THE ELEMENTS FINANCIAL GROUP, LLC SOLICITOR S DISCLOSURE STATEMENT Pursuant to Rule 206(4)-3 of The Investment Adviser s Act of 1940 ( Solicitor ) hereby proposes to introduce you to The Elements Financial Group, LLC ( ELEMENTS ), an SEC registered investment adviser, for the purpose of your possibly becoming a client of ELEMENTS. ELEMENTS provides investment management services which are more fully disclosed in its Form ADV Part 2. ELEMENTS and Solicitor wish to disclose to you the nature of this referral arrangement. Solicitor has a written agreement with ELEMENTS under which prospective clients are referred to ELEMENTS in exchange for a referral fee from ELEMENTS. If you become an investment management client of ELEMENTS, Solicitor will be compensated a percentage of the advisory fee, payable by you, up to a maximum of 1.50%, depending on the value of your account with ELEMENTS. Importantly, no portion of this fee will be charged to you by ELEMENTS. Additionally, use of a solicitor will not result in a higher fee as reflected on ELEMENTS fee schedule listed in its most current Form ADV Part 2. Solicitor is not an employee of, nor affiliated with ELEMENTS. In addition, Solicitor is not authorized to provide investment advice on behalf of ELEMENTS or to act for or bind ELEMENTS in any way. No investment management agreement with ELEMENTS will become effective until accepted by ELEMENTS at its offices in Irvine, California. Acknowledgment of Receipt I, the undersigned, hereby acknowledge receipt of (1) ELEMENTS Form ADV Part 2 and (2) a copy of this Disclosure Statement describing the arrangements between Solicitor and ELEMENTS. Client # 1 Signature Client # 1 Printed Name Date Client # 2 Signature Client # 2 Printed Name Date 1
INVESTMENT MANAGEMENT AGREEMENT THIS INVESTMENT MANAGEMENT AGREEMENT is made and entered into as of by and between ( Client ) and The Elements Financial Group, LLC, a California limited liability company ( Adviser ). WHEREAS, the Adviser is an investment adviser properly registered and in good standing with the U.S. Securities and Exchange Commission ( SEC ) pursuant to the Investment Advisers Act of 1940, and the rules and regulations thereunder, as amended ( Advisers Act ), and is appropriately registered and/or notice-filed in all applicable states and jurisdictions; WHEREAS, Adviser offers an asset allocation platform (the Platform ), which includes model portfolios developed and administered by or on behalf of the Adviser; WHEREAS Adviser has engaged certain portfolio management companies to develop model portfolios for various strategies ( Strategists ); and WHEREAS, Client desires to open an account in the Platform; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: I. ROLE OF ADVISER Adviser and its back office service provider are hereby granted a limited power of attorney to act in Client s place and to exercise all the powers available to Client, including without limitation, full discretionary power to appoint third-party portfolio managers ( TPMs ) (including Strategic Capital Group ( SCG ), Parametric Portfolio Associates or others), to buy, sell, invest, reinvest, convey, exchange, convert, transfer, redeem, liquidate or otherwise dispose of securities in Client s account in the Platform without notice to, or approval of, Client, which are consistent with the model portfolio(s) selected by Client. Client may be required to enter into a Discretionary Investment Adviser Agreement with each TPM appointed by Adviser. Client acknowledges that the liquidation of securities in the Platform may result in a taxable event for Client. Adviser shall not directly or indirectly take custody of the Client s investments and the investments shall always be held in Client s name or in the name of a custodian selected by and under separate contract with Client. Adviser shall be responsible for allocating investments, at Client s cost, within the chosen model portfolio(s) without distinction between principal and income and at such times and in such proportions as Adviser in its sole discretion shall deem advisable. Client further authorizes Adviser to enter into agreements and execute any documents required to effect transactions for Client s account in Platform including the appointment and monitoring of such TPM to manage all or parts of the Client s Account in Platform as Adviser deems appropriate. 2
Notwithstanding, Client retains absolute ownership of all assets contained in the Platform, including the power to withdraw such assets. In accordance with Clauses X. and XIII. of this Agreement, Client may terminate this Agreement at any time upon giving proper notice to Adviser. Unless the parties otherwise agree in writing, or as required by law, Adviser shall have no obligation or authority to take any action or render any advice with respect to the voting of proxies solicited by or with respect to issuers of securities held by Client s account in Platform. The Client (or the plan fiduciary in the case of an Account subject to the provisions of The Employee Retirement Income Security Act of 1974 [ ERISA ]), expressly retains the authority and responsibility for, and Adviser is expressly precluded from, rendering any advise or taking any action with respect to the voting of any such proxies. II. REPRESENTATIONS AND UNDERTAKINGS BY CLIENT Client represents that Client has received the opportunity to read the disclosure documents provided by Adviser and will review future documents and statements received concerning the Platform and Adviser s services. While it is NOT a legal agreement or part of this agreement in any way, Client further represents that Client HAS RECEIVED THE OPPORTUNITY TO READ THE INVESTMENT PPROPOSAL & POLICY. Client further represents that Client has provided suitability information to Adviser which indicates that the use of Adviser s services and model portfolio(s) selected by Client are suitable for Client. Client hereby represents that the Objectives and Investment Risks of the strategy selected are consistent with Client s current investment objectives and financial circumstances. Client acknowledges Client s responsibility to immediately notify Adviser of any changes in Client s investment objectives or financial situation which would impact this representation, as well as any additions and withdrawals to the Investments. Client further represents that CLIENT HAS RECEIVED AND READ A CURRENT COPY OF ADVISER S FORM ADV PART 2, AT LEAST 48 HOURS PRIOR TO OR AT THE TIME OF EXECUTING THIS AGREEMENT, which includes the description and risk considerations of the strategy elected by client. Client further represents that Client owns (or beneficially owns) all current investments without restriction on their investment or disposition, and if an entity, execution of this Agreement has been authorized by the entity s governing body and is not in conflict with the governing documents of the entity. Client further represents that if the investment is governed by a trust agreement, including, without limitation, employee benefit plans and personal and family trusts, the governing trust documents grant Client the specific power to retain investment advisers and to invest in the range of investment vehicles for which authority is granted to Adviser hereunder. Client acknowledges that its representations made in this Agreement will be relied on by Adviser and Client will indemnify Adviser for any costs or damages, including Adviser s reasonable attorney fees that may arise as a result of Client s misrepresentations or omissions of material facts. 3
III. ERISA Both parties acknowledge that if the Account is subject to ERISA, the following provisions will apply: Adviser acknowledges that it is a fiduciary with respect to Client as that term is defined under Section 3(21)(A) under ERISA; The person signing this Agreement on behalf of Client acknowledges its status as a named fiduciary with respect to the control and management of the account in the Platform, and agrees to notify Adviser promptly of any change in the identity of the named fiduciary with respect to the account in the Platform; Adviser agrees to obtain and maintain an ERISA bond satisfying the requirements of Section 412 of ERISA and include Adviser and Adviser s members, agents, and employees among those insured under that bond; Client confirms that any instructions that have been given to Adviser with regard to the account in the Platform are consistent with the governing plan documents and investment policy statements, which the plan will deliver to Adviser; and Client confirms that if the account(s) on the Platform is/are only part of the retirement plan s assets, the Adviser is not responsible for overall compliance of such investments with the requirements of ERISA or any other governing law or documents In addition, for Accounts subject to ERISA who have a Strategist s model portfolio, Client hereby acknowledges that Client is not relying on Strategist for any investment decisions and provides no discretion to such Strategist. Instead, the Client hereby appoints Adviser as its investment manager and fiduciary and Adviser acknowledges and accepts such appointment. Client understands that the Strategist s model portfolio need not be used by the Adviser, and the Adviser is free to select different allocations of Strategist s funds within the model portfolio in accordance with the Platform s overall investment objective. IV. CLIENT PROFILE Client has completed a Client Profile, which has been used to assist Adviser in determining the suitability of the Platform and the model portfolio(s) selected by Client. Client shall be solely responsible for the completeness and accuracy of the data and information contained in the Client Profile. Client is responsible for promptly advising Adviser of any changes or modifications to Client s objectives or any other information contained in the Client Profile. 4
V. MINIMUM ACCOUNT SIZE Client understands that the minimum initial account size for management in each strategy is set forth in Form ADV Part 2A which has been delivered to and read by Client but as may be amended by Adviser upon providing Client with no less than twenty-one (21) day s notice. In the event that the balance of an account is below the applicable minimum due to withdrawals or inadequate capitalization by the Client, Adviser reserves the right to remove the account from any management strategy at any time the balance of the account is below such applicable minimum; or add a quarterly surcharge of $25 to the Adviser Fees payable to Adviser pursuant to Section VI. on each occasion the balance of the account is below such applicable minimum on a date in respect of which the Adviser Fees are calculable. VI. ADVISORY FEES Adviser Fees Each calendar quarter (and at the end of any month a deposit in excess of $10,000 is received) Adviser shall compute and collect Adviser Fees from each Client account in accordance with the fee schedule set forth in Exhibit A which may be amended by Adviser from time to time upon providing a twenty-one (21) day s written notice to Client. Client understands that Adviser may need to liquidate securities to raise requisite funds to cover any outstanding fees. Other Fees In addition to Adviser s fees, Client s account(s) may be charged brokerage and custodian fees. Exchange-traded funds and mutual fund shares purchased in Client s account may be subject to a custodian ticket charge and/or other mutual fund annual expenses which are more fully described in each fund s prospectus and statement of additional information. VII. BROKERAGE Adviser and any TPM will place buy and sell orders with or through a qualified broker-dealer custodian selected by Client. Client consents and agrees that the Adviser and/or its TPM may aggregate ( block trade ) sale and purchase orders with other client accounts that are custodied with the same custodian and have similar orders being made contemporaneously under the management of the Adviser and/or TPM, if in the Adviser s and/or TPM s judgment such aggregation is reasonably likely to result in an overall economic benefit to Client. If all aggregate orders do not fill at the same price, Adviser and/or the TPM may cause Client and each similar order to pay or receive the average prices at which the orders were filled. If such orders cannot be fully executed under prevailing market conditions, Adviser and/or the TPM may allocate the securities traded among clients and each similar order in a manner which they consider equitable. 5
VIII. CONTRIBUTIONS AND WITHDRAWALS Client may make additions to the Client s account at any time subject to the terms and conditions of Adviser. Client may request periodic withdrawals at the time the account is opened or thereafter, pursuant to the Adviser s instructions. Client may withdraw account assets at any time by submitting instructions to Adviser, in writing. If the withdrawal request necessitates the liquidation of securities held in the account, it is understood that the process of liquidation may take up to five (5) business days to effect. Client understands that the Platform is designed as a long-term investment vehicle and that withdrawals of assets may impair the achievement of Client s investment objectives. Withdrawals from certain qualified plans prior to age 59½ may also have certain tax penalties, in addition to being subject to ordinary income tax. IX. REPORTS The Client will instruct its investment custodian to deliver available monthly custodian statements, including transaction summaries, capital gains and losses, trade confirmations, prospectuses, proxies and other reports directly to Client. Adviser shall make available for online viewing additional monthly investment activity, performance, allocation, appraisal, and fee reports. Unless Client, within 30 days of the date of any statement or invoice issued by Adviser or statement issued by the custodian of the investments, shall notify Adviser of any error, omission, or other objection to such statement or invoice, the transactions and fees reflected therein shall be deemed final and conclusively binding on both Client and Adviser. X. INVESTMENT RISK Client acknowledges that Adviser cannot guarantee investment success. Past performance cannot guarantee future results. Adviser relies on services, systems, information, platforms and data provided by third parties including, without limitation, broker/dealers, registered representatives, insurance agents, investment advisers, custodians, insurance companies, transfer agents, solicitors, and the employees and agents of each of them (all of such third parties referred to as Service Advisers ). The Service Advisers are believed to be reliable but such reliability cannot be guaranteed. Adviser is not responsible for any of Service Advisers failure or delay in performance of its responsibilities. This limitation applies to any action or inaction on the part of any Service Adviser however caused, including delays, failures, or inaccuracies in any electronic system, computer system, software application or communication system. Client understands the scope of Adviser s responsibility as so limited, and covenants with Adviser that Client will not attempt to hold Adviser liable for any loss or expense attributable in whole or in part to any Service Adviser s failure or delay. For Clients using an automatic withdrawal plan to generate income, since a sufficient level of return to pay withdrawals cannot be guaranteed, it is possible that such withdrawals may be from principal, depreciating the investments. 6
XI. TERMINATIONS Client may rescind this Agreement, in writing, without cost by notifying Adviser within five days of the effective date of this Agreement. This Agreement may be terminated by either the Client or the Adviser at any time without cause upon receipt of written notice from the terminating party. UPON A TERMINATION BY EITHER PARTY, ADVISER WILL NOT CHANGE THE THEN INVESTED POSITION OF THE INVESTMENTS UNLESS IT RECEIVES WRITTEN INSTRUCTIONS FROM CLIENT. Nonpayment of fees does not constitute notice of termination. All provisions of this Agreement shall survive its termination to the extent necessary to carry out the purpose of this Agreement or to ascertain and enforce the parties rights and obligations hereunder existing at the time of termination. XII. NONDISCLOSURE All information furnished directly or indirectly by either party including either party s agent or employees, is proprietary and shall be regarded as confidential and shall not be utilized by the other party or disclosed to any third party except as agrees upon in writing or required by law. Client acknowledges receipt of Adviser s privacy notice in conformity with Regulation S-P. XIII. COMMUNICATIONS AND NOTICES Client agrees to provide promptly any additional documentation required from time to time by Adviser. Any actions or direction by Client shall be in writing to Adviser, who is entitled to rely on the persons disclosed therein as to their identity, authority and signatures authenticity. Any notice or other communication required or permitted to be given pursuant to this Agreement and as required by the Investment Advisers Act of 1940 ( Communications ) shall be in writing and shall be deemed to have been duly given when: Delivered in person, when personally delivered; Sent by facsimile transmission or e-mail, at close of business on the business day following telecopy or e-mail transmission; Sent by overnight courier, upon verification of receipt; or Sent by certified or registered mail, upon verification of receipt. All Communications should be sent to the parties as indicated below. 7
The Elements Financial Group, LLC Client Attn: Ron Thompson Name: 19200 Von Karman Ave., Suite 800 Address: Irvine, CA 92612 Telephone: 866.612-5808 Telephone: Facsimile: 866.293-5833 Facsimile: E-mail: accounts@tegadvisor.com E-mail: Client expressly consents to Adviser delivering all Communications to the Client by e-mail and certifies that it possesses the means of accepting delivery by e- mail. In the event of the death or disability of an individual Client, Adviser will continue to provide the services specified in this agreement, unless and until such time that Adviser receives written instructions to the contrary from Client s legally designated executor, administrator, guardian, or other legal representative, together with appropriate documentation of that person s authority to provide direction with respect to the Client s account in the Platform. XIV. ASSIGNMENT No assignment (as that term is defined by the Investment Advisers Act of 1940) of this agreement shall be made by Adviser without Client s written consent. Client shall be presumed to have given such consent if Adviser gives written notice of its intention to assign this Agreement (i) specifying the name and address of the proposed assignee, and (ii) enclosing its required disclosure documents, and Client shall not have objected on writing to such assignment within thirty (30) days after the giving of such notice by Adviser. XV. AMENDMENT Unless stated otherwise in this Agreement, Adviser may amend this Agreement at any time by providing thirty (30) days advance notice to the Client. XVI. SEVERABILITY In the event that any portion of this Agreement is found to be unenforceable, the balance of the Agreement shall be enforced as if such portion had been served. XVII. WAIVER No supplement, modification or amendment of this Agreement shall be deemed to, or constitute, a waiver of any other provision whether or not similar, nor shall any 8
waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. XVIII. CHOICE OF LAW This Agreement shall be governed, construed and enforced by the laws of the State of California, except to the extent that they are preempted by the laws and regulation of the United States of America, which shall then govern. XIX. ARBITRATION Client agrees that the following steps will be used to settle any controversy or claim including, any arising out of or relating to this agreement or the breach thereof. a. Escalation. Client and Adviser (hereinafter the Parties ) agree that they will attempt to resolve any controversy, claim, or dispute relating to this agreement by prompt, good faith negotiations. Any dispute which is not settled by the Parties within fifteen (15) days after written notice of a dispute is given by one Party to the other shall be referred to the senior executives of Adviser who will meet with Client for negotiations at time(s) and place(s) mutually acceptable to both Parties. b. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, which is not resolved pursuant to Section (a) above shall be submitted to arbitration and be held in accordance with the rules, regulations and procedures then in effect of the American Arbitration Association ( AAA ). This arbitration shall take place before a single arbitrator in Orange County, California. The arbitration will be governed by and subject to the applicable laws of the State of California and the then prevailing rules of AAA. The award of the arbitrators shall be final and binding and any court of competent jurisdiction may enforce a judgment upon the award rendered. The prevailing party shall be entitled to an award of reasonable attorney fees. A party may obtain provisional or ancillary remedies, such as injunctive relief or the appointment of a receiver, or exercise self-help, in each case at any time and without waiving its right to arbitration. Client understands that this agreement to arbitrate does not constitute a waiver of the right to seek a judicial forum where such waiver would be void under the federal securities laws. 9
XX. ENTIRE AGREEMENT This Agreement constitutes the entire Agreement between the parties and supersedes all prior or contemporaneous agreements, representation and understandings of the parties. The parties acknowledge and agree that neither of them has made any representation with respect to the subject matter of this agreement or any representations including its execution and delivery, except those specifically set forth herein. Each of the parties acknowledges that such party has relied on its own judgment in entering into this agreement. Agreed to on the day of 2. Client: The Elements Financial Group: Client # 1 Signature Ron E. Thompson Client # 1 Printed Name Date Client # 2 Signature Client # 2 Printed Name Date 10
EXHIBIT A FEE SCHEDULE TO INVESTMENT MANAGEMENT AGREEMENT Adviser shall cause each Client account to be charged an annualized quarterly Adviser Fee as set forth in the schedule set out below. Such, quarterly Adviser Fee shall be charged in advance based on the quarter-end account value as of the end of the prior quarter. The formula used for the Adviser Fee calculation is as follows: (Annual Rate) x (Total Assets Under Management at Quarter-End) / 365 (X the number of days in the subsequent quarter). Adviser may aggregate Client account balances that have family relationships with each other for purposes of calculating the Adviser Fee applicable to each client. At the time in which a Client account is first opened and funded and any time an additional deposit of $10,000 or more is received, the initial Adviser Fees shall be calculated based on the value of the deposit, prorated for the number of days remaining in the quarter. This initial fee will be charged at the end of each month. In the event that a client account is terminated during a calendar quarter and any time a withdrawal of $10,000 or more is taken from an account, Adviser will compute the unearned Adviser fees, prorated for the number of days remaining in the quarter and cause such unearned Adviser Fees to be refunded to the Client. Fee Schedule Up to $250,000 $250,001 - $500,000 $500,001 - $1,000,000 $1,000,001 - $2,000,000 $2,000,001 and above Important Disclosures: [1] The Adviser Fees above do not include the additional annual fee to cover the cost of the services provided by certain Strategists and Separate Account Managers (SMA s) if any. Such fees will be up to 0.55%, depending upon the Strategist and/or Separate Account Manager selected (in some cases the Strategist and/or Separate Account Manager is reimbursing Elements and Elements is passing such reimbursement on to the client thereby resulting in a reduction of the Platform fee). The fee will be calculated by Elements at the same time and in the same manner as the Elements fee. [2] Note that in lieu of the Adviser and any applicable Strategist or Separate Account Manager Fees, SCA Custom accounts will be charged a flat annual 0.80% Adviser Fee. This fee will be negotiable for family relationships with accounts in excess of $5 million. [3] The Adviser Fee is negotiable for family relationships with accounts in excess of $2 million. Elements reserves the right to change its Platform Fees at anytime. Elements may negotiate with any Advisor different Platform Fees and different fee terms than those described above. For example, Elements may negotiate a tiered fee structure that is based on the total amount of assets placed under management by the Advisor. A tiered fee structure will provide an incentive to the Advisor to recommend Element s services, as the compensation retained by the Advisor increases with the increase in assets placed under management by the Advisor. Such an agreement would not affect the total fees paid by the client. Client should note that Adviser may negotiate and charge lower fees at its sole discretion. 11
EXHIBIT B INITIAL INVESTMENT FORM Account Registration Strategist Model Approx. $ Amount 1