC, a Florida limited liability company (“Advisor”), herein referred to individually as the “Party” and collectively as the “Parties.”

WHEREAS, Tuscan Gardens Senior Living Communities, Inc. (the “Company”) is a recently formed Florida corporation organized on July 20, 2018 for the purpose of acquiring, developing, owning and disposing of multiple senior housing communities with experienced senior housing operators. The Company expects to acquire majority ownership interest in each property indirectly through a limited liability company (a “Holdco”) for each Community or Communities owned by such Holdco; and

WHEREAS, the business of the Company shall be to invest in entities which acquire and/or develop senior housing communities consisting of independent living, assisted living and/or memory care for approximately fifty (50) to two-hundred and fifty (250) residents (collectively the “Company Properties”), and ultimately to own and/or operate or sell the Company Properties; and

WHEREAS, Company desires to obtain expertise in the processes and capital allocation decisions associated with investments in Senior Living; and

WHEREAS, Advisor has been formed as an affiliated company for the purpose of providing expertise to Company in the field of acquiring, developing, and disposing of Senior Living Communities; and

WHEREAS, the Parties desire to contract with each other for the purpose of providing Advisor’s expertise to Company.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the Parties hereby agree as follows:

1.Definitions.
a.“Community” means an individual luxurious senior housing facility consisting of independent living, assisted living and/or memory care for approximately fifty (50) to two-hundred and fifty (250) residents.
b.“Disposition (Dispose)” means any sale, assignment, exchange, mortgage, pledge, grant, hypothecation, or other transfer, absolute or as security or encumbrance (including dispositions by operation of law).
c.“Holdco” means a wholly-owned limited liability subsidiary for each Community or Communities owned by the Company through which the Company expects to indirectly acquire interest in each property.
d.“Net Disposition Proceeds” means, with respect to any asset of the Company or its affiliates, or portion thereof, the proceeds, if any, with respect to the sale, refinancing, redemption or other disposition of such asset, or portion thereof (including such amounts received in distributions from an Holdco), net of any costs and expenses, including the repayment of indebtedness, incurred in connection with such sale, refinancing, redemption or other disposition and after setting aside appropriate reserves, all as determined in good faith by the Manager.

 

2.Scope of Engagement.
a.The Company authorizes Advisor to provide oversight of the Company’s acquisitions, developments, financing, and disposition activities, including, without limitation, the negotiation and execution of all agreements pertaining to development, acquisition, financing, and disposition of the Company’s assets.
b.The Company hereby appoints the Advisor as an Investment Advisor to perform the services hereinafter described, and the Advisor accepts such appointment. The Advisor shall be responsible for the investment and reinvestment of those assets of the Company designated by the Company to be subject to the Advisor’s management (which assets, together with all additions, substitutions and/or alterations thereto are hereinafter referred to as the “Assets” or “Account”);
c.The Company agrees to provide information and/or documentation requested by Advisor in furtherance of this Agreement as pertains to Company’s investment objectives, needs and goals, and to keep Advisor informed of any changes regarding same. The Company acknowledges that Advisor cannot adequately perform its services for the Company unless the Company diligently performs its responsibilities under this Agreement. Advisor shall not be required to verify any information obtained from the Company, Company’s attorney, accountant or other professionals, and is expressly authorized to rely thereon; and

 

 1 of 4 
 

 

d.Company authorizes Advisor to respond to inquiries from, and communicate and share information with, Company’s attorney, accountant, and other professionals to the extent necessary in furtherance of Advisor services under this agreement; and
e.Company acknowledges and understands that the service to be provided by Advisor under this Agreement is limited to the management of the Assets and does not include financial planning or any other related or unrelated services.

 

3.Advisor Compensation. The Advisor will receive the following compensation for its services:

a.Acquisition Fees. The Company will cause each respective Holdco to pay the Advisor acquisition fees (the “Acquisition Fees”) for the selection, purchase, underwriting, financing, development or construction of the Communities equal to three (3.0%) percent of the Company’s prorata percentage of total Holdco preferred ownership interests multiplied by estimated Total Project Costs, as defined herein, upon the acquisition of each Community. In the event the Acquisition Fees are paid to the Advisor in connection with any Community that is not ultimately acquired by the Company, such Acquisition Fees shall be promptly repaid by the Advisor to the Company.
b.Financial Guarantee Fee. The Company will cause each respective Holdco to pay the Advisor, on a monthly basis, an annual Guarantee Fee (the “Financial Guarantee Fee”) equal to three quarters of one (0.75%) percent of the guaranteed amounts under total aggregate financing (“Guaranteed Amount”) for each Community for which Advisor or its affiliate provides financial or carve-out guarantees. The Company will pay the Advisor the Financial Guarantee Fee earned with respect to the Guaranteed Amount upon the execution of guarantees by Advisor or its affiliates at each Community. In the event the Financial Guarantee Fee is paid to the Advisor in connection with any Community that is not ultimately developed or acquired by the Company, such Financial Guarantee Fee shall be promptly repaid by the Advisor to the Company. These amounts are expected to be funded with working capital reserves established with Net Offering Proceeds prior to such time as the Company receives distributions from the Holdcos in amounts sufficient to pay such fees. As used herein, “Breakeven Cash Flow” means the amount of net cash flow from the operations of a Community necessary to meet any capital expenditure reserve payments and all principal and interest debt service payments.
c.Disposition Fees. The Company will cause each respective Holdco to pay the Advisor disposition fees (the “Disposition Fees”) for the disposition, recapitalization, or sale of Communities equal to three (3.0%) percent of the Company’s prorata percentage of total Holdco preferred ownership interests multiplied by the actual selling price or recapitalized amount, as defined herein, upon the sale or recapitalization of each Community. In the event the Disposition Fees are paid to the Advisor in connection with any Community that is not ultimately sold or recapitalized by the Company, such Disposition Fees shall be promptly repaid by the Advisor to the Company.
d.Reimbursement of Advisor Operating Expenses. The Company will cause each respective Holdco to pay the Advisor and its Affiliates, as applicable, for Advisor’s ongoing operating expenses incurred on behalf of the Company, the Holdcos or their affiliates. These amounts are expected to be funded with working capital reserves established with Offering proceeds prior to such time as the Company receives distributions from the Holdcos in amounts sufficient to pay such operating expenses. These amounts are estimated to be two (2.0%) percent of the Company’s prorata percentage of total Holdco preferred ownership interests multiplied by Total Project Costs.  

 

4.            Risk Acknowledgment. Advisor does not guarantee the future performance of the Account or any specific level of performance, the success of any investment decision or strategy that Advisor may use, or the success of Advisor’s overall management of the Account. Company understands that investment decisions made for the Account by Advisor are subject to various market, currency, economic, political and business risks, and that those investment decisions will not always be profitable.

 

5.            Directions to the Advisor. All directions by the Company to the Advisor (including notices, instructions, directions relating to changes in the Company’s investment objectives) may be in verbal or by email (email notification). The Advisor shall be fully protected in relying upon any such direction, notice, or instruction until it has been duly advised in writing of changes therein.

 

6.            Advisor Liability. The Advisor, acting in good faith, shall not be liable for any action, omission, investment recommendation/decision, or loss in connection with this Agreement including, but not limited to, the investment of the Assets, or the acts and/or omissions of other professionals or third-party service providers recommended to the Company by the Advisor, including a broker-dealer and/or custodian. If the Account contains only a portion of the Company’s total assets, Advisor shall only be responsible for those assets that the Company has designated to be the subject of the Advisor’s investment management services under this Agreement without consideration to those additional assets not so designated by the Company.

If, during the term of this Agreement, the Advisor purchases specific individual securities for the Account at the direction of the Company (i.e. the request to purchase was initiated solely by the Company), the Company acknowledges that the Advisor shall do so as an accommodation only, and that the Company shall maintain exclusive ongoing responsibility for monitoring any and all such individual securities, and the disposition thereof. Correspondingly, the Company further acknowledges and agrees that the Advisor shall not have any responsibility for the performance of any and all such securities, regardless of whether any such security is reflected on any quarterly account reports prepared by Advisor.

 

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The Company acknowledges that investments have varying degrees of financial risk, and that Advisor shall not be responsible for any adverse financial consequences to the Account resulting from any investment that, at the time made, was consistent with the Company’s investment objectives.

 

7.            Reports. Advisor and/or Account custodian shall provide Company with periodic reports for the Account. In the event that the Advisor provides supplemental Account reports which include assets for which the Advisor does not have discretionary investment management authority, the Company acknowledges the reporting is provided as an accommodation only, and does not include investment management, review, or monitoring services, nor investment recommendations or advice. As such, the Company, and not the Advisor shall be exclusively responsible for the investment performance of any such assets or accounts. In the event the Company desires that the Advisor provide investment management services with respect to any such assets or accounts, the Company may engage the Advisor to do so for a separate and additional fee.

 

8.            Termination. This Agreement will continue in effect until terminated by either party by written sixty (60) day notice to the other (email notice will not suffice), which written notice must be signed by the terminating party. Termination of this Agreement will not affect (i) the validity of any action previously taken by Advisor under this Agreement; (ii) liabilities or obligations of the parties from transactions initiated before termination of this Agreement; or (iii) Company’s obligation to pay advisory fees (prorated through the date of termination). Upon the termination of this Agreement, Advisor will have no obligation to recommend or take any action with regard to the securities, cash or other investments in the Account.

 

9.            Assignment. This Agreement may not be assigned (within the meaning of the Advisors Act) by either the Company or the Advisor without the prior written consent of the other party. The Company acknowledges and agrees that transactions that do not result in a change of actual control or management of the Advisor shall not be considered an assignment pursuant to Rule 202(a)(1)-1 under the Investment Advisors Act of 1940, and/or relevant state law.

 

10.          Non-Exclusive Management. Advisor, its officers, employees, and agents, may have or take the same or similar positions in specific investments for their own accounts, or for the accounts of other Companies, as the Advisor does for the Account. Company expressly acknowledges and understands that Advisor shall be free to render investment advice to others and that Advisor does not make its investment management services available exclusively to Company. Nothing in this Agreement shall impose upon the Advisor any obligation to purchase or sell, or to recommend for purchase or sale, for the Account any security which the Advisor, its principals, affiliates or employees, may purchase or sell for their own accounts or for the account of any other Company, if in the reasonable opinion of the Advisor such investment would be unsuitable for the Account or if the Advisor determines in the best interest of the Account it would be impractical or undesirable.

 

11.          Death or Disability. The death, disability or incompetency of Company will not terminate or change the terms of this Agreement. However, Company’s executor, guardian, attorney-in-fact or other authorized representative may terminate this Agreement by giving written notice to Advisor. Company recognizes that the custodian may not permit any further Account transactions until such time as any documentation required is provided by the custodian.

 

12.          Governing Law and Dispute Resolution. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. In the event of a dispute regarding this Agreement or the respective rights of the parties hereunder, the parties agree to submit such dispute exclusively to binding arbitration in Orlando, Florida before an arbitration panel consisting of three professional arbitrators with each of two arbitrators selected by the parties and the final third arbitrator selected by the selected two arbitrators. Any such arbitration shall be restricted to the party filing the arbitration and shall not be a joint or multiple arbitration reflecting more than one party and shall be commenced within fifteen (15) days of selection of the arbitrator and the discovery rules contained in the Florida Rules of Civil Procedure shall apply to all such proceedings. The arbitrator shall order all remedies permitted by law, award attorney's fees and costs to the prevailing party, and require that the entire proceeding, including the existence of the proceeding, be held confidential by the parties, and shall not be disclosed by any party. Any and all orders issued by the arbitrator shall be enforced by a state court of competent jurisdiction located in Orlando, Orange County, Florida.

 

13.          Disclosure Statement. The Company hereby acknowledges prior receipt of a copy of the Disclosure Statement of the Advisor as same is set forth on Part 2 of Form ADV. Company further acknowledges that he has had a reasonable opportunity (i.e. at least 48 hours) to review said Disclosure Statement, and to discuss the contents of same with professionals of his choosing, prior to the execution of this Agreement. If the Company has not received a copy of the Advisor’s Disclosure Statement at least 48 hours prior to execution of this Agreement, the Company shall have 5 business days from the date of execution of this Agreement to terminate Advisor’s services without penalty.

 

14.          Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms or provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.

 

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15.          Company Conflicts. If this Agreement is between the Advisor and related Companies (i.e. husband and wife, life partners, etc.), Advisor’s services shall be based upon the joint goals communicated to the Advisor. Advisor shall be permitted to rely upon instructions from either party with respect to disposition of the Assets, unless and until such reliance is revoked in writing to the Advisor. The Advisor shall not be responsible for any claims or damages resulting from such reliance or from any change in the status of the relationship between the Companies.

 

16.          Privacy Notice. The Company acknowledges prior receipt of the Advisor’s Privacy Notice.

 

17.          Authority. The Company acknowledges that he/she/they/it has (have) all requisite legal authority to execute this Agreement, and that there are no encumbrances on the Assets. The Company correspondingly agrees to immediately notify the Advisor, in writing, in the event that either of these representations should change.

 

IN WITNESS WHEREOF, the Company and Advisor have each executed this Agreement on the day, month and year first above written.

 

 

“COMPANY”    “ADVISOR”
     
TUSCAN GARDENS SENIOR LIVING   TUSCAN GARDENS ADVISORS, LLC
COMMUNITIES, INC.    
     
     
By:     By:  
  Laurence Pino, President    

William N. Johnston, President

Tuscan Gardens Management Corporation,

Manager

 

 

Page 4 of 4

 

EX1A-6 MAT CTRCT 8 ex1a_6aii.htm EXHIBIT 1A-6A.II

 

Exhibit 1A-6A.ii

 

Exhibit 6A(ii) – Asset Management Agreement

  

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

  

ASSET MANAGMENT AGREEMENT

  

This AGREEMENT is made and entered into this ___ day of ___________, 2018, by and

  

between Tuscan Gardens Senior Living Communities, Inc., a Florida corporation (“Company”), and Tuscan Gardens Senior Living Communities Asset Manager, LLC, a Florida limited liability company (“Asset Manager”), herein referred to individually as the “Party” and collectively as the “Parties.”

  

WHEREAS, Tuscan Gardens Senior Living Communities, Inc. (the “Company”) is a recently formed Florida corporation organized on July 20, 2018 for the purpose of acquiring, developing, owning and disposing of multiple senior housing communities with experienced senior housing operators. The Company expects to acquire majority interest in each property indirectly through a limited liability subsidiary (a “Holdco”) for each Community or Communities owned by such Holdco; and

 

WHEREAS, the business of the Company shall be to invest in entities which acquire and/or develop senior housing communities consisting of independent living, assisted living and/or memory care for approximately fifty (50) to two-hundred and fifty (250) residents (collectively the “Company Properties”), and ultimately to own and/or operate or sell the Company Properties; and

 

WHEREAS, Company desires to obtain expertise in the oversight of affiliated or third-party managers of Company Properties; and

 

WHEREAS, Asset Manager has been formed as an affiliated company for the purpose of providing expertise to Company in the area of operating Senior Living Communities; and  

  

WHEREAS, the Parties desire to contract with each other for the purpose of providing Asset Manager’s expertise to Company.

  

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the Parties hereby agree as follows:

  

1.Definitions.

a.“Community” means an individual luxurious senior housing facility consisting of independent living, assisted living and/or memory care for approximately fifty (50) to two-hundred and fifty (250) residents.

b.“Disposition (Dispose)” means any sale, assignment, exchange, mortgage, pledge, grant, hypothecation, or other transfer, absolute or as security or encumbrance (including dispositions by operation of law).

c.“Holdco” means a limited liability company for each Community or Communities owned by the Company through which the Company expects to indirectly acquire majority ownership interest in each property.

d.“Net Disposition Proceeds” means, with respect to any asset of the Company or its affiliates, or portion thereof, the proceeds, if any, with respect to the sale, refinancing, redemption or other disposition of such asset, or portion thereof (including such amounts received in distributions from an Holdco), net of any costs and expenses, including the repayment of indebtedness, incurred in connection with such sale, refinancing, redemption or other disposition and after setting aside appropriate reserves, all as determined in good faith by the Manager.

e. “Community Manager” means the management company responsible for the day to day operation of the Company Properties in accordance with Company’s business plan and in compliance with regulatory bodies.

f.“Gross Assets Under Management” means the aggregate total value of all assets under the direct or indirect management or oversight by the Company or its affiliates, without any deduction for debt or leverage.

 

2.Scope of Engagement.

a.The Company authorizes Asset Manager to provide oversight of the Company Properties and Community Managers including, without limitation, the negotiation and execution of all agreements pertaining to operation of the Company Properties.

b.The Company hereby appoints the Asset Manager to perform the services hereinafter described, and the Asset Manager accepts such appointment. The Asset Manager shall be responsible for the operation of Company Assets (which assets, together with all additions, substitutions and/or alterations thereto are hereinafter referred to as the “Assets” or “Account”);

c.The Company agrees to provide information and/or documentation requested by Asset Manager in furtherance of this Agreement as pertains to Company’s investment and financial performance objectives, operational needs and goals, and to keep Asset Manager informed of any changes regarding same. The Company acknowledges that Asset Manager cannot adequately perform its services for the Company unless the Company diligently performs its responsibilities under this Agreement. Asset Manager shall not be required to verify any information obtained from the Company, Company’s attorney, accountant or other professionals, and is expressly authorized to rely thereon; and

 

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d.Company authorizes Asset Manager to respond to inquiries from, and communicate and share information with, Company’s attorney, accountant, and other professionals to the extent necessary in furtherance of Asset Manager services under this agreement; and

e.Company acknowledges and understands that the service to be provided by Asset Manager under this Agreement is limited to the operational oversight of the Community Manager and day to day management of the Assets and does not include financial planning or any other related or unrelated services.

 

3.Asset Manager Compensation. The Asset Manager is responsible for the oversight of day to day Company Property management decisions by the Community Manager. The Company will pay the Asset Manager:

a.on a monthly basis, an annual Asset Management Fee (the “Asset Management Fee”) equal to two (2.0%) percent of Gross Assets under management. In the event the Asset Management Fee is paid to the Asset Manager in connection with any community that is not ultimately acquired by the Company, such Asset Management Fee shall be promptly repaid by the Asset Manager to the Company. These amounts are expected to be funded with working capital reserves established with Net Offering Proceeds prior to such time as the Company receives distributions from the Holdcos in amounts sufficient to pay such fees. As used herein, “Breakeven Cash Flow” means the amount of net cash flow from the operations of a Company Property necessary to meet any capital expenditure reserve payments and all principal and interest debt service payments.

b.Reimbursement of Asset Manager Operating Expenses. The Company will reimburse the Asset Manager for actual expenses incurred in connection with the selection or acquisition of an investment, whether or not it ultimately acquires the investment.

 

4.            Risk Acknowledgment. Asset Manager does not guarantee the future performance of the Account or any specific level of performance, the success of any investment decision or strategy that Asset Manager may use, or the success of Asset Manager’s overall management of the Account. Company understands that investment decisions made for the Account by Asset Manager are subject to various market, currency, economic, political and business risks, and that those investment decisions will not always be profitable.

 

5.            Directions to the Asset Manager. All directions by the Company to the Asset Manager (including notices, instructions, directions relating to changes in the Company’s investment objectives) may be in verbal or by email (email notification). The Asset Manager shall be fully protected in relying upon any such direction, notice, or instruction until it has been duly advised in writing of changes therein.

  

6.            Asset Manager Liability. The Asset Manager, acting in good faith, shall not be liable for any action, omission, investment recommendation/decision, or loss in connection with this Agreement including, but not limited to, the investment of the Assets, or the acts and/or omissions of other professionals or third-party service providers recommended to the Company by the Asset Manager, including a broker-dealer and/or custodian. If the Account contains only a portion of the Company’s total assets, Asset Manager shall only be responsible for those assets that the Company has designated to be the subject of the Asset Manager’s investment management services under this Agreement without consideration to those additional assets not so designated by the Company.

  

The Company acknowledges that the operation of Company Properties has varying degrees of financial risk, and that Asset Manager shall not be responsible for any adverse financial consequences resulting from the operation of any Company Property.

 

7.            Reports. Asset Manager and/or Account custodian shall provide Company with periodic reports for the Account. In the event that the Asset Manager provides supplemental Account reports which include assets for which the Asset Manager does not have discretionary investment management authority, the Company acknowledges the reporting is provided as an accommodation only, and does not include investment management, review, or monitoring services, nor investment recommendations or advice. As such, the Company, and not the Asset Manager shall be exclusively responsible for the investment performance of any such assets or accounts. In the event the Company desires that the Asset Manager provide investment management services with respect to any such assets or accounts, the Company may engage the Asset Manager to do so for a separate and additional fee.

  

8.            Termination. This Agreement will continue in effect until terminated by either party by written sixty (60) day notice to the other (email notice will not suffice), which written notice must be signed by the terminating party. Termination of this Agreement will not affect (i) the validity of any action previously taken by Asset Manager under this Agreement; (ii) liabilities or obligations of the parties from transactions initiated before termination of this Agreement; or (iii) Company’s obligation to pay Asset Management fees (prorated through the date of termination). Upon the termination of this Agreement, Asset Manager will have no obligation to recommend or take any action with regard to the securities, cash or other investments in the Account.

  

9.            Assignment. This Agreement may not be assigned (within the meaning of the Asset Managers Act) by either the Company or the Asset Manager without the prior written consent of the other party.

 

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10.           Non-Exclusive Management. Asset Manager, its officers, employees, and agents, may have or take the same or similar positions in specific investments for their own accounts, or for the accounts of other Companies, as the Asset Manager does for the Account. Company expressly acknowledges and understands that Asset Manager shall be free to render investment advice to others and that Asset Manager does not make its investment management services available exclusively to Company. Nothing in this Agreement shall impose upon the Asset Manager any obligation to purchase or sell, or to recommend for purchase or sale, for the Account any security which the Asset Manager, its principals, affiliates or employees, may purchase or sell for their own accounts or for the account of any other Company, if in the reasonable opinion of the Asset Manager such investment would be unsuitable for the Account or if the Asset Manager determines in the best interest of the Account it would be impractical or undesirable.

 

11.           Death or Disability. The death, disability or incompetency of Company will not terminate or change the terms of this Agreement. However, Company’s executor, guardian, attorney-in-fact or other authorized representative may terminate this Agreement by giving written notice to Asset Manager. Company recognizes that the custodian may not permit any further Account transactions until such time as any documentation required is provided by the custodian.

  

12.           Governing Law and Dispute Resolution. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. In the event of a dispute regarding this Agreement or the respective rights of the parties hereunder, the parties agree to submit such dispute exclusively to binding arbitration in Orlando, Florida before an arbitration panel consisting of three professional arbitrators with each of two arbitrators selected by the parties and the final third arbitrator selected by the selected two arbitrators. Any such arbitration shall be restricted to the party filing the arbitration and shall not be a joint or multiple arbitration reflecting more than one party and shall be commenced within fifteen (15) days of selection of the arbitrator and the discovery rules contained in the Florida Rules of Civil Procedure shall apply to all such proceedings. The arbitrator shall order all remedies permitted by law, award attorney's fees and costs to the prevailing party, and require that the entire proceeding, including the existence of the proceeding, be held confidential by the parties, and shall not be disclosed by any party. Any and all orders issued by the arbitrator shall be enforced by a state court of competent jurisdiction located in Orlando, Orange County, Florida.

  

13.           Disclosure Statement. The Company hereby acknowledges prior receipt of a copy of the Disclosure Statement of the Asset Manager as same is set forth on Part 2 of Form ADV. Company further acknowledges that he has had a reasonable opportunity (i.e. at least 48 hours) to review said Disclosure Statement, and to discuss the contents of same with professionals of his choosing, prior to the execution of this Agreement. If the Company has not received a copy of the Asset Manager’s Disclosure Statement at least 48 hours prior to execution of this Agreement, the Company shall have 5 business days from the date of execution of this Agreement to terminate Asset Manager’s services without penalty.

  

14.           Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms or provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.

  

15.           Company Conflicts. If this Agreement is between the Asset Manager and related Companies (i.e. husband and wife, life partners, etc.), Asset Manager’s services shall be based upon the joint goals communicated to the Asset Manager. Asset Manager shall be permitted to rely upon instructions from either party with respect to disposition of the Assets, unless and until such reliance is revoked in writing to the Asset Manager. The Asset Manager shall not be responsible for any claims or damages resulting from such reliance or from any change in the status of the relationship between the Companies.

 

16.           Privacy Notice. The Company acknowledges prior receipt of the Asset Manager’s Privacy Notice.

 

17.           Authority. The Company acknowledges that he/she/they/it has (have) all requisite legal authority to execute this Agreement, and that there are no encumbrances on the Assets. The Company correspondingly agrees to immediately notify the Asset Manager, in writing, in the event that either of these representations should change.

 

IN WITNESS WHEREOF, the Company and Asset Manager have each executed this Agreement on the day, month and year first above written.

  

 

“COMPANY”    “ASSET MANAGER”
     
TUSCAN GARDENS SENIOR LIVING   TUSCAN GARDENS SENIOR LIVING COMMUNITIES ASSET
MANAGER, LLC
     
COMMUNITIES, INC.    
     
By:     By:  
  Laurence Pino, President    

William N. Johnston, President

Tuscan Gardens Management Corporation,

Manager

 

 

Page 3 of 3

 

EX1A-11 CONSENT 9 ex1a_11i.htm EXHIBIT 1A-11.I

 

Exhibit 1A-11.i

 

Exhibit 11(i) – Consent to use Legal Opinion

 

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

 

CONSENT BY PINO NICHOLSON PLLC TO USE LEGAL OPINION

 

 

 

 

To whom it may concern:

 

We consent to the inclusion of our legal opinion dated August 1, 2019, with respect to the legal authority and right of Tuscan Gardens Senior Living Communities, Inc. as of August 1, 2019 to issue Preferred Shares in this Regulation A Offering Circular on Form 1-A. We also consent to the reference to our firm under caption “Experts”.

 

 

Sincerely,

/s/Larry Pino, Esq., for the firm

PINO NICHOLSON PLLC

 

 

Orlando, Florida August 1, 2019

 

 

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EX1A-11 CONSENT 10 ex1a_11ii.htm EXHIBIT 1A-11.II

 

Exhibit 1A-11.ii

 

Exhibit 11(ii) – Consent of Independent Auditor

 

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

 

CONSENT BY GRENNAN, FENDER, HESS & POPARAD LLP TO USE AUDIT OPINION

 

 

 

We consent to the inclusion of our report dated July 12, 2019, with respect to the financial statements of Tuscan Gardens Senior Living Communities, Inc. as of December 31, 2018, and for the period from inception (July 20, 2018) to December 31, 2018, in this Regulation A Offering Circular on Form 1-A of Tuscan Gardens Senior Living Communities, Inc. We also consent to the reference to our firm under caption “Experts”.

 

 

 

/s/GRENNAN FENDER HESS & POPARAD LLP

 

Orlando, Florida

July 12, 2019

 

 

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EX1A-12 OPN CNSL 11 ex1a_12.htm EXHIBIT 1A-12

 

Exhibit 1A-12

 

Exhibit 12 – Legal Opinion

 

TUSCAN GARDENS SENIOR LIVING COMMUNITIES, INC.

 

PINO NICHOLSON PLLC OPINION REGARDING THE ISSUANCE OF PREFERRED SHARES

 

 

Pino Nicholson PLLC 

189 S. Orange Ave, Suite 1650 

Orlando, FL 32801 

Telephone: 407-206-6577 

Email: ljp@PinoNicholsonLaw.com 

 

 

August 1, 2019

 

To: Board of Directors – Tuscan Gardens Senior Living Communities, Inc. 

 

Re: Legal Opinion of the Sales of Shares of Preferred Stock

 

Gentlemen:

 

Tuscan Gardens Senior Living Communities, Inc., a Florida corporation, (the "Company"), has requested our opinion with respect to the issuance, transferability, and compliance with the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), of Company stock.

 

In rendering the legal opinion contained in this letter, we have reviewed certain documents and information furnished by the Company which have been fully relied upon as being authentic without further investigation. These documents include copies of the Articles of Incorporation; Bylaws of the Company; and the Offering Statement dated August 1, 2019 on Form 1-A as required under Regulation A of the Securities Act.

  

FACTS

 

Based upon our review of the above referenced Company documents, our law firm has ascertained the following facts and history of the Company:

 

1.The Company was organized under the laws of the State of Florida on July 20, 2018, and the Company was authorized to issue up to 100,000 shares, consisting of 50,000 shares of voting common shares, $1.00 par value per share (the “Common Shares”), and 50,000 shares of Class A Non-Voting Preferred Shares, $1,000.00 par value per share (the “Preferred Shares”).

 

2.On August 7, 2018, the Company issued 50,000 Common Shares to Tuscan Gardens Capital Partners, LLC which were fully paid. All Common Shares issued by the Company were issued under Section 4(a)(2) of the Securities Act.

  

3.During August 2018, the Company submitted an Offering Statement for an offering of up to 50,000 Preferred Shares in reliance upon the exemption from registration under Regulation A of the Securities Act.

 

4. As of December 31, 2018, the Company has 50,000 Common Shares issued and outstanding which are held by one shareholder of record.

  

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PERTINENT LAW AND EXPLANATION

 

Section 5 of the Securities Act requires that any offer or sale of securities which involves the mails, or a means of interstate commerce must be registered. Certain offerings may be exempt from the registration process by the nature of the security, nature of the transaction, or the amount of the offering.

 

Section 2(a)(4) of the Securities Act defines an "issuer" as including "-every person who issues or proposes to issue any security". An issuer is subject to the registration requirements of Section 5 of the Securities Act whenever it makes an original distribution of securities to the public.

 

Section 4 of the Securities Act provides several transactional exemptions to the registration requirements of Section 5 of the Securities Act, as do certain rules and regulations promulgated thereunder. 

 

Section 4(a)(1) of the Securities Act exempts from registration transactions which do not involve an issuer, underwriter or dealer. The burden of proof is upon the individual or entity claiming the exemption to show that they are not issuer, underwriter or dealer. Section 4(a)(2) of the Securities Act exempts from registration those "-transactions by an issuer not involving any public offering" 

 

Rule 144 provides a background for determining who is an underwriter under Section 4(a)(1) and (a)(11) of the Securities Act. This is particularly important for those who are sellers of restricted securities from being classified as underwriters. An investor holding restricted securities who are not professionals in the securities business may be considered to be underwriters if they act as links in the chain of transactions through which securities move to the public. Rule 144 attempts to provide an understanding by delimiting persons who will not be characterized as underwriters and sets out objective standards under which a Section 4(a)(1) exemption is available and provides a safe harbor for claiming it.

 

Rule 144(a)(1) provides that "An affiliate of an issuer is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such issuer." An affiliate has also been further interpreted to include any officer, director, or ten percent (10%) shareholder of the issuer.

 

Rule 144(b) provides that any affiliate or other person who sells restricted securities of the issuer of an issuer for his or her own account, or any person who sells restricted securities or any other securities for an account of an affiliate of the issuer, is deemed not to be engaged in the distribution of securities and therefore, is not an underwriter, if the sale is made in accordance with all of the terms and conditions of the rule.

 

Rule 144(d)(1), provides that if restricted securities are sold then a "-minimum of one year must elapse between that later of the date of the acquisition of the securities from the issuer or from an affiliate of the issuer, and any resale of such securities in reliance on this section for the account of either the acquirer or any subsequent holder of those securities. If the acquirer takes these securities by purchase, the one-year period shall not begin until the full purchase price or other consideration is paid or given by the person acquiring the securities from the issuer or from an affiliate of the issuer."

 

The Preferred Shares are being offered and 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 the Preferred Shares offered hereby are offered and sold only to “qualified purchasers” or at a time when the Preferred Shares 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 in the Preferred Shares 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, the Company reserves the right to reject any investor’s subscription in whole or in part for any reason, including if the Company determines in its sole and absolute discretion such investor is not a “qualified purchaser” for purposes of Regulation A of the Securities Act.

 

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To determine whether a potential investor is an “accredited investor” for purposes of satisfying one of the tests in the “qualified purchaser” definition, the investor must be a natural person who has: (i) an individual net worth, or joint net worth with the person’s spouse, that exceeds $1,000,000 at the time of the purchase, excluding the value of the primary residence of such person; or (ii) earned income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

 

LEGAL OPINION

 

The Florida Business Corporations Act provides that a corporation existing under the laws of the State of Florida may issue its shares for consideration consisting of any tangible or intangible property or benefit to the corporation, including, but not limited to, cash, promissory notes, services performed, contracts for services to be performed or other securities of the corporation and that the judgment of the Board of Directors as to the adequacy of the consideration received for the shares issued is conclusive in the absence of substantial evidence to the contrary.

 

Upon our review of the relevant corporate documents, it is our opinion that the Company is validly organized and presently existing in good standing under the laws of the State of Florida and that it is governed by a validly constituted Board of Directors. The Board of Directors has the capacity and authority to authorize officers of the Company to enter into contracts on behalf of and binding upon the Company for any lawful purpose.

 

In connection with requesting this opinion, we have been informed by the Board of Directors that the Company was duly incorporated under the laws of the State of Florida on July 20, 2018, under the name of Tuscan Gardens Senior Living Communities, Inc. On August 7, 2018, the Company issued 50,000 Common Shares to Tuscan Gardens Capital Partners, LLC, which were fully paid.

 

During the course of September 2018, the Company filed an Offering Statement Amendment No. 1 on a Form 1-A with the Securities Exchange Commission pursuant to Regulation A of such same Act for a “best efforts” offering of up to 50,000 Preferred Shares (the “Offering”). As of December 31, 2018, the Company has 50,000 Common Shares issued and outstanding which are held by one shareholder of record. 

 

Based upon the documents provided by the Company and our review of the applicable securities law, it is our opinion that i) the one holder of the Company's Common Shares described above holds securities which are unrestricted and fully transferable, ii) the Board of Directors has the capacity and authority to authorize officers of the Company to issue up to 50,000 Preferred Shares under the Offering, and iii) the Preferred Shares purchased by an Investor will be validly issued, fully paid, and non-assesable.

  

The opinions herein expressed are qualified to the extent that the resales of the shares may be subject to or affected by present or future compliance with State or Federal securities laws, bankruptcy, insolvency, reorganization or other laws relating to or affecting the rights of shareholders or creditors of the Company. This firm does not express any opinion as to any National Association of Securities Dealers member or the broker/dealer's ability or willingness to create, maintain or transact trades in the shares or to whether the National Association of Securities Dealers would permit the listing of the shares of Common Stock of the Company for sale publicly.

 

This firm has made no independent attempt to verify the facts set forth in this opinion. Any subsequent information regarding the facts may affect the opinions and conclusions stated herein. The opinions expressed herein are limited to and conditioned upon the facts as stated and as deemed to be in existence based upon the information provided to this firm by the Company. These facts are deemed to be accurate as of the date of this letter and this letter and the opinions do not take into consideration any events that may occur subsequent hereto. Therefore, this firm reserves the right to modify or rescind its opinion if new facts are brought to its attention but has no obligation to expressly inform any holder of this opinion, except the Company.

 

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Be advised that opinion letters from counsel are not binding upon the Commission, regulatory bodies or the courts, and, to the extent that persons relying upon this letter may have knowledge of facts or circumstances which are contrary to or which would alter the conclusions and opinions expressed herein then the opinion(s) would not be applicable. The various statutory provisions, regulatory citations, administrative interpretations and court decisions which have reviewed and, in some cases, cited here, are necessarily subject to change from time to time. The opinions expressed herein are based, in part, upon such authorities as they exist as of the date hereof, coupled with and applied to the facts as previously stated which have been provided to this firm by the Company.

 

No opinion is expressed with respect to any federal or state law, regulation or rule not otherwise expressly referenced herein. In particular, and without limiting the generality of the foregoing, no opinion is given with respect to any secondary trading exemption under the laws of any individual state. Prior to any trading in the shares, the Company must first comply with the rules and regulations of the securities laws in the jurisdictions wherein the shares are to be traded.

 

No opinion is expressed with respect to any federal or state statute or regulation or with regard to the rules of any self-regulatory authority with which a broker/dealer trading these shares must comply. 

 

In issuing this opinion, we acknowledge that each shareholder of the Company described above and the securities broker/dealers through whom such shareholders may seek to sell their Company shares may rely upon this opinion, and we hereby grant to the Company our authorization and consent to provide a copy of this opinion to any such shareholder or his broker/dealer.

 

Sincerely,

 

/s/Larry Pino, Esq., for the Firm

 

 

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