Item 5. Fees and Compensation
With respect to each LLC, SCS will receive an Organizational Fee, an Acquisition and Portfolio
Fee, a Collection Fee, a Revenue-Based Fee and may also be entitled to a Sales Commission.
Organizational Fee
SCS is entitled to a one-time fee equal to 1.5% of the gross purchase price of Units in the
offering for an LLC. In return, SCS is responsible for all expenses for the offering of the LLC
interests. These expenses include, but are not limited to, legal, accounting, printing, travel,
meals, state securities filing fees and the sales commissions and expenses of placement agents
utilized by SCS.
Portfolio Acquisition and Collection Services
Acquisition and Portfolio Fee: an annual amount equal to 4% of the total capital committed to
each LLC is paid to SCS regardless of the capital contribution requirements of the LLC. This fee
is paid quarterly.
Collection Fee: an amount equal to the Applicable Percentage (determined by the classification
of the Debt collected as set forth below) of gross collections of all Receivables collected on
behalf of each LLC. The Collection Fee is payable as Debt is collected irrespective of whether
the LLCs are profitable or ever generate cash flow. Furthermore, after two years of collection
efforts for any indebtedness, SCS has the right to negotiate, in our discretion, fee structures with
unaffiliated collection agencies. SCS shall be responsible for paying all collection fees
irrespective of whether the Collection Fees paid to SCS by the LLC are higher or lower than the
fees charged by collection agents to SCS. If the collection agency’s fees are higher than SCS’s
Collection Fee, SCS shall be responsible for paying the difference, and if the fees are lower than
SCS’s Collection Fee, SCS shall have the right to retain the difference between the lower fee and
the Collection Fee paid by the LLC.
Types of Debt Classification:
Prime Debt: Indebtedness for which no collection agency has attempted collection after the debt
has been charged off by the credit issuer.
Secondary Debt: Indebtedness for which only one attempt for collection has been made post
charge-off by the credit issuer.
Tertiary Debt: Indebtedness for which two or more attempts for collection have been made post
charge-off.
Debt Classification: Applicable Percentage (%)
Prime Debt 30%
Secondary Debt 35%
Tertiary Debt 40%
Revenue-Based Fee and Hurdle:
After our investors have received distributions equal to a fifteen percent (15%) annualized return
on invested capital (excluding invested capital previously returned) plus their invested capital,
SCS will receive fifty percent (50%) of the net cash flow of the LLC that would otherwise be
available for distribution to our investors.
Sales Commission:
When our firm determines that it is in the best interest of an investment vehicle to sell uncollected
Receivables, we typically arrange a sale. We reserve the right to hire ourselves or an affiliate to
arrange these sales. The sales commission paid to our firm or an affiliate will not exceed four
percent (4%) of the sales price.
Fees in General:
Our firm directly debits any fees owed by the LLCs.
Expense Reimbursement:
The LLCs are responsible for all expenses that we or the LLCs incur in connection with the
LLC’s business, and these expenses are paid from the investments in the LLCs. The two
exceptions to this rule are (a) expenses directly attributable to collecting Receivables, which are
covered by our Collection Fee and (b) expenses related to the organization of the LLC and the
offering of the Units of the LLC, which are covered by our Organizational Fee. Claims,
demands, actions and litigation against the LLC or the Manager arising out of the collection
process and liability or settlements related to this are the responsibility of the LLC and not our
firm.