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#4003Criteria 1. Ability to operate a business, including but not limited to education, knowledge, and experience
Criteria 2. Plan for operating a medical marijuana dispensary in the county for which the applicant is seeking a license, including but not limited to a timeline for opening a retail dispensing location
Criteria 3. Proof of financial stability and access to financial resources
Criteria 4. Ability to comply with the security requirements of this chapter and section 329D-7, HRS
Criteria 5. Capacity to meet the needs of qualifying patients
Criteria 6. Ability to comply with criminal background check requirements pursuant to this chapter and sections 329D-7, 329D-12, and 846-2.7, HRS
Criteria 7. Ability to comply with the requirements in this chapter and chapters 329 and 329D, HRS, for inventory tracking, security, and dispensing limits for qualifying patients
Criteria 8. Ability to maintain confidentiality of a qualifying patient?s medical condition, health status, and purchases of marijuana or manufactured marijuana products
Criteria 9. Ability to conduct or contract for certified laboratory testing on marijuana and manufactured marijuana products pursuant to this chapter and sections 329D-7 and 329D-8, HRS
Criteria 10. Ability to comply with requirements for packaging, labeling, and chain of custody of products
Criteria 11. A plan for secure disposal of marijuana and manufactured marijuana products
Criteria 12. Ability to ensure product safety, in accordance with this chapter and sections 329D-8, 329D-10, 329D-11, HRS
Criteria 13. No history of having a business license revoked.
Total Merit Criteria Points Awarded to Applicant
Home (/mmjdisp/index.html) My Account Log Out (/mmjdisp/logout)
Page 1 of 14Medical Marijuana Dispensary
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HELPFUL INFORMATION FOR FILLING OUT THIS FORM:
1. You can save your work on this form by checking the 'Save my progress and resume later' box and then clicking the 'Save form and resume later' button at the bottom of each screen. IMPORTANT: Remember to do this every time you leave your application or you will lose the information you have entered.
2. To keep your information secure, remember to log out of your application each time you finish working on it.
3. Use a current version of Google Chrome or Firefox browser when completing this form.
4. Save the form every 20 minutes to avoid timing out. When entering information in a spreadsheet, save and exit the form first.
5. Do not include single or double quote marks (' or ") or more than one period (.) in your document names.
INSTRUCTIONS FOR THE MEDICAL MARIJUANA DISPENSARY LICENSE APPLICATION
Before applying for a medical marijuana dispensary license, applicants must acknowledge that they have read the statute and administrative rules on medical marijuana dispensary licensing. Click be redirected to the statute and administrative rules.
Hawaii Revised Statute (HRS) 329D I acknowledge that I have read Chapter 329D, HRS (http://health.hawaii.gov/medicalmarijuana/wp-content/blogs.dir/9
329D-HRS.pdf ), and I am aware of the application and licensing requirements.
Hawaii Administrative Rules (HAR) Chapter 11-850 I acknowledge that I have read HAR, Chapter 11-850 (http://health.hawaii.gov/medicalmarijuana/wp-
content/blogs.dir/93/files/2015/12/Dispensary-Rules-Chapter-11-850-signed-by-Gov-12-13-15.pdf), and I am aware of the licensing requirements.
Disclaimer: I understand that the use and possession of marijuana is illegal under federal law, and is illegal under State law except as prov
Chapters 329 and 329D, HRS.
Page 2 of 14Medical Marijuana Dispensary
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MINIMUM REQUIREMENTS
All individual applicants and applying entities must meet the requirements listed below or the application will not be accepted. Applicants must attach proof to the online application as described insections.
INDIVIDUAL APPLICANT
* Individual applicant shall be at least 21 years old. * Shall be a legal resident of the State of Hawaii for at least five (5) uninterrupted years immediately preceding the date of the license application.* Shall not have any felony convictions or any other disqualifying background history. * Shall be authorized by the applying entity to submit an application for a dispensary license, and act as the primary point of contact with the department.
APPLYING ENTITY
* The applying entity must be organized under the laws of the State of Hawaii.* Have a Hawaii tax identification number.* Have a Department of Commerce and Consumer Affairs Business Registration Division number and suffix.* Have a federal employer identification number.* Not be less than fifty-one percent held by Hawaii legal residents or entities wholly controlled by Hawaii legal residents who have been legal residents for not less than five years immediately preceapplication was submitted.* Have financial resources under its control of not less than $1,000,000 for each license applied for, plus not less than $100,000 for each retail dispensing location allowed under the license applied bank statements or escrow accounts, and those financial resources shall have been under the control of the applying entity for not less than ninety days immediately preceding the date the applica* Be composed of owners, principals, or members, each of whom is not less than twenty-one years of age and has no felony convictions or any other disqualifying background history.
APPLICATION FEE
The license application fee of $5,000 by certified check or cashier's check payable to the State of Hawaii, Department of Health, is part of the minimum requirements and must be received at DepartmMedical Marijuana Dispensary Licensing, Room 337, 601 Kamokila Blvd., Kapolei, HI 96707 or be postmarked by 4:30 pm Hawaii Standard Time on the last day of the open application period January
Please note the application number on the check. This is found in the heading of the email confirmation you receive upon submittal, and is also visible when you view your completed application on
NOTE: ALL QUESTIONS MUST BE ANSWERED TO SUBMIT YOUR APPLICATION UNLESS OTHERWISE INDICATED.
SECTION A: APPLICATION FOR COUNTY
NOTE: An applicant may apply for a license for more than one county, but may only receive one license. Indicating here that you are applying for a license for more than one county does not constilicense in another county; separate applications must be submitted. The applicant and applying entity must complete a separate application with all required documentation for each application andrefundable application fee of $5,000 for each application. The financial resources required ($1,000,000 plus not less than $100,000 for each retail dispensing location) may apply across applications only apply toward one license, if granted.
1. For which county are you requesting a license? County of Kauai
2. Are you also applying for a dispensary license in another county? Yes
2a. If YES, what other county or counties are you applying for a license? (NOTE: A separate application and check will be required for each county.) County of Hawaii
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SECTION B: INDIVIDUAL APPLICANT INFORMATION
GENERAL INFORMATION
3. Legal Name of Applicant Benjamin Aaron Partyka
4. Upload Proof of Legal Name of Applicant
Scan and submit a certified copy of AT LEAST ONE (1) of the following:
* Certified copy of a birth certificate or marriage certificate filed with a state office of vital statistics or equivalent agency in the individual's state of birth or marriage;* Valid, unexpired U.S. passport [inside cover and first page only] or U.S. passport card;* Consular report of birth abroad Form FS-240, DS-1350 or FS-545 issued by the U.S. Department of State;* Valid, unexpired permanent resident card (Form I-551) issued by the Department of Homeland Security (DHS) or the U.S. Citizenship and Immigration Services (USCIS);* Unexpired employment authorization document issued by the DHS, Form I-766 or Form I-688B;* Unexpired foreign passport with the following: a valid, unexpired U.S. visa affixed, and an approved I-94 form documenting the applicant's most recent admittance into the United States or a DHS admittance stamp on the passport;* Certified copy of the Certificate of Naturalization issued by DHS, Form N-550 or Form N-570;* Certificate of citizenship, Form N-560 or Form N-561, issued by DHS;* Court-issued, certified copy of a divorce decree;* Certified copy of a legal change of name order
5. Date of Birth (must be at least 21 years old)
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6. Upload Proof of Date of Birth of Applicant
Scan and submit a certified copy of AT LEAST ONE (1) of the following:
* Certified copy of a birth certificate or marriage certificate filed with a state office of vital statistics or equivalent agency in the individual's state of birth or marriage;* Valid, unexpired U.S. passport [inside cover and first page only] or U.S. passport card;* Consular report of birth abroad Form FS-240, DS-1350 or FS-545 issued by the U.S. Department of State;* Valid, unexpired permanent resident card (Form I-551) issued by the Department of Homeland Security (DHS) or the U.S. Citizenship and Immigration Services (USCIS);* Unexpired employment authorization document issued by the DHS, Form I-766 or Form I-688B;* Unexpired foreign passport with the following: a valid, unexpired U.S. visa affixed, and an approved I-94 form documenting the applicant's most recent admittance into the United States or a DHS admittance stamp on the passport;* Certificate of naturalization issued by DHS, Form N-550 or Form N-570;* Certificate of citizenship, Form N-560 or Form N-561, issued by DHS;* Valid, unexpired driver's license or government issued photo identification card.
7. Social Security No. or Identifier No. (last 4 digits only):
8. Applicant's AddressUnited States
9. Daytime Phone No.
10. Fax No.
11. Email
CRIMINAL HISTORY INFORMATION
12. Has the individual applicant ever been convicted of a felony? If YES, STOP, you are not an eligible applicant.
13. Has the individual applicant ever been convicted of a crime?
13a. If YES, please describe (e.g., conviction, date, disposition, etc.)
14. Has the individual applicant ever been arrested?
14a. If YES, please describe (e.g., date, disposition, etc.)
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Obtain a Criminal History Report
Copy the Validation code from an eCrim report for the individual applicant generated by the Hawaii Criminal Justice Data Center no earlier than December 12, 2015 at 8:00 a.m. (Hawaii-Aleutian Standard Time).
Visit eCrim.ehawaii.gov (https://ecrim.ehawaii.gov/ahewa/) to obtain the eCrim report.
15. Enter the eCrim Validation Code here:
16. NOTICE: Pursuant to Chapter 329D HRS and Chapter 11-850 HAR, applicants are required to provide consent to a background check, including fingerprinting, to be conducted by the Department of Health or its designee.
Further information and instructions will be provided on http://health.hawaii.gov/medicalmarijuana/. If the information and instructions are not yet posted, please check the website often.
I consent
RESIDENCY INFORMATION 17. Is the Applicant a legal resident of the State of Hawaii for at least five years? If NO, STOP, you are not an eligible applicant.
Yes
18. Upload Proof of Hawaii Residency:
Scan and submit AT LEAST ONE (1) of the following source documents as proof of Hawaii state residency for at least five years:
* State of Hawaii tax return Form N-11 without schedules, worksheets, or attachments, and redacted to remove all financial information and all but the last four digits of the individual's social security number;* Evidence of voter registration;* Ownership, lease, or rental documents for place of primary domicile;* Billing statements including utility bills; or* Vehicle registration.
19. Authorized to Act on Behalf of Applying Entity
Scan and submit evidence of the authority of the individual to act on behalf of the applying entity, and supporting documentation (e.g. corporate resolution, bylaws, articles of incorporation):
SECTION C: APPLYING ENTITY INFORMATION
20. Name of Applying Entity 11th Street Partners LLC
21. Applying Entity's Business Address965 Prospect Street Apartment 506Honolulu, Hawaii 96822United States
22. Entity Phone #
23. Entity Email
24. Entity Fax #
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25. Is the applying entity organized under the laws of the State of Hawaii? If the answer is 'NO', STOP, you are not an eligible applicant.
Yes
26. Upload Applying Entity Incorporation or Business Status Documentation:
Upload a certified copy of applying entity's incorporation documents in the State of Hawaii.
Visit Hawaii Business Express
(https://hbe.ehawaii.gov/documents/search.html) for available documents.
27. Provide the entity's Hawaii Department of Commerce & Consumer Affairs Business Registration Division Number & Suffix (file number).
Visit Hawaii Business Express - Business Name Search
(https://hbe.ehawaii.gov/documents/search.html) to locate your entity's file number.
136395 C5
28. Upload a copy of the entity's Certificate of Good Standing from the Department of Commerce and Consumer Affairs.
29. Hawaii Tax Identification Number:
Provide the number along with a copy of the State of Hawaii Tax Identification Number (see question immediately below).
Visit Tax ID Search (https://dotax.ehawaii.gov/tls/app) for this information.
30. Upload a copy of the entity's State of Hawaii Tax Identification document.
31. Federal Employer Identification Number: Provide the Federal Employer Identification Number.
32. Upload a copy of the entity's Federal Employer Identification Number document.
OWNER(S), PRINCIPAL(S), & MEMBER(S) INFORMATION
33. Enter the total number of Owner(s), Principal(s), and Member(s) of the applying entity here: 3
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34. Upload Owner, Principal, and Member Information Spreadsheet
INSTRUCTIONS: Download the EXCEL spreadsheet below, enter the following information in the format required, and upload it to attach it to your application.
Information to be provided:
1) List of Owners, Principals, and Members of the Applying Entity
For each Owner, Principal, and Member of the Applying Entity: A) Name, Address, Phone number, and Email Address B) Each individual's percent interest in the company C) State of primary residence D) Number of years each person has lived in Hawaii (the most recent, uninterrupted number of years that the person has been a resident), and E) A criminal background check for each Owner, Principal, and Member.
Copy the validation code from an eCrim report for the individual generated by the Hawaii Criminal Justice Data Center no earlier than December 12, 2015 at 8:00 a.m. (Hawaii-Aleutian Standard Time).Visit eCrim.ehawaii.gov (https://ecrim.ehawaii.gov/ahewa/) to obtain the eCrim report.
Please include a signed statement by each Owner, Principal, or Member certifying that the information is complete and accurate. Upload the signed statements in the following question (35.)
2) Other Businesses Holding an Interest
If there are businesses that hold an interest in the company, list the business names and percent interest on a separate tab on the spreadsheet.
Download Owner Principal Member Information Spreadsheet
(/mmjdisp/templates/Owner_Principal_Member_Report.xls)
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35. Upload Proof of Name, Date of Birth, and Residency for each Officer, Principal, or Member listed on the spreadsheet
1) Proof of Legal Name of Each Owner, Principal, and Member:
Scan and submit a certified copy of AT LEAST ONE (1) of the following:
* Certified copy of a birth certificate or marriage certificate filed with a state office of vital statistics or equivalent agency in the individual's state of birth or marriage;* Valid, unexpired U.S. passport [inside cover and first page only] or U.S. passport card;* Consular report of birth abroad Form FS-240, DS-1350 or FS-545 issued by the U.S. Department of State;* Valid, unexpired permanent resident card (Form I-551) issued by the Department of Homeland Security (DHS) or the U.S. Citizenship and Immigration Services (USCIS);* Unexpired employment authorization document issued by the DHS, Form I-766 or Form I-688B;* Unexpired foreign passport with the following: a valid, unexpired U.S. visa affixed, and an approved I-94 form documenting the applicant's most recent admittance into the United States or a DHS admittance stamp on the passport;* Certificate of naturalization issued by DHS, Form N-550 or Form N-570;* Certificate of citizenship, Form N-560 or Form N-561, issued by DHS;* Court-issued, certified copy of a divorce decree;* Certified copy of a legal change of name order;
2) Proof of Date of Birth
Scan and submit a certified copy of AT LEAST ONE (1) of the following:
* Certified copy of a birth certificate or marriage certificate filed with a state office of vital statistics or equivalent agency in the individual's state of birth or marriage;* Valid, unexpired U.S. passport [inside cover and first page only] or U.S. passport card;* Consular report of birth abroad Form FS-240, DS-1350 or FS-545 issued by the U.S. Department of State;* Valid, unexpired permanent resident card (Form I-551) issued by the Department of Homeland Security (DHS) or the U.S. Citizenship and Immigration Services (USCIS);* Unexpired employment authorization document issued by the DHS, Form I-766 or Form I-688B;* Unexpired foreign passport with the following: a valid, unexpired U.S. visa affixed, and an approved I-94 form documenting the applicant's most recent admittance into the United States or a DHS admittance stamp on the passport;* Certificate of naturalization issued by DHS, Form N-550 or Form N-570;* Certificate of citizenship, Form N-560 or Form N-561, issued by DHS;* Valid, unexpired driver's license or government issued photo identification card.
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3) Proof of Hawaii Residency:
Scan and submit AT LEAST ONE (1) of the following source documents as proof of Hawaii state residency for at least five years:
* State of Hawaii tax return Form N-11 without schedules, worksheets, or attachments, and redacted to remove all financial information and all but the last four digits of the individual's social security number;* Evidence of voter registration;* Ownership, lease, or rental documents for place of primary domicile;* Billing statements including utility bills; or* Vehicle registration.
Document size limit is 2 MB. Up to 10 documents may be attached.
SECTION D: FINANCIAL INFORMATION
36. FINANCIAL RESOURCES GENERAL INFORMATION
INSTRUCTIONS: Download the EXCEL spreadsheet below, enter the following information in the format required, and upload it to attach it to your application.
Information to be provided:1) Financial Resources the applying entity has under its control. List each financial resource, amount of the resource (round to nearest dollar, no cents), and verifying information (account type, account number, account name, name of financial institution, applicant contact information) as shown on the spreadsheet
2) Date Resource/Dollar amount under the applying entity's control
Download Financial Resources General Information Spreadsheet
(/mmjdisp/templates/Financial_Resources_General.xls)
Upload the completed Financial Resources General Information Spreadsheet
37. Upload Financial Resources General Information Supporting Source Documents
Upload supporting source documents, i.e. bank statements, escrow account information, balance sheets etc. Supporting source documents for Financial Resources General Information must be provided as proof of the financial resources.
Document size limit is 10 MB. Up to 5 documents may be attached.
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38. FINANCIAL RESOURCES -RETAIL DISPENSING LOCATION INFORMATION
INSTRUCTIONS: Download the EXCEL spreadsheet below, enter the following information in the format required, and upload it to attach it to your application.
Data to be provided:1) Financial Resources the applying entity has under its control for each retail dispensing location allowed (2 locations maximum)
2) Dollar Amount (total aggregate for each retail dispensing location shall be not less than $100,000, or $200,000 for 2 locations)
3) Date Resource/Dollar amount under the applying entity's control (resources have been under the Applying Entity's control for not less than 90 days)
Download Financial Resources - Retail Dispensing Location Information
Spreadsheet
(/mmjdisp/templates/Financial_Resources_Retail_Dispensing_Location.xls)
Upload the completed Financial Resources - Retail Dispensing Location Information Spreadsheet
39. Upload Retail Dispensary Location Supporting Source Documents
Upload supporting source documents, i.e. bank statements, escrow account information, balance sheets etc. Supporting source documents for retail dispensary locations must be provided as proof of the financial resources.
Document size limit is 10 MB. Up to 5 documents may be attached.
SECTION E: MERIT INFORMATION - OPTIONAL
Responses for each criteria shall be no longer than specified for each criteria, double spaced, font size no smaller than 12, and margins no less than 1 inch on all sides.
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(1) Ability to operate a business, including but not limited to education, knowledge, and experience with: (A) Regulated industries; (B) Agriculture or horticulture; (C) Commercial manufacturing; (D) Pharmaceutical companies; (E) Operating or working in a medical marijuana dispensary business; (F) Creating and implementing a business plan, including a timeline for opening a business; (G) Creating and implementing a financial plan; (H) Retail sales; (I) Secure inventory tracking and control; (J) Protecting confidential customer information; (K) Owning or managing a business that required twenty four hour security monitoring; and (L) Any other experience the applicant considers relevant;
Response to (1) shall be no longer than five (5) pages.
Upload Response to (1)
(2) Plan for operating a medical marijuana dispensary in the county for which the applicant is seeking a license, including but not limited to a timeline for opening a retail dispensing location;
Response to (2) shall be no longer than five (5) pages.
Upload Response to (2)
(3) Proof of financial stability and access to financial resources, including but not limited to: (A) Legal sources of finances immediately available to begin operating a dispensary; (B) A summary of financial statements in businesses previously or currently owned or operated by the applicant; (C) A financial plan for operating a medical marijuana dispensary in Hawaii; (D) Good credit history; and (E) History of bankruptcy by the applicant or entities owned or operated by the applicant;
Response to (3) shall be no longer than five (5) pages.
Upload Response to (3)
(4) Ability to comply with the security requirements of Chapter 11-850 and Section 329D-7, HRS;
Response to (4) shall be no longer than five (5) pages.
Upload Response to (4)
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(5) Capacity to meet the needs of qualifying patients, including but not limited to: (A) Educating patients on how marijuana can be used to assist patients with debilitating medical conditions and about the marijuana and manufactured marijuana products that will be available in the applicant's retail dispensing locations; (B) Producing and maintaining a supply of marijuana that is sufficient to meet the needs of qualifying patients; (C) Providing safe, accessible retail dispensing locations; and (D) Measuring and improving customer satisfaction;
Response to (5) shall be no longer than five (5) pages.
Upload Response to (5)
(6) Ability to comply with criminal background check requirements pursuant to Chapter 11-850 and Sections 329D-7, 329D-12, and 846-2.7, HRS;
Response to (6) shall be no longer than three (3) pages.
Upload Response to (6)
(7) Ability to comply with the requirements in Chapter 11-850 and Sections 329 and 329D, HRS, for inventory tracking, security, and dispensing limits for qualifying patients;
Response to (7) shall be no longer than five (5) pages.
Upload Response to (7)
(8) Ability to maintain confidentiality of a qualifying patient's medical condition, health status, and purchases of marijuana or manufactured marijuana products;
Response to (8) shall be no longer than three (3) pages.
Upload Response to (8)
(9) Ability to conduct or contract for certified laboratory testing on marijuana and manufactured marijuana products pursuant to Chapter 11-850 and Sections 329D-7 and 329D-8, HRS;
Response to (9) shall be no longer than three (3) pages.
Upload Response to (9)
(10) Ability to comply with requirements for packaging, labeling, and chain of custody of products;
Response to (10) shall be no longer than three (3) pages.
Upload Response to (10)
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(11) A plan for secure disposal of marijuana and manufactured marijuana products;
Response to (11) shall be no longer than five (5) pages.
Upload Response to (11)
(12) Ability to ensure product safety, in accordance with Chapter 11-850 and Sections 329D-8, 329D-10, 329D-11, HRS.
Response to (12) shall be no longer than five (5) pages.
Upload Response to (12)
(13) No history of having a business license revoked.
Response to (13) shall be no longer than three (3) pages.
Upload Response to (13)
SECTION F: CERTIFICATION AND SUBMITTAL
Certification I hereby certify under penalty of law that the information submitted as part of this application is correct and complete.
By checking the box above and entering the individual applicant's name below, the applicant has electronically signed this application.
Applicant Name Benjamin Aaron Partyka
If you have previously submitted an application and this is a revision, enter the unique entry number(s) of your previous submission(s) here.
User ID 11260811
User Email
Entry Info
Date Created 29 Jan 2016 - 12:17:48 PM
Date Updated
IP Address
Page 14 of 14Medical Marijuana Dispensary
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{00166740.DOCX / 1}
AMENDED AND RESTATED OPERATING AGREEMENT
OF
11TH STREET PARTNERS, LLC
January 26, 2016 THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE BOARD OF MANAGERS OF THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE BOARD OF MANAGERS OF THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE BOARD OF MANAGERS TO THE EFFECT THAT ANY SUCH TRANSFER OR SALE WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
{00166740.DOCX / 1} -1-
AMENDED AND RESTATED OPERATING AGREEMENT 11th Street Partners, LLC
This AMENDED AND RESTATED OPERATING AGREEMENT (“Agreement”) is
dated as of January 26, 2016 (the “Effective Date”), and is made and entered into by and among BENJAMIN PARTYKA, a natural person (“Partyka”), JOSE BRETON, a natural person (“Partyka”), and 11th Street Investor, LLC, a Colorado limited liability company (“Investor”), whose signatures appear on the signature page of this Agreement.
Recitals: This Agreement is made with reference to the following:
A. 11TH STREET PARTNERS, LLC, a Hawaii limited liability company (the “Company”) was formed on October 19, 2015 by the filing of Articles of Organization for Limited Liability Company with the Hawaii Department of Commerce and Consumer Affairs.
B. Investor, as the sole member and manager of the Company, entered into an
Operating Agreement of the Company dated October 9, 2015 (the “Original Operating Agreement”).
C. Partyka and Breton have each acquired a Membership Interest (as hereafter defined)
in the Company and have been admitted as Members of the Company. D. The Members now desire to enter into this Agreement to amend, restated, and
supersede the Original Operating Agreement in its entirety.
Agreement:
The parties agree as follows:
ARTICLE I DEFINITIONS
All capitalized terms used and not defined herein shall have the meaning ascribed to them in the Allocations Annex attached hereto (the “Annex”). As used in this Agreement, the following terms have the following meanings: “Act” means the Hawaii Uniform Limited Liability Company Act, H.R.S. §§ 428-101 to 428-1302, as amended from time to time. “Additional Capital Contribution” means any amounts contributed by such Member pursuant to Section 8.2. “Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such Person. For purposes of this definition, the term “controls,” “is controlled by,” or “is under common control with” means the possession,
{00166740.DOCX / 1} -2-
direct or indirect, of the power to direct or cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract, or otherwise. “Agreement” means this Operating Agreement, as amended from time to time. “Articles of Organization” means the Articles of Organization of the Company, as filed with the Secretary of State of Colorado, as the same may be amended from time to time. “Asset” or “Company Asset” means the assets owned by the Company.
“Board of Managers” means the Board of Managers of the Company having such authority
granted pursuant to Error! Reference source not found. of this Agreement. “Capital Contribution” means any contribution to the capital of the Company in cash or
property by a Member, whenever made, pursuant to Sections 8.1 – 8.3 of this Agreement. “Cause” means the fraud, bad faith, gross negligence or willful misconduct of the Manager. “Company” means 11th Street Partners, LLC, a Hawaii limited liability company.
“Economic Interest” means a Member’s or Economic Interest Owner’s share of one or more of the Company’s Profits, Losses and distributions of the Company’s assets pursuant to this Agreement and the Act. Economic Interest expressly shall not include any other rights or obligations under this Agreement or the Act including, without limitation, any right to participate in the management or affairs of the Company, including the right to vote on, consent to or otherwise participate in any decision of the Members or Manager.
“Economic Interest Owner” means an owner of an Economic Interest who is not a Member
due to a failure to meet certain transfer requirements in Paragraph 10.5.
“Entity” means any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association or any foreign trust or foreign business organizations.
“Event of Insolvency” shall mean when any Member: (i) petitions for, obtains or as a result
of its petition or other affirmative act becomes subject to an order for relief under the federal bankruptcy code; (ii) petitions for, obtains or as a result of its petition or other affirmative act becomes subject to an order, judgment or decree of insolvency under state law; (iii) makes an assignment for the benefit of creditors’ (iv) consents to or suffers the appointment of a receiver, trustee or liquidator to any substantial part of its assets that is not vacated within sixty (60) days; or (v) consents to or suffers an attachment or execution on any substantial part of its assets that is not released within sixty (60) days. “Fiscal Year means the Company’s fiscal year, which shall be the calendar year. “Initial Capital Contribution” means the initial contribution to the capital of the Company
{00166740.DOCX / 1} -3-
pursuant to this Agreement. “Manager” means each Person serving on the Board of Managers.
“Member(s)” means Partyka, Breton, and Investor. “Membership Interest” means, as to any Member, such Member’s entire interest in the Company including, without limitation, such Member’s right to the Profits, Losses and distributions of the Company pursuant to this Agreement and such other rights and privileges that the Member may have pursuant to this Agreement and the Act. “Net Cash Available for Distribution” means, for any period, the revenues received by the Company less (i) the total cash payments made by the Company during such period (including payment of the Manager Compensation), other than distributions to Members during such period pursuant to Section 9 hereof, and (ii) amounts set aside to establish or increase reserves for future cash expenditures as the Manager reasonably deems necessary for the proper operation of the Company’s business.
“Partnership Representative for Tax Matters” shall have the meaning given to such term in Section 5 of the Annex.
“Percentage Interest” means as to each Member, such Member’s Membership Interest
expressed as a percentage of all Membership Interests and Economic Interests, as applicable. “Person” means any individual or Entity, and the heirs, executors, administrators, legal representatives, successors, and assigns of such Person where the context so permits. “Transfer” means to sell, assign, transfer or otherwise dispose of for consideration a Membership Interest, to any Person other than the Company. “Transferee” means a Person to whom a Transfer is made. “Transferor” means a Person who makes a Transfer. “Treasury Regulations” means proposed, temporary and final regulations promulgated under the Code in effect as of the date of filing the Articles of Organization and the corresponding sections of any regulations subsequently issued that amend or supersede such regulations.
ARTICLE II FORMATION OF COMPANY
2.1 Formation. The Company has been organized as a Hawaii limited liability
company, by executing and filing of Articles of Organization for Limited Liability Company with the Hawaii Department of Commerce and Consumer Affairs in accordance with and pursuant to the Act.
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2.2 Name. The name of the Company is 11th Street Partners, LLC, a Hawaii limited liability company.
2.3 Principal Place of Business. The principal place of business of the Company within
the State of Hawaii shall be 965 Prospect Street, Apartment 506, Honolulu, HI 96822. The Company may locate its places of business and registered office at any other place or places as the Manager may from time to time deem advisable, provided Manager provides the other Members with at least thirty (30) days prior written notice of such change.
2.4 Registered Office and Registered Agent. The Company’s initial registered office
and the name of the initial registered agent at such address shall be as set forth in the Articles of Organization. The registered office and registered agent may be changed from time to time by filing the address of the new registered office and/or the name of the new registered agent with the Colorado Secretary of State pursuant to the terms of the Act.
ARTICLE III BUSINESS OF COMPANY
3.1 Permitted Businesses. The business of the Company shall be:
(a) To engage in any lawful business, purpose or activity permitted by the Act,
and it shall possess and may exercise all of the powers and privileges granted by the Act or which may be exercised by any limited liability company organized pursuant to the Act, together with any powers incidental thereto, so far as such powers or privileges are necessary or convenient to the conduct, promotion or attainment of the business, purposes or activities of the Company; and
(b) To exercise all other powers necessary to or reasonably connected with the Company’s business which may be legally exercised by limited liability companies under the Act.
ARTICLE IV NAMES AND ADDRESS OF INITIAL MEMBERS
The names, addresses, and Percentage Interests of the Members set forth on Exhibit A attached to and made a part of this Agreement.
ARTICLE V MANAGEMENT; EXPENSES
5.1 Management. The day-to-day business and affairs of the Company shall be
managed by the Board of Managers. Subject to the approval rights of the Members as to Major Decisions hereunder, or the Act, the Board of Managers (i) shall manage the business and affairs of the Company and (ii) shall hold the power to act for or to bind the Company, subject to the Board of Manager’s authority to delegate powers and duties to officers and others as set forth herein. Subject to obtaining any necessary approvals hereunder, any Manager shall have the power and authority to execute and deliver contracts, instruments, filings, notices, certificates, and other documents of whatsoever nature on behalf of the Company (including, without limitation, any
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amendments to the Articles of Organization and any other certificates required or permitted to be filed by or on behalf of the Company pursuant to the Act or like law of any other jurisdiction). Except as otherwise required by applicable law, any such contract, instrument, certificate, or other document shall require the signature of only one Manager or the signature of such officer, employee, or agent to whom authority has been delegated by the Manager. A Member shall have no authority to act on behalf of the Company except (i) to the extent such Member is also designated as a Manager, or (ii) in the event of a vacancy in the office of the Manager for any reason, in which event all of the Members shall serve as co-managers of the Company until such time as the Members have designated a new Manager.
5.2 [Intentionally Omitted]
5.3 Number, Tenure and Qualifications. The Board of Managers shall be comprised of
three (3) Persons (each a “Manager”). Each Manager shall hold office unless and until removed pursuant to the provisions of Section 5.13. Benjamin Partyka, Jose Breton, and Bhikhu Gandhi are hereby designated as the initial Managers of the Company.
5.4 No Member Authority. In the absence of a delegation of authority by the Board of Managers or this Agreement, no Member, agent, or employee of the Company shall have any power or authority to bind the Company in any way, to pledge the credit of the Company, or to render the Company financially liable for any purpose. However, the Board of Managers may act by a duly authorized attorney-in-fact.
5.5 Insurance. The Board of Managers, when and if it deems appropriate, shall cause each Company Asset to be insured with commercially reasonable policies of insurance. All insurance policies shall be written by such companies, on such terms, in such form and for such periods and amounts as the Members shall from time to time designate or approve and shall provide that they shall not be canceled or amended without at least thirty (30) days’ prior written notice to the Company.
5.6 Member Approval. Notwithstanding the general authority of the Manager under Section 5.1, the following matters relating to the Company (“Major Decisions”) shall be determined by the unanimous vote of Members, provided that the Board of Managers shall make initial proposals for each of the following items unless otherwise instructed by the Members or unless the Board of Managers shall have resigned or been removed:
(a) Any borrowing and/or the assumption of any debt or guaranty, including the initial terms and conditions and any subsequent modifications;
(b) Sales of Interests in the Company;
(c) Voluntary bankruptcy filings or cooperation with any involuntary filing;
(d) Commingling any Company funds or capital with the funds of any other Person;
(e) Signing any contract or agreement of guaranty, indemnity, suretyship, or other arrangement under which the Company or its assets become liable or
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contingently liable for any obligations of any other entity in which the Company does not own an interest;
(f) Amending this Agreement or admitting any new Member; and
(g) Taking any other action which this Agreement specifically requires to be agreed upon by a unanimous vote of the Members.
5.7 Liability for Certain Acts. The Board of Managers does not, in any way, guarantee the return of the Members’ Capital Contributions or a profit for the Members from the operations of the Company. A Manager shall not be liable to the Company or to any Member for any loss or damage sustained by the Company or any Member, unless the loss or damage shall have been the result of fraud, bad faith, gross negligence or willful misconduct by such Manager as determined by final, non-appealable judicial decision.
5.8 Board of Managers and Members Have No Exclusive Duty to Company. A Manager shall not be required to manage the Company as its sole and exclusive function and such Manager may have other business interests and may engage in other activities in addition to those relating to the Company. Neither the Company nor any Member shall have any right, by virtue of this Agreement, to share or participate in such other investments or activities of the Manager, or to the income or proceeds derived therefrom. A Manager shall not incur any liability to the Company or to any other Member as a result of engaging in any other business or venture.
5.9 Bank Accounts. The Board of Managers may from time to time open bank accounts
in the name of the Company, and the Managers shall be the sole signatory thereon. 5.10 Indemnity of the Board of Managers. The Company, but not the Members, shall
indemnify each Manager to the maximum extent permitted under the Act. Notwithstanding any other provision of this Agreement, no Manager shall be liable to any Member with respect to any act performed or neglected to be performed in good faith and in a manner which such Manager believed to be necessary or appropriate in connection with the ordinary and proper conduct of the Company’s business or the preservation of its property, and consistent with the provisions of this Agreement.
5.11 Manager Compensation, Reimbursement. No person on the Board of Managers shall receive any stated salary or compensation for the services performed for the Company in such capacity; provided however, that nothing herein contained shall be construed to preclude any person on the Board of Managers from serving the Company in any other capacity, including as an officer of the Company, and receiving compensation therefore. Each person on the Board of Managers shall be reimbursed by the Company for any reasonable out-of-pocket costs incurred on behalf of the Company upon substantiation of the amount and purpose thereof.
5.12 Right to Rely on the Manager. Any Person dealing with the Company may rely (without duty of further inquiry) upon a certificate signed by any Manager as to: the identity of any Manager, Member, or Economic Interest Owner; the existence or nonexistence of any fact or facts which constitute a condition precedent to acts on behalf of the Company by any Manager or which are in any other manner germane to the affairs of the Company; the Persons who are
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authorized to execute and deliver any instrument or document of the Company; or any act or failure to act by the Company or any other matter whatsoever involving the Company.
5.13 Removal of Manager. At a meeting called expressly for that purpose, a Manager
may be removed, at any time, for Cause, by the vote of at least 4/5 of the Percentage Interests of the Members that are not Affiliates of such Manager. The removal of a Manager who is also a Member shall not affect the Manager’s rights as a Member and shall not constitute a withdrawal of such Member.
5.14 Vacancies. Upon resignation or removal of the Manager, a new Manager shall be
elected by the vote of at least 2/3 of the Percentage Interests of the Members entitled to vote at such meeting.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
6.1 Limitation of Liability. Except as provided by the non-waivable provisions of the Act and by this Agreement, no Member shall be liable for any obligation of the Company solely by reason of being or acting as a Member.
6.2 List of Members. Upon written request of any Member, the Board of Managers
shall provide a list showing the names, addresses and Membership Interests and Economic Interests of all Members and Economic Interest Owners.
6.3 Company Books. The Board of Managers shall maintain and preserve, during the term of the Company, and for three (3) years thereafter, all accounts, books, and other relevant Company documents. Upon reasonable request, each Member shall have the right, during ordinary business hours, to inspect and copy such Company documents at the requesting Member’s expense.
6.4 Priority and Return of Capital. Except as specifically set forth herein with respect
to distribution of Net Cash Available for Distribution under Section 9.1 or distributions made upon liquidation in accordance with Section 11.3, no Member shall have priority over any other Member, either as to the return of Capital Contributions or as to Profits, Losses or distributions.
6.5 Indemnification and Liability. Each Member and its Affiliates shall be
indemnified, defended and held harmless by the Company for, from and against any and all losses, claims, damages, liabilities, expenses (including attorneys’ fees and costs), judgments, fines, settlements, demands, actions, or suits relating to or arising out of the business of the Company, or the exercise by the Member of any authority conferred on it hereunder or the performance by the Member of any of its duties and obligations hereunder, except with respect to any claim, issue or matter in respect of which such Member or its Affiliate has been adjudged liable for fraud, gross negligence or willful misconduct.
6.6 Obligation of the Members. It is hereby agreed that no Member shall arbitrarily or unreasonably withhold its approval of any consent required under this Agreement, and each Member hereby undertakes to respond promptly to any request for approval where such request
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has been accompanied by all information necessary to evaluate such request.
6.7 [Intentionally Omitted]
6.8 Unregistered Interests. Each Member (i) acknowledges that the Membership Interests are being offered and sold without registration under the Securities Act of 1933, as amended, or under similar provisions of state law, (ii) acknowledges that such Member is fully aware of the economic risks of an investment in the Company, and that such risks must be borne for an indefinite period, (iii) represents and warrants that such Member is acquiring a Membership Interest for such Member’s own account, for investment and with no view to the distribution of the Membership Interest and (iv) agrees not to Transfer, or to attempt to Transfer, all or any part of its Membership Interest without registration under the Securities Act of 1933, as amended, and any applicable state securities laws, unless the Transfer is exempt from such registration requirements. Each Member represents that it has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment in the Company. Each Member represents that it has received, reviewed and is familiar with all information requested of and received from the Company and, based on such review, understands and has evaluated the merits and risks of the prospective investment in the Company, and has decided to invest in the Company. Each Member represents that it is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the 1933 Act, and he is able to bear the economic risk of an investment in the Company.
ARTICLE VII MEETINGS OF MEMBERS
7.1 Annual Meeting. The Members may meet at such time and places, within or outside
the State of Colorado, as may be determined by the Board of Managers. 7.2 Notice of Meetings. Except as provided in Section 7.3, written notice stating the
place, day and hour of the meeting and the purpose or purposes for which the meeting is called shall be delivered not less than ten nor more than fifty days before the date of the meeting, either personally or by mail, by or at the direction of the Board of Managers, to each Member entitled to vote at such meeting.
7.3 Meeting of all Members. If all of the Members shall meet at any time and place,
either within or outside of the State of Hawaii, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting lawful action may be taken.
7.4 Quorum. Members holding a minimum of 67% of the Membership Interests must
be represented in Person or by telephone, to constitute a quorum at any meeting of Members. If a quorum is present, the vote of the Members holding at least 67% of the Membership Interests represented in person or by telephone shall be the act of the Members.
7.5 Action by Members without a Meeting. Action required or permitted to be taken
at a meeting of Members may be taken without a meeting if the action is evidenced by one or more written consents or approvals describing the action taken and signed by all Members.
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7.6 Waiver of Notice. When any notice is required to be given to any Member, a waiver
thereof in writing signed by the Person entitled to such notice, whether before, at, or after the time stated therein, shall be equivalent to the giving of such notice.
ARTICLE VIII
CONTRIBUTIONS TO THE COMPANY AND INVESTMENTS 8.1 Members’ Capital Contributions & Interests. As of the date hereof, each Member
has made the capital contributions reflected on the Company books and records. 8.2 Additional Capital Contributions.
(a) Calls for Additional Capital. Except to the extent required by Section 8.1,
the Members expect and intend that any cash requirements of the Company in excess of the amounts to be contributed to the Company pursuant to Section 8.1 will be provided from the operations of the Company or by loans from unaffiliated Persons. If Members, by unanimous agreement, determine that the funds available from such sources are insufficient to meet the cash requirements of the Company, then the Members shall make Capital Contributions to the Company in proportion to their relative Percentage Interests (each an “Additional Capital Contribution”).
(b) No Third-Party Rights to Force Capital Contributions. The provisions of this Section 8.2 shall not be deemed to be for the benefit of any Person other than the Members and the Company, and no third party shall have any right to compel any actions or payments by the Members.
(c) No Liability for Deficits. Except as otherwise required by the Act (and subject to Sections 8.1 and 8.2), no Member shall have any liability to restore all or any portion of a deficit Account Balance, upon the liquidation of the Company or at any other time.
8.3 Remedies for Failure to Make a Capital Contribution - Straight Dilution. If any Member does not make the full amount of an Additional Capital Contribution, the other Members shall have the right, but not the obligation, to make the contribution requested for the non-contributing Member on a pro-rata basis in accordance with their relative interests or as they otherwise agree. In such event, the Interests of the Members shall be adjusted so that their respective Interests are in proportion to their respective aggregate Capital Contributions. Alternatively, contributing Members may elect to treat their advance as a loan pursuant to the terms of Paragraph 8.4 of this Agreement.
8.4 Loans by Members to Company. If the Board of Managers determines that the
Company needs additional funds, but the Members do not unanimously elect not to require Additional Capital Contributions therefor, the Company may borrow such funds from any third party, Member, or Members upon such market terms and conditions as may be agreed to at that time. No such loan to the Company from a Member shall be a capital contribution to the Company and shall not increase the Capital Account(s) of the Member(s) making the loan. Subject to
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applicable law, a Member who loans money to the Company shall have the same rights and obligations with respect thereto as a person who is not a Member.
ARTICLE IX DISTRIBUTIONS, ELECTIONS AND REPORTS
9.1 Tax Allocations. All Profits and Losses shall be allocated pursuant to the
provisions of the Allocations Annex attached hereto. Further the Company shall maintain the Member’s Capital Accounts and address Company tax matters in accordance with the provisions of the Allocations Annex attached hereto.
9.2 Limitation Upon Distributions. No distribution shall be declared and paid unless it complies with section 70-80-606 of the Act.
9.3 Interest On and Return of Capital Contributions. No Member shall be entitled to interest on its Capital Contribution or to return of its Capital Contribution, except as otherwise specifically provided for herein. No Member shall receive out of the Company’s property any part of its Capital Contribution until all liabilities of the Company have been paid or there remains property of the Company sufficient to pay them.
9.4 Accounting Period. The Company’s accounting period shall be the Fiscal Year.
9.5 Returns and other Elections. The Manager shall cause the preparation and timely filing of all tax returns required to be filed by the Company pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which the Company does business. Copies of such returns, or pertinent information therefrom, shall be furnished to the Members within a reasonable time after the end of the Company’s Fiscal Year but in no event later than July 31st.
9.6 Distributions of Net Cash Available for Distribution. Except as otherwise provided in Section 12.3, Net Cash Available for Distribution shall be distributed by the Company to the Members on a quarterly basis within thirty (30) days following each calendar quarter, or at such other times as may be approved by the Board of Managers, and shall be made to the Members in proportion to their relative Percentage Interests.
ARTICLE X TRANSFERS
10.1 Transfer Restrictions. No Member shall have the right to sell, assign, transfer,
exchange or otherwise transfer (collectively, a “Transfer”), all or any part of its Membership Interest, in whole or in part, directly or indirectly, except in compliance with the terms and conditions of this Article XI. Each Member hereby acknowledges the reasonableness of the restrictions on Transfer or Encumbrance of Membership Interests imposed by this Agreement, in view of the Company’s purposes and the relationship of the Members. Accordingly, the restrictions on Transfers or Encumbrances herein shall be specifically enforceable. In addition, if any Member effects any Encumbrance of any of its Membership Interest as security for repayment of a liability, any such Encumbrance shall be made pursuant to a pledge or hypothecation
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agreement that requires the pledgee or secured party to be bound by all the terms and conditions of this Article X.
10.2 Permitted Transfers.
(a) Other Members and Affiliates. Each Member may Transfer all or any part of its interest in the Company to an Affiliate of such Member provided the transferring Member Transfers such interest in accordance with Section 10.5.
(b) Gift Transfers.
(i) Subject to Paragraph 10.2(b)(ii), a Member may gift all or any portion of its Membership Interest provided that the donee (“donee”) complies with Paragraph 10.2(b)(ii) and further provided that the donee is either the gifting Member’s spouse, former spouse, or lineal descendent, including adopted children. In the event of the gift of all or any portion of a Gifting Member’s Membership Interest to one or more donees who are under twenty-five years of age, one or more trusts shall be established to hold the gifted interest(s) for the benefit of such donee(s) until all of the donee(s) reach the age of at least twenty-five years.
(ii) In the event of the gift of an interest in the Company and as a condition to recognizing the effectiveness and binding nature of any such gift and subject to section 15.4, substitution of a new Member as against the Company or otherwise, the remaining Members may require the Gifting Member and the proposed donee to execute, acknowledge, and deliver to the remaining Members such instruments of transfer, assignment, and assumption and such other certificates, representations, and documents and to perform all such other acts which the remaining Members may deem necessary or desirable to (a) constitute such donee or successor-in-interest as such, (b) confirm that the person desiring to acquire an interest or interests in the Company or to be admitted as a Member has accepted, assumed, and agreed to be subject and bound by all of the terms, obligations, and conditions of the operating Agreement as the same may have been further amended, whether such Person is to be admitted as a new Member or will merely be an Assignee), (c) preserve the Company after the completion of such transfer, assignment, or substitution under the laws of each jurisdiction in which the Company is qualified, is organized, or does business, (d) maintain the status of the Company as a partnership for federal tax purposes, and (e) ensure compliance with any applicable state and federal laws, including securities laws and regulations. Any gift of a Membership Interest shall be deemed effective on such date that the donee or successor-in-interest complies with Paragraph 10.4.
(c) Death of a Member. Upon the death of a Member, the deceased Member’s rights as a Member of the Company shall pass to such Member’s heirs or devisees subject to the provisions of Paragraph 10.4.
10.3 Covenant Not to Withdraw or Dissolve. Except as otherwise permitted by this Agreement, each Member hereby covenants and agrees not to (a) take any action to file a certificate of dissolution or its equivalent with respect to itself or (b) withdraw or resign, or attempt to withdraw or resign from the Company.
10.4 Death or Event of Insolvency.
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(a) Generally. Upon any Member’s death (if such Member is a natural person) or upon any Member’s sufferance of an Event of Insolvency, or at any time thereafter, it may be removed by the other Members. The fiduciary obligations of each Member are personal and cannot be provided by any entity except that Member, including the Member as debtor in possession or by a trustee or other agent of the Member. In the event any Member ceases to be a Member under this Paragraph 10.4, (i) the other Members shall have the right, but not the obligation, to purchase such insolvent Member’s Interest pursuant to this Section 10.4, and (ii) at all times prior to any such sale, such insolvent Member shall not be entitled to vote on Company matters as Member.
(b) Purchase of Member’s Interest. Upon the Member’s death sufferance of an Event of Insolvency, the Member’s Interest in the Company may be purchased by the Company or an entity designated by the Company for a purchase price equal to the aggregate fair market value of the Member’s Interest determined according to the provisions of Paragraph 10.4(c) of this Agreement. The purchase price of such interest shall be paid by the Company to the Member in cash within sixty (60) days of the determination of the aggregate fair market value.
(c) Purchase Price of Member’s Interest. The fair market value of the terminated Member’s Interest to be purchased by the Company according to the provisions of Paragraph 10.4 of this Agreement shall be determined by agreement between the remaining Member(s) (or their representatives) and the terminated Member(s). For this purpose, the fair market value of such Interest of the terminated Member shall be computed as the amount that the Member(s) would likely receive for such Interest if it were to be sold to a disinterested third party in an arm’s length transaction. If the remaining Member(s) (or their representatives) and the terminated Member cannot agree upon the fair market value of such Member’s Interest within thirty (30) days, they shall endeavor to agree upon a single appraiser experienced in appraisal of properties in the area of the properties owned by the Company, to determine the fair market value of such Interest, and if they agree upon a single appraiser within ten (10) days following the close of such thirty (30) day period, the value fixed by such appraiser shall be binding for purposes hereof, absent fraud. If the remaining Member(s) and the terminated Member are unable to agree upon a single appraiser within such ten (10) day period, they shall each select an appraiser having the aforesaid qualifications. If such two appraisers are unable to agree upon the fair market value of such Interest within thirty (30) days after their appointment, the two appraisers shall select a third appraiser having the same qualifications. The third appraiser shall then be instructed to select such of the values submitted by the first two appraisers as the third appraiser considers to be the closer to the fair market value of the Interest and the value so chosen shall be binding for purposes hereof, absent fraud. The remaining Member(s) and the terminated Member shall each compensate the appraiser appointed by it and the compensation of the third appraiser shall be borne one-half by the terminated Member and one-half by the remaining Members.
10.5 Requirements for Transferee Becoming a Substituted Member. No Transferee shall
become a substituted Member in the Company unless the following conditions precedent are satisfied: (a) the remaining Members, in their sole discretion, shall have unanimously consented in writing to the Transferee becoming a Member; (b) the Transferee shall have assumed any and all of the obligations under this Agreement with respect to the Membership Interest to which the Transfer relates; (c) all reasonable expenses required in connection with the Transfer shall have been paid by or for the account of the Transferee; and (d) all agreements, articles, minutes, written consents and all other necessary documents and instruments shall have been executed and filed
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and all other acts shall have been performed which the Manager deems necessary to make the Transferee a substitute Member of the Company and to preserve the status of the Company as a limited liability company. Unless all of the conditions set forth in this Section 10.4 are met, a Transferee shall become only an Economic Interest Owner.
ARTICLE XI. ADDITIONAL MEMBERS
From the date of the formation of the Company, any Person unanimously approved by all
of the Members may become a Member in this Company either by the issuance by the Company of Membership Interests for such consideration as the Members shall unanimously determine, or as a transferee of a Member’s Membership Interest or any portion thereof, subject to the terms and conditions of this Agreement. No new Members shall be entitled to any retroactive allocation of losses, income or expense deductions incurred by the Company. The Manager may, at its option, at the time a Member is admitted, close the Company’s books (as though the Company’s tax year had ended) or make pro rata allocations of loss, income and expense deductions to a new Member for that portion of the Company’s tax year in which a Member was admitted in accordance with the provisions of Section 706(d) of the Code and the Treasury Regulations promulgated thereunder. Upon the admission of any new Member the Percentage Interests of all Members shall be adjusted to reflect the new Member’s Membership Interest.
ARTICLE XII.
DISSOLUTION AND TERMINATION
11.1 Dissolution. The Company shall be perpetual until dissolved upon the unanimous written agreement of the Members. As soon as possible following the dissolution triggering event, the Manager shall execute a statement of intent to dissolve in such form as shall be prescribed by the Hawaii Department of Commerce and Consumer Affairs.and file same with the Hawaii Department of Commerce and Consumer Affairs.
11.2 Effect of Filing of Dissolving Statement. Upon the filing with the Hawaii
Department of Commerce and Consumer Affairs of a statement of intent to dissolve, the Company shall cease to carry on its business, except insofar as may be necessary for the winding up of its business, but its separate existence shall continue until a certificate of dissolution has been issued by the Hawaii Department of Commerce and Consumer Affairs or until a decree dissolving the Company has been entered by a court of competent jurisdiction.
11.3 Winding Up, Liquidation and Distribution of Assets.
(a) Upon dissolution, an accounting shall be made by the Company’s independent
accountants of the accounts of the Company and of the Company’s assets, liabilities and operations, from the date of the last previous accounting until the date of dissolution. The Board of Managers shall immediately proceed to wind up the affairs of the Company.
(b) If the Company is dissolved and its affairs are to be wound up, the Board of Managers shall:
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(i) Sell or otherwise liquidate all of the Company’s assets as promptly as practicable (except to the extent the Board of Managers may determine to distribute any assets to the Members in kind);
(ii) Allocate any Profits or Losses resulting from such sales or liquidation
to the Members’ Capital Accounts; Allocate any Profits or Losses resulting from such sales or liquidation to the Members’ Capital Accounts.
(iii) Discharge all liabilities of the Company, and establish such reserves as
may be reasonably necessary to provide for contingent liabilities of the Company;
(iv) Distribute the remaining assets proportionately, in accordance with the positive balance (if any) of each Member’s and Economic Interest Owner’s Capital Account (as determined after taking into account all Capital Account adjustments for the Company’s taxable year during which the liquidation either in cash or in kind, as determined by the Board of Managers, with any assets distributed in kind being valued for this purpose at their fair market value, and any gain or loss in respect of such assets being allocated to the Capital Accounts of the Members as if such assets had been sold at their fair market value. Any such distributions to the Members and Economic Interest Owners in respect of their Capital Accounts shall be made in accordance with the time requirements set forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations.
(c) Notwithstanding anything to the contrary in this Agreement, upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations, if any Member or Economic Interest Owner has a Deficit Capital Account (after giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation occurs), such Member or Economic Interest Owner shall have no obligation to make any Capital Contribution, and the negative balance of such Member’s or Economic Interest Owner’s Capital Account shall not be considered a debt owed by such Member or Economic Interest Owner to the Company or to any other Person for any purpose whatsoever.
(d) Upon completion of the winding up, liquidation and distribution of the assets, the Company shall be deemed terminated.
11.4 Articles of Dissolution. When all debts, liabilities and obligations have been paid and discharged or adequate provisions have been made therefor and all of the remaining property and assets have been distributed to the Members or Economic Interest Owners, articles of dissolution shall be executed in duplicate and verified by the person signing the articles, which articles shall set forth the information required by the Act. Duplicate originals of such articles of dissolution shall be delivered to the Hawaii Department of Commerce and Consumer Affairs..
11.5 Certificate of Dissolution. Upon the issuance of the certificate of dissolution, the
existence of the Company shall cease, except for the purpose of suits, other proceedings and appropriate action as provided in the Act. The Manager shall have authority to distribute any Company property discovered after dissolution, convey real estate and take such other action as may be necessary on behalf of and in the name of the Company.
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11.6 No Recourse For Return of Contribution. Except as provided by law or as expressly
provided in this Operating Agreement, upon dissolution, each Member and Economic Interest Owner shall look solely to the assets of the Company for the return of its Capital Contribution. If the Company property remaining after the payment or discharge of the debts and liabilities of the Company is insufficient to return the cash contribution of one or more Members or Economic Interest Owners, such Members or Economic Interest Owners shall have no recourse against any other Member or Economic Interest Owner.
ARTICLE XII MISCELLANEOUS PROVISIONS
12.1 Notices. Any notice, demand, or communication required or permitted to be given
by any provision of this Agreement shall be deemed to have been sufficiently given or served for all purposes if delivered personally to the party, sent via e-mail, overnight carrier or, if sent by registered or certified mail, postage and charges prepaid, addressed to the Member’s and/or Company’s address, as appropriate, which is set forth in this Agreement. Except as otherwise provided herein, any such notice shall be deemed to be given one business day after the date on which the same was deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and sent as aforesaid.
12.2 Application of Hawaii Law. This Agreement shall be governed exclusively by its
terms and by the laws of the State of Hawaii. 12.3 Waiver of Action for Partition. Each Member irrevocably waives during the term
of the Company any right that it may have to maintain any action for partition with respect to the property of the Company.
12.4 Amendments. This Agreement may not be amended except by the unanimous
written agreement of all of the Members. 12.5 Execution of Additional Instruments. Each Member hereby agrees to execute such
other and further statements of interest and holdings, designations, powers of attorney and other instruments necessary to comply with any laws, rules or regulations.
12.6 Severability. If any provision of this Agreement or the application thereof to any
person or circumstance shall be invalid, illegal or unenforceable to any extent, the remainder of this Agreement and the application there of shall not be affected and shall be enforceable to the fullest extent permitted by law.
12.7 Successors and Assigns. Each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
12.8 Counterparts; Facsimile Signatures. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall constitute one and
{00166740.DOCX / 1} -16-
the same instrument. Executed counterparts of this Agreement delivered by facsimile shall be binding on the party delivering this Agreement in such fashion.
[Signature Page Follows]
{00166740.DOCX / 1} A-1
EXHIBIT A SCHEDULE OF MEMBERS
NAME ADDRESS CAPITAL
CONTRIBUTION PERCENTAGE
INTEREST
{00166740.DOCX / 1} Annex-1
ANNEX TO AMENDED AND RESTATED OPERATING AGREEMENT OF
11TH STREET PARTNERS, LLC
Allocations Annex
1. Definitions
Capitalized terms used and not defined herein have the meaning ascribed to them in the Amended and Restated Operating Agreement of 11th Street Partners, LLC (the “Agreement”). As used in this Annex, the following terms have the following meanings:
“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit
balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Member is obligated
to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) Debit to such Capital Account the items described in Sections 1.704-1
(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.
“Allocation Provisions” has the meaning specified in Section 3 of this Annex. “Capital Account” means the capital account established and maintained for each Member
pursuant to Section 2 of this Annex. “Carrying Value” means, with respect to a Company asset, the asset’s adjusted basis for
federal income tax purposes, except, other than as provided herein, that the Carrying Values of all Company assets may be adjusted to equal their respective fair market values (as determined in good faith by the Board of Managers), in accordance with the rules set forth in Treasury Regulations Section 1.704.1(b)(2)(iv)(f) immediately prior to: (a) the date of the acquisition of any additional Interest by any new or existing Member in exchange for more than a de minimis Capital Contribution; (b) the date of the distribution of more than a de minimis amount of the Company’s Property (other than a pro rata distribution) to a Member; or (c) such other dates as may be specified in Treasury Regulations under Section 704 of the Code; provided, that adjustments pursuant to clauses (a), (b) and (c) above shall be made only if the Board of Managers determine in their sole discretion that such adjustments are necessary or appropriate to reflect the relative economic Interests of the Members. The Carrying Value of any Company asset distributed
{00166740.DOCX / 1} Annex-2
to any Member shall be adjusted immediately prior to such distribution to equal its fair market value. In the case of any asset that has a Carrying Value that differs from its adjusted tax basis, Carrying Value shall be adjusted by the amount of depreciation calculated for purposes of the definition of “Profits and Losses” rather than the amount of depreciation determined for Federal income tax purposes.
“Code” means the Internal Revenue Code of 1986, as the same may be amended from time to time.
“Company Minimum Gain” has the meaning set forth for “Partnership Minimum Gain” in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations. “Depreciation” means, for each Fiscal Year, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable with respect to an asset for such Fiscal Year for United States Federal income tax purposes, except that if the Gross Asset Value of an asset differs from its adjusted basis for United States Federal income tax purposes at the beginning of such Fiscal Year, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the United States Federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for United States Federal income tax purposes of an asset at the beginning of such Fiscal Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Partnership Representative for Tax Matters.
“Gross Asset Value” means, with respect to any property of the Company (other than
money), such property’s adjusted basis for United States Federal income tax purposes, except that the Gross Asset Value of such property will be adjusted to its fair market value (i) whenever such adjustment is required in order for allocations under this Agreement to have “economic effect” within the meaning of Regulation Section 1.704-(b)(2)(ii), and (ii) if the Partnership Representative for Tax Matters considers appropriate, whenever such adjustment is permitted under Regulation Section 1.704-1(b)(2)(ii). If the Gross Asset Value of the property is so adjusted, such Gross Asset Value shall thereafter be further adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.
“Member Nonrecourse Debt” has the meaning set forth for “Partner Nonrecourse Debt” in
Section 1.704-2(b)(4) of the Regulations. “Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each
Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the Regulations.
“Member Nonrecourse Deductions” has the meaning set forth for “Partner Nonrecourse
Deductions in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations. “Nonrecourse Deductions” has the meaning set forth in Section 1.704-2(b)(1) of the
Regulations.
{00166740.DOCX / 1} Annex-3
“Nonrecourse Liability” has the meaning set forth in Section 1.704-2(b)(3) of the
Regulations. “Profits” and “Losses” means, for each Fiscal Year, an amount equal to the Company’s
taxable income or losses for such Fiscal Year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:
(a) Any income of the Company that is exempt from United States Federal
income tax and not otherwise taken into account in computing Profits or Losses pursuant to this Section shall be added to such taxable income or loss;
(b) In the event the Gross Asset Value of any Company property is adjusted
pursuant to the definition of “Gross Asset Value”, the amount of such adjustment shall be taken into account as gain or losses from the disposition of such property for purposes of computing Profits or Losses;
(c) Gains or losses resulting from the disposition of Company property shall,
be computed by reference to the Gross Asset Value of such property, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;
(d) In lieu of the depreciation, amortization, and other cost recovery deductions
taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year, computed in accordance with the definition of Depreciation contained herein
(e) To the extent an adjustment to the adjusted tax basis of any Company asset
pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations to be taken into account in determining Capital Accounts as a result of a distribution other than in complete liquidation of a Member’s Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Profits or Losses; and
(f) Notwithstanding any other provision of this Article, any items which are
specially allocated pursuant to Section 3.1 or 3.2 hereof shall not be taken into account in computing Profits or Losses.
“Regulations” means the Income Tax Regulations, including Temporary Regulations,
promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
“Regulatory Allocations” has the meaning specified in Section 3.4 of this Annex.
{00166740.DOCX / 1} Annex-4
2. Members’ Capital Accounts. A separate capital account (the “Capital Account”) shall be established and maintained for each Member. The Capital Account of each Member shall be credited with such Member’s Capital Contributions to the Company, all Profits allocated to such Member pursuant to Section 3.1 and any items of income or gain which are specifically allocated pursuant to Section 3.2 or otherwise pursuant to this Agreement; and shall be debited with all Losses allocated such Member pursuant to Section 3.1, any items of loss or deduction of the Company specially allocated to such Member pursuant to Section 3.2 or otherwise pursuant to this Agreement, and all cash and the Carrying Value of any property (net of liabilities assumed by such Member and the liabilities to which such property is subject) distributed by the Company to such Member. To the extent not provided for in the preceding sentence, the Capital Accounts of the Members shall be adjusted and maintained in accordance with the rules of Treasury Regulations Section 1.704-1(b)(2)(iv), as the same may be amended or revised; provided, that such adjustment and maintenance does not have a material adverse effect on the economic interests of the Members. Any references in any section of this Agreement to the Capital Account of a Member shall be deemed to refer to such Capital Account as the same may be credited or debited from time to time as set forth above. In the event of any transfer of any interest in the Company in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest. 3. Allocations
3.1 Allocations of Profits and Losses. Except as otherwise provided in this Agreement,
Profits, Losses and, to the extent necessary, individual items of income, gain, loss or deduction, of the Company shall be allocated among the Members in a manner such that, after giving effect to the special allocations set forth in Section 3.2(e) or (f) or elsewhere in this Agreement, the Capital Account of each Member, immediately after making such allocation, is, as nearly as possible, equal (proportionately) to (i) the distributions that would be made to such Member pursuant to Section 9.6 and Article XI if the Company were dissolved, its affairs wound up, its assets sold for cash equal to their Carrying Value, all Company liabilities were satisfied (limited with respect to each nonrecourse liability to the Carrying Value of the assets securing such liability) and the net assets of the Company were distributed in accordance with Section 9.6 and Article XI to the Members immediately after making such allocation, minus (ii) such Member’s share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical sale of assets. Notwithstanding the foregoing, the Board of Managers may make such allocations as they deem reasonably necessary to give economic effect to the provisions of this Agreement taking into account such facts and circumstances as the Board of Managers deem reasonably necessary for this purpose.
3.2 Special Allocations. The following special allocations shall be made in the
following order: (a) Minimum Gain Chargeback. If there is a net decrease in Company
Minimum Gain or Member Nonrecourse Debt Minimum Gain (determined in accordance with the principles of Treasury Regulations Section 1.704-2(d) and 1.704-2(i)) during any Company taxable year, the Members shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to their
{00166740.DOCX / 1} Annex-5
respective shares of such net decrease during such year, determined pursuant to Treasury Regulations 1.704-2(g) and 1.704-2(i)(5). The items to be so allocated shall be determined in accordance with the Treasury Regulations Section 1.704-2(f). This Section 3.2(a) is intended to comply with the minimum gain chargeback requirements in such Treasury Regulations Sections and shall be interpreted consistently therewith, including that no chargeback shall be required to the extent of the exceptions provided in the Treasury Regulations Section 1.704-2(f) and 1.704-2(i)(4).
(b) Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations or distributions described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate the deficit balance in his Capital Account created by such adjustments, allocations or distributions as promptly as possible.
(c) Gross Income Allocation. In the event any Member has a deficit Capital
Account at the end of any Fiscal Year which is in excess of the sum of (i) the amount such Member is obligated to restore, in any, pursuant to any provisions of this Agreement, and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible; provided, that an allocation pursuant to this Section 3.2(c) shall be made only if and to the extent that a Member would have a deficit Capital Account in excess of such sum after all other allocations provided for in this Article 3 have been tentatively made as if Section 3.2(b) and this Section 3.2(c) were not in this Agreement.
(d) Payee Allocation. In the event any payment to any person that is treated by
the Company as the payment of an expense is recharacterized by a taxing authority as a Company distribution to the payee as a Member, such payee shall be specially allocated an amount of Company gross income and gain as quickly as possible equal to the amount of the distribution.
(e) Nonrecourse Deductions. Nonrecourse Deductions shall be allocated to the
Members in accordance with their respective Percentage Interest. (f) Member Nonrecourse Deductions. Member Nonrecourse Deductions for
any taxable period shall be allocated to the Member who bears the economic risk of loss with respect to liability to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704-2(j).
3.3 Tax Allocations. (a) For income tax purposes only, each item of income, gain, loss and deduction of the Company shall be allocated among the Members in the same manner as the corresponding items of Profits and Losses and specially allocated items are allocated for Capital Accounts purposes; provided that in the case of any Company asset the Carrying Value of which differs from its adjusted tax basis for Federal income tax purposes, income, gain, loss and deduction with respect to such asset shall be allocated solely for income tax purposes in accordance
{00166740.DOCX / 1} Annex-6
with the principles of Sections 704(b) and (c) of the Code (in any manner determined by the Board of Managers) so as to take account of the difference between Carrying Value and adjusted basis of such asset. Notwithstanding the foregoing, the Board of Managers may make such allocations as it deems reasonably necessary to give economic effect to the provisions of this Agreement taking into account such facts and circumstances as the Board of Managers deems reasonably necessary for this purpose. 3.4 Other Allocation Provisions. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such regulations. Sections 3.1 and 3.4 may be amended at any time by the Board of Managers if necessary, in the opinion of tax counsel to the Company, to comply with such regulations, so long as any such amendment does not materially change the relative economic interests of the Members. 3.5 Intent of Allocations/Cash Savings Clause. The parties intend that the foregoing tax allocation provisions of this Article 3 shall produce final Capital Account balances of the Members that will permit liquidating distributions that are made in accordance with final Capital Account balances under Section 11.3 hereof to be made (after unpaid loans and interest thereon, including those owed to Members have been paid) in a manner identical to the order of priorities set forth in Section 9.6. To the extent that the tax allocation provisions of this Section 3 would fail to produce such final Capital Account balances, (i) such provisions shall be amended by the Board of Managers if and to the extent necessary to produce such result and (ii) taxable income and taxable loss of the Company for prior open years (or items of gross income and deduction of the Company for such years) shall be reallocated by the Board of Managers among the Members to the extent it is not possible to achieve such result with allocations of items of income (including gross income) and deduction for the current year and future years, as approved by the Board of Managers. This Section 3.5 shall control notwithstanding any reallocation or adjustment of taxable income, taxable loss, or items thereof by the Internal Revenue Service or any other taxing authority. The Board of Managers shall have the power to amend this Agreement without the consent of the other Members, as it reasonably considers advisable, to make the allocations and adjustments described in this Section 3.5. To the extent that the allocations and adjustments described in this Section 3.5 result in a reduction in the distributions that any Member will receive under this Agreement compared to the amount of the distributions such Member would receive if all such distributions were made pursuant to the order of priority set forth in Section 9.6, the Company may make a guaranteed payment (within the meaning of Section 707(c) of the Code) to such Member (to be made at the time such Member would otherwise receive the distributions that have been reduced) to the extent such payment does not violate the requirements of Sections 704(b) and 514(c)(9)(E) of the Code or may take such other action as reasonably determined by the Board of Managers to offset such reduction. 4. Partnership Representative for Tax Matters
4.1 By joining this Agreement, the Members appoint and designate Bhikhu Gandhi as
the Company’s Partnership Representative for Tax Matters, as such term is defined under the Code.
{00166740.DOCX / 1} Annex-7
4.2 Bhikhu Gandhi in his capacity as Partnership Representative for Tax Matters may
cause the Company to make all elections required or permitted to be made by the Company under the Code (including an election under Section 754 thereof permitting the adjustment in basis of Company assets upon the occurrence of certain events, such as a sale of an interest or the death of the Member) and not otherwise expressly provided for in this Agreement, in the manner that Bhikhu Gandhi determines will be most advantageous to the Company.
5. Classification of Company as Partnership for Tax Purposes, Not State Law. The Company will be classified as a partnership for federal (and, as appropriate, state and local) income tax purposes. This characterization, solely for tax purposes, does not create or imply a general partnership or limited partnership among the Members for state law or any other purpose. Instead, the Members acknowledge the status of the Company as a limited liability company formed under the Act. All duties and obligations of the Members to each other are expressly set forth in this Agreement. Without limiting the foregoing, the Members do not owe to each other or to the Company the duties that a general partner owes to a partnership and its other partners nor do the Board of Managers owe such duties to each other, the Company or its Members, it being acknowledged that the duties owed by the Board of Managers to each other and the Company are as set forth in this Agreement.
Department of Commerce and Consumer Affairs
CERTIFICATE OF GOOD STANDING
I, the undersigned Director of Commerce and Consumer Affairsof the State of Hawaii, do hereby certify that according to therecords of this Department, 11TH STREET PARTNERS, LLC was organized under the laws of the State of Hawaii on 10/20/2015 ;that it is an existing limited liability company in good standingand is duly authorized to transact business.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Department of Commerce and Consumer Affairs, at Honolulu, Hawaii. Dated: January 16, 2016
Director of Commerce and Consumer Affairs
To check the authenticity of this certificate, please visit: http://hbe.ehawaii.gov/documents/authenticate.htmlAuthentication Code: 246397-COGS_PDF-136395C5
Owner_Principal_Member_Report (2)
OWNER / PRINCIPAL / MEMBER REPORT
Please include a signed statement by each Owner, Principal, or Member certifying that the information is complete and accurate.
Name of Owner, Principal, or Member Address (Street, City, State, Zip, Country (if not USA)) Phone Number Email Address
Percent Interest in the Company
State of Primary Residence
Number of Years Lived in Hawaii (most recent uninterrupted number of years person has been a resident)
Has person ever been convicted of a Felony? (If So, STOP, they are not an eligible applicant)
Has person ever been convicted of a crime?
If person has been convicted of a crime, please describe (e.g., conviction, date, disposition, etc.)
Has person ever been arrested?
If person has ever been arrested, please describe (e.g., date, disposition, etc.)
eCrim Report Validation Code
Benjamin Partyka
Jose Breton
11th street Investor LLC (Bhikhu Gandhi)
Page 1 of 3
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1. Ability to Operate a Business
11th Street Partners DBA as Keala Ola (KO) intends to collaborate with the State of Hawaii to
open two retail stores and two cultivation facilities while offering the highest quality products
and medical marijuana education in a safe environment to the State Medical Marijuana patients.
Having secured two prime retail locations meeting HIDOH (Hawaii Department Of Health)
zoning restrictions and agricultural land for cultivation, KO is prepared to hit the ground running
and become one of the first organizations to begin serving medical marijuana patients in the
State of Hawaii. (Exhibit A for Leases and letters of support)
As experts in their respective fields, the members of KO bring forth a vast amount of
knowledge, experience and determination necessary to become founding members of the medical
marijuana industry in the State of Hawaii. The members have an outstanding track record for
success in the areas of business, management, retail operations, alternative medicine, contracting,
food preparation and local culture. With a CEO who pioneered the medical and recreational
marijuana industry in the State of Colorado, there is no organization more qualified to set the
standard for excellence while serving the State of Hawaii’s medical marijuana patients in the
safest most comprehensive manner. (Exhibit B for all team members resume)
Chief Executive Officer: Jose Breton
Mr. Breton’s early career started in sales and marketing in the medical business of Dental
implants where he gained passion for helping people improve their lives by replacing dentures,
bridges or missing teeth with dental implants. During this time, his passion for helping people
doubled by seeing the real changes and direct impact on people’s quality of life. In October
2009, David Ogden, then the Deputy Attorney General, sent a memo that seemed to fulfill this
promise. "As a general matter," he told U.S. attorneys, they "should not focus federal resources"
3
on "individuals whose actions are in clear and unambiguous compliance with existing state laws
providing for the medical use of marijuana." after this Memo Mr. Breton saw a personal and
business opportunity. He resigned from his corporate position and ventured to learn how to
cultivate marijuana. His first facility was one of the first legal medical marijuana facilities in the
State of Colorado and the world to obtain building permits by City and State approval. His State
Badge number was #56. To date, badges registered to individuals exceed 25,000!. Changes to
state rules caused Mr. Breton to partner with a retailer. During this partnership Mr. Breton
focused on making major changes to increase patient comfort and education.
In 2013 when recreational use became legal he decided to start a new Marijuana company who’s
goal was to educate and create a more inviting environment for customers. Within Mr. Breton’s
new stores customers are able to learn about marijuana at their own pace while being able to
receive personal attention should they have questions.
His first store was a huge success that revolutionized the way marijuana stores were perceived
and forever changed the future of retail marijuana. (Exhibit C for present business articles)
The noted success of this business model catapulted Mr. Breton’s business by making him
eligible for a merit based license application process in the third largest city in Colorado. This
merit based system was very similar to the State of Hawaii’s process. The combination of an
outstanding business, operating, security plan, and more than five years of industry experience
undoubtedly aided his approval. His application obtained 2 out of only 21 licenses granted in the
City of Aurora in 2014. His strong ability to execute and wealth of industry knowledge and
experience allowed Mr. Breton to open the first store in Aurora. His second license was among
the first 5 stores to open out of the 21 licenses given. Mr. Breton’s superb execution allowed his
first store to operate with no competition for over one year while competitors struggled through
4
obtaining building permits, tenant improvements and passing inspections.(Exhibit D for Articles)
His understanding of the difficulty in securing locations and
expertise in the permitting/inspections process will enable KO to be the first to open their doors
and begin helping medical patients while collecting sales tax on behalf of the State of Hawaii.
Mr. Breton is an active owner/operator in the marijuana industry. He knows how to build retail
and growing facilities from start to finish. He has performed every single job in the cultivation
and retail side of the business. Not only can he cultivate a plant from seed to packaging, he also
has a full understanding of product benefits for medical patients and is capable of guiding
patients though the purchasing process. His experience in the Colorado medical marijuana
industry gives him great knowledge on complying with tracking and executing the sale in
accordance with all state regulations. (Exhibit E for certificates of Marijuana Education)
Chief Financial Officer: Bhikhu Gandhi
Using his Bachelors of Science degree in Electrical Engineering, Bhikhu originally worked as an
electrical engineer in nuclear power plants across the country. His role was vital in ensuring the
safe operation of the reactor. In the Nuclear Industry, everything is highly regulated due to
security and public safety concerns. As an electrical engineer, Bhikhu also had to follow strict
engineering protocols to ensure proper design and function of the equipment with which he
worked. During his career he was certified as an ANSI Level II Startup Engineer and received
Instrument Society of America BWR Instrumentation certification. His diligence ensured a 100%
accident and incident free operation while he was on the job. After his career in the energy
5
industry, Bhikhu worked his way into the hotel industry. In his 33 years owning and operating
hotels, Bhikhu fully understands the importance of following procedure. In the hotel industry
this is critical to ensure guest safety and satisfaction. In addition to owner and operations
experience, Bhikhu was also the primary developer on his properties. This involved working
closely with city planning to ensure the project was safe and the city was fully satisfied before
implementing the build. Throughout his career, Bhikhu has learned the importance of regulation
to long term prosperity and that there are no short cuts to success.
Chief Operating Officer: Mr. Partyka
After receiving his Doctorate of Physical Therapy and then becoming a licensed Physical
Therapist in the state of Hawaii, Mr. Partyka began working full-time in the highly regulated
healthcare industry. Initially, Mr. Partyka worked in a skilled nursing facility requiring
knowledge of safety regulations, Medicare guidelines and HIPAA (Health Insurance Portability
and Accountability Act) to maintain the safety and privacy of each individual. The State of
Hawaii Department of Health completed yearly surveys at the skilled nursing facility and
interviewed Mr. Partyka concerning the safety protocols and systems in place to maintain
compliance with HIPAA. In addition to his devotion and practice of alternative medicine Mr.
Partyka currently serves at Straub Hospital in the inpatient setting (Mr. Partyka is seeing patients
on the floor, including the Intensive Care Unit). Due to the importance and acuteness of the care
provided, the hospital is strictly regulated. Mr. Partyka was required to complete a series of
tests/certifications (CPR, HIPAA regulations, Material Safety Data Sheet compliance, etc.) prior
to beginning work with the hospital and will need to pass the tests yearly to maintain
6
compliance. Mr. Partyka continues to understand the importance of regulation to maintain safety
and privacy in the medical industry and is excited to bring his knowledge of alternative
medicine
to the marijuana industry.
Cultivation Director: David Risley
David brings 13 years of horticultural experience devoted to Marijuana cultivation. David will
oversee all cultivation operations for KO. Mr. Risley’s accolades include a degree from Colorado
State University, one of the most prestigious Horticulture schools in the US.
Mr. Risley’s experience includes operations at a state of the art 100,000 sqft greenhouse where
he had over 80 different species of plants. He was in charge of 20 employees and oversaw the
entire operation He understands plant physiology and soil chemistry. His working knowledge
also extends beyond plant and soil science to the understanding of environmental stresses and
cultural practices and their impact on plant health. Mr Risley’s background allowed him to jump
into the cultivation of Marijuana with great success. He has consulted in multiple facilities in
Colorado and has helped in the construction of three new facilities with great success. He has
knowledge of multiple growing methods and has applied them to other plant varieties. (Exhibit F
Horticulture Degree)
Extraction Company to use as Subcontractors:
7
2. Operating a Medical Marijuana Business
Mission
Our mission at KO is to re-create and improve established medical marijuana practices while
providing comprehensive, community and clinically based services. KO will be a reliable and
legal medical marijuana source for seriously ill patients throughout the county of Kauai.
KO will operate as a for profit organization that builds community and helps cultivate healthy
lives by providing the best quality medicine, emotional support, and personal development
services to patients affected by debilitating medical conditions. KO will also provide registered
patients and healthcare providers with current, scientifically accurate information about medical
marijuana and statistical data, necessary for clinical research.
The focal point of the operations is the creation of a facility that will be fully compliant with
Hawaii House Bill HB321 signed into law and Act 241 pertaining to a Medical Marijuana
Dispensary System amended sections of HRS 329 Regulations issued by the State of Hawaii
Department of Health. In addition KO will compassionately assist Hawaiian terminally and
chronically ill registered qualifying patients with adequate, safe, consistent, secure, clean, legal
and affordable supply of medicine, while educating them regarding dosing and the most effective
ways of consuming medical marijuana.
KO’s plan is to rely on it’s CEO’s past experience of opening 4 successful retail locations and a
couple of cultivation facilities. Mr. Breton’s guiding principles of running a successful retail
location and cultivation operation are rooted in excellent training and targeted hiring. During his
six years of experience he has created key job descriptions and duties for individuals to follow
that guarantee a smooth opening and day to day business operations. Mr. Breton also believes in
social responsibility to find innovative ways to improve the quality of lives of people with
8
debilitating medical conditions in the community.
Staffing
Chief Operations Officer (COO)- is a full-time position responsible for setting long term
strategy and objectives, achieving the mission and operations of KO, establishing sound financial
practices, preparing budgets, and approving spending. The COO maintains official records and
documents, ensures compliance with state and local regulations. The COO oversees human
resources and directly manages the Patient Services Director, Security and Compliance Director,
Cultivation Director, consultants and contractors. The COO reports to the CEO and will work in
close contact to ensure all regulations are followed.
Patient Services Director (PSD)- Is a full-time, salaried position. Roles and responsibilities of
the PSD include patient intake , patient consulting and education, diversion prevention, HIPAA
compliance, proper data management, proper record keeping procedures, inventory management,
verification of patient and caregiver registrations, qualifying and administering the patient
compassion program. The PSD will also be responsible for the supervision and training of the
receptionist. The MIP (Manufacture Infuse Products) Chef shall report to the PSD. The PSD
interfaces with the Security and Compliance Director and Cultivation Director on a daily basis
and reports directly to the COO.
Security and Compliance Director (SCD)- Is full-time and salaried. Roles and responsibilities
include ensuring that KO is in compliance with Hawaii regulations; regularly inspect all areas of
the facility to ensure all procedures, policies, and regulations are being properly executed;
maintain OSHA compliance within the facility; monitor all patient appointments, scheduled
vendors, contractors, consultants, and expected deliveries, and positive identification and
admittance into the building of all dispensary agents, patients, caregivers and visitors. The SCD
9
will schedule all deliveries, accompany the delivery driver during all transports of medical
marijuana to or from KO. He/she shall be in charge of and transact all deliveries, whether to
disposal site, patient, caregiver, or testing facility. The SCD shall file incident reports upon
discovery of any condition or practice not in compliance with Hawaii regulations, and will be
responsible for the management and corrective actions as directed by the ED. The SCD shall
report directly to the COO. The SCD shall interface with all dispensary agents, patients,
caregivers and visitors.
Cultivation Director (CD)- Is a full-time, salaried position. Roles and responsibilities include
ensuring the health of the plants beginning with strain and seed selection, soil design and
selection, maintaining proper lighting and environmental conditions, cultivation practices,
implementation and execution of Integrated Pest Management program, proper selection,
transportation, storage and application of "organic pesticides" and beneficial insects, and nutrient
applications for successful harvests. Maintain inventory process management, record keeping
and documentation for the prevention of theft and diversion. Purchasing and maintaining all
supplies, equipment and control devises. Reports directly to the COO and interfaces with the
Cultivation manager PSD, SCD, and is directly responsible for the Cultivation Manager.
Cultivation Manager (CO)- Is a full-time hourly position responsible for the direct supervision
of trimmers, including work schedule, distribution of work load, tracking weights and inventory
assigned to each trimmer; and verification of trimmers worksheets. Responsible for:
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-The curing and packaging of all dry products.
-Maintaining strict company controls over inventory and other dispensary assets.
-Maintaining a high level of organization, patience and flexibility.
-Reporting incidents and implementing company incident procedures.
-Trimmers: A trimmer shall be part time, hourly position with the possibility for full-
time employment. Trimmers will be responsible for delicate handling of dry flowers,
close attention to detail, recording weights and tracking of work. Trimmers report
directly to the Cultivation Manager and interface with the SCD.
Manufacture Infuse Products Chef (MIP) and extractions subcontractor: The MIP Chef is a
part-time hourly position that may lead to full time employment. The roles and responsibilities of
the MIP Chef include preparing all MIP products under the direction and control of MIP
Consultant; recipe planning; ordering kitchen supplies; maintaining equipment; fulfilling special
dietary requirements; and packaging, inventory and storage of all MIPS in compliance with
Hawaii regulations. The MIP Chef reports directly to the PSD and interfaces with the MIP
Consultant, SCD and the Cultivation Manager. Extraction subcontractor will be in charge of all
extractions for capsules, lozenges, pills, oils and ointments.(Exhibit B for Resume and Exhibit G
for Extraction subcontractor)
Delivery Driver: Part time hourly position. Responsibility is to safely drive the delivery
vehicle while making deliveries in the presence of the SCD and in accordance with all
delivery rules and procedures. The delivery driver reports directly to the SCD.]
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Proposed Timeline
Upon application approval KO will immediately execute the following proposed timeline to
ensure the fastest possible opening of Hawaii’s first medical marijuana dispensary. Mr Breton
would like to reference his track record for being the 1st retail store to be open among 19 other
licenses given in the City of Aurora in 2014. In addition he was one of the first cultivations to
obtain approved City and State building permits in 2010.
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3. Proof of financial stability and access to financial resources.
In order to express credibility to the State of Hawaii KO has devoted double the amount of
capital required to open 2 retail and 2 cultivation locations.
Based on KO’s extensive prior experience
regarding opening and operating marijuana facilities it is estimated that opening each
In our vast
business experience undercapitalization is the number one reason for failure. The attached
statements outline our extensive resources that will be dedicated to ensuring the success of
medical marijuana in Hawaii through KO. (Exhibit H Bank statements and bank letters)
Note:
13
Financial Reports on existing marijuana CEO’S operations for 2015
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15
Projected Financial Reports for Keala Ola
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Credit Scores and Bankruptcies
All of KO’s members can immediately demonstrate positive credit history upon application
approval. As of January 25th it has been verified that
(Exhibit I Credit Scores and Proof of 0
bankruptcies)
Ability to Bank
Mr Breton has been struggling with this topic since 2009; he has met with multiple banks
throughout his career in order to persuade them to have banks start working with this industry
with no success.
KO will try to reach out to local banks and explore this
option. However with the teams experience they know is a very challenging task.(Exhibit H Bank
personal reference letter for CEO)
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4. Ability to comply with security
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19
20
Floor plans of executed leases for retail locations:
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5.Capacity to provide patient satisfaction
KO company structure has been setup to create several levels of verification. These checks and
balances will ensure Hawaii state rules and regulations are followed thus ensuring the safety of
the general public as well as patients. KO officers have a vast amount of compliance experience
that will be put to use to ensure the highest quality standards to provide the entire industry in
Hawaii. This includes all aspects of operations: from security, product quality, safety, to constant
education of personnel and qualifying registered patients and their primary caregivers serving
their interests.
KO is dedicated to the following objectives for the benefit of its future registered patients:
- Provide a steady supply of high quality (including purity and consistency of dose)
medical marijuana to registered qualifying patients at affordable and reasonable prices.
- Help improve quality of life of the patients through improved symptom management,
patient's self-assessment management system and reduce emotional distress.
- Provide high quality products such as Topical Formulations, oral lozenges, personal
microscopes for personal medical marijuana quality testing and personal portable
scales, necessary for accurate dosage of medical marijuana.
- Provide registered qualifying patients and their primary caregivers with up to date ,
scientifically accurate information about medical marijuana.
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- Provide registered qualifying patients and their primary caregivers with up to date reliable
resources, regarding State and Federal statutes related to the use of medical marijuana.
Keys to success
KO is dedicated to a diverse workforce as we understand our future patients will come from a
diverse set of backgrounds. We will focus on hiring individuals in medical related professions as
this will help with our goals of patient education. Since KO believes in a caring and
compassionate atmosphere we will have ongoing training to help our employees empathize with
patients. All of KO’s facilities will be state of the art with a large focus on patient experience. It
is KO’s goal to build lasting relationships with patients, in order to perform this task all of KO’s
facilities will be upheld to the highest levels of sanitation with a special focus on the human
factor in delivering our services..
KO will rely on the CEO’s industry experience to successfully execute hiring, training and
educating practices to succeed in the industry.
They have worked with and have intimate
knowledge of several dispensaries, growing facilities and medical marijuana testing laboratories
in the state of Colorado. Additionally the officers and employees have been to several MMJ and
Plant Medicine exhibitions in different states creating a broad foundation in the medical
marijuana industry. KO’s dedication to hiring medical professionals will give us an advantage
over the competition.
Medical professional will teach the qualified registered patients and primary caregivers with the
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safest techniques and alternative methods of using medical marijuana.
People with such qualifications know how to deal with sick patients and their primary caregivers
from their previous job experiences. KO will search for individuals dedicated to improve the
quality of life of the qualified registered patients through compassionate care, education and
professional conduct.
1. In an effort to build the modern state-of-art growing facility and grow the best quality of
medicine, KO CEO and Cultivation Director will work together to not only replicate
past operation but continue to innovate and continue making every facility better than
past opera cooperation with growing consultants from other states, and will hire
knowledgeable specialists in horticulture.
2. KO contacted
, if KO is in compliance with all necessary
security measures and all necessary rules and procedures according to rules and
requirements issued by Hawaii Health Department. has the
exclusive Cooling insurance policy for medical marijuana industry, being the biggest
insurance company in medical marijuana industry in USA.(Exhibit K Insurance LOI and
Personal Reference to CEO)
(a) KO—dispensary will maintain, and make available for distribution to registered
qualifying patients and their primary caregivers, an adequate supply of up-to-date
informational materials.
(b) Informational materials will be available for inspection by the Department upon
request.
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KO—dispensary will provide registered qualifying patients and their primary caregivers
with a notice requesting approval for the KO—dispensary to contact registered
qualifying patients and their primary caregivers with information concerning on-going
peer reviewed clinical studies related to the use of marijuana.
Besides brochures, in adequate supply in the waiting room of the dispensary, KO will
also have there a wall monitor, showing educational information. The brochures can be
taken by registered patients for their everyday usage at home. This information will be
available for the patients when he/she is checking in as a new registered patient of KO.
KO will have a specially trained employee (Social Worker) who can explain all
necessary information to the registered patients. The educational materials will contain:
1. Legal information;
2. Rules and prohibitions in KO;
3. Potential side-effects of medical marijuana;
4. Alternative methods of consumption of medical marijuana;
5. Safe techniques for using medical marijuana paraphernalia;
6. Signs and symptoms of substance abuse;
7. Information on tolerance, dependence and withdrawal.
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The general philosophy of KO management is to create a compassionate environment, where
every qualified patient feels special, secure, comfortable, welcome and receives the highest
possible quality of medicine. Every patient will be offered and encouraged to seek one on one
consultation with a trained patient educator. We know that working with patients is a very
demanding task. Our patient educators will be strong listeners with concern for our future
patients' health. Our goal is to achieve excellence at all levels, ensuring that our services reflect
the highest standards of quality and that all our methods are legally and ethically correct.
KO officers and employees are dedicated to work in strict compliance with Hawaii Use Medical
Marijuana Act issued by the State of Hawaii Health Department Rules and Regulations and
according Federal Law. KO does not promote drug trafficking activity, violence, sales of drugs to
minors, illegal possession or sale of other controlled substances. We must defend the registered
patients, primary caregivers, the community and our children from illegal drug activity in our
society! We are eager and willing to be at the forefront to ensure registered and qualified
patients' safe access to high quality services and medicine.
In order to track patient satisfaction all patients will be encouraged to review their experience
and overall satisfaction via our website or through in-store surveys.
6. Ability to comply with background checks
KO will conduct criminal background checks In order to ensure the reputable and responsible
character and fitness of all persons in any way associated with or employed by KO.
(a) Prior to and for the duration of employment or association with KO the following are subject
to annual criminal background checks conducted by KO or its designee:
1) All prospective KO members, managers, officers, directors, and shareholders with at least
twenty-five percent ownership interest or more;
2) Each employee of a dispensary or cultivation facility;
3) Each subcontractor of a dispensary;
4) All officers, directors, shareholders with at least twenty-five per cent ownership or more,
members, and managers of a subcontracted production center or retail dispensing location.
5) Each employee of a subcontracted production center or retail dispensing location;
6) Any person permitted to enter or remain in dispensary facilities; and
7) Agents of any of the above persons.
(b) A person subject to background checks as provided in subsection (a) is prohibited from
entering a dispensary facility and shall be disqualified for employment or association with KO if
the person:
1) Has a felony conviction;
2) Has a conviction related to use, possession, or distribution of drugs or intoxicating
compounds;
3) Has a conviction for a crime involving violence;
4) Has a conviction for a crime involving a firearm;
5) Has a conviction for a crime involving theft, or business or commercial fraud; or
6) Has any other background history that KO finds would pose a risk to the health, safety, or
welfare of the public or a qualifying patient, considering the nature of the offense, the time
elapsed since the offense occurred, and evidence of rehabilitation.
All persons employed by or associated with KO as provided in subsection (a) shall immediately
notify KO and the Department of Health of any arrest or conviction for an offense listed in
subsection (b).
Each person undergoing a background check shall provide written consent to KO to conduct the
background check.
All persons employed by or associated with KO as provided in subsection (a) shall be verbally
notified of and find accessible in writing in KO’s policies and procedures manual, the above
requirements for upholding KO and the Department of Health’s effort to maintain a crime-free
reputation and environment of dispensary facilities and their operators by conducting criminal
background checks.
Members e-crime verification
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7. Ability to comply with inventory tracking and sales
KO will maintain patient records in both electronic and paper format. Employees will be
properly trained in data management and the documentation of information will be an essential
function of every employee's routine practice. All paper patient records will be filed in HIPAA-
compliant locked cabinets. Only employees who require access to patient information will have
access to the files. Updates to patient records will be made immediately following each patient
appointment. Files will then be returned to the locked cabinet. In addition, all computers will
operate HIPAA-compliant patient record keeping software. KO electronic files will be created
and stored through the use of a web-based software program called BioTrack. This software
program is an industry leader in providing strict security policies for all facets of patient record
keeping and captures all important patient information including: name, phones, email, mailing
address, physician information, birth date, designated caregiver status, diagnosis
information/symptoms, favorites, preferred contact method, permission to communicate, and
paperwork status.(Exhibit M for City Official letter of Recommendation for CEO)
All sales of medical marijuana will be entered into BioTrack. Each patient will have an
individual profile in the system and each entry will indicate: patient/caregiver ID #, products
purchased, quantity purchased and date. Prior to each dispensing, the Patient Service Director
will evaluate the dispensing history to ensure patients are receiving the proper amount of
marijuana as specified by their recommending physician and in compliance with HIDOH.
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In addition to the use of BioTrack, KO will track registered patients and their dispensing records
utilizing the DPH electronic data management system. All required patient records will be
documented and shared with the DPH in compliance with all required protocols. Staff will be
trained to use the DPH system. This is an important safeguard to prevent a single patient from
fraudulently obtaining marijuana from multiple dispensaries.
BioTrack software will also support business operations including inventory management,
vendor and purchase order recording, business transactions, and accounting records. Since
BioTrack was developed specifically for the medical marijuana industry, it is capable of
compliant record keeping for business functions.
KO will maintain hard copies of all business documents. Proper record keeping procedures for
all business related documents are vital for the financial health and management of KO.
Documentation will be regularly updated and maintained to include the following: Business
assets and liabilities; all monetary transactions; books of accounts including journals, ledgers,
agreements, checks, invoices, vouchers; patient specific sales records; and financial information
regarding all forms of compensation granted to board members, consultants, and staff at all
levels of the organization.
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Inventory Tracking in Cultivation Facility
Record keeping for each package by lot, label and bar code
Each plant in KO will be tagged with an inventory control tag when the plant is first
transplanted into the vegetative room. Using these control tags (bar codes), the computer will
keep track of each plant's individual information. This information will include the strain, batch
number, plant number, birth date, projected harvest date and projected yield.
1)
will be implemented for security and safety. This automated
process will provide instant access of any product that has left the facility. The barcode
system will be used for small items that have been packaged and are placed in a
warehouse inventory management system.
2) The inventory will be moved from the Growing Facility to the Dispensary being bar-
coded and tagged. These items will then be recorded in the database system and placed
in a secured inventory room (vault).
During the entire process of
packaging, there will be a minimum of two people who will be present to make certain
that procedures are followed properly and sign-off and witness that all is safe and secure.
In addition, this activity will be video recorded to ensure KO and HHD that this process
is secure.
3) Inventory that is sold within the Dispensary will be tracked through a Point of Sale
system which will automatically transfer information back to the database management
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system for patient consumption purposes.
Inventory Policies and Procedures
KO will follow inventory controls and procedures designed to prohibit unlawful activity,
misallocated material, and employee malfeasance.
KO will use the following procedures:
Growth Supplies – The Plant Cultivation Manager will inventory all supplies as they
are purchased and delivered to KO facility: lights, plant containers, trays, etc.
A. Dispensary Supplies – The Dispensary Shift Manager, will inventory all supplies as they
are purchased and delivered to KO facility: labels, medicine containers, paraphernalia,
accessories, etc.
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B. Raw materials – The Plant Cultivation Manager will inventory all raw materials as they
are purchased and delivered to KO facility: Organic growing medium, Organic plant
nutrient etc.
C. Plants –
a.
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8. Ability to maintain patient confidentiality
KO is dedicated to protect the confidential medical information of its patients.
It will be made clear to all employee of KO on their first day of employment and reiterated
repeatedly thereafter that they have a responsibility in maintaining confidentiality and privacy of
operations simultaneously with confidentiality and privacy of clients, and each employee is
accountable for his/her actions or inactions. Each employee will need to sign a Letter of
Confidentiality and obtain training prior to employment at KO.
All KO staff will:
Comply with the defined responsibilities and practices in the KO Operations Manual.
Adhere to all applicable Hawaii State laws and regulations.
-Protect the registered qualifying patient's right to confidentiality with regard to patient’s
records and health conditions, including all KO policies and procedures for HIPAA
compliance.
-Ensure the legitimacy of all orders and the accuracy of dispensing records and labeling
of the order dispensed to registered qualifying patients and registered caregivers.
-Serve and satisfy registered qualifying patients’ and registered caregivers’ health needs
pursuant to Hawaii State Department of Health.
-Communicate with registered qualifying patients while protecting their protected health
information (PHI) in accordance with HIPAA guidelines and KO Privacy Policies.
Receive all necessary training regarding confidentiality and privacy of operations and
registered patients.
-Immediately notify one of the principal officers of KO about unauthorized release of
confidential patient’s information noticed by the employee. In the case of employee
violation of patient’s confidentiality and privacy of KO, there will be termination of
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employment and management will report to Hawaii Department of Health.
Record keeping
KO will have the engagement letter from the best known software providers of business record
keeping and tracking system for medical marijuana dispensaries and growing facilities. It is
BioTrack, which is providing necessary onsite assistance and educational materials about the
program. There is a monthly charge for using this software. Employee access to confidential
patient's information will be restricted. Our comprehensive computerized record keeping system
will be in HIPAA compliance. This software has several pages:
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The New Patient Intake procedure requires that patients/caregivers present their registration
cards. KO will also issue its own photo identification card for its registered qualifying patients,
necessary not only for security, but also for Point of Sales control (POS).
.
8
10. Signage, packaging, labeling and chain of custody requirements
KO is well aware of signage restrictions therefore we went ahead and created a logo that has
only our name in a discrete form to not capture kids attention. The size of our signage would not
be greater than 1600 square inches and will not have any images. Here is an example of our
signage in the locations we have chosen and have executed leases.
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Packaging and Labeling
To maintain freshness, packaging will take place every week. Cannabis ready for dispensing will
be packaged in dark pharmaceutical jars with a limit of weight 1/4 oz., labeled with their
KO--plant cultivation will place a legible, firmly affixed label containing the information
specified below on each package of medical marijuana.
The label required will contain the following:
1) The name and address of KO;
2) The quantity of the medical marijuana contained within the package;
3) The date that the KO--plant cultivation packaged the content;
4) A sequential serial number, lot number and bar code to identify lot associated
with manufacturing and processing;
5) The cannabinoid profile of the medical marijuana contained within the package,
including THC level not to exceed 10 percent;
- Whether the medical marijuana is of the low, medium or high strength strain;
7) A statement that the product is for medical use by a qualifying patient and not for
resale; and
8) A list of any other ingredients besides medical marijuana contained within the package
of oral lozenges or lotions.
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Labeling shall be clear and truthful in all respects and shall not be false or misleading in any
particular. A label containing any statements about the product other than those specified will
contain the following statement prominently displayed, and in boldface type:
"This statement has not been evaluated by the Food and Drug Administration. This
product is not intended to diagnose, treat, cure, or prevent any disease."
KO will have a food safety certified experienced handler, who will be on the kitchen staff.
He/she has to be familiar and demonstrate knowledge of FDA's Food Code to protect
consumers' health. Regular inspections and stringent policies will ensure a safe, standard,
healthful range of products for our clients.
KO protocols for production and packaging include rigorous standards for quality control and
testing, batch production records, product release specifications, labeling, ingredients, safe
storage and disposal, and sanitation.
KO will buy packaging from Medical Marijuana Bottles Inc, which is selling FDA approved
bottles, highest possible quality plastic, Odor-free, Water-proof, UV-resistant and even Child-
proof
KO will take seriously our obligation to prevent the transmission of food borne illnesses
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(through the use of oral lozenges) to all our registered patients, and professionally produce
cannabis-infused products.
As a part of quality control, our system of record keeping, which was described
earlier, will permit the identification for purposes of recall of any lot or batch of medical
marijuana from registered qualifying patients when such is found to be unsafe to use. KO
Officers hope that such accidents would never occur in our operation.
KO-plant cultivation shall process marijuana in a safe and sanitary manner to protect registered
qualifying patients from adulterated marijuana and shall process the dried leaves and flowers of
the female Marijuana plant only, which shall be:
1) Well cured and free of seeds and stems; 2) Free of dirt, sand, debris or other foreign matter; and 3) Free of mold, rot or other fungus or bacterial diseases.
Transportation Procedures §11-850-36, §329D-7 (7)
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11. Plan for secure disposal and destruction of marijuana
All waste, including waste composed of or containing finished marijuana and MIPs, will be
stored, secured and managed in accordance with applicable state and local statutes, ordinances
and regulations as described in 11-850-43.
All plant and product waste will be weighed and recorded in the inventory system and then
stored in the secure waste storage room. The waste storage room will be included in all regular
inventory counts.
The COO will create a record of the date, type, quantity, manner of disposal and the employees
present during disposal, with their signatures, and place the record on file for 6 years.]
Destruction of medical marijuana by KO will be done in such cases:
1) Contaminated marijuana;
Infected and contaminated marijuana should be packed in special containers and
quarantined in the Contamination Room immediately.
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1) Unused marijuana or surplus inventory, if the actual number of patients is less than
the projected number, thus, there is a surplus of grown and packaged medical marijuana
in the facility;
1) If the permit to operate KO expires without being renewed or is revoked;
4) If a qualified patient/primary caregiver shall dispose medical marijuana that is no
longer needed for him or he/she was disqualified as a registered patient by KO and
HIDOH;
KO COO shall check if this medicine was received in KO and provide the patient/primary
caregiver with a record, showing the name, date and the amount of medical marijuana returned to
the dispensary. This medical marijuana should be destroyed.
1) If KO requests the return of accidentally sold contaminated medical marijuana. (using
bar code system: each strain, batch, lot and prepared packages will have a bar code, and
thus KO can keep track of medicine sold)
The return request should be done as soon as such accident is discovered. (KO quality
control system and Plant Cultivation sanitary system would prevent our patients from
such accidents)
KO checks if this medicine was sold by KO and prepares a replacement. All this
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information should be recorded in patient's records and KO inventory and disposal
records.
1)
Executive Director, while checking if medical marijuana is from KO, would notice that improper
storing caused defected marijuana. There will be no replacement from KO. The record should be
made, showing the name, date and the amount of medical marijuana returned to the dispensary.
This amount of defected medicine should be totaled in the whole record of marijuana identified
for destruction.
a)
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12. Ability to ensure product safety
Steps to ensure purity will begin with the design and construction of the cultivation rooms. All
framing surfaces fastened to existing structure will be sealed with caulking at the joints to
prevent the travel of pests between grow areas. The building will be maintained free of cracks in
the foundation and voids around eaves, windows, and doors. A two-foot-wide strip-free of
ground cover and organic matter will run around the building's perimeter. The facility is
designed to include an air lock room to prevent direct exposure of the grow rooms to the
outdoors. Air intake will be HEPA filtered, and exhaust air will be carbon filtered.
The grow operation will be a closed growing environment to achieve product purity. This will
include limiting human traffic, enforcing proper sanitation and scrupulous clean room operations
(systematically pruning plants of decaying matter, quarantining contaminated plants, employing
predator species and developing disease-resistant strains). Dispensary agents working in the
cultivation areas will wear uniforms, similar to hospital scrubs, and clean footwear not worn
outdoors. All work areas will be wiped clean daily, and all surfaces will be cleaned weekly. No
plant litter, prunings, or trimmings will remain on soil or in the room.
Quality, purity, consistency of marijuana: The quality of any consumable plant is dependent
upon the ability of the grower to provide an optimum growing environment.
These elements include:
-Moisture
-Air flow
-Nutrition
-Temperature
-Light
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When all elements are controlled to meet the specific plants needs, the highest quality will be
achieved and the plants will have a lower stress level allowing them to resist diseases and pests.
Controlled Environment Agriculture (CEA) and the environment in a Plant Cultivation room are
tightly controlled for maximum efficiency. With this CEA grower can make ultra-premium
medicine regardless of growing seasons, anywhere in the world, constantly monitoring the
humidity, temperature and pH level. The future Plant Cultivation facility will be designed with a
patient in mind and built to medical laboratory standards, while maintaining our objective to be
environmentally friendly and producing the best medical cannabis possible. The facility will
have completely sterile walls and medically sealed floors, which mitigate any risk of mold or
pest. Each sector of the facility will have an optimum temperature and environmental control
necessary for maximum production of cannabis. To maximize the space, if needed, we will use a
tiered vertical hydroponic design. Additional horticultural practices that will enhance the ability
to achieve the quality goal include but are not limited to the following:
-Using quality seedlings for initial plantings
-Cloning female plants to ensure consistent genetics
-Growing female seedlings with disease resistance
-Maintaining consistent growing conditions and practices to retain THC potency
-Flushing plants prior to harvest to remove any residual build up of any fertilizer that were
used during growing
-Visual microscopic inspection leading up to harvest for resin crystals to determine
optimum harvest time within the recommended day frame to achieve proper THC level
-Careful harvest to prevent friction which can affect resin
-Proper moisture and temperature management in the drying process to allow slow, even
drying which encourages minimum THC decomposition, taste, and encourages sweet
51
smooth taste. This slow process also allows enough time for pigments to degrade improving
taste and aroma
-Vacuum sealing for storage will preserve the aroma, taste and potency
-Storing in darkness in a cool dry place, maintaining proper temps, and humidity will help
preserve the ultimate quality of medicine, pharmaceutical grade packaging and storage
containers
-Cleaning with preferably organic certified sanitizers
Cannabis Plant health, regarding macronutrients, presence of pests and presence of mold will be
consistently monitored.
Our overall plan is to address the consistency of dose issue by growing plant in a healthy
environment using consistent methods which will help re-produce healthy genetic clones. By
beginning with consistent genetics and managing ―Bestǁ harvesting, drying, curing and storage
practices we will be able to achieve consistent final quality, purity and doses in our products
which will be monitored by regular testing and record keeping.
Special protocols with testing reports will be available in KO dispensary room for every
registered patient and primary caregiver, thus assuring them that KO produces the highest quality
medicine and KO takes all serious precautions to ensure that our registered patients are receiving
purest and safest medical marijuana and other infused products with a consistency of dose.
Our Cultivation Director Mr Risley was working as a chief of the Quality Control Testing
Laboratory, he is a very experienced chemist and microbiologist. KO considers his future help as
invaluable input to our future Quality Control Program.
Cannabis will be grown in "a closed" system with strict environmental control (encapsulated
system). It is like the enclosed box built inside the growing area. There will be a metal cage
52
around this box as a security measure.
will be employed throughout the
structure to maintain mold-free environment for the safety of staff and health of the plants.
KO’s
This level of environmental biological control will ensure that cannabis will be of
the highest level quality and purity.
13. No history of having a business license revoked.
Members of KO have never had any license’s revoked or suspended, here is a list of business
licenses and medical licenses that the members have had in their professional career. CEO Jose
Breton has been operating Marijuana Businesses in Colorado and has never had a negative
violation or a warning from either the State or local municipalities.(Exhibit M for City Official
letter of Recommendation for CEO)
ExhibitMCityOfficialletterofpositiveevidenceandpersonalreference