1/11/2017 - Hawaii Department of Health

#4291Criteria 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

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Page 1 of 15Medical 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.

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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.


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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?

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.)


1/11/2017https://mmjdisp.ehawaii.gov/mmjdisp/wikiflow/view_entry.php?form_id=10439&entry_id=4291

SECTION B: INDIVIDUAL APPLICANT INFORMATION

GENERAL INFORMATION

3. Legal Name of Applicant CHARLES KENJI KAWAKAMI

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)



6. Upload Proof of Date of Birth of Applicant


* 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 Address

United 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 HK MEDICINAL LLC

21. Applying Entity's Business Address4273 RICE STREET LIHUE, Hawaii 96766United 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.

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: 21


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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:


* 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


* 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.

HK_Medicinal_organization_chart.pdf (https://mmjdisp.ehawaii.gov/mmjdisp/wikiflow/download.php?


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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


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36. FINANCIAL RESOURCES GENERAL INFORMATION


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.



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38. FINANCIAL RESOURCES -RETAIL DISPENSING LOCATION INFORMATION


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.


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;



(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;



(4) Ability to comply with the security requirements of Chapter 11-850 and Section 329D-7, HRS;




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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;



(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.


(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;



(8) Ability to maintain confidentiality of a qualifying patient's medical condition, health status, and purchases of marijuana or manufactured marijuana products;



(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;



(10) Ability to comply with requirements for packaging, labeling, and chain of custody of products;




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(11) A plan for secure disposal of marijuana and manufactured marijuana products;



(12) Ability to ensure product safety, in accordance with Chapter 11-850 and Sections 329D-8, 329D-10, 329D-11, HRS.



(13) No history of having a business license revoked.



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 CHARLES KENJI KAWAKAMI

If you have previously submitted an application and this is a revision, enter the unique entry number(s) of your previous submission(s) here. #3265

User ID

User Email

Entry Info

Date Created 29 Jan 2016 - 02:14:10 PM

Date Updated

IP Address



The information contained in this document and any attachments thereto is proprietary in nature and constitutes a trade secret under the Freedom of Information Act and/or information that constitutes a significant privacy interest under the Hawaii Uniform Information Practices Act, Haw. Rev. Stat., Chapter 92F, and it is requested that any such information be exempt from disclosure under such acts.

1382262_1

OPERATING AGREEMENT OF HK MEDICINAL LLC

(see attached)

Note: While this Operating Agreement was not required in the Application, the Applicant is providing this pursuant to HRS, Section 329D-4(g)(10) and HAR, Section 11-850-16(a)(2)(F), as the equivalent of the “applying entity’s bylaws”.

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OPERATING AGREEMENT OF

HK MEDICINAL LLC

a Hawaii limited liability company

THIS OPERATING AGREEMENT OF HK MEDICINAL LLC (the “Operating Agreement”) is made this 25th day of January, 2016 (the “Effective Date”), by and between the undersigned Class A Voting Members and Class B Non-Voting Members (as such terms are defined below) (each, a “Member”, and together, the “Members”, as further defined herein).

RECITALS

WHEREAS, HK MEDICINAL LLC, a Hawaii limited liability company (the “Company”), was formed by the Members under the Hawaii Uniform Limited Liability Company Act, Chapter 428 of the Hawaii Revised Statutes, as amended (the “Act”), pursuant to the Articles of Organization of the Company (the “Articles of Organization”) filed with the Department of Commerce and Consumer Affairs of the State of Hawaii (the “DCCA”) on August 6, 2015;

WHEREAS, the Company was formed to operate a licensed medicinal marijuana production, manufacturing and retail dispensary business in accordance with the laws of the State of Hawaii, and any and all related activities in connection therewith; and

WHEREAS, the Members now wish to enter into this Operating Agreement to set forth their agreement with respect to the ownership, management and operation of the Company.

NOW, THEREFORE, upon the covenants and conditions set forth herein and other consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto mutually agree as follows:

1. FORMATION

1.1 Name. The name of the company is HK MEDICINAL LLC.

1.2 Term. The term (the “Term”) of the Company commenced upon the filing of the Articles of Organization with the DCCA and shall continue until December 31, 2115, unless earlier terminated or extended in accordance with the provisions of the Act and/or this Operating Agreement.

1.3 Principal Place of Business. The initial mailing address and the location of the initial principal office of the Company shall be at 4273 Rice Street, Lihue, Hawaii 96766 (the “Principal Office”). The Manager (as defined herein) may change the mailing address, relocate the Principal Office or establish additional offices from time to time.

1.4 Registered Office and Registered Agent. The Company’s registered office shall be at 4273 Rice Street, Lihue, Hawaii 96766, and the name of the initial registered agent for service of process at such address shall be Charles Kawakami. The Manager may, from time to time, change the registered agent or the registered office through appropriate filings with the DCCA.

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1.5 Purposes and Powers. The Company has been formed (a) to operate a licensed medicinal marijuana production, manufacturing and retail dispensary business in accordance with Act 241 (July 14, 2015) relating to medical marijuana (the “Medical Marijuana Dispensary Act”), and the applicable laws of the State of Hawaii, and any and all related activities in connection therewith, and (b) to engage in any other business that may lawfully be conducted by a limited liability company under the Act as approved by the Class A Voting Members holding a majority of the Class A Voting Shares (the “Business”). The Company shall have all of the powers granted to a limited liability company under the Act.

1.6 Intention for Company. The Company was formed as a limited liability company under and pursuant to the Act. The Members specifically intend and agree that the Company shall not be, for legal purposes, a partnership (including a limited partnership) or any other venture, but it shall be a limited liability company under and pursuant to the Act, which has elected to be taxed as a partnership for federal and state income tax purposes. As such, the Members will be subject to federal income tax treatment on income, deductions, losses, credits and other tax items of the Company (collectively, the “Tax Items”) as partners of a partnership; provided, however, other than for federal and state income tax purposes, no Member shall be construed to be a partner in the Company or a partner of any other Member for any purpose, and the Articles of Organization, this Operating Agreement and the relationship created thereby and arising therefrom shall not be construed to suggest otherwise.

1.7 Title to Company Property. Title to Company property, whether real, personal or mixed, tangible or intangible, shall be deemed to be owned by the Company as an entity and no Member shall have any ownership interest in such property in their individual name. All Company property shall be recorded as the property of the Company on its books and records, irrespective of the name in which legal title to that property is held. The Company’s credit and assets shall be used solely for the benefit of the Company, and no asset of the Company shall be transferred or encumbered for, or in payment of, any individual obligation of any Member. Each Member’s respective Shares (as defined herein) in the Company shall be personal property for all purposes, and a judgment creditor of any Member shall only be entitled to a charging order against such Member’s right to Distributions from the Company and shall not be entitled to exercise any other rights of such Member as a “Member” of the Company.

2. DEFINITIONS

Capitalized words and phrases used in this Operating Agreement have the following meanings:

2.1 “Accounts” has the meaning set forth in Section 5.1(f).

2.2 “Act” has the meaning set forth in the recitals of this Operating Agreement.

2.3 “Additional Capital Contribution” has the meaning set forth in Section 7.2.

2.4 “Additional Member” means any Person admitted as a Member of the Company after the Effective Date in accordance with Section 11.8.

2.5 “Affiliate” means, for any Person, (i) any Person directly or indirectly controlling, controlled by, or under common control with such Person, (ii) any officer, director, general partner, member or trustee of such Person, or (iii) any Person who is an officer, director, general partner, member or trustee of any Person described in the preceding clauses (i) or (ii). For

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purposes of this definition, the terms “controlling”, “controlled by”, or “under common control with” shall mean the possession, 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, or the power to elect at least fifty percent (50%) of the directors, managers, general partners or Persons exercising similar authority concerning such Person.

2.6 “Approved Sale” has the meaning set forth in Section 9.3.

2.7 “Articles of Organization” has the meaning set forth in the recitals of this Operating Agreement.

2.8 “Assignee” has the meaning set forth in Section 11.2.

2.9 “Bankrupt” means, with respect to any Member or the Company, any of the following events:

(a) the filing of a voluntary petition in bankruptcy or for reorganization or for the adoption of an arrangement under the Bankruptcy Code (as now or in the future amended) or an admission seeking the relief therein provided;

(b) the making of a general assignment for the benefit of creditors;

(c) consenting to the appointment of a receiver or trustee for all or a substantial part of such Person’s property;

(d) in the case of the filing of an involuntary petition in bankruptcy, an entry of an order for relief, where such order is not vacated or stayed within ninety (90) days after the entry of such order;

(e) the entry of a court order appointing a receiver or trustee for all or a substantial part of such Person’s property without its consent, where such appointment is not vacated or stayed within ninety (90) days after such appointment; or

(f) the assumption of custody or sequestration by a court of competent jurisdiction of all or substantially all of such Person’s property.

2.10 “Breach Event” has the meaning set forth in Section 12.3.

2.11 “Breaching Member” has the meaning set forth in Section 12.3.

2.12 “Business” has the meaning set forth in Section 1.5.

2.13 “Capital Account” has the meaning set forth in Section 7.5.

2.14 “Capital Contribution” means, with respect to any Member, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Company with respect to the Shares held by such Member pursuant to the terms of this Operating Agreement.

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2.15 “Class A Voting Member” means any Member holding Class A Voting Shares as noted in Exhibit A attached hereto and incorporated herein by this reference, as amended from time to time. “Class A Voting Members” means all such Members.

2.16 “Class A Voting Shares” means those Shares held by the Class A Voting Members set forth on Exhibit A hereto, as amended from time to time.

2.17 “Class B Non-Voting Member” means any Member holding Class B Non-Voting Shares as noted in Exhibit A hereto, as amended from time to time. “Class B Non-Voting Members” means all such Members.

2.18 “Class B Non-Voting Shares” means those Shares held by the Class B Non-Voting Members set forth on Exhibit A hereto, as amended from time to time.

2.19 “Code” means the Internal Revenue Code of 1986, as amended from time to time.

2.20 “Company” has the meaning set forth in the recitals of this Operating Agreement.

2.21 “Consent” means either the written consent in lieu of meeting or the affirmative vote at a meeting duly called and held pursuant to this Operating Agreement, as the case may be, to approve the act or thing for which the Consent is solicited, or the act of granting such Consent. The Consent of any Person may be given, withheld or conditioned in the sole and absolute discretion of such Person.

2.22 “DCCA” has the meaning set forth in the recitals of this Operating Agreement.

2.23 “Dissociated Member” has the meaning set forth in Section 10.1.

2.24 “Distribution” means a transfer of the Company’s cash, property or other assets by the Company to a Member in respect to the Member’s Shares.

2.25 “Distributional Interest” means the right, title and interest in any and all Distributions from the Company to a Member, in the Member’s capacity as a Member, on account of the Member’s Shares, together with any and all allocations of any Tax Items with respect to the Member’s Shares, but specifically excluding all non-economic rights of the Member (such as voting rights, rights to receive notice of, to attend, and to participate in meetings, rights with respect to Company information and fiduciary duties). A Member’s Distributional Interest shall be expressed as a percentage based on the number of Shares held by the Member and the total number of Shares held by all of the Members.

2.26 “Effective Date” has the meaning set forth in the introductory paragraph of this Operating Agreement.

2.27 “Event of Dissociation” has the meaning set forth in Section 10.1.

2.28 “Federal Securities Act” has the meaning set forth in Section 15.1.

2.29 “Fiscal Year” has the meaning set forth in Section 3.3.

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

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

(b) The Gross Asset Value of all Company assets shall be adjusted to equal their respective gross fair market value, as determined by the Manager, as of the following times:

(i) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution;

(ii) the distribution by the Company to a Member of more than a de minimis amount of the Company’s real or personal property as consideration for an interest in the Company; and

(iii) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);

provided, however, that adjustments pursuant to clauses (i) and (ii) above shall be made only if the Manager reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company.

(c) The Gross Asset Value of any Company asset distributed to any Member shall be the gross fair market value of such asset on the date of distribution; and

(d) The Gross Asset Value of the Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and Section 8.4; provided, however, that the Gross Asset Value shall not be adjusted pursuant to this Section 2.30(d) to the extent the Manager determines that an adjustment pursuant to Section 2.30(b) is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this Section 2.30(d).

2.31 “Hawaii Securities Act” has the meaning set forth in Section 15.1.

2.32 “Indemnified Party” has the meaning set forth in Section 6.1.

2.33 “Interested Manager” has the meaning set forth in Section 5.10(b).

2.34 “Interested Member” has the meaning set forth in Section 4.4(b).

2.35 “Interim Distribution” means any Distribution except a Liquidating Distribution (as defined below).

2.36 “Issuance Items” has the meaning set forth in Section 8.2(g).

2.37 “Liquidating Distribution” means a Distribution in connection with (a) the Company’s partial or complete redemption of a Member’s Shares to the extent that this redemption is not an exchange within the meaning of Section 302(a) or Section 303 of the Code; or (b) the Company’s liquidation.

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2.38 “Liquidator” has the meaning set forth in Section 13.2.

2.39 “Litigation” means any action, suit, administrative proceeding, investigation, arbitration, employee grievance proceeding, governmental enforcement proceeding or other proceeding.

2.40 “Manager” means the Person authorized to manage the business, property and affairs of the Company pursuant to Section 5, or any replacement Manager elected or appointed pursuant to Section 5.4. “Managers” means all of such Persons.

2.41 “Medical Marijuana Dispensary Act” has the meaning set forth in Section 1.5.

2.42 “Member” means any Person noted as a Member (or who becomes a Member pursuant to the terms of this Operating Agreement) in Exhibit A hereto, as amended from time to time, including but not limited to the Class A Voting Members and all of the Class B Non-Voting Members. “Members” means all such Persons.

2.43 “Non-Contributing Member” has the meaning set forth in Section 7.3.

2.44 “Offeror Member” has the meaning set forth in Section 11.3.

2.45 “Operating Agreement” has the meaning set forth in the introductory paragraph of this Operating Agreement.

2.46 “Person” means any individual, partnership, corporation, trust, limited liability company, or other entity.

2.47 “Principal Office” has the meaning set forth in Section 1.3.

2.48 “Regulations” means the official Department of Treasury interpretation of the Code.

2.49 “Regulatory Allocations” has the meaning set forth in Section 8.3.

2.50 “Related Party” means any Member, Manager or employee of the Company or any Affiliate of any of them.

2.51 “Share” means the respective unit of ownership of a Member in the Company, which includes, but is not limited to, the right to receive any and all distributions of money, property, and other benefits from the Company to a Member, in the Member’s capacity as a Member, on account of the Member’s Shares, together with any and all allocation of Tax Items with respect to the Member’s Shares and all non-economic rights of the Member (such as voting rights, if any, rights to receive notice of, to attend, and to participate in meetings, as applicable, rights with respect to Company information and fiduciary duties). “Shares” means the collective Shares of all Members and includes Class A Voting Shares and Class B Non-Voting Shares. The Shares of each Member shall be as noted in Exhibit A hereto, as amended from time to time. No holder of Shares of the Company shall be entitled to divide the Shares into fractional Shares.

2.52 “Substitute Member” means any Person not a Member of the Company to whom any Shares in the Company have been transferred and who has been admitted to the Company as a Member pursuant to and in accordance with the provisions of Section 11.

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2.53 “Tax Distribution” has the meaning set forth in Section 8.10.

2.54 “Tax Items” has the meaning set forth in Section 1.6.

2.55 “Term” has the meaning set forth in Section 1.2.

2.56 “Transfer” means, as a noun, any voluntary or involuntary transfer, sale, pledge, assignment, hypothecation, or other disposition and, as a verb, voluntarily or involuntarily to transfer, sell, pledge, assign, hypothecate, or otherwise dispose of in any way.

2.57 “Transferee” means any Person who has been Transferred any Shares pursuant to Section 11.

3. BOOKS, RECORDS AND TAX MATTERS

3.1 Company Books and Records; Accounting Practices. The Company’s books and records shall be kept on a cash method of accounting consistently applied, and shall reflect all the Company’s transactions and shall be appropriate and adequate for all Company business. The Company’s books and records will be maintained either at its Principal Office or such other place as the Manager designates, and each Member shall have access to the Company’s books and records at all reasonable times.

3.2 Records to be Maintained. The Manager shall maintain the following records at the Principal Office or such other place as the Manager designates:

(a) A register showing the names, addresses and taxpayer identification numbers of the Members of the Company and the respective Shares owned by such Members;

(b) A copy of the Articles of Organization and all amendments thereto, together with executed copies of any powers of attorney pursuant to which the same have been executed;

(c) Copies of the Company’s federal, foreign, state and local income tax returns and reports, if any, for the three (3) most recent years;

(d) Copies of this Operating Agreement including all amendments thereto, together with executed copies of any powers of attorney pursuant to which the same have been executed; and

(e) Financial statements of the Company for the three (3) most recent years, if applicable.

3.3 Fiscal Year. The fiscal year of the Company shall be the calendar year (the “Fiscal Year”).

3.4 Accounting Reports. Within ninety (90) days after the close of each Fiscal Year, or as soon as reasonably possible thereafter, the Manager shall make available to the Members a financial report reviewed by an independent certified public accountant of the activities of the Company for the preceding Fiscal Year, including a copy of a balance sheet of the Company as of the end of such year and a statement of income or loss for such year.

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3.5 Banking. The Manager shall open and maintain a separate bank account(s) in the name of the Company, in which there shall be deposited all the funds of the Company. No other funds may be deposited into the account(s) and the Company’s funds shall not be commingled in any fashion with the funds of any Member, Manager or other Person(s). The funds in that account must be used solely for the Business of the Company and all withdrawals from that account are to be made only on checks signed by or wire transfers authorized by the Manager or as otherwise designated by the Manager.

3.6 Tax Returns. The Manager shall cause all required federal and state income tax returns for the Company to be prepared and timely filed with the appropriate authorities. Within ninety (90) days after the end of each Fiscal Year, or as soon as reasonably practicable thereafter, each Member shall be furnished a statement suitable for use in the preparation of the Member’s income tax return, showing the respective amounts of any distributions, contributions, gains, losses, profits or credits allocated to such Member during such Fiscal Year.

3.7 Elections. The Manager may make any tax elections for the Company allowed under the Code or the tax laws of any state or other jurisdiction having taxing jurisdiction over the Company. By executing this Operating Agreement, each of the Members hereby consents to any such election (including both prospective and retroactive elections) made by the Manager and consents to any action necessary, including without limitation, the execution of any forms and documents, for the Company to be treated as a partnership for federal and state income tax purposes.

3.8 Taxes of Taxing Jurisdictions. To the extent that the laws of any taxing jurisdiction require and as requested by the Manager, each Member, Assignee or Transferee will submit an agreement indicating that the Member, Assignee or Transferee will make timely income tax payments to the taxing jurisdiction and that the Member, Assignee or Transferee accepts personal jurisdiction of the taxing jurisdiction with regard to the collection of income taxes attributable to the Member’s, Assignee’s or Transferee’s income, and interest, and penalties assessed on such income. If the Member, Assignee or Transferee fails to provide such agreement, the Company may withhold and pay over to such taxing jurisdiction the amount of tax, penalty and interest determined under the laws of the taxing jurisdiction with respect to such income. Any such payments with respect to the income of a Member, Assignee or Transferee shall be treated as a distribution for purposes of Section 8.

3.9 Tax Matters Partner. The Manager (or if it is not eligible, the Manager shall designate any other Member) shall be designated as the “tax matters partner” of the Company pursuant to Section 6231(a)(7) of the Code. The tax matters partner shall take such action as may be necessary to cause each of the Members to become a “notice partner” within the meaning of Section 6223 of the Code.

4. MEMBERS

4.1 Names and Addresses. The names and addresses of the Members of the Company and their respective Shares and Distributional Interest, shall be as noted in Exhibit A hereto, as amended from time to time.

4.2 Liability of Members. No Member shall be liable as either Member or as Manager for the debts, obligations or liabilities of the Company, including but not limited to that incurred by the Company under a judgment decree or order of a court. The failure of the Company to observe any formalities or requirements relating to the exercise of its powers or management of

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its business or affairs under this Operating Agreement or the Act shall not be grounds for imposing personal liability on the Members for liabilities of the Company.

4.3 Members Are Not Agents. Pursuant to Section 5.1 and the Articles of Organization, the management of the Company is vested in the Manager. No Member who is not a Manager, and no Member acting solely in the capacity as a Member, is an agent of the Company nor can any Member in such capacity bind the Company nor execute any instrument on behalf of the Company.

4.4 Business of Members.

(a) Each Member shall account to the Company and hold in trust for the benefit of the Company, any property, profit, or benefit derived by such Member, in the conduct of the Company’s business or from a use or appropriation by such Member of property of the Company, including, without limitation, information developed exclusively for the Company and opportunities expressly offered to the Company.

(b) A Member may lend money to and transact other business with the Company and/or any Affiliate. The rights and obligations of a Member who lends money to or transacts business with the Company and/or any Affiliate are the same as those of a Person who is not a Member, subject to other applicable law. No transaction with the Company and/or any Affiliate shall be voidable solely because a Member (the “Interested Member”) has a direct or indirect interest in the transaction if (i) the transaction is fair to the Company and/or such Affiliate, as the case may be, and (ii) the Manager, knowing the material facts of the transaction and the Interested Member’s interest in the transaction, authorizes, approves and ratifies the transaction.

4.5 Meetings of Members; Notice; Proxies; Quorum; Voting.

(a) Annual and Special Meetings. Beginning in 2017, there shall be an annual meeting of the Members to be held at such time and on such date as may be fixed by the Manager and stated in the notice of such meeting. The Manager shall present financial reports of the prior Fiscal Year of the Company, and shall report on the Company’s business and affairs. Additionally, special meetings of the Class A Voting Members may be called at any time by the Manager or any of the Class A Voting Members and need not include an Class B Non-Voting Members (for notice purposes or otherwise).

(b) Location and Conduct of Meetings. All meetings of the Members shall be held at the Principal Office of the Company or any other place specified in the notice of meeting. The Manager shall preside over each meeting of the Members. Meetings of the Members may be held by conference telephone call or by any other means of communication by which all parties can hear each other simultaneously during the meeting, and such participation shall constitute presence in person at the meeting. Any meeting of the Members may be adjourned from time to time to another date, time and place at which the meeting will be reconvened, and it is not necessary to give any further notice of the reconvening.

(c) Notice of Meetings. Notice of the date, time and place of each annual meeting of the Members shall be given to each Member not less than five (5) days before the meeting date. Notice of the date, time and place of each special meeting of the Class A Voting Members shall be given to the Class A Voting Members not less than five (5) days before the meeting date. All such notices must include a description of the purpose or purposes for which

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the meeting is called. The Members entitled to notice of a meeting of the Members shall be determined as of the record date for the meeting. The record date shall be a date, not earlier than seventy (70) days nor less than ten (10) days before the meeting date, selected by the Manager. If the Manager does not specify a record date, the record date shall be the date on which notice of the meeting was first mailed or otherwise delivered to the Members.

(d) Proxies. Any eligible Class A Voting Member may cast or authorize the casting of a vote by filing a written appointment of a revocable proxy with the Manager at or before the meeting at which the appointment is to be effective. The Manager may sign or authorize the written appointment by telegram, cable, facsimile or other means of electronic transmission stating, or submitted with information sufficient to determine, that the Class A Voting Member authorized the transmission. Any copy, facsimile, telecommunication or other reproduction of the original of either the writing or the transmission may be used in lieu of the original, if it is a complete and legible reproduction of the entire original. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. Furthermore, a Class A Voting Member may not grant or appoint an irrevocable proxy.

(e) Quorum. The presence, in person or by proxy, of no less than the Class A Voting Members holding a majority of the Class A Voting Shares shall constitute a quorum. The presence of any Class B Non-Voting Member shall not be required for a quorum to be present at any meeting of the Members.

(f) Voting Rights. On each matter requiring action by the Members, the Class A Voting Members shall have the sole and exclusive right to vote on such matters. A Class A Voting Member shall be entitled to one (1) vote for each Class A Voting Share held by such Class A Voting Member. Except as otherwise stated in the Articles of Organization, this Operating Agreement, or applicable law, a matter submitted to the vote of the Class A Voting Members shall be deemed approved upon the approval of the Class A Voting Members holding a majority of the Class A Voting Shares. The Class B Non-Voting Members shall have no voting or approval rights whatsoever.

(g) Action by Members Without Meeting. Any action that may be taken at any meeting of the Members may be taken without a meeting, if a Consent in writing, setting forth the action so taken, is signed and delivered to the Company for that action by all of the Class A Voting Members having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which a quorum is present. All such Consents shall be filed with the Company and kept in the minute book of the Company.

4.6 Compliance with the Medical Marijuana Dispensary Act. For so long as a Member is a Member of the Company, each Member agrees to abide by all of the applicable laws, rules and regulations that may apply to such Member under the Medical Marijuana Dispensary Act, including, without limitation, the terms and provisions of the criminal history record checks performed pursuant to Hawaii Revised Statutes § 846-2.7, as amended. Additionally, each Member represents and warrants as of the Effective Date and for so long as such Member is a Member of the Company, that such Member is not a convicted felon in the United States of America and that there are no pending felony charges pending against such Member. In the event the Member is an entity, the foregoing representation and warranty shall apply to each present and future officer, director, shareholder, member, manager and/or partner of the Member and any of the same for any upstream entity that is a shareholder, member, manager and/or partner of the Member and their respective shareholders, members, managers and/or partners.

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Additionally, if the Member is an individual, such Member hereby consents from time to time to a criminal background check by the Hawaii Criminal Justice Data Center on behalf of the Company and/or the State of Hawaii Department of Health. This shall include, without limitation, submission of the Member’s name, date of birth, social security number and gender. If the Member is an entity, such Member hereby consents from time to time to a criminal background check by the Hawaii Criminal Justice Data Center on behalf of the Company and/or the State of Hawaii Department of Health, for such Member’s present and future officers, directors, shareholders, members, managers, and/or partners. This shall include, without limitation, submission of such person’s name, date of birth, social security number and gender. The same shall apply to any upstream entities who are shareholders, members, managers and/or partners and their respective shareholders, members, managers and/or partners. The Company shall have the right to submit any such background check received from the Hawaii Criminal Justice Data Center to the State of Hawaii Department of Health or any other governmental agency with jurisdiction thereof.

5. MANAGER

5.1 Manager’s Exclusive Right to Manage. Except where the approval of the Members is expressly required in this Operating Agreement, the business, property and affairs of the Company shall be managed exclusively by the Manager. Subject to the foregoing, the Manager shall have full, complete and exclusive authority, power and discretion as is reasonably necessary or desirable to manage and control the business, property and affairs of the Company, to make all decisions regarding those matters and to perform any and all acts or activities customary or incident to the management of the Company’s business, property and affairs, which power and authority includes, and is not limited to, the following:

(a) Administrative Offices and Work Sites. Establishing, maintaining, operating and managing administrative offices and other work sites for the conducting of the business affairs of the Company in such places as the Manager may deem convenient or necessary from time to time;

(b) Hiring Employees. Investigating, hiring, paying, supervising and discharging such employees or independent contractors as may be necessary or desirable to accomplish the Manager’s duties under this Operating Agreement, excluding any employee or independent contractor who is a Related Party;

(c) Hiring Professionals. Engaging such accountants, attorneys, consultants and other professionals as may be necessary or desirable to accomplish the Manager’s duties under this Operating Agreement;

(d) Contracting and Leasing. Entering into contracts, leases, and other instruments as may be required for the normal maintenance, operation and management of any administrative offices and other work sites and for the ordinary conduct of the business affairs of the Company, including, without limitation, performing all duties of landlord and/or tenant under all leases for which the Company is the landlord and/or tenant, as the case may be;

(e) Insurance. Obtaining insurance for the Company and Business as is customary in the business in which the Company is engaged and in the places in which it is so engaged;

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(f) Bank Accounts. Establishing and maintaining one or more checking, savings and other banking relationships (the “Accounts”) in the name of the Company;

(g) Paying Bills. Subject to Section 3.5, receiving and paying from the Accounts all bills for services, work and supplies incurred in connection with the ordinary conduct of the business and affairs of the Company;

(h) Reporting and Filing Returns. Executing and causing to be filed when due all forms, reports and returns required by law relating to the business and affairs of the Company, and to record or not record transfers of real property in accordance with the best interests of the Company;

(i) Collections. Collecting all dividends, interest, distributions of principal, and other sums, charges and/or income due to the Company with respect to assets or other investments of every description owned in whole or part by the Company;

(j) Assets. Acquiring, holding, managing, operating, and disposing the Company’s assets and investments, and approving any and all decisions regarding the acquisition, holding, managing, operating and disposing of the same;

(k) Litigation. Instituting, compromising, settling or abandoning any claims existing in favor of or against the Company and representing the Company in any proceeding or litigation involving the Company;

(l) Investing. Investing or reinvesting all or any part of the assets of the Company or the income, interest, dividends, distributions and other sums received thereon, in federally insured, interest-bearing depository accounts;

(m) Borrowing Money and Guaranteeing Indebtedness. Subject to Section 5.2(a), borrowing money, guaranteeing any indebtedness or other liabilities, and/or incurring any indebtedness on behalf of the Company or any Affiliate, whether secured or unsecured by all or any portion of the Company’s and/or any Affiliate assets, for any purpose whatsoever, including, without limitation, the negotiating and executing of any financing documentation such as promissory notes, debt securities, mortgages, guarantees, or other debt instruments;

(n) Interim Distributions. Determining and paying any Interim Distribution to the Members;

(o). Substitute Members and Additional Members. Admitting any Substitute Members pursuant to Section 11.6 or any Additional Members pursuant to Section 11.8;

(p) Additional Capital Contributions. Approving any Additional Capital Contributions pursuant to Section 7.2;

(q) Transactions with an Interested Member. Approving any Interested Member transactions pursuant to Section 4.4(b); and

(r) Change of Control of a Class B Non-Voting Member. Approving any change of control of a Class B Non-Voting Member pursuant to Section 11.10.

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5.2 Restrictions on Authority of the Manager. The Manager shall not have the authority to, and covenants and agrees that it shall not, do any of the following acts without the approval of the Class A Voting Members holding a majority of the Class A Voting Shares:

(a) Borrowing Money. Borrowing money on behalf of the Company, whether secured or unsecured by all or any portion of the Company’s assets, in excess of $100,000.00;

(b) Dissolving the Company. Dissolve or seek to dissolve the Company (see Section 13.1); and

(c) Transactions with an Interested Manager. Approving any transactions with an Interested Manager (see Section 5.10(b)).

5.3 Actions of the Manager. The Manager has the power to bind the Company as provided in this Section 5. The act of the Manager for the purpose of apparently carrying on the usual course of business or affairs of the Company, including the exercise of the authority indicated in this Section 5, shall bind the Company, and no Person dealing with the Company shall have any obligation to inquire into the power or authority of the Manager acting as such on behalf of the Company.

5.4 Election and Removal of the Manager.

(a) Number; Term. The Company shall initially have one (1) Manager, who shall initially be CHARLES KAWAKAMI. The number of Managers shall be fixed from time to time by the Class A Voting Members holding a majority of the Class A Voting Shares. Unless a Manager resigns or is removed, a Manager shall hold office until a successor shall have been elected and qualified. In the event a Manager resigns in accordance with Section 5.4(b) or is removed in accordance with Section 5.4(c), the replacement Manager shall be appointed by the Class A Voting Members holding a majority of the Class A Voting Shares. In any event, a Manager need not be a Member, an individual or a resident of the State of Hawaii. The Members agree to execute any documents and take whatever actions as are necessary to effectuate the removal and replacement of a Manager.

(b) Resignation. A Manager may resign at any time upon written notice to the Class A Voting Members without prejudice to the rights, if any, of the Company under any contract to which the Manager is a party. The resignation 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.

(c) Removal. A Manager may be removed at any time by the Class A Voting Members holding a majority of the Class A Voting Shares upon written notice to the Manager. Except as provided herein, the removal of a Manager who is also a Member shall not affect the Manager’s rights as a Member or constitute a withdrawal of such Member.

(d) Vacancies. Any vacancy occurring for any reason in the number of Managers may be filled by the Class A Voting Members holding a majority of the Class A Voting Shares. During the time that the Company has no Manager, decisions regarding the Company’s business affairs shall made by the Class A Voting Members holding a majority of the Class A Voting Shares until such time that a replacement Manager shall be appointed by the Class A Voting Members holding a majority of the Class A Voting Shares.

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5.5 Other Agents. The Manager may authorize and appoint any agent to enter into any lawful contract or to otherwise act on behalf of the Company, subject to the restrictions set forth in this Operating Agreement. Such authority may be general or be confined to specific instances.

5.6 Fiduciary Duties. The Manager shall manage and control the affairs of the Company to the best of the Manager’s ability and shall use the Manager’s best efforts to carry out the purposes of the Company. A Manager’s fiduciary responsibilities to the Company and to the Members shall be limited to the safekeeping and use of all funds and assets of the Company. A Manager shall not employ, or permit another to employ, such funds or assets in any manner except for the exclusive benefit of the Company. The Manager does not, in any way, guarantee any specific return on a Member’s investment in the Company.

5.7 Company Liability for the Manager’s Conduct. The Company shall be liable for loss or injury caused to any Person, or for a penalty incurred, as a result of a wrongful act or omission or other actionable conduct of the Manager acting in the ordinary course of the Company’s business, except where caused by the Manager’s fraud, gross negligence or willful misconduct. The liability of the Manager for damages and other monetary relief for breach of the Manager’s fiduciary duty shall be eliminated or limited to the fullest extent permitted under Hawaii law.

5.8 Company Expenses. The Company shall pay all costs and expenses of the Company, including, but not limited to, all organizational expenses, all costs reasonably related to the conduct of the Company’s day-to-day business affairs, all costs and other taxes applicable to the Company, all legal, audit, accounting, brokerage and other fees, all expenses in connection with the acquisition, management and disposition of Company assets (including legal and accounting fees), and all costs related to the Company’s compliance with any applicable federal, state or local laws, rules or ordinances.

5.9 Compensation of the Manager. The Manager shall be reimbursed for all reasonable out-of-pocket expenses incurred for the Manager’s services performed in managing the Company in accordance with this Operating Agreement, and shall receive reasonable compensation for such services as determined by the Class A Voting Members holding a majority of the Class A Voting Shares.

5.10 Business of the Managers.

(a) The Manager shall account to the Company and hold in trust for the benefit of the Company, any property, profit or benefit derived by the Manager, in the conduct of the Company’s business or from a use or appropriation by the Manager of the Company’s property, including, without limitation, information developed exclusively for the Company and opportunities expressly offered to the Company.

(b) The Manager may lend money to and transact business with the Company and/or any Affiliate. The rights and obligations of a Manager who lends money to or transacts business with the Company and/or any Affiliate are the same as those of a Person who is not a Manager, subject to other applicable law. No transaction with the Company and/or any Affiliate shall be voidable solely because the Manager (the “Interested Manager”) has a direct or indirect interest in the transaction if (i) the transaction is fair to the Company and/or such Affiliate, as the case may be, and (ii) the Class A Voting Members holding a majority of the

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Class A Voting Shares, knowing the material facts of the transaction and the Interested Manager’s interest in the transaction, authorizes, approves and ratifies the transaction.

6. INDEMNIFICATION

6.1 Indemnification. To the fullest extent permitted under the laws of the State of Hawaii, the Company shall indemnify and hold harmless each current and former Manager and Member of the Company (each, an “Indemnified Party”), from and against any and all losses, claims, demands, costs, damages, liabilities, joint and several, expenses of any nature, including attorneys’ fees and costs, disbursements, judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits, or proceedings, civil, criminal, administrative or investigative, in which an Indemnified Party may be involved, or threatened to be involved, as a party or otherwise, arising out of, or incidental to, the initial offering of Shares of the Company or the Business of the Company, regardless of whether the Indemnified Party continues to act in such capacity if:

(a) The Indemnified Party acted in a manner authorized by this Operating Agreement and the Articles of Organization which the Indemnified Party believed to be in, or not opposed to, the interests of the Company, and, with respect to any criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and

(b) The Indemnified Party’s conduct did not constitute actual fraud, gross negligence, or willful or wanton misconduct. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere, or its equivalent, shall not, in and of itself, create a presumption or otherwise constitute evidence that the Indemnified Party acted in a manner contrary to that specified herein.

6.2 Expenses. Expenses incurred by an Indemnified Party in defending any claim, demand, action, suit or proceeding subject to this Section 6.2 shall be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Indemnified Party of an undertaking to repay such amount if it is determined that the Company is not liable for the same or if reimbursement is obtained from some other source. If it shall be determined that such Indemnified Party is not entitled to be indemnified as authorized in this Section 6, such Indemnified Party shall be liable to the Company to repay such expenses as incurred by the Company on said Person’s behalf.

6.3 Other Rights. The indemnification provided in this Section 6 shall be in addition to any other rights to which those indemnified may be entitled under any agreement or vote of the Class A Voting Members holding a majority of the Class A Voting Shares as a matter of law or equity, or otherwise, as to an action in the capacity as Manager or Member, and shall inure to the benefit of the heirs, successors, assigns and legal representatives of the same. A Manager shall not be liable to the Company or its Members for monetary damages for conduct as Manager except to the extent that the Act, as it now exists or may hereafter be amended, prohibits elimination or limitation of the Manager’s liability. No repeal or amendment of this Section 6 or of the Act shall adversely affect any right or protection of a Manager for actions or omissions prior to the repeal or amendment.

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7. CONTRIBUTIONS AND CAPITAL ACCOUNTS

7.1 Initial Contributions by Current Members. Each Member has made or shall make the initial Capital Contribution described for that Member as set forth in such Member’s subscription agreement with the Company.

7.2 Additional Contributions. From time to time, the Manager may determine that additional funds are necessary in order to meet the expenses of the Company to enable the Company to (a) conduct its business, or (b) expand its business. Upon making such determination, the Manager shall give written notice to all of the Members of the need for such additional funds, the Member’s pro rata share (based on their respective Shares in the Company) of such additional funds, and the date such additional funds are needed (such date to be not less than thirty (30) days after the date of such notice). The Members shall pay their pro rata share of the additional funds as set forth in said notice (which funds upon payment to the Company shall be deemed to be an “Additional Capital Contribution”) not later than the date set forth in the Manager’s written notice to all of the Members requesting the additional funds. No additional Shares shall be issued to the Members in exchange for their Additional Capital Contribution.

7.3 Non-Contributing Members.

(a) If any Member (a “Non-Contributing Member”) shall fail to make its pro rata share of any Additional Capital Contribution required to be made by such Member under Section 7.2, the other Members shall have the right and option at any time thereafter, but not the obligation, to advance to the Company the unpaid portion of such required Additional Capital Contribution that is not paid by the Non-Contributing Member. Any such advance shall be treated as a purchase by the advancing Members of a pro rata share of the Non-Contributing Member’s Shares equal to (A) times (B), where (A) is the amount advanced by the Advancing Member divided by the aggregate Capital Contributions of all Members to date (including the total additional funds requested and approved pursuant to Section 7.2), and (B) is the total number of Shares of the Company then issued and outstanding. Reallocated Shares shall retain the same classification and attributes (i.e., Class A Voting Shares shall remain as Class A Voting Shares and Class B Non-Voting Shares shall remain as Class B Non-Voting Shares) before and after the reallocation.

(b) To the extent the advancing Members do not agree to contribute the Non-Contributing Member’s share of the Additional Capital Contribution within seven (7) days after the request therefor, the Manager may, with respect to such Non-Contributing Member, borrow from any lending institution or other lending source of the Manager’s choosing, on terms the Manager determines are reasonable, an amount which is sufficient to pay the balance of such Non-Contributing Member’s share of the requested Additional Capital Contribution and, in repaying such loan, use funds which, thereafter, would otherwise have been distributed to such Non-Contributing Member pursuant to this Agreement.

7.4 No Interest on Capital Contributions. No interest shall be paid on any Capital Contributions.

7.5 Capital Accounts. An individual capital account shall be maintained for each Member in accordance with federal income tax accounting principles as set forth in Regulations Section 1.704-1(b)(2)(iv) or any successor provision (the “Capital Account”). Each Member’s Capital Account shall be (a) credited with all Capital Contributions by such Member and the

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Member’s distributive share of all income and gain including any income exempt from federal income tax, and (b) charged with the amount of all distributions to such Member and the Member’s distributive share of losses and deductions.

7.6 Transfer of Capital Account. If a Member transfers all or part of such Member’s Shares in accordance with this Agreement, such Member’s Capital Account attributable to the transferred Shares shall carry over to the new owner of such Shares pursuant to Regulations Section 1.704-1(b)(2)(iv)(1).

7.7 Compliance With Section 704(b) of the Code. The provisions of this Section 7 as they relate to the maintenance of Capital Accounts are intended, and shall be construed, and, if necessary, modified to cause the allocations of profits, losses, income, gain and credit pursuant to Section 8 to have substantial economic effect under the Regulations promulgated under Section 704(b) of the Code, in light of the distributions made pursuant to Section 8 and Section 13 and the contributions made pursuant to this Section 7. Notwithstanding anything herein to the contrary, this Agreement shall not be construed as creating a deficit restoration obligation or otherwise personally obligate any Member to make a contribution in excess of the Initial Capital Contribution of the Member.

7.8 Return of Capital Contributions. Except as otherwise provided in this Agreement or by the Act, (a) no Member shall have the right to withdraw or reduce its Capital Contribution, or to demand and receive property, including cash, from the Company in return for its Capital Contribution during the term of the Company, and (b) any return of Capital Contribution to the Members shall be solely from the Company’s assets, and neither the Manager, the Members nor the Company shall be personally liable for any such return.

8. ALLOCATIONS AND DISTRIBUTIONS

8.1 Allocations of Profits and Loss for Tax Purposes. After giving effect to the special allocations set forth in Section 8.2 and Section 8.3 or as may be otherwise required in this Agreement or by the Code, as amended, all profits and losses shall be allocated to the Members in proportion to their respective Shares.

8.2 Special Allocations. The following special allocations shall be made in the following order:

(a) Minimum Gain Chargeback. Notwithstanding any other provision of this Section 8, if there is a decrease in Company minimum gain during any fiscal year, each Member shall be specially allocated items of Company income and gain for such fiscal year (and, if necessary, in subsequent fiscal years) in an amount equal to the portion of such Member’s share of the net decrease in Company minimum gain that is allocable to the disposition of Company property subject to a nonrecourse liability, which share of such net decrease shall be determined in accordance with Regulations Section 1.704-2(g)(2). Allocations pursuant to this Section 8.2(a) shall be made in proportion to the amounts required to be allocated to each Member under this Section 8.2(a). The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(f). This Section 8.2(a) is intended to comply with the minimum gain chargeback requirement contained in Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

(b) Chargeback of Minimum Gain Attributable to Member Nonrecourse Debt. Notwithstanding any other provision of this Section 8, if there is a net decrease in Company

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minimum gain attributable to a Member nonrecourse debt, during any fiscal year, each Member who has a share of the Company minimum gain attributable to such Member nonrecourse debt (which share shall be determined in accordance with Regulations Section 1.704-2(i)(5)) shall be specially allocated items of Company income and gain for such fiscal year (and, if necessary, in subsequent fiscal years) in an amount equal to that portion of such Member’s share of the net decrease in Company minimum gain attributable to such Member nonrecourse debt that is allocable to the disposition of Company property subject to such Member nonrecourse debt (which share of such net decrease shall be determined in accordance with Regulations Section 1.704-2(i)(5)). Allocations pursuant to this Section 8.2(b) shall be made in proportion to the amounts required to be allocated to each Member under this Section 8.2(b). The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(i)(4). This Section 8.2(b) is intended to comply with the minimum gain chargeback requirement contained in Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

(c) Nonrecourse Deductions. Notwithstanding Section 8.1, any nonrecourse deductions (as defined in Regulations Section 1.704-2(b)(1)) for any fiscal year or other period shall be specially allocated in accordance with how profits are allocated in Section 8.1.

(d) Member Nonrecourse Deductions. Notwithstanding Section 8.1, those items of Company loss, deduction, or Code Section 705(a)(2)(B) expenditures which are attributable to Member nonrecourse debt for any fiscal year or other period shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member nonrecourse debt to which such items are attributable in accordance with Regulations Section 1.704-2(i).

(e) Code Section 754 Adjustment. To the extent an adjustment to the adjusted basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(iv)(m), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of its Shares, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in a manner in which their Capital Accounts are required to be adjusted pursuant to such Section or Regulations.

(f) Qualified Income Offset. Notwithstanding Section 8.1, if a Member unexpectedly receives any adjustments, allocations or deductions described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), or any other event creates a deficit balance in such Member’s Capital Account in excess of such Member’s share of Company minimum gain, items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate such excess deficit balance as quickly as possible. Any special allocations of items of income and gain pursuant to this Section 8.2(f) shall be taken into account in computing subsequent allocations of income and gain pursuant to this Section 8.2(f) so that the net amount of any item so allocated and the income, gain and losses to each Member pursuant to this Section 8.2(f) to the extent possible, shall be equal to the net amount that would have been allocated to each such Member pursuant to the provisions of this Section 8.2(f) if such unexpected adjustments, allocations or distributions had not occurred.

(g) Allocations Relating to Taxable Issuance of Company Shares. Any income, gain, loss or deduction realized as a direct or indirect result of the issuance of any Shares in the Company to a Member (the “Issuance Items”) shall be allocated among the Members so that, to the extent possible, the net amount of such Issuance Items, together with all other allocations

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under this Agreement to each Member, shall be equal to the net amount that would have been allocated to each such Member if the Issuance Items had not been realized.

8.3 Curative Allocations. The allocations set forth in Section 8.2(a) through Section 8.2(f) (the “Regulatory Allocations”) are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 8.3. Therefore, notwithstanding any other provision of this Section 8.3 (other than the Regulatory Allocations), the Manager shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines is appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Section 8.1. In exercising its discretion under this Section 8.3, the Manager shall take into account future Regulatory Allocations under Section 8.2(a) and Section 8.2(b) that, although not yet made, are likely to offset other Regulatory Allocations previously made under Section 8.2(c) and Section 8.2(d).

8.4 Code Section 704(c) Allocations. Notwithstanding any other provision in this Section 8.4, in accordance with Code Section 704(c) and the Regulations promulgated thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its fair market value on the date of contribution. Allocations pursuant to this Section 8.4 are solely for purposes of federal, state and local taxes. As such, they shall not affect or in any way be taken into account in computing a Member’s Capital Account or share of profits, losses or other items of distributions pursuant to any provision of this Agreement.

8.5 Change in Regulations. If any of the specific Regulations upon which the special allocations provided for in Section 8.2 are based are hereunder changed or if new Regulations in the opinion of the tax counsel retained by the Manager make it necessary to revise the foregoing special allocation rules or provide further special allocation rules in order to avoid a significant risk that a material portion of any attributes otherwise provided in Section 8.1 would be altered as a result of a challenge thereto by the Internal Revenue Service, the Members agree to make such reasonable amendments to the Agreement as, in the opinion of such counsel, are necessary or desirable, taking into account the interests of the Members as a whole and all other relevant factors, to avoid or reduce significantly such risk to the extent possible without materially affecting the amounts distributable to any Member pursuant to this Agreement.

8.6 Allocation of Net Profits and Losses and Distributions in Respect of any Transferred Shares. If any Shares are transferred, or if the aggregate number of Shares is increased or decreased by reason of the admission of a new Member or otherwise, during any Fiscal Year of the Company, each item of income, gain, loss, deduction or credit of the Company for such Fiscal Year shall be assigned pro rata to each day in the particular period of such fiscal year to which such item is attributable (i.e., the day on or during which it is accrued or otherwise incurred) and the amount of each such item so assigned to any such day shall be allocated to the Member based upon its respective Shares at the close of such day. However, for the purpose of accounting convenience and simplicity, the Company shall treat a transfer of any

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Shares, or an increase or decrease in the aggregate number of Shares, which occurs at any time during a semi-monthly period (commencing with the semi-monthly period including the date hereof) as having been consummated on the last day of such semi-monthly period, regardless of when during such semi-monthly period such transfer, increase or decrease actually occurs (i.e., sales and dispositions made during the first fifteen (15) days of any month will be deemed to have been made on the fifteenth (15th) day of the month); provided, however, that any income, gain, loss, deduction or credit of the Company resulting from any extraordinary transaction occurring after the actual transfer, increase or decrease but before the last day of the semi-monthly period shall be allocated to the Members based on their respective Shares as of the date of such extraordinary transaction and not as of the last day of the semi-monthly period. Notwithstanding any provision above to the contrary, gain or loss of the Company shall be allocated solely to the parties owning Shares as of the date such sale or other disposition occurs.

8.7 Interim Distributions. From time to time and subject to applicable law and any limitations contained in this Agreement, the Manager shall determine in the Manager’s reasonable judgment to what extent, if any, the Company’s cash on hand exceeds the current and anticipated needs, including, without limitation, needs for operating expenses, debt service, reserves, and mandatory distributions, if any. To the extent such cash on hand excess exists, the Manager may make Interim Distributions to the Members in proportion to their respective Shares; provided, however, no Interim Distributions shall be made to the Members unless and until all Members loans made to the Company are paid in full.

8.8 Restrictions on Distributions. No distributions shall be made if, after giving effect to the distributions, the Company would not be able to pay its debts as they become due in the usual course of business, or the Company’s total assets would be less than the sum of its total liabilities.

8.9 Distributions Other Than Cash. No Member shall have a right to demand or receive any distribution of net cash flow in any form other than money. Except upon dissolution and winding up of the Company, no Member shall be compelled to accept the distribution of any asset in kind from the Company in lieu of any distribution or money due that Member.

8.10 Distributions to Pay Tax Liabilities. The Company shall, to the extent that its financial condition reasonably permits as determined by the Manager, make Interim Distributions to the Members at such times and in such amounts as to enable the Members to pay federal and state income taxes on their share of Company income (the “Tax Distribution”). Subject to the foregoing, the amount of the Tax Distribution shall be a percentage of the respective profit, gain or other income from the Company which is allocated to the Members for the applicable period as reasonably determined by the Manager and which may not fully cover the Member’s full tax liability, with the aggregate Tax Distribution being allocated between the Members in proportion to the Company profit, gain or other income allocated to each Member.

8.11 Return of Distributions. Except for distributions made in violation of the Act or this Agreement, no Member shall be obligated to return any distribution to the Company or pay the amount of any distribution for the account of the Company or to any creditor of the Company. The amount of any distribution returned to the Company by a Member or paid by a Member for the account of the Company or to a creditor of the Company shall be added to the account or accounts from which it was subtracted when it was distributed to the Member.

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8.12 Offset Against Distributions. In the event that any Member owes any amount to the Company which is due and unpaid at the time a payment or distribution would be payable to such Member under this Section 8, then the amount of such distribution shall be reduced by the amount of such obligation, together with interest thereon at a rate of twelve percent (12%) per annum (except where interest is otherwise provided in a separate agreement with respect to such obligation), from the date such amount became due and payable to the Company until payment thereof is made, but not to exceed the maximum rate for such obligation under the usury laws of the State of Hawaii, which offset shall be deemed to be payment to the Company by such Member and shall be applied first to such interest and then to such obligation.

8.13 Obligations of Members to Report Allocations. The Members are aware of the income tax consequences of the allocations made by this Section 8 and hereby agree to be bound by the provisions of this Section 8 in reporting their share of Company income and loss for income tax purposes.

9. OTHER MEMBER RIGHTS

9.1 Piggyback Rights. The Company will not be obligated to undertake a registration of the Company’s securities unless such registration is approved by the Class A Voting Members holding a majority of the Class A Voting Shares. In the event such registration is approved and undertaken, whenever the Company proposes to register any of its securities under the Federal Securities Act and/or the Hawaii Securities Act, all Shares of the Members will be included in such registration and the Members shall reasonably cooperate with the Company, shall consent to such registration, and shall execute and deliver any reasonably requested documents in connection therewith.

9.2 Lock-Up Provision. In the event the Company decides to pursue an initial public offering of the Shares of the Company, the Members agree to be bound by any lock-up provision which may apply under applicable stock exchange rules which may be reasonably approved by the Class A Voting Members holding a majority of the Class A Voting Shares in order to enhance the success of the initial public offering.

9.3 Drag-Along Rights. If the Class A Voting Members holding a majority of the Class A Voting Shares approves a sale of the Company or of all or substantially all of the Company’s assets, whether by means of a merger, consolidation, recapitalization, reorganization, restructuring or other similar business combination, or the sale of the Shares of the Company, to a Person who is not an Affiliate of the Company or any Member (an “Approved Sale”), then (a) if the Approved Sale is structured as a merger or consolidation of the Company, or a sale of all or substantially all of the Company’s assets, the Members, by their acceptance of this Operating Agreement, each waive any dissenters rights, appraisal rights, approval rights, or similar rights in connection with such merger, consolidation, or asset sale, if any, and (b) if the Approved Sale is structured as a sale of the Shares of the Company, then the Members shall each sell their respective Shares to the purchaser on the terms and conditions approved by the Class A Voting Members holding a majority of the Class A Voting Shares, provided such terms result in the Members receiving at least the amount that would be distributed to such Member in the event the proceeds of the sale of the Company were distributed upon liquidation of the Company as provided in this Operating Agreement. The Members shall each take all necessary and desirable actions in connection with the consummation of the Approved Sale, including the execution and delivery of such agreements and such instruments and other actions reasonably necessary to (i) provide the representations, warranties, indemnities, covenants, conditions, non-compete agreements, escrow agreements and other provisions and agreements relating to

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such Approved Sale, and (ii) effectuate the allocation and distribution of the aggregate consideration upon the Approved Sale.

10. DISSOCIATION OF A MEMBER

10.1 Dissociation. A Member shall cease to be a Member (a “Dissociated Member”) upon the happening of any of the following events (any of which shall be an “Event of Dissociation”):

(a) In the case of a Member who is a natural person, the death of the Member (unless the deceased Member’s Shares are transferred to a permitted transferee pursuant to Section 11.4);

(b) In the case of a Member who is a separate entity, the dissolution, termination or commencement of winding up of the separate entity;

(c) When a Member becomes Bankrupt or has initiated, either in an original proceeding or by way of answer in, any state insolvency or receivership proceeding, an action for liquidation, arrangement, composition, readjustment, dissolution, or similar relief;

(d) When a Member causes, whether voluntarily or involuntarily, a Breach Event

(e) When a Member fails to comply or is unable to comply with all of the applicable laws, rules and regulations that may apply to such Member under the Medical Marijuana Dispensary Act, including, without limitation, the terms and provisions of the criminal history record checks performed pursuant to Hawaii Revised Statutes § 846-2.7, as amended; and

(f) When a Member is convicted of any felony offense.

10.2 Rights of Dissociated Member. Upon the occurrence of an Event of Dissociation, the Dissociated Member shall cease to be a Member of the Company as of the effective date of the Event of Dissociation and the Dissociated Member shall then be treated as an Assignee for all purposes unless and until:

(a) for an Event of Dissociation under Section 10.1(a), the Dissociated Member’s Interest is sold to the Company or the Class A Voting Members at a purchase price and other terms of sale as agreed to by the buying and selling parties; or

(b) for an Event of Dissolution under Section 10.1(b), Section 10.1(c), Section 10.1(d), Section 10.1(e), or Section 10.1(f), the Dissociated Member’s Shares are purchased by the Company pursuant to Section 12.3(e) or sold pursuant to Section 12.3(i).

11. TRANSFER OF DISTRIBUTIONAL INTEREST, TRANSFER OF SHARES, SUBSTITUTE MEMBERS AND ADDITIONAL MEMBERS

11.1 General Restrictions on Transfers of Shares. The Members acknowledge and agree that no Shares may be Transferred, whether by operation of law or otherwise, except in the manner and subject to the terms and conditions set forth herein. Any purported Transfer of Shares in violation of this Operating Agreement shall be null and void and the Company shall not recognize or give effect to any such Transfer. The Members acknowledge the

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reasonableness of the restrictions of Transfer imposed by this Operating Agreement and that such restrictions are specifically enforceable.

11.2 Transfer of Distributional Interest. No Member may Transfer all or any part of its Distributional Interest to any other Person, except to a judgment creditor as ordered by any court of competent jurisdiction. Any such judgment creditor shall be deemed an Assignee. For purposes herein, an “Assignee” means a Person who shall only be entitled to receive Distributions attributable to the assigning Member’s Distributional Interest, but shall specifically not be entitled to any non-economic rights of the assigning Member (such as voting rights, if any, rights to receive notice of, to attend, and to participate in meetings, rights with respect to Company information and fiduciary duties). Notwithstanding the Transfer of such Distributional Interest, the assigning Member shall continue to be entitled to all such non-economic rights as set forth in this Operating Agreement, the Articles of Organization or as provided by law. Any attempted Transfer of a Distributional Interest or any part thereof not in compliance with this Section 11.2 shall be, and is declared to be, null and void and of no force or effect whatsoever.

11.3 Transfer of Shares to Bona Fide Purchaser; Right of First Refusal. If a Member wishes to sell for value any Shares to a bona fide prospective purchaser, and the sale is not prohibited under Section 11.1, the Member (the “Offeror Member”) shall first offer, in writing, such Shares for sale to the Class A Voting Members, at the price set forth herein. Class B Non-Voting Members shall not have a right to purchase any Shares offered for sale by an Offeror Member. Upon receipt of said offer from the Offeror Member, the Class A Voting Members shall then have the right to exercise a right of first refusal to purchase on a pro rata basis (or such other basis as the Class A Voting Members shall agree) all or any portion of the Shares proposed to be sold to the prospective purchaser upon the terms set forth in the Offeror Member’s written offer to the Class A Voting Members (but at the purchase price set forth herein). If the Class A Voting Members do not elect to purchase all of the Shares proposed to be sold by the Offeror Member to the prospective purchaser, the Class A Voting Members shall notify the Offeror Member in writing of such election. The Class A Voting Members shall have thirty (30) days from the date of their receipt of the written offer notice to notify the Offeror Member of their desire to exercise this right of first refusal and any failure to timely respond shall be deemed an election not to purchase any Shares then being offered for sale.

If the Class A Voting Members do not exercise this right of first refusal to purchase all of the Shares proposed to be sold by the Offeror Member, then the Class A Voting Members shall not have any right to purchase any of such Shares and the Offeror Member shall thereafter be free to dispose of such Shares on the same terms offered by the prospective purchaser; provided, however, that such sale shall be subject to Section 11.5 and Section 11.6 and shall close no later than sixty (60) days after the termination of the Class A Voting Members’ right of first refusal as provided herein. The sale of the Offeror Member’s Shares to the prospective purchaser pursuant to this section and the admission of the prospective purchaser as a Substitute Member as to the Shares so Transferred shall be effective on the Company’s books upon the prospective purchaser’s compliance with the conditions set forth in Section 11.5 and Section 11.6. If the sale of the Offeror Member’s Shares to the prospective purchaser does not close within said sixty (60) day period, the Offeror Member shall be required to again comply with the requirements of this section and offer the Shares to the Class A Voting Members as provided herein.

Shares Transferred hereunder shall retain the same classification and attributes (i.e., Class A Voting Shares shall remain as Class A Voting Shares and Class B Non-Voting Shares shall remain as Class B Non-Voting Shares) before and after the Transfer.

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11.4 Permitted Transfers. Any Member may Transfer all or any number of the Member’s Shares (but not any fractional Shares) without the consent of the other Members and without being subject to the right of first refusal of the Class A Voting Members set forth in Section 11.3, provided that such Transfer shall be subject to the conditions set forth in Section 11.5, to any Person who is (a) a Member (provided, however, Class A Voting Shares may only be Transferred to Class A Voting Members), (b) the spouse of a Transferring Member who is an individual, (c) any child or children of a Transferring Member who is an individual, (d) any beneficiaries of a Transferring Member who is a trust, provided that such beneficiaries are the spouse and/or children of the settlor of the trust, or (e) a revocable trust established by and for the benefit of a Transferring Member who is an individual, of which the Transferring Member is the trustee. HSK MM LLC may Transfer its Class A Voting Shares to any other Person without the consent of the other Members and without being subject to the right of first refusal of the other Class A Voting Members set forth in Section 11.3, provided that such Transfer shall be subject to the conditions set forth in Section 11.5.

11.5 Further Restrictions on Transfers. Notwithstanding anything to the contrary contained in this Operating Agreement, no Member shall Transfer all or any part of its Shares if (a) the Shares sought to be Transferred when added to all other Shares Transferred within the twelve (12) consecutive month period ending on the date of such proposed Transfer would cause the termination of the Company for federal income tax purposes, (b) the Transfer will violate any applicable federal or state securities laws, or (c) the transferee is unable to satisfy and comply with the terms and conditions of Section 4.6. No Shares may be fractionalized for transfer or other purposes. Furthermore, any Transfer or attempts thereof by any Member in violation of this Section 11 shall be, and is declared to be, null and void and of no force or effect whatsoever. Each Member hereby acknowledges the reasonableness of the Transfer restrictions imposed by this Operating Agreement in view of the Company purposes and the relationship of the Members. Accordingly, the Transfer restrictions contained herein shall be specifically enforceable. Each Member hereby further agrees to indemnify, defend and hold the Company and each other Member (and each other Member’s, personal representatives, successors and permitted assigns) wholly and completely harmless from any cost, liability, or damage (including without limitation, liabilities for income taxes and costs of enforcing this indemnity) incurred by any of such indemnified persons as a result of any transfer or attempt thereof in violation of this Operating Agreement.

11.6 Substitute Members. Any Person who has been Transferred Shares of the Company (but excluding a Transfer of only a Distributional Interest) pursuant to and in accordance with this Section 11 shall be admitted as a Substitute Member upon the approval of the Manager, which approval shall not be unreasonably withheld, and upon such Person’s delivery to the Company of such duly executed and acknowledged instruments of transfer, assignment and assumption and such other certificates, representations and documents, and performance of such other acts, all as reasonably necessary or desirable, in the Manager’s discretion, (a) to effect such admission, (b) to confirm such Person’s agreement to be bound by all of the covenants, terms and conditions of this Operating Agreement, as the same may be amended from time to time, (c) to preserve the Company after completion of such Transfer of Shares under the laws of each jurisdiction in which the Company is qualified, organized or does business (d) to maintain the status of the Company as a partnership for federal and state income tax purposes, (e) to assure compliance with any applicable state and federal laws including the Federal Securities Act and the Hawaii Securities Act, and (f) to assure compliance with the terms and conditions of Section 4.6. All reasonable expenses and legal fees incurred by the Company in connection with such Person’s admission to the Company as a Substitute

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Member shall be paid by the Substitute Member as a condition to its admission as a Substitute Member.

Upon the effective Transfer of any Shares on the Company books and the admission of a Substitute Member as set forth in this Section 11.6, the Member Transferring the Shares shall cease to be a Member with respect to such Shares Transferred and shall not have the right to vote on matters submitted to the Members (if applicable) or otherwise participate in or interfere with the operations and affairs of the Company with respect to such Shares Transferred.

11.7 Failure to Become a Substitute Member. Any Person to whom any Shares are Transferred but who does not become a Substitute Member shall be deemed to have been Transferred only a Distributional Interest and (a) shall only be entitled to receive any Distributions or other financial rights attributable to such Distributional Interest to which the Member Transferring the Shares would have been entitled, and (b) shall not have any right to participate in the management of the business and affairs of the Company, to have access to or to inspect or copy the books and records of the Company, to vote on matters submitted to the Members (if applicable), or to have any other benefits of membership to which the Transferring Member was entitled to under this Operating Agreement, the Articles of Organization or the Act.

11.8 Admission of Additional Members; Preemptive Rights; Dilution. The Company may from time to time offer and sell new Class A Voting Shares and/or new Class B Non-Voting Shares to such Persons who are not then Members of the Company as approved by the Manager. The contribution amount per Class A Voting Share or Class B Non-Voting Share and the number of Class A Voting Shares or Class B Non-Voting Shares to be offered for sale shall be determined by the Manager.

Any Person acquiring Class A Voting Shares or Class B Non-Voting Shares hereunder who is not then a Member of the Company and who has (a) made the contribution required by such Person as set forth herein, and (b) executed an instrument by which such Person accepts and adopts each and every provision of this Operating Agreement, shall be admitted to the Company as an Additional Member. The Manager shall cause an amendment to this Operating Agreement to be executed naming the Additional Member as a Member. Such amendment shall be executed by the Company, the Class A Voting Members and the Additional Member to be admitted to the Company as soon as reasonably possible after clauses (a) and (b) above have been satisfied. To the extent any Class A Voting Shares or Class B Non-Voting Shares are issued pursuant to this section, the Members shall be proportionately diluted.

11.9 Effect of Admission of Additional Members. No Additional Members shall be entitled to any retroactive allocation of profit, loss, income or expense deductions incurred by the Company. The Manager may, in the Manager’s sole discretion, at the time an Additional Member is admitted, close the Company’s books (as though the Company’s tax year had ended) or make pro rata allocations of profit, loss, income and expense deductions to the Additional Member for that portion of the Company’s tax year in which such Additional Member was admitted in accordance with the provisions of Section 706(d) of the Code.

11.10 Change of Control of a Class B Non-Voting Member Who is a Separate Entity. In the case of a Class B Non-Voting Member who is a separate entity, a change of control of such Member shall require the prior approval of the Manager. A “change of control” shall mean a transaction or series of related transactions where the persons who owned a majority of the capital stock or other ownership interests of the Member immediately prior to the transaction(s)

1364106_3 26

own fifty percent (50%) or less of such capital stock or other ownership interests immediately after the transaction(s).

Prior to any change of control of a Class B Non-Voting Member, the Class B Non-Voting Member shall give written notice of such proposed change of control to the Manager. Such written notice shall include all relevant details of the proposed change of control to enable the Manager to make an informed decision. The Manager shall within fifteen (15) days of receipt of such written notice approve or disapprove the proposed change of control in writing delivered to said Class B Non-Voting Member. The failure of the Manager to respond within such fifteen (15) day period shall be deemed a vote of disapproval by the Manager. To the extent it is determined that a change of control of a Class B Non-Voting Member has occurred in violation of this Section 11.10, (a) such Class B Non-Voting Member shall be treated as an Assignee with respect to all Class B Non-Voting Shares held by such Member, and (b) such Member shall be deemed in breach of this Operating Agreement.

12. WITHDRAWALS; ACTION FOR PARTITION; BREACHES

12.1 Waiver of Partition. No Member shall, either directly or indirectly, take any action to require partition or cause the sale of any Company property, and notwithstanding any provisions of applicable law to the contrary, each Member (and each of its legal representatives, successors, or assigns) hereby irrevocably waives any and all rights it may have to maintain any action for partition or to compel any sale with respect to its Shares, or with respect to any assets or properties of the Company, except as expressly provided in this Operating Agreement.

12.2 Covenant Not to Withdraw, Dissolve the Company; or Breach this Operating Agreement. Notwithstanding any provision of the Act, each Member hereby covenants and agrees that the Members have entered into this Operating Agreement based on their mutual expectation that all Members will continue as Members and carry out the duties and obligations undertaken by them hereunder and that, except as otherwise expressly required or permitted hereby, each Member hereby covenants and agrees not to (a) withdraw or attempt to withdraw from the Company, (b) exercise any power under the Act to dissolve the Company, (c) except as provided in Section 11, Transfer all or any portion of its Shares, (d) petition for judicial dissolution of the Company, or (e) materially breach any of the Member’s obligations under this Operating Agreement.

12.3 Consequences of Violation of Covenants. Notwithstanding anything to the contrary in the Act, if a Member (a “Breaching Member”) causes, whether voluntarily or involuntarily, a breach of any of the covenants set forth in Section 12.1 or Section 12.2 (any of which shall be deemed a “Breach Event”), the Company shall continue and such Breaching Member shall be subject to this Section 12.3. In such event, the following shall occur:

(a) The Breaching Member shall immediately cease to be a Member and the Breaching Member shall have no further power to vote on matters submitted to the Members as provided in this Operating Agreement or under the Act;

(b) The Members (excluding a Member who is a Breaching Member) shall continue to have the right to possess the Company’s property and goodwill and to conduct its business and affairs;

1364106_3 27

(c) The Breaching Member shall be liable for damages, without requirement of a prior accounting, to the Company for all costs and liabilities that the Company or any Member may incur as a result of such breach;

(d) The Company shall have no obligation to pay to the Breaching Member its respective Capital Contributions, capital or profits in the Company, but may, by notice to the Breaching Member within thirty (30) days of its withdrawal, elect to make Breach Payments (as hereinafter defined) to the Breaching Member in payment for the Breaching Member’s Shares (or if the Company does not elect to purchase the Breaching Member’s Shares, the remaining non-breaching Members may, on a pro rata basis, elect to make Breach Payments to the Breaching Member in payment for the Breaching Member’s Shares);

(e) If the Company (or the non-breaching Members) does not elect to make Breach Payments pursuant to Section 12.4, the Company shall treat the Breaching Member as if he were an Assignee of the Breaching Member’s Shares and shall make Distributions to the Breaching Member only of those amounts otherwise payable with respect to such Shares hereunder;

(f) The Company may apply any distributions otherwise payable with respect to such Shares (including Breach Payments) to satisfy any claims it may have against the Breaching Member;

(g) The Breaching Member shall have no right to inspect the Company’s books or records or obtain other information concerning the Company’s operations;

(h) The Breaching Member shall continue to be liable to the Company for any unpaid Capital Contributions required hereunder with respect to such Shares and to be jointly and severally liable with the other Members for any debts and liabilities (whether actual or contingent, known or unknown) of the Company that the Members were liable for and that exists at the time the Breaching Member withdraws or dissolves; and

(i) Notwithstanding anything to the contrary hereinabove provided, unless the Company has elected to make Breach Payments to the Breaching Member in satisfaction of its Shares, the Company may offer and sell the Breaching Member’s Shares to any other Members or other Persons on the Breaching Member’s behalf, provided that any Person acquiring such Shares becomes a Member with respect to such Shares and agrees to perform the duties and obligations imposed by this Operating Agreement on the Breaching Member.

12.4 Breach Payments. For purposes hereof, Breach Payments shall be made in four installments, each equal to one-fourth (1/4) of the Breach Amount, payable on the next four (4) consecutive anniversaries of the breach by the Breaching Member, without interest. The Breach Amount shall be an amount equal to fifty percent (50%) of the aggregate Capital Contribution made by the Breaching Member to the Company for the purchase of the Breaching Member’s Shares, without interest.

12.5 No Bonding. Notwithstanding anything to the contrary in the Act, the Company shall not be obligated to secure the value of the Breaching Member’s Shares by bond or otherwise; provided, however, that if a court of competent jurisdiction determines that, in order to continue the business of the Company such value must be so secured, the Company may provide such security. If the Company provides such security, the Breaching Member shall not have any right to participate in Distributions from the Company during the term of the Company,

1364106_3 28

or to receive any interest on the value of such Shares. For this purpose, the value of the Breaching Member’s Shares shall be the Breach Amount as determined in Section 12.4.

13. DISSOLUTION AND WINDING UP

13.1 Events of Dissolution. The Company shall be dissolved and its affairs wound up, upon the earlier of (a) expiration of its term (unless otherwise extended by the Class A Voting Members holding a majority of the Class A Voting Shares), or (b) approval of dissolution by the Class A Voting Members holding a majority of the Class A Voting Shares. Upon the occurrence of an Event of Dissociation with respect to any Member the business of the Company shall be continued and the Company shall not be dissolved.

13.2 Winding Up. Upon the occurrence of any events specified in Section 13.1, the Company shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets and satisfying the claims of its creditors. The Managers (or, if none, any Class A Voting Member) (the “Liquidator”), shall be responsible for overseeing the winding up and liquidation of the Company, shall take full account of the liabilities of the Company and its assets, shall either cause its assets to be sold or distributed, and, if sold, as promptly and as consistent with obtaining the fair market value thereof, and shall cause the proceeds therefrom, to the extent sufficient, to be applied and distributed as provided in Section 13.3. The Liquidator shall give written notice of the commencement of winding up by mail to all known creditors and claimants whose addresses appear on the records of the Company.

13.3 Compliance with Certain Requirements of Regulations; Deficit Capital Accounts. In the event the Company is “liquidated” within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, (a) distributions shall be made pursuant to this Section 13 to the Members who have positive Capital Accounts in compliance with Section 1.704-1(b)(2)(ii)(b)(2) of the Regulations, and (b) if any Member’s Capital Account has a deficit balance (after giving effect to all contributions, distributions and allocations for all Fiscal Years, including the Fiscal Year during which such liquidation occurs), such Member shall have no obligation to make any contribution to the capital of the Company with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or any other Person for any purpose whatsoever. In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise be made to the Members pursuant to this Section 13.3 may be:

(a) distributed to a trust established for the benefit of the Members for the purposes of liquidating Company assets, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company or of the Members arising out of or in connection with the Company. The assets of any such trust shall be distributed to the Members from time to time, in the reasonable discretion of the Liquidator, in the same proportions as the amount distributed to such trust by the Company would otherwise have been distributed to the Members pursuant to this Agreement; or

(b) withheld to provide a reasonable reserve for Company liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Company, provided that such withheld amounts shall be distributed to the Members as soon as practicable.

13.4 Deemed Distribution and Recontribution. Notwithstanding any other provisions of this Section 13, in the event the Company is liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations but no Liquidating Event has occurred, the property shall not be

1364106_3 29

liquidated, the Company’s liabilities shall not be paid or discharged, and the Company’s affairs shall not be wound up. Instead, the Company shall be deemed to have distributed the property in kind to the Members, who shall be deemed to have assumed and taken subject to all Company liabilities, all in accordance with their respective Capital Accounts. Immediately thereafter, the Members shall be deemed to have re-contributed the property in kind to the Company, which shall be deemed to have assumed and taken subject to all such liabilities.

13.5 Distribution in Kind. Any non-cash assets distributed to one or more Members shall first be valued at its fair market value to determine the net profit or net loss that would have resulted if such assets were sold for such value, such net profit or net loss shall then be allocated pursuant to Section 8, and the Members’ Capital Accounts shall be adjusted to reflect such allocations. The amount distributed and charged to the Capital Account of each Member receiving a share in such distributed assets shall be the fair market value of such asset (net of any liability secured by such assets that such Member assumes or takes subject to). The fair market value of such asset shall be determined by the Liquidator, or, if any Member objects, by an independent appraiser selected by the Liquidator or liquidating trustee and approved by the Liquidator.

13.6 Order of Payment of Liabilities and Distribution of Assets Upon Dissolution. After determining that all known debts and liabilities of the Company in the process of winding up, including, without limitation, debts and liabilities to Members who are creditors of the Company, have been paid or adequately provided for, the remaining assets shall be distributed to the Members or the Member’s heirs, devisees, personal representatives, successors or assigns, as the case may be, in accordance with their positive balances in the Capital Accounts, after taking into account allocations of Tax Items for the Company’s taxable year during which the liquidation occurs. Any remaining assets in excess of the positive Capital Account balances shall be distributed to the Members in proportion to their Shares in the Company.

13.7 Limitation of Payments Made in Dissolution. Except as otherwise specifically provided in this Agreement, each Member shall only be entitled to look solely to the assets of the Company for their return of its positive Capital Account balance and shall have no recourse for their Capital Contributions and/or share of net profits (upon dissolution or otherwise) against the Liquidator, the Manager or any of the other Members.

13.8 Termination of the Company. Upon completion of the winding up of the Company and distribution of any remaining assets of the Company to the Member or the Member’s heirs, devisees, personal representatives, successors or assigns, as the case may be, the Liquidator shall file articles of termination with the DCCA and/or such other documentation as may be required by the DCCA and the Company shall cease to exist.

14. AMENDMENT

14.1 By the Class A Voting Members. This Operating Agreement and the Articles of Organization of the Company may only be amended, altered or repealed by the Class A Voting Members holding a majority of the Class A Voting Shares.

14.2 By Manager or Class B Non-Voting Members. The Manager and the Class B Non-Voting Members shall have no right to amend, alter or repeal the provisions of this Operating Agreement or the Articles of Organization of the Company.

1364106_3 30

15. MISCELLANEOUS PROVISIONS

15.1 Notice to Members Regarding Securities. Notice is hereby given to each Member that the Shares in the Company have not been registered under either the Securities Act of 1933, as amended (the “Federal Securities Act”), in reliance upon the exemption from registration contained in Sections 3(a)(11), 3(b) or 4(2) thereof or the Hawaii Uniform Securities Act, as amended (the “Hawaii Securities Act”). The Shares must be acquired by the Members for investment purposes and not with a view to, or for resale in connection with, any distribution of such Shares, and such Shares may not be Transferred or offered for Transfer in the absence of compliance with the terms of this Operating Agreement and (a) an effective registration statement with respect to the Shares under the Federal Securities Act, the Hawaii Securities Act or other applicable state securities laws, or (b) an opinion of counsel satisfactory to the Company that such Shares will be Transferred or offered for Transfer only in a transaction which is exempt under the Federal Securities Act, the Hawaii Securities Act or other applicable state securities laws, or which is otherwise in compliance with such laws.

15.2 Investment Representation and Indemnity Agreement. Each Member (and his personal representatives, heirs, assignees and transferees) by execution of this Operating Agreement represents and warrants to each of the other Members, to the Manager and to the Company that:

(a) The Member is acquiring its respective Shares in the Company for the purpose of investment and not with the view to, or for resale in connection with any distribution of said Shares.

(b) The Member acknowledges that the Shares in the Company have not been registered under the Federal Securities Act, the Hawaii Securities Act, or any other applicable state securities laws, and may not be resold or Transferred by the Member without appropriate registration or the availability of an exemption from such requirements.

(c) The Member has been fully informed of the risks inherent in any investment, and has had the opportunity to review any and all information related to the Company and the Company’s business.

(d) The Member acknowledges that there are no guaranties of a return of its Capital Contributions made to the Company, nor have there been any representations or warranties made to the Member by any Person, of an anticipated rate of return on the Member’s investment.

Furthermore, each Member (and his personal representatives, heirs, assignees and transferees) agrees to indemnify the other Members, the Manager, the Company and any agent, Affiliate or legal counsel of such parties, from and against any and all loss, damage, liability, claims and expenses incurred, suffered or sustained by any of them in any manner because of the falsity of any representation contained in this Section 15.2, including but not limited to, liability for violation of the Federal Securities Act, the Hawaii Securities Act, or any other applicable state securities laws which violation would not have occurred had such representation been true.

15.3 Entire Agreement. This Operating Agreement represents the entire agreement among and between the Members, the Manager, and the Company.

1364106_3 31

15.4 Additional Documents. Each Member shall execute such additional documents and take such actions as are reasonably requested by the Managers in order to complete or confirm the transactions contemplated by this Operating Agreement.

15.5 Counterparts; Electronic Signatures. This Operating Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which shall constitute one agreement. Delivery of an executed signature page to this Operating Agreement by facsimile or other electronic transmission (e.g., e-mailed pdf file) will be effective as delivery of an originally signed counterpart of this Operating Agreement without the need to deliver the originally signed counterpart.

15.6 Governing Law. This Operating Agreement shall be governed by, construed and enforced in accordance with Hawaii law, notwithstanding any Hawaii or other conflict-of-law provisions to the contrary. Any action or proceeding relating to this Operating Agreement shall be brought in the courts in Honolulu, Hawaii, and each party hereby irrevocably submits to the non-exclusive jurisdiction of such court.

15.7 Headings. Headings in this Operating Agreement are for convenience only and shall not affect its meaning.

15.8 Severability. The invalidity or unenforceability of any provision of this Operating Agreement shall not affect the validity or enforceability of the remaining provisions.

15.9 Third-Party Beneficiaries. The provisions of this Operating Agreement are intended solely for the benefit of the Members and shall create no rights or obligations enforceable by any third party, including creditors of the Company, except as otherwise provided by applicable law.

15.10 Singular and Plural. As used in this Operating Agreement reference to the singular shall include reference to the plural and reference to the plural shall include reference to the singular, unless the context clearly requires otherwise.

15.11 Effect of Inconsistencies with Act and the Articles of Organization. This Operating Agreement is intended to govern the relationship among the Company and the Members, notwithstanding any provision of the Act or common law to the contrary. Except to the extent a provision of this Operating Agreement expressly incorporates federal income tax rules by reference to sections of the Code, or the Regulations, or is expressly prohibited or ineffective under the Act, this Operating Agreement shall govern, even when inconsistent with, or different than, the provisions of the Act or any other law or rule. To the extent any provision of this Operating Agreement is prohibited or ineffective under the Act, this Operating Agreement shall be considered amended to the smallest degree possible in order to make this Operating Agreement effective under the Act. In the event the Act is subsequently amended or interpreted in such a way to make any provision of this Operating Agreement that was formerly invalid valid, such provision shall be considered to be valid from the effective date of such interpretation or amendment. In the event of a conflict between the Articles of Organization and this Operating Agreement: (a) this Operating Agreement, as amended from time to time, shall control as to the Members, the Managers, and the Members’ Transferees, and (b) the Articles of Organization shall control as to Persons other than the Members, the Manager, and the Members’ Transferees who rely on the Articles of Organization to their detriment.

[SIGNATURE PAGE FOLLOWS]

Owner_Principal_Member_Report

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

HSK MM LLC

MFM, Inc.

H.S. Kawakami Stores, Ltd.

Charles Kenji Kawakami HI

Cesili Miyo Kawakami‐Wong HI

Bertha C. Kawakami HI

Gertrude K. Toma

HI

Edith T. Tan HI

Kurt T. Toma HI

Lyndall Kawakami HI

Derek Kawakami HI Douglas Kawakami HI

Craig Kawakami HI

Kauai Investments LLC Andrew Bosshard WI

John Bosshard III UT

Sabina Bosshard MN Joseph William Bosshard COThe Kurt Bosshard Trust dated 9/9/99

Kurt Bosshard HI

Lindsey Bosshard HIK2SH LLC Karene Kunimura HI Roy T. Kobatake HI Robert T. Hirano HI

Lloyd M. Sako HINice Cream LLC

Clayton R. C. Kim HI

Page

1 1380365_4

SECTION E(1)

HK Medicinal LLC (“HKM”), through its Manager/Individual Applicant (Mr.

Kawakami), its Voting Members (Mr. Kawakami, Mr. Kaneshiro and Mr. Kouchi), its Advisory

Board and its consulting partners, have the requisite education, knowledge and experience to

operate a business, including the matters set forth below. The Advisory Board consists of

community and professional leaders, who will meet regularly with Mr. Kawakami and senior

management to review the operations and finances of HKM and to provide advice and

recommendations to improve HKM’s business in order to comply with applicable law and to

achieve HKM’s core business values and objectives (as further described herein). See

Appendix E(1.1) for resumes for Mr. Kawakami, Mr. Kaneshiro, Mr. Kouchi, Appendix E(1.2)

for a list of Advisory Board members (and their resumes/biographies), and Appendix E(1.3) for

a list of key consulting partners (and their company profiles).

Section E(1)(A): Mr. Kawakami is President/CEO of MFM, Inc. (formerly known as

Big Save, Inc.) (“MFM”), which owned and operated a diverse portfolio of businesses on the

Island of Kauaʻi. In this capacity, Mr. Kawakami oversaw the grocery, gasoline sales, cookie

manufacturing and restaurant operations, all of which are highly regulated industries under both

federal and state law. Regulation of such businesses included truth-in-labeling, country-of-

origin, food safety and sanitation standards, alcohol and tobacco sales protocols and restrictions,

OSHA standards, and a slew of other regulations to ensure customer, public and employee

safety. Additionally, Mr. Kaneshiro and Mr. Kouchi are both licensed primary caregivers under

Hawaii Revised Statutes (“HRS”), Chapter 329, and understand, are experienced in, and can

advise HKM on compliance aspects of a regulated industry.

Section E(1)(B): Terry Sekioka, James Nishida and Peter Tausend are members of the

2 1380365_4

Advisory Board. Mr. Sekioka is a horticulturalist with B.S., M.S. and Ph.D. degrees in general

agriculture, horticulture and plant breeding. Mr. Nishida is a private fruit and vegetable farmer

and is a member of the Moloaa Farmers Cooperative. Mr. Tausend has over 30 years of practical

agricultural experience in sugar, patchouli, tea and coffee. He was also Chair of Horticulture at

the National Tropical Botanical Garden in Lawai and currently oversees the construction and

operation of more than 40 greenhouses. Additionally, Mr. Tausend has M.S. and Ph.D. degrees

in botany. As Advisory Board members, Mr. Sekioka, Mr. Nishida and Mr. Tausend will

provide HKM general agricultural and horticultural expertise in the development and operation

of HKM’s production facility and the planting, cultivating, growing and harvesting of marijuana.

Section E(1)(C): Mr. Kawakami also oversaw the operation of the Kauaʻi Kookie

Company, which was a division of MFM that specialized in the production of baked and

processed food items such as cookies, manju, brownies, various baked goods, and a specialty

salad dressing line. Mr. Kawakami also oversaw the operation of a commercial manufacturing

central kitchen for MFM’s convenience stores throughout the island. From this location, MFM

manufactured the renown “Lawai Manju” as well as many other prepared food items that were

distributed to MFM’s other stores for sale.

Section E(1)(D): Keizo Osuga is a member of the Advisory Board. Mr. Osuga is

currently a staff pharmacist at Longs Drugs. He has nearly 35 years of experience as a

pharmacist manager on the mainland and in Hawaii, and is very educated, knowledgeable and

experienced as a pharmacist and in the operation of a pharmacy. As a member of the Advisory

Board, Mr. Osuga will provide HKM the expertise necessary to manage and operate the

dispensary in accordance with HRS, Chapter 329D. He is also being considered by HKM for the

general manager position to oversee the day-to-day operations of the dispensary.

3 1380365_4

Section E(1)(E): To supplement Mr. Kaneshiro’s and Mr. Kouchi’s medical marijuana

knowledge and experience, HKM has entered into a license arrangement with Medicine Man

Technologies, Inc. (“MMT”) and will be relying on the utilization of MMT’s general support and

licensed technology and information (see Appendix E(1.4) for MMT company profile). MMT

will be providing access to the general experience and knowledge base of Medicine Man

Production Corporation, a reputable and respected vertically integrated Colorado based medical

marijuana company. Their business has provided high quality, safe, and consistent medical

marijuana to registered qualifying patients since 2009 and is considered a leading pioneer in the

marijuana industry throughout the nation. Through its license arrangement, MMT (as a licensor

and not as an operator) will provide its innovative practices and full access to all of MMT’s

knowledge and experience, including training, proprietary indoor cultivation system designs,

cultivation operation manuals, dispensary operation manuals, and more (see Appendix E(1.5),

Appendix E(2.3) and Appendix E(2.5) for further information). MMT is currently supporting

the deployment of turn-key solutions to 25 clients in 13 states which will enable HKM to quickly

become a competent operator through emulation of MMT’s extensive experience and knowledge

base. Brett Roper, COO of MMT, is also serving on HKM’s Advisory Board.

Section E(1)(F): Mr. Kawakami also has extensive knowledge and experience creating

and implementing business plans, including timelines for opening businesses. Since his return to

MFM in 1984, he helped rescue MFM when it was on the verge of bankruptcy and subsequently

grew the company exponentially by stabilizing the existing core operations and then expanding

the business to include restaurants, convenience stores and other business opportunities. Each

step of the way required him to develop and implement business plans and timelines for both

operational and financing purposes. Through his leadership and his meticulous planning, MFM

4 1380365_4

was able to weather 2 major hurricanes, the economic collapse of Japan, the 2007 recession, and

the influx of outside competition (i.e., the “Big Box” retail concept) on Kauaʻi.

Section E(1)(G): In connection with the creation and implementation of business plans

and timelines discussed in Section E(1)(F) above, Mr. Kawakami also has extensive knowledge

and experience creating and implementing financial plans for both operational and financing

purposes. When financing was obtained, he worked closely with his commercial lenders to

implement financial plans and to properly manage cash flow to maintain and grow MFM’s

business and to assure timely payment to MFM’s lenders, vendors, and suppliers.

Section E(1)(H): Mr. Kawakami also has extensive knowledge and experience in retail

sales. Over the years, MFM’s retail business has included a grocery store chain, a convenience

store chain, a quick service restaurant chain, a gas station chain, and a gift shop chain. At its

peak, MFM employed 450 employees, of which, approximately 70% were full-time employees.

See Appendix E(1.6) for further details on MFM’s business.

Section E(1)(I): Mr. Kawakami also has extensive knowledge and experience in secure

inventory tracking and control. Since the mid-1990s, MFM deployed a holistic approach to

inventory control, tracking, and sales associate performance. As a grocery store chain, MFM

typically carried between about 45,000 stock keeping units (SKUs), which were used to track

each item for inventory purposes. MFM had the ability to track each of those items, and drill

down forensically to see what day of the week was peak for each SKU, and to track which sales

associate sold which SKU and what date and time that it was sold.

Section E(1)(J): Mr. Kawakami also has extensive knowledge and experience protecting

confidential customer information when dealing with credit card transactions at MFM’s stores.

At its peak, MFM dealt with an average of approximately 2,500 credit card transaction per day

5 1380365_4

and had a stellar record of protecting the confidential and proprietary information. Additionally,

as one of the largest employers on Kauaʻi, MFM maintained a wide range of confidential

employee information on a daily basis. Mr. Osuga also has extensive knowledge and experience

in protecting confidential customer/patient information under HIPAA in connection with his

pharmaceutical managerial position. Stanwood Kanna is also a member of HKM’s Advisory

Board. Mr. Kanna is currently a practicing dentist who also has extensive knowledge and

experience in protecting confidential customer/patient information under HIPAA.

Section E(1)(K): Mr. Kawakami also has extensive knowledge and experience in

owning or managing a business that required 24-hour security monitoring. MFM’s grocery

stores, convenience stores and gas stations required 24/7 continuous video surveillance.

Section E(1)(L): As noted in Appendix E(2.1), HKM’s mission statement is to provide

Kauaʻi’s medicinal marijuana patients with high quality, safe, and fairly priced medicinal

marijuana, with a central focus on great customer service. We are passionate about providing

more value to our customers than our competitors and seek to become a leader in the cannabis

industry both locally and nationally. We are locally owned and operated, and from seed-to-sale,

HKM’s goal is to provide a safe and secure business that serves Kauaʻi with Aloha. In this

respect, HKM intends to provide regular price discounts to registered qualifying patients who are

veterans, seniors and minors.

1 1381608_1

APPENDIX E(1.1)

Resumes for Class A Voting Members

1. Charles Kawakami

2. Daryl Kaneshiro

3. Ralph Kouchi

Resumes for each of the above Class A Voting Members of HK Medicinal LLC are attached.

1 1381087_1

APPENDIX E(1.2)

List of Advisory Board Members

1. Keizo Osuga

2. Terry Sekioka

3. James Nishida

4. Stanwood Kanna

5. Peter Tausend

6. Ellen Ching

7. Wayne Iwaoka

8. Brett Roper

9. Tom Keener

10. Lloyd Meador

11. Michael Murakoshi

Biographical summaries or resumes for each of the members of the Advisory Board are attached.

1 1381605_1

APPENDIX E(1.3)

List of Key Consulting Partners

1. Medicine Man Technologies, Inc.

2. TreeFrog LLC

3. Carbon Blue Consulting

4. BioTrack THC

5. Blackhawk Security LLC

6. Commercial Properties, Limited

Company profiles for each of our key consulting partners are attached.

Thomas Keener, Owner/President Annual Sales: $1.1 million

OAHU OFFICE: 2800 Woodlawn Drive, Suite 149 Honolulu, Hawaii 96822 808.988.9111

BIG ISLAND: PO Box 437298 Kamuela, Hawaii 96743 808.885.9111

COMPANY OVERVIEW

Tom Keener, the president and founder of Keener Technologies, and now Blackhawk Security, has over 30 years experience in electronics / security systems industry and has spent much of his life studying electronic and system design.

Blackhawk Security provides high tech solutions for a variety of local companies, law enforcement agencies, military installations, hotels, condominiums, high end homes and residential communities, and locally owned and operated businesses throughout the Hawaiian Island chain and the Pacific Rim.

SPECIALIZING IN THE FOLLOWING MARKETS: • Critical Infrastructures (power

plants, solar farms, fuel storage facilities, data centers)

• Department of Defense (Army, Navy, Coast Guard, Air Force)

• US Secret Service • Cannabis Growing Facilities &

Dispensaries • State and City & County • Cell Sites

• New Construction • Healthcare (hospitals) • Hospitality Industry (hotels &

resorts) • Condominiums • Shopping Centers • Private Gated Communities • Private Estates

TECHNOLOGIES: • High-Definition IP Camera Systems • Thermal Imaging Camera Systems • Mass Storage Data Systems • Access Control Systems • Biometrics (iris, finger and hand

scanners) • Intrusion Detection Systems • Fiber Optic Networks • Wireless Networks (point-to-point to

multipoint)

• Battery Backup and Line Conditioning Systems

• Cat5 and Cat6 Networks & Infrastructures

• Cloud Based Storage Systems • GPS Tracking System • Microwave and Fence Perimeter

Detection Systems

SERVICES OFFERED: • CAD System Drawings • System Design and Engineering • Installation (conduit, cable and

infrastructure) • Equipment Installation,

Programming and Testing • Service & Maintenance of new and

existing systems

• Support Contracts • Training and On-Going Support • Remote PC and Network Support • Central Station Monitoring • Full Service Electronics Security

Firm • Consulting

CERTIFICATIONS: • Milestone Systems Corporate VMS

Certified • Hirsch-Identive Access Control

Hardware/Software Certified

• Software House Access Control Systems

• Axis IP Video Channel Partner • Bosch Intrusion Detection Systems

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APPENDIX E(1.4)

Medicine Man Technologies Inc. Executive Summary

Business Description

Medicine Man Technologies Inc. (OTCBB: MDCL) is a Colorado Corporation that was

incorporated on March 20, 2014 in the state of Nevada. The company provides cannabis

consulting providing licensing and consulting services for cannabis growing technologies and

methodologies, as well as retail operations of cannabis products. The Medicine Man

Licensor/Licensee relationship is founded on a strong mutual desire to deploy industry best

practices, allowing our client licensees total access to our continually evolving experience and

knowledge base.

Medicine Man of Denver was incorporated in 2009. The company’s primary business is

a 40,000 square foot cultivation facility with two retail dispensing locations servicing medical as

well as adult use customers. Over the course of the last six years, the Medicine Man brand and

founders team has developed extensive experience and knowledge working within a medical as

well as adult use marijuana business marketplace. What began as a fledgling medical marijuana

growing facility in 2009 has today evolved into a Tier III facility having regulatory oversight for

10,000 plus marijuana plants and 4,000 medical marijuana cardholders as well as a substantial

adult use marketplace. With strong commitment to patient safety, strict adherence to both state

and federal guidance (including the Cole and Ogden Memorandums), and the production of the

highest quality medical marijuana, they have quickly become regarded as one of the nation's

preeminent marijuana business industry leaders.

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Objective

Medicine Man Technologies and Medicine Man Production are anxious to combine their

unique skills, knowledge and technologies to offer our clients a robust turnkey solution allowing

them to get a strong start as cultivation and dispensary operators in the cannabis industry. We

accomplish this through quality state application support, facility design, genetic consultation,

cultivation husbandry practices and operations, dispensary operations, training and development,

SOPs, training manuals and continued support.

Clients are granted access to Medicine Man’s 6 years of cultivation and dispensary

operations experience and proven methodologies essentially allowing licensees to emulate these

practices in their own states. In order to streamline the cultivation process, Medicine Man has

developed (and continues to improve upon) a highly industrialized cultivation methodology we

refer to as a Variable Capacity, Continuous Harvest (VCCH) process. Documentation of the

plant’s life cycle has been aggregated through hands on experience and careful management of

the entire seed to sale process. We continue to implement improvements of this overall process

so that our Licensees can continue to tap into this evolving knowledge to maintain the highest

standards of performance. Medicine Man’s transition over the past six years to becoming a truly

industrialized process has been accomplished through patience, trial and error, costly mistakes,

engineering innovation, and reinvesting front end profits back into the business to fuel research

and development. We believe that having the ability to tap into this aggregate experience will

help our clients avoid many of the pitfalls we encountered trying to learn and refine the process.

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Mission Statement

Since the inception of Medicine Man Technologies, the Company’s mission has always

been:

● Offer quality support to our licensees through our licensure agreement in the form of

application support, facility design, training and development, SOPs, manuals,

training videos and continued future support.

● Provide excellent customer service through attentiveness, presence and going the

extra mile.

● Knowledge sharing through our licensure network; working to insure we are always

focused on teaching our Licensees to ‘fish’, not ‘fishing’ for them. They are the best

operator of their facilities, once trained and will continue to participate in various

training regimens throughout their licensure period.

Personnel

Andy Williams

Andy Williams is the President and CEO of Medicine Man in Colorado. He is veteran of

the US Army, and served three years as a Cavalry Scout in the 3rd Infantry Division. He went

on to earn a Bachelor of Science degree in Industrial Engineering from the University of

Southern Colorado in Pueblo, CO. Andy has worked in a wide range of manufacturing

industries as an industrial engineer, and in leadership positions. He is a lifelong entrepreneur. In

2009 the Ogden letter was published stating the Department of Justice would not utilize their

resources to prosecute those individuals following state marijuana laws. That was the call to a

new opportunity in the marijuana industry for Andy and his brother, Pete Williams. In

December of 2009 they launched Medicine Man with the concept of being the Costco of

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marijuana. Six years later Medicine Man is now a $17 million a year corporation and has

branched out to assist start up marijuana companies and grow facilities across the country with

their consulting company, Medicine Man Technologies. They are known as industry leaders

throughout the United States.

Brett Roper

Mr. Roper has an extensive background in business development, having successfully

‘shepherded’ several Form 10 and S1 filings as well as NASDAQ up listing efforts, most

recently co-founding Medicine Man Technologies, a unique cannabis business consultant and

advisory service provider. Mr. Roper has a substantial amount of RE based experience,

managing acquisition, interim holding, and disposition of substantial industrial properties in the

50,000 to 400,000 SF range and is active in providing design insights for cannabis related

property deployment. Mr. Roper has been responsible for management of a national marketing

program for a regional RE developer having relationships with SIOR, NAI, CORFAC Global,

NAIOP, and other real estate organizations across the country. Mr. Roper has served in a

number of advisory capacities to other pre-public and public companies including corporate

development, strategic initiative refinement, business turnaround, service as an independent

board member, and management of investor relations fundamentals. His extraordinary

background has allowed him to become a well-rounded ‘quiet advisor’ to many companies as

well as investors in the Cannabusiness space. Since 2002 Mr. Roper continues to service as the

COO and member of the Board of Directors of another OTCBB markets company and from time

to time serve on other Boards at his sole election.

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Marc Harvill

Mr. Harvill has a background in pharmacy operations both in the manufacturing and

retail space, with more than 10 years of experience. He holds a B.A in Marketing and Spanish

from PSU and an M.B.A from Washburn University. Prior to joining Medicine Man

Technologies, Marc worked for one of the largest privately operated pharmacy technology

companies in the country, specifically focused on training and development, hardware and

software testing and quality assurance. Marc also works for a small publicly traded company in

a research and operational capacity.

Matt Best

As Licensing Coordinator at Medicine Man Technologies, Matt is responsible for day to

day management of license agreements and client relationships for the company. He holds a

B.A. in Communication and Integrated Marketing Communications from the State University of

New York, College at Geneseo, a small liberal arts college in Upstate New York. Prior to

joining MMT in 2015, Matt worked as a Media Supervisor at TDA Boulder, a full-service

advertising agency in Boulder, CO. In this capacity, Matt oversaw the media planning and

buying team and was responsible for client relationships across local, regional, and national

media accounts. Matt is an avid skier and enjoys time spent within the National Parks, away

from the hustle and bustle of the Mile High City.

Carrie Roberts

Carrie Roberts is a creative visionary with an entrepreneurial spirit. She has a Bachelor

of Arts degree in Sociology and Criminal Justice from Colorado State University. She has 13+

years of entrepreneurial business experience and began the first Customer Experience

Management Company focused exclusively on the cannabis industry in 2014. She has a strong

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business background in strategic consulting, including business planning and strategy

development, as well as expertise in marketing, business development and customer experience

management. As a former Colorado POST Certified law enforcement officer Carrie is on the

speakers’ bureau for LEAP (Law Enforcement Against Prohibition), speaking to both policy

makers and the public on drug policy reform measures. She is also on the national Retail

Committee for FOCUS (Foundation of Cannabis Unified Standards), an independent, non-profit,

third party source for the creation of cannabis standards and monitoring of the cannabis industry.


1381195_1

APPENDIX E(1.5)

While we considered using Hawaii’s local caregiver design to model our own operations,

we quickly realized that our local depth of knowledge in operating an industrial scale cultivation

facility would not be comparable to the local caregiver model which typically provides

cultivation for a small number of plants. So as to avoid the pains and pitfalls of transitioning

from the current smaller scale caregiver model to a much larger and more robust industrial model

we decided it would be in our best interest to enlist professional support. After reviewing several

candidates, we selected MMT as we felt they had the knowledge, capacity and aggregate

experience necessary to reach our goal of successfully operating a large scale vertically

integrated cannabis operation.

Over the course of the last six years, the Medicine Man brand and founders team has

developed extensive experience and knowledge working within a medical as well as adult use

marijuana business marketplace. What began as a fledgling medical marijuana growing facility

in 2009 has today evolved into a Tier III facility having regulatory oversight for 10,000 plus

marijuana plants and 4,000 medical marijuana cardholders as well as a substantial adult use

marketplace.

With their strong commitment to patient safety, strict adherence to both state and federal

guidance (including the Cole and Ogden Memorandums), and the production of the highest

quality medical marijuana they have quickly become regarded as one of the nation’s preeminent

marijuana business industry leaders. The Medicine Man Licensor/Licensee relationship we have

entered into is founded on a strong mutual desire to deploy best industry practices, allowing

HKM, as a Licensee, total access to MMT’s continually evolving experience and knowledge

base.

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As marijuana is a Schedule 1 controlled substance under federal law, we’ve seen that

there is a general lack of qualified medical research available to the public. As such, we will

have the ability to rely on the firsthand experience that Medicine Man has acquired through

direct engagement with patients and caregivers who over time suffered from a variety of

debilitating medical conditions, many of which are part of Hawaii’s qualifying conditions list. In

addition to their hands on engagement with patients, Medicine Man has relied on continuous

industry involvement and monitoring through direct participation in marijuana industry trade

shows, events, groups, websites, and other industry-related publications, which will allow us to

tap into their vast accumulated knowledge base.

We know from their experience that one-on-one patient interaction will be crucial to our

evolution as a provider of high quality, safe medical marijuana and manufactured marijuana

products to our patients. Listening to these needs and using this information to inform our

services, product mix, and customer experience will be at the core of our operating philosophy as

we develop our own unique Hawaiian presence. Through interaction between our retail

dispensary team and qualifying medical patients, our staff and managers will become educated

through first person feedback from medical marijuana patients on what works and doesn’t work

for each patient.

We understand that navigating the state regulatory authority and keeping compliant with

regard to permitting, zoning, licensing, laboratory testing, and record maintenance amid an ever

changing industry landscape will be challenging. Being that Medicine Man has been able to

successfully navigate these challenges since 2009, we are confident in their ability as advisors to

help us. Since the federal government’s issuance of both the Ogden (2009) and Cole (2014)

Memorandums more states continue to develop and offer both medical and adult use regulations

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just as Hawaii is doing now. Paying attention to this ever-changing landscape and legal

compliance has become a substantial asset in demonstrating their operating ability. Through

their constant evolution of best practices, MMT has been able to provide their patients and adult

use consumers with consistent, high-quality, safe products supported by superior customer

service. As a Licensee, we will emulate these established best practices in consideration of the

DOH’s rules and regulations which will allow us to build on our experience and knowledge as

we work to earn the loyalty of the patients we will be serving.

In order to streamline the cultivation process, Medicine Man has developed (and

continues to improve upon) a highly industrialized cultivation methodology they refer to as the

Variable Capacity, Continuous Harvest (VCCH) process. Documentation of the plant’s life

cycle has been aggregated through hands on experience and careful management of the entire

seed to sale process. Over time MMT will continue to focus on improvement of this overall

process so that we, as Licensee, can continue to tap into this evolving knowledge to maintain the

highest standards of performance. Medicine Man’s transition over the past six years to

becoming a truly industrialized process has been accomplished through patience, trial and error,

costly mistakes, engineering innovation, and reinvesting front end profits back into the business

to fuel research and development. We believe that having the ability to tap into their aggregate

experience will help us avoid many of the pitfalls we might encounter. “A smart man makes a

mistake, learns from it, and never makes that mistake again. But a wise man finds a smart man

and learns from him how to avoid the mistake altogether.” ~ Roy H. Williams

We will continually train our lead growers so that they may in turn educate and train

entry level team members in deployment of best practices for pest management (in-house as well

as through participation of State and other offerings of classes and certifications). In turn, these

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lead growers train all the junior growers so that they are current on all EPA approved

methodologies in relation to pesticide, miticide and fungicide Integrated Pest Management.

By contracting with an experienced security company we will have the ability to train our

staff bi-annually on important security protocols such as how to handle armed robbery, burglary,

theft, life-saving and other emergencies. Once trained, our staff will sign off that they have

received the training and this documentation will be kept in their employee file for six months or

until the next training takes place. As safety for patients and the public is of primary concern,

the education and training that we will receive from MMT as a Licensee will ensure that our staff

are well equipped to handle crisis situations with professionalism.

In our effort to stay compliant, we will undergo strict product safety testing. We will

conduct rigorous third party laboratory testing for microbials, heavy metals, molds, powdery

mildew and other pathogens. Since no one in Hawaii has this type of experience to date,

Medicine Man has referred us to Genifer Murray, with Carbon Blue Consulting. Genifer was the

founder of CannLabs, a preeminent Colorado marijuana testing laboratory, who has many years

of both setting up and running labs in order to ensure product safety for our patients (See

Section E(9) and Appendix E(9) for additional reference information). Over years of testing,

Medicine Man has maintained a clean bill of health in the face of constantly changing state and

local regulation. As we know our reputation hinges on our ability to deliver high-quality, safe,

consistent, marijuana and manufactured marijuana products to our patients and having Medicine

Man as a model for our product safety protocols (per DOH rules and regulations) will ensure our

ability to focus on putting our patient’s safety first.

Medicine Man has been able to integrate any state regulatory changes that have taken

place. As a result, they have had to change their standard operating procedures in order to

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comply with shifting laws. An example of this has been the recent change in integrated pest

management where they had to remove several EPA approved chemicals from their list in order

to utilize organic substitutions. We will have the ability to model our operations after theirs in

order to successfully adapt to these types of changes that we anticipate experiencing over the

years to come. This will allow us to keep both the cultivation and the retail dispensary

operational, compliant and safe, allowing us to continuously produce and maintain a supply of

marijuana that is sufficient to meet the needs of our qualifying patients. Medicine Man has been

able to maintain the highest level of public safety in their community. Through the creation,

implementation and strict adherence to state and federal regulations, Medicine Man has

contributed positively to public safety in the state of Colorado. By following a regulated State

model, they have worked tirelessly to lessen the effects of the black market associated with

marijuana, which can cause significant harm to communities and poses a true risk to public

safety. We will follow their lead in striving to make our community safer by aiding in lowering

this criminal presence of the unregulated black market by giving our patients a safe way to

access their medicine by providing safe, accessible dispensing locations with consistent, quality

products.

Medicine Man has hosted lawmakers, regulators, media, public officials, law

enforcement and a wide range of other audiences from various states and countries because they

recognize the benefits of what a well-regulated medical marijuana operation can do for the

community. Through our Licensing agreement with MMT we will garner knowledge and

insights as to how best integrate ourselves into the community and with various constituents

throughout our state. As we move forward through the adoption of these newly founded

regulations for medical marijuana we will continually strive to be transparent and compliant in

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all that we do as we work with the State to become Hawaii’s model for how a successful medical

marijuana operation should be lead.

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APPENDIX E(1.6)

MFM, Inc. Company History

In 1926, H.S. Kawakami, with the advice and financial support of his brother, Fukutaro Kawakami, opened his first grocery store in Waimea, Kauaʻi to serve the plantation community. At the time, retail businesses were expanding on the island and both brothers opened a variety of stores with different concepts. In 1934, Fukutaro opened a general merchandise store in Hanapepe and later H.S. opened a retail furniture store. Fukutaro passed away in 1954 and the business was taken over by his son, Norito. As the businesses continued to grow, it became apparent that joining the two companies would foster economies of scale and other efficiencies. In 1958, Big Save, Inc. was formed by the merger of the two Kawakami families and Minoru Furugen, who operated a store in Kapaa.

Over the years, Big Save continued to expand its retail business beyond grocery and general merchandise stores. During the 1990s, however, the Company exited from its general merchandise and furniture stores and focused on the grocery business, convenience store operations, gift shops, quick service restaurants, and gas stations. Throughout their 89-year history, the Kawakami families were able to weather many different economic storms. Despite being hit with two major hurricanes, various economic fallouts including the Great Recession during 2007-2009, and the wave of mainland based competition and big box stores, the companies continued to thrive. “Our ability to be resilient is all due to our loyal employees and our customers. After all, this is a company that was born during the Great Depression, born into adversity.”

The complete portfolio of business operations throughout current history includes:

Value Center Division

• Eleele Value Center • Kapaa Value Center • Lihue Value Center • Waimea Value Center • Koloa Value Center • Hanalei Value Center • Market Warehouse and Distribution

Subway Restaurant Division

• Hanalei Subway • Kalaheo Subway • Eleele Subway • Koloa Subway • Kilauea Subway

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Menehune Food Mart Division

• Kekaha Menehune Food Mart • Kalaheo Menehune Food Mart • Lawai Menehune Food Mart • Kilauea Menehune Food Mart • Kapahi Menehune Food Mart

Super Service Division

• Kapaa Shell Super Service • Kilauea Shell Super Service

Resort Gift Shop Division

• Poipu Sundries • Wailua Marina Gift Shop • Happy Kauaian Coconut Marketplace • Happy Kauaian Coconut Beach Resort • Resort Gift Shop Warehouse and Distribution

Kauai Kitchen Division

• Lihue Kauai Kitchen • Koloa Kauai Kitchen • Kukui Nut Family Restaurant Kukui Grove

Kauai Kookie Division

• Kauai Kookie Manufacturing • Kauai Kookie Retail Shop • Kauai Kookie Warehouse and Distribution

Administration Division

• Administration • Accounting • Special Projects/Loss Prevention • Human Resources • Value Center Administration and Operations • Resort Gift Shop Administration and Operations • Subway Restaurant and Food Service Administration and Operations

At its peak, Big Save (now known as MFM, Inc.) employed 450 associates of which roughly 70% were full-time employees and 30% were part-time employees. MFM offers its full-time and part-time employees with a full range of benefits including medical, dental, and health

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benefits, vacation benefits based on years of service, holiday pay benefits, sick leave based on years of service, military leave of absence, paid funeral leave for three days with excuse from work for up to seven days, jury duty leave with adjusted compensation, election time off, leave of absence, tuition reimbursement and educational assistance program, 401(k) profit sharing plan, as well as all other mandated benefits such as workers compensation insurance, Temporary Disability Insurance, Family and Medical Leave and Military Family Leave.

In 2011, the Kawakami family successfully sold a portion of their business to QSI, Inc. doing business as Times Supermarket. Times Supermarket acquired the five grocery stores. The H.S. Kawakami family retained a portion of the remaining business.

Moving forward post-sale of the grocery stores, the Kawakami family restructured their remaining business to include four convenience stores operating as Menehune Food Mart, two Shell gas stations, two Subway restaurants, a warehouse and delivery operation, as well as an administrative office that consists of an accounting department, IT department, and operations department.

In mid-December of 2015, Charles Kawakami successfully navigated and completed the transaction of selling the remaining businesses to Aloha Petroleum, Ltd.

MFM now exists as one of the principal owners of HK Medicinal LLC.


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SECTION E(2)

HKM will be a vertically integrated medical marijuana company in the County of Kauaʻi,

dedicated to providing safe and secure access to marijuana and manufactured marijuana products

to qualified patients while ensuring the highest standard of patient, product, and public safety

(see Appendix E(2.1) for excerpts of HKM’s business plan). This includes mitigating and

preventing diversion of marijuana and misuse of marijuana, particularly by minors. In order to

achieve this, HKM will commit great care to customer service and ensure that all operating

procedures, policies, and facilities are in strict compliance with HRS, Chapter 329D and Hawaii

Administrative Rules (“HAR”), Chapter 11-850. HKM is financially prepared to commit the

same level of care and resources in regard to all phases of the planned deployment of our

operation, including but not limited to, design and build out, inventory and quality control,

consumer education, community outreach, security, compliance, staffing, and safe handling of

marijuana, to ensure we meet the needs of patients in a timely, yet well executed manner.

Through our licensing and consulting arrangements, HKM is fully equipped to navigate

the process of opening and operating a medical marijuana production center and retail

dispensary.

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Considering the inherent risks that will come with the transition from the existing

caregiver model to a fully integrated industrial process for commercial marijuana manufacturing,

HKM will mitigate that risk through the licensing and adoption of MMT’s Variable Capacity

Continuous Harvest methodology which produces high quality, consistent, safe marijuana within

an enclosed indoor production facility (see Appendix E(2.3) for production plan summary).

HKM will deploy a clean and sanitary production center capable of maintaining complete control

of the growing and manufacturing environment (see Appendix E(2.4) for representative photos),

and will seek LEED® certification, if applicable, and reduce HKM’s carbon footprint.

HKM will establish standard operating procedures (“SOPs”) for cultivation, compliance,

cleanliness, testing, production controls, and work instructions which have been refined by MMT

over the course of 6 years of operational history in Colorado.

In order to mitigate risk, we plan

to deploy Hawaii state specific compliance software (see Appendix E(2.5)) to help us

continually monitor the complex maze of rules and regulations.

Product manufacturing will be an integral component of our vertically-integrated plan.

We will reserve a significant quantity of our marijuana production to this segment of our

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business and we will dedicate approximately 3,000 square feet of our production center to the

creation of a state-of-the-art extraction lab and manufacturing facility.

We will design safe alternatives to inhaling marijuana that address State-approved

medical conditions and patient needs. These products offer a variety of delivery methods,

including gastro-intestinal, sublingual, and transdermal absorption.

With the expert guidance of our manufacturing advisors, we are in the process of

designing our facility, planning our manufacturing processes, refining our 5 primary lines and

considering all methods of extraction as permitted by law (see Appendix E(2.6) for

manufacturing plan summary).

Our retail dispensary facility will include a newly renovated, modern retail center with

administrative offices.

Our retail location will be which will provide ample

space for a comfortable, safe, and secure location (see Appendix E(2.8) for preliminary floor

plan of retail dispensary and Appendix E(2.9) for representative photos). We have preliminarily

identified and secured a site for the retail dispensary facility

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HKM intends to establish good relationships with neighboring businesses. We will

maintain the exterior and surrounding property thereby adding aesthetic value to the neighboring

community. Anticipating we will serve approximately during the first year of

operation, HKM will act as an anchor operation, thereby increasing exposure and driving

additional traffic to neighboring businesses. We will become an integral part of the Kauaʻi

Chamber of Commerce and look forward to becoming a leader in the Kauaʻi community.

HKM will be committed to consistent and timely delivery of our products to our patients

through the use of our partnership with the state-awarded seed-to-sale software system,

BioTrackTHC, the use of the Variable Capacity Continuous Harvest production model adopted

from our partner MMT, and the use of SOPs developed by MMT. We will conduct a weekly

physical inventory and investigate any variances from actual inventory. With the ability to be

vertically integrated, we will be empowered to supply timely, high-quality, safe and consistent

medical marijuana to our retail dispensing location(s).

Our goal is to create a safe, positive working environment for all employees in order to

build and maintain an excellent record of employee retention. We will mandate leadership

training for all management personnel, provide opportunity for advancement, and provide a

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comprehensive benefits package for all full time employees. A unique opportunity is the ability

for management and key personnel to train in Colorado within an operational medical marijuana

production and retail environment through our relationship with MMT, including the safe

handling of all marijuana and related products. Additionally, we have internal performance

monitoring programs to ensure employee performance.

In the event of a natural calamity, HKM will be fully insured to cover business operating

costs for an extended period of time and reconstruction of its facilities.

Establishment of any timeline will be subject to both internal and external circumstances

and should be considered to be fluid throughout the interim time period up to first day of the

retail dispensary’s operational status when sales begin, which could include scheduling

adjustments related to legal requirements, material and labor availability, and permitting and

inspection processes. While speed to market is very important, the thing that is most important is

patient, product and public safety. Although other applicants may be representing a faster speed

to market, if a person were to follow all of the State guidelines, we believe it will be virtually

impossible to meet that timeline without compromising patient, product and public safety and/or

violating the law. Our timeline is aggressive and takes into account all State requirements. As

such, our timeline clearly shows we will have a safe and consistent supply of materials in our

retail dispensary on or about January 1, 2017 (see Appendix E(2.10) for proposed timeline).

We believe this is very important for

operational success as well as customer and employee safety.


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APPENDIX E(2.1)

HK Medicinal LLC Business Plan (select excerpts only)

(see attached)


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SECTION E(3)

HKM has the necessary financial stability and access to financial resources in order to

open and operate a medical marijuana dispensary in the County of Kauaʻi. In particular, HKM

has financial resources in its control in an amount sufficient to satisfy HRS, Section 392D-

3(b)(2)(F), and, based on its financial projections (see Section E(3)(C) below and

Appendix E(3.5)), in an amount sufficient to satisfy its cash flow requirements until it reaches

profitability and is cash flow positive.

Section E(3)(A):

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Section E(3)(B): HKM was formed on August 6, 2015, for the sole purpose of operating

a production center and retail dispensary in the County of Kauaʻi, and, therefore, did not

previously and does not currently own or operate another business.

Section E(3)(C): Since this is an entirely new industry in Hawaii HKM worked with

MMT to design a comprehensive financial model incorporating their industry experience and

HKM’s local business experience. The following describes the approach utilized to develop the

major elements of financial projections (see Appendix E(3.5)):

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(i)

(ii) Production and operating costs were developed based on the revenue

projections which drove the level of plant production. We anticipate that will have a production

center that will accommodate 3,000 plants, with an initial plant count of approximately 1,200 to

1,500 plants in order to satisfy the projected demand when the retail dispensary opens for

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business. Headcounts, job descriptions and compensation levels were determined based on the

level of cultivation activities and product mix expectations.

(iii)

Section E(3)(D): As noted above, HKM was formed on August 6, 2015, and has not

commenced business

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With the guidance of Mr. Kawakami, we expect HKM to maintain a good credit history

once it begins operation of the medical marijuana dispensary business and thereafter.

Section E(3)(E):


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SECTION E(5)

HKM has the capacity to meet the needs of qualifying patients in accordance with HRS,

Chapter 329D and the applicable rules promulgated thereunder. This includes, without

limitation, implementation of the following:

Section E(5)(A): HKM will publish a consumer education brochure for patients

outlining the State regulations for use of marijuana and manufactured marijuana products,

including guidelines for safe consumption and use of marijuana, as well as storage

recommendations to address child and pet safety issues. We will make this available in printed

format at our retail dispensing location(s) as well as electronically on our website. All staff will

be trained on State and local rules and regulations which will be reinforced with patients at the

point of sale. Record of staff education in regard to this training will be retained within an

employee file and re-visited on a minimum annual basis or as laws and regulations regarding

medical marijuana are updated.

In order to best accommodate personal patient consultations, HKM will provide phone

and online scheduling for individual appointments. All patient consultations, regardless of prior

scheduling, will not have a time restriction within the retail dispensing location. All patient

consultations will be conducted on a one to one basis to ensure the privacy of a qualifying

patient. Staff will be trained to spend as much time as necessary with each patient to ensure that

the patient is comfortable with the marijuana or manufactured marijuana products, including safe

consumption and use of their purchase.

Patient education is particularly important as many consumers may not have had the

opportunity to interact with various delivery methods. Each patient has unique circumstances.

They require information about dosages, absorption, delivery methods, psychoactive effects,

2 1380765_2

strains, and types which have the best indications for their condition so that they can make

informed decisions, and practice safe consumption.

We have developed comprehensive educational materials that include product-specific

literature, such as product-safety inserts, as well as a patient-education guide containing

information about medicinal aspects of various cannabinoids, and the relative benefits of various

delivery methods.

Since each form provides its own unique terpene and cannabinoid profile, the following

are examples of the type of guidance that will be given to our patients so they can choose the

right type of medical marijuana based upon their medical condition.

● Indica Products and Extracts: Utilizing Indica dominant genetics will be particularly

helpful with those health conditions that relate to the body. This will be useful to

treat conditions recognized by the state such as: chronic or debilitating diseases or a

medical condition that results in the patient being admitted into hospice or receiving

palliative care; post-traumatic stress disorder (PTSD); seizures; severe or persistent

muscle spasms; severe or chronic pain.

● Sativa Products and Extracts: Utilizing Sativa dominant genetics will be targeted at

conditions that involve increased energy and appetite stimulation. These have

demonstrated success in conditions such as: cachexia or wasting syndrome; severe or

chronic pain; severe nausea and glaucoma.

● CBD Dominant Products and Extracts: Utilizing CBD dominant genetics will

specifically target: seizures; post-traumatic stress disorder (PTSD); severe or

persistent muscle spasms.

3 1380765_2

For sample medical marijuana educational brochures, see Appendix E(5.1).

HKM also understands that choosing the right delivery system is important and that

educating our patients in this respect will be necessary (see Appendix E(5.2)):

● Transmucosal (Sublingual): Tincture (takes effect in 5-30 minutes, effects last 1-6

hours)

● Oral Mucosal: Tincture, Concentrates (takes effect in 5-30 minutes, effects last 1-6

hours)

● Gastrointestinal: Tincture, Capsule, Tablet, Concentrates (takes effect in 1-2 hours,

effects last 6-8 hours)

● Transdermal: Lotion, (takes effect in varying times, effects last for varying times)

Delivery methods also target specific conditions and needs. For example, if a patient has

nausea-related conditions, a sublingual delivery method would be preferable because it

circumvents the digestive system and directly targets the bloodstream.

HKM will maintain a printed and electronic resource library within the retail dispensary

which will be made available to staff, qualifying patients, and approved visitors. This may

include, but not limited to: books related to pharmacology, routes of administration, cultivation

and/or production, as well as industry magazines and periodicals covering educational topics

such as: information about medical studies relating to medical marijuana for health conditions,

determining dosage and tolerances, side effects, dependence, withdrawal symptoms and signs,

drug interactions, how to keep medical marijuana secure, unlawful distribution, driving,

operation of mechanical equipment, child care or making important decisions while under the

influence of medical marijuana, medical marijuana laws and regulation highlights. See

Appendix E(5.3) for sample safety educational brochure.

4 1380765_2

Section E(5)(B): Serving qualified patients by supplying and maintaining enough

marijuana to meet their needs is of paramount interest for HKM within the County of Kauaʻi.

Through the adoption and deployment of MMT’s Variable Capacity Continuous Harvest

(VCCH) approach, as well as through the implementation of an aseptic, risk-averse production

and manufacturing environment, we will be able to produce safe, high-quality and consistent

marijuana to qualified patients. Our storage and replenishment room will allow us to store

product in an environment similar to our dry and cure room. The use of light-tight and air-tight

storage containers will be implemented to preserve and protect the product and aid in further

curing. This room will be well maintained and cleaned daily to prevent pathogen outbreaks.

Access will be limited to specific employees and management in order to prevent cross-

contamination from within the production center.

Section E(5)(C):

. To further facilitate the mobility of qualifying

patients and patrons with limiting or debilitating medical conditions, HKM’s retail dispensary

facility will be ADA-compliant inclusive of walkway ramps and bathrooms as well as the

availability of electronic and information technology to patrons. Additionally, HKM will seek to

5 1380765_2

establish and maintain strong ties and open communication lines with local law enforcement to

ensure police and/or emergency medical assistance is available to staff and patrons in the event

of a serious adverse event.

Section E(5)(D): Patient education and customer satisfaction are the core focus of the

retail dispensing facility. Being able to measure and improve customer satisfaction is critical for

both our long-term business growth as well as ensuring that consumers are provided with the

safest, most consistent experience possible. We plan to measure and improve customer

satisfaction in a variety of ways. Our customer experience strategy will be comprised of the

following: a secret shopping program, including on-site secret shops as well and recorded phone

call secret shops; customer satisfaction surveys to include point-of-sale surveys, mobile feedback

surveys as well as an online feedback platform; an employee satisfaction and engagement

survey; customer intercept and exit interviews; and the creation of an anecdotal patient feedback

repository (see Appendix E(5.4) for customer satisfaction program details).

We will use Customer Experience (CX) metrics to benchmark, measure and improve

upon the customer experience through all customer touchpoints and interactions. This will help

us to identify any gaps in training, improve patient education, ensure we are responsible vendors

of medical marijuana and provide patients with the information they need to make informed

health decisions. We will closely monitor online review sites and set up company Google Alerts

to make sure we are promptly responding to any online customer feedback we might receive.

We commit to continually optimizing and prioritizing our company’s customer experience

strategy for constantly improving our customers’ experience, and patient and community safety.


1380887_2

SECTION E(6)

HKM will be fully compliant with all criminal background check requirements in

accordance with HRS, Chapter 329D and all applicable rules promulgated thereunder, including,

without limitation, HRS, Sections 329D-7 and 12 and Section 846-2.7. HKM intends to

implement strict adherence to background checks for all required individuals and parties with

current or future association to ensure our organization is a model for the 8 medical marijuana

license holders in the State of Hawaii. With regard to the initial dispensary license application,

HKM has ensured that the following parties have fulfilled their criminal background check

requirements: individual applicant, officers, directors, shareholders with at least twenty-five

percent ownership interest or more, members, and managers of HKM.

Upon award of a dispensary license from the State of Hawaii, HKM will ensure that the

following parties fulfill their criminal background check requirements: each employee of the

medical marijuana dispensary, each subcontracted production center and retail dispensing

location employee, as applicable, and all officers, directors, shareholders with at least twenty-

five percent ownership interest or more in a subcontracted production center or retail dispensing

location.

Additionally, no person shall intentionally or knowingly enter or remain upon the

premises of our medical marijuana retail dispensing or production center location pursuant to

HRS, Sections 329D-15(a)(4) or 329D-16(3) without having previously fulfilled their criminal

background check requirements.

. This will be kept on file and

made available to the DOH or law enforcement as requested or for the purpose of inspection.

2 1380887_2

HKM understands that the DOH will need to approve a list of visitors and that this list shall be

effective for 1 year from the date of approval. HKM also understands that unauthorized access

to our production center and retail dispensing locations is a class C felony.

HKM will develop detailed SOPs to ensure strict compliance with Criminal Background

Check Requirements and Facility Access Authorization as mandated by Hawaii law. The

provisions of our SOPs will include, but not be limited to the following:

Responsibility: The Compliance Department and Human Resources Department will

share the overall responsibility to ensure HKM has documented its compliance with background

check and restricted access regulations and that this documentation is at all times available to the

DOH for inspection. Employee Files, Approved Contractor Files, and the Authorized Access

List will be audited periodically by the Compliance Department to ensure current and complete

documentation is on file. Any discrepancies will be immediately resolved and will be reported to

senior management.

Policy:

Principals: All principals must comply with state background check requirements and

documentation will be retained by the Compliance Department. Principals may be defined as:

individual applicant, officers, directors, shareholders with at least twenty-five percent ownership

interest or more, members, and managers.

Employees: Employee Job Descriptions and Employment Contracts will include the

provision that individuals must successfully pass a criminal background check as required by

Hawaii law as a prerequisite condition for employment. Human Resource employee files will

contain documentation of criminal background check compliance.

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Independent Contractors and Other Approved Vendors: Independent contractors and

other approved vendors will be subject to the following:

1. HKM will identify and compile a list of all individuals who will require access to the

production center and/or the retail dispensary. All persons on this list will provide

HKM any and all documentation as required by the state with regard to background

check compliance.

2. The persons on this list must be approved by the DOH. The DOH approval

information and other evidentiary materials documenting criminal background checks

will be retained by the compliance department.

3. All individuals who have successfully met all requirements will be included on

HKM’s official list of authorized visitors (on HKM’s letterhead). This certified list

will be retained at the entrance to the production center and retail dispensary.

4.

5. If at any time an individual is observed in the facility who is not an employee and

who does not have a “visitor badge” all HKM’s personnel shall be required to report

this to a supervisor.


1380773_2

SECTION E(7)

In order to comply with the State of Hawaii’s selection of BioTrackTHC as the seed-to-

sale inventory tracking software system for its medical marijuana initiative, HKM has engaged

BioTrackTHC for their preliminary application support. BioTrackTHC has sent HKM their

support document to assist us in becoming compliant with the requirements set forth in HRS,

Chapters 329 and 329D, and the HAR, Chapter 11-850, for inventory tracking, security, and

dispensing limits for qualifying patients. BioTrackTHC’s commercial software will provide

seamless data exchange integration between HKM and Hawaii’s medical marijuana tracking

system. There will be integration via the application program interface (API) between HKM and

BioTrackTHC’s enterprise system and the state interface utilized by the State of Hawaii

Department of Health (“DOH”). This will allow data to be sent in real time, not only from HKM

to the DOH, but it will allow HKM to retrieve transferred data by the DOH.

The BioTrackTHC System (the “System”) is comprised of several components, all of

which are designed to seamlessly integrate with one another. The BioTrackTHC producer,

processor and retail tracking components are completely interoperable with one another.

Whether the tracking requirements include plants, trimmings, waste, conversion, dispensing or

anything in between, the System, in concert with its unique inventory typing system, can

currently track and comply with all DOH requirements (see Appendix E(7.1) for summary of

BioTrackTHC inventory POS hardware and tracking functionality).

At every stage in the product lifecycle where something needs to be differentiated,

the System issues a new “child” identifier (e.g., separating flower from stems during the harvest

process, the creation of new clones or seeds from a mother plant).

2 1380773_2

Every identifier is associated with a quantity that is measured in either discrete units or a

weight depending on the item’s classification.

Laboratory testing is built-in and tied directly into the System. This allows for very

complex or very simple rules on what needs to be tested, what the testing requirements are, the

pass/fail limits, etc. This testing paradigm provides a model for ensuring that only properly

tested product may be sold to a patient. The System’s integrated features will be setup to prevent

the sale or transfer of product that has not passed state mandated laboratory tests, if necessary.

In order to maintain a record of clear and unbroken custody at all stages, this will include full

tracking during the transport of inventory between our production center and the retail

dispensary and between our facilities (both the production center and the retail dispensary) and a

State-certified laboratory.

3 1380773_2

HKM will use the System to generate shipping manifests that will be sent with each

outgoing shipment from the production center to the retail dispensary. The DOH will be able to

see what product or products are in route between facilities, with timestamps and dates on when

the product was checked out of production, is in route, and when it arrives to the retail

dispensary. We will use the BioTrackTHC transportation manifest to monitor and reconcile all

products that arrive to the retail dispensary. We will inspect the physical shipment and compare

to the transportation manifest for accuracy. After checking the product in and determining

accuracy, we will utilize the System on the retail dispensary side of the business to enter the

product into inventory.

HKM will track the plant through each phase of its lifecycle beginning with a clone,

through early, mid and late vegetative phases, flower, trim, dry, cure and storage. We will have

the ability to readily track plants within the System should we at any time need to physically

locate a plant within our production center. An example of this would be a plant affliction which

escapes the attention of the cultivation team but is detected by a trimmer. Utilizing the System

would allow the team to track the precise flowering room location. The cultivation team can

immediately go to that room and check all other plants, and treat them for afflictions if

necessary, in order to prevent future outbreaks or allowing other plants to pass through with

pathogenic afflictions. We will be able to easily report to the DOH at any time the number of

plants we have in our facility, where these plants reside in the lifecycle process, and in which

room a plant or plants reside.

4 1380773_2

This information will be recorded

with date and time stamp and will be viewable on the related report run through BioTrackTHC.

HKM will be able to pre-set certain security rights and privileges to staff members depending on

their job status. For example, a manager will have the security clearance required to take cash

pulls from the register should too much cash reside in the till. Once the employee has serviced

the employee and completed the transaction, the patient’s name will be automatically removed

from the queue.

Utilizing the System will also allow us to keep our focus on patient safety. With our

ability to electronically track all sales of our marijuana and manufactured marijuana products to

qualified patients and their primary caregivers, we have the ability to ensure that no sales are

authorized in excess of the legal limits which have been set forth in HRS, Section 329D-7(12).

Using the System will ensure that patients will not have the ability to purchase products in excess

of the legal limits and that those limits cannot be overridden manually. Within these sales limits,

our personnel can regulate the permissible quantities allotted to a patient or caregiver. The

System stores patient purchases and cross-references with any DOH defined limits. As the

System will be recording every transaction, this data can be parsed, filtered and reported against

at any time. The System can also issue stop purchase alerts it a patient attempts to exceed said

defined limits and disallow the completion of such a sale. In the event that a patient has

exceeded their purchasing limit, HKM will be notified within the System that the patient has

exceeded their sales limit. In response, the System will issue a stop purchase alert. The System

will not allow HKM to transact with a patient that has exceeded their pre-defined sales limit.

5 1380773_2

While using the System, we will also be prepared to deal with a breach or failure of the

System. Our protocols will provide that should such a breach or failure occur within the System,

we will suspend all of our operations until the System is fully operable again. If this should ever

occur, we will notify the DOH immediately upon the breach or failure, and again when it

resumes operations. In the event of a loss of internet access, the System has the ability to operate

in offline mode. While operating in offline mode, we will have the ability to continue to process

sales with an on-site server, even if the internet connectivity goes down. When service is

restored, all changes made in offline mode will be updated and synced within the System.


1381640_1

SECTION E(8)

HKM recognizes the need to and has the ability to maintain the confidentiality of a

qualifying patient’s medical condition, health status, and purchases of marijuana or

manufactured marijuana products, in addition to the qualifying patient’s personally identifying

information. All such patient information obtained by HKM is confidential and will not be

disclosed without the written consent of the individual to whom the information applies, or as

required under applicable law or pursuant to an order from a court of competent jurisdiction.

HKM shall adopt SOPs and operate the retail dispensary in substantial compliance with

the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). As provided under

HIPAA, we shall apply reasonable safeguards and implement minimum necessary standards to

protect confidential patient information from unauthorized disclosure and use.

We will have in place appropriate administrative, technical and physical safeguards that

protect against unauthorized uses and disclosures, and that limit incidental uses or disclosures.

This will include, without limitation, adopting practices such as:

2 1381640_1

These methods of

storage ensure that all records are adequately protected from loss, damage, or unauthorized use.

Use and Disclosure:

Confidential patient information shall not be used or disclosed when it is not necessary to

satisfy a particular purpose or carry out a particular function. We will implement procedures that

limit how much confidential patient information is used, disclosed, and requested for certain

purposes, which procedures will also limit who within HKM’s organization has access to such

confidential patient information and under what conditions, based on job responsibilities and the

nature of its business. For routine or recurring requests and disclosures, our procedures will limit

3 1381640_1

the confidential patient information disclosed or requested to that which is the minimum

necessary for that particular type of disclosure or request. For non-routine disclosures or

requests, we will have reasonable criteria in place for determining and limiting the disclosure or

request to only the minimum amount of confidential patient information necessary to accomplish

the purpose of the non-routine disclosure or request.

Communication of Confidential Patient Information:

HKM will inform individuals about its privacy practices as they relate to confidential

patient information that may be maintained by HKM in order to safeguard such information, and,

to the extent practicable, to protect the communication of such information from intentional or

unintentional use or disclosure. HKM will publicly disseminate these policies and procedures

and make a good faith effort to receive an acknowledgement of such receipt prior to the first date

of employment for HKM’s employees at the retail dispensary. HKM will not knowingly use or

disclose such information in a manner inconsistent with these policies and procedures.

Enforcement:

HKM will designate an individual as its Privacy Official, who is responsible for the

development and implementation of HKM’s patient confidentiality policies and procedures. The

Privacy Official shall also handle complaints and provide information about HKM’s practices

with respect to confidential patient information.


1380888_3

SECTION E(9)

In order to ensure a high quality, safe, consistent supply of marijuana for our patients,

HKM understands the critical nature of testing our marijuana and manufactured marijuana

products before they are sold to qualified patients. Testing provides patients with specific,

relevant information about the quality and strength of their medicine and ensures that patients

who may already have compromised health do not consume contaminants such as heavy metals,

solvents, pesticides or any type of microbial impurities.

HKM proposes to not only follow and comply with the State mandated third party

laboratory testing guidelines, as laid out in accordance with HAR, Sections 11-850-61 through

11-850-86, but to also be prepared to set up an in-house marijuana testing laboratory to ensure

the marijuana and manufactured marijuana products we produce meet or exceed the highest

possible quality safety standards set for our patients.

In order for HKM to be compliant with HAR, Section 11-850-82, we intend to

implement SOPs (see Section 9.3 of Appendix E(9) for recommended list of SOPs) in order for

our business to hold the required laboratory certification, independent from all dispensary

licensees, employees and all other persons and entities with a financial interest in a dispensary

licensee using accredited standards equivalent to the ISO 17025. HKM will also establish SOPs

that include chain of custody for samples being transferred to the laboratory for testing. HKM

will also meet all of the criteria for laboratory certification in accordance with HAR, Chapter 11-

850, Subchapter 7.

In order for HKM to be compliant with HAR, Section 11-850-83, we intend to provide

all necessary fees and documents required by the DOH accompanying our application so that we

can test our marijuana and manufactured marijuana products. All required documentation will

2 1380888_3

be available immediately upon request from the DOH. We will be available for an on-site

inspection to demonstrate capacity and proficiency to test marijuana and manufactured marijuana

products so that the DOH can verify that we meet all requirements set forth in HAR, Chapter 11-

850, Subchapter 7. HKM intends to renew and provide documentation to the DOH to

continuously hold all certifications required for laboratory testing of marijuana and manufactured

marijuana products adhering to the requirements set forth in HAR, Chapter 11-850, Subchapter

7.

In order for HKM to be compliant with HAR, Section 11-850-84, we plan to display

our certification in a prominent location at our facilities. We will establish SOPs detailing each

step of the procedure including, but not limited to, documentation, sample preparation, reagent

preparation, instrument set up and usage, acquisition of data and applicable calculations. We

will be in communication with the DOH if our accreditation is in jeopardy in any way.

In an effort for HKM to be compliant with HAR, Section 11-850-85, we intend to

implement SOPs that reflect ISO standards in testing a statistically representative sample from

each batch of marijuana or manufactured marijuana products and will secure a similar sample

from the same batch for verification testing. HKM will test and analyze samples according to

SOPs based on scientifically validated methods according to HAR, Chapter 11-850, Subchapter

7, and Section 11-850-85. HKM will also provide a certificate of analysis for each batch of

marijuana and manufactured marijuana products tested for that dispensary and only report on the

things for which we are certified to do so (see Section 9.2 of Appendix E(9) for potency testing).

In order to remain compliant, procedures for the tests will be based on validated published

methods (see Section 9.4 of Appendix E(9)).

3 1380888_3

All microbial tests conducted will be validated using the FDA approved methods from

April 2015 in their document, Guidelines for the Validation of Analytical Methods for the

Detection of Microbial Pathogens in Foods and Feeds (see Section 9.1 of Appendix E(9)). If a

batch does not meet acceptance criteria (defined by the DOH) for any of the tests above, it will

be quarantined and retested. If the retest is still a failure, the batch will be destroyed. HKM will

be prepared to do additional testing at the discretion of the DOH. As a business policy, we will

create and retain all testing records for a minimum of 5 years including all provisions in HAR,

Chapter 11-850, Subchapter 7, and Section 11-850-85.

In an effort for HKM to be compliant with HAR, Section 11-850-86, we intend to follow

all rules and regulations set forth in HAR, Chapter 11-850, Subchapter 7. In case we do not, we

are aware of the reasons our laboratory certification may be revoked as set out in HAR,

Section 11-850-86, including what the laboratory shall do upon revocation of the certification.

In order to be compliant with HAR, Section 11-850-87, we intend to follow all of the

rules set forth in this section for reconsideration of certification, including all explanations of

why we may feel the revocation was improper in the timeline requested. We understand that a

final decision by the director of the DOH on a request for reconsideration is a final agency

action.

HKM would like to reiterate that if only third party testing is allowed by the State, we

have a full understanding of these regulations and are prepared to follow all such procedures.

Should the State allow for both in-house as well as third party testing, we will be fully equipped

and able to institute either or both protocol.


1381190_2

APPENDIX E(9)

9.1 – Microbial Testing Overview

Scope

This document will provide general procedure including- time requirements, sample size,

storage and disposal- for in house microbial testing of flower and concentrates.

General Process

Note: SOPs and Methods to be provided at a later date if requested.

1) Weigh sample into whirl-pak bag. Record weight.

2) Add appropriate amount of dilutent

3) Massage bag for 1 minute

4) Set up serial dilutions

5) Plate onto petrifilm or Ecoli/Salmonella tests

6) Analyze/Report results after 24-60 hrs

7) Store/dispose of extracts and samples

Chemicals Needed

Note: The local fire department will need to be consulted regarding the storage of chemicals and

chemical waste

1) 70% Ethanol- To be used for cleaning only

No other flammable chemicals are used in the microbial testing process

2 1381190_2

Sample Size Requirements

Sample Type Sample Size (minimum)

Flower, bud, trim 1 gram

Concentrates (extract oil, wax, etc.) 1 gram

Sample Time Requirements

Process Time requirements

Sample Prep 5 minutes (per sample)

Sample Dilutions 10 minutes (per sample)

Sample Plating 3 minutes (per sample)

Sample run time 24-60 hours (per sample) can do up to 350

Sample Analysis Time 5 minutes (per sample)

Sample Capacity

Process Capacity

Sample Preparation 25-40 samples per day per person

Incubator Capacity 480 petrifilms per day (including QCs)

50-100 Ecoli and Salmonella tests per day

(including QCs)

Storage

Sample Type Storage Time

Sample (flower, concentrate, etc.) 3 months

Sample extract 1 week

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Disposal

This may depend on final State regulations but we have provided a suggested protocol as noted

in Section E(11).

Testing Frequency

This may depend on final State regulations, but recommendations are as follows:

- 2% of every strain of flower harvested

- 2% of every batch of oil produced

9.2 – Potency Testing

Scope

This section will provide general procedure including- time requirements, sample size,

storage and disposal- for in house potency testing of flower and concentrates.

General Process

Note: SOPs and Methods to be provided at a later date if requested.

1) Weigh sample into conical vial. Record weight.

2) Add appropriate amount of extraction solvent

3) Sonicate

4) Dilute with extraction solvent (to make sure extract is within quantifiable range)

5) Run sample extract on UPLC to determined % potency

6) Analyze/Report results using UPLC software

7) Store/dispose of extracts and samples

Chemicals Needed

NOTE: The local fire department will need to be consulted regarding the storage of chemicals

and chemical waste.

4 1381190_2

1) Methanol

2) Chloroform

3) Formic Acid

4) Ammonium Formate

5) Acetonitrile

6) HPLC grade Water

7) Reference Standards for each cannabinoid to be analyzed

Sample Size Requirements

Sample Type Sample Size (minimum)

Flower, bud, trim 0.200 grams

Concentrates (extract oil, wax, etc.) 0.0500 grams

Sample Time Requirements

Process Time requirements

Sample Weighing 1 minute (per sample)

Sample Extraction 30 minutes per batch of samples (~25)

Sample Dilution 1 minute (per sample)

Program Sequence on UPLC 15 minutes per sequence (can be up to 288

samples)

Sample run time on UPLC 5 minutes (per sample)

Sample Analysis Time 3 minutes (per sample)

UPLC/PDA Sample Capacity 288 samples per day

5 1381190_2

Sample Capacity

Process Capacity

Sample Preparation (Extraction) 100 samples per day per person

UPLC/PDA Sample Capacity 288 samples per day (including QCs)

Storage

Sample Type Storage Time

Sample (flower, concentrate, etc.) 3 months

Sample extract 1 week

Disposal

This may depend on final State regulations but we have provided a suggested protocol as noted

in Section E(11).

Testing Frequency

This may depend on final State regulations, but recommendations are as follows:

-Sample from each 10 pounds of harvest (~25 samples per 250 lbs. of the same strain)

-A sample from each production batch that will be given to a patient

9.3 – Recommended List of Standard Operating Procedures (SOPs)

Scope

This section will provide a list of recommended SOPs for use in Microbial testing,

Potency Testing and General Lab procedures.

1) Micro Sample Preparation

2) Plating-Aerobic Count

3) Plating- Total Yeast and Mold

6 1381190_2

4) Plating-Coliform/Enterobacter

5) Cell Count

6) Ecoli Testing

7) Salmonella spp. Testing

8) Aspergillis spp. Testing

9) Mycotoxin Testing

10) Autoclave Operation and Maintenance

11) Biohazard Waste

12) Documentation of experiments and results

13) Media Preparation

14) Organism Maintenance

15) Laboratory Notebook Procedure

16) Sample Receipt, Handling, Storage and Disposal

17) Training Procedure

18) Method Validation Procedure

19) Potency Extraction

20) Potency Analysis

21) Moisture Content Determination

22) Calibration, Maintenance and Use of pH Meters

23) Glassware Washing and Cleaning

24) Oven Operation and Maintenance (if Moisture Content Determination is required)

25) Moisture Content Determination (if Moisture Content Determination is required)

7 1381190_2

9.4 – Validated Procedures

Test Type Equipment Validation Based

On

Chemical Profile UPLC(HPLC)/UV Detector

FDA/GLP Guidelines

Heavy Metals ICP-MS EPA

Pesticides LC-MS/MS EPA

Solvents GC-FID US Pharmacopeia Chapter 467

Visible foreign and extraneous material Microscope or visual

FDA

Moisture Content Oven ISO Method

Total Viable Aerobic Bacteria, Total Yeast and Mold, Total Coliforms, and Bile-Tolerant Gram Negative Bacteria (Enterobacter)

3M petrifilm plates specific to the species of interest

AOAC

E. coli (also called STEC or EHEC), Salmonella spp.

ELISA based screen tests

AOAC and FDA

Aspergillus spp. of mold (Niger, Fumigatus, Flavus)

Morphology and microscopic examination

FDA approved media from the Bacteriological Analytical Manual

8 1381190_2

9.5 – Lab Equipment

The following equipment list is for example purposes only in order to show our

understanding of what is typically necessary to out-fit an in-house testing laboratory (if allowed

by the State). We are still seeking vendors for and pricing the equipment and will make a final

determination on all equipment to be purchased upon issuance of the license.

9 1381190_2

10 1381190_2

11 1381190_2


1380787_3

SECTION E(10)

HKM has the ability to comply with all applicable requirements for packaging, labeling,

and chain of custody of products in accordance with HRS, Chapter 329D and all applicable rules

promulgated thereunder. In particular, HKM has solicited proposals from several packaging

companies to service our needs for both shipping from our production center to our retail

dispensing location as well as point of sale transactions to our patients. We will make our final

selection of this packaging partner based upon their ability to deliver upon the requirements set

forth within HRS, Section 329D-11, and other variables including cost, reputation and best

practices with regard to medical marijuana and consumer safety prior to the retail dispensary

becoming operational.

Prior to shipping any marijuana-related products from production to retail, HKM will

have appropriately sized shipping containers on-site, requiring the use of tamper evident lids,

constructed out of opaque material, sealed with tamper evident tape and signed by no less than 2

managers on duty. The packaging manager will be responsible for sealing and initialing the

package with tamper evident tape. The shipment will be placed on a shipping pallet and loaded

for transport.

All products being shipped from the production center to the retail dispensary will have a

unique label generated by BioTrackTHC software. All labeling will be generated from

BioTrackTHC software, ensuring the product history is easily traceable. Included in this label

will be: (i) the date and time the package was sealed for shipment, (ii) the name and signature of

the manager responsible for preparing the shipment, (iii) the unique shipment identification,

(iv) the description of the shipment including the weight of each item in the package, including

each item’s unique bar code generated from the BioTrackTHC software, and (v) the product’s

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lab-testing results. Two identical manifests will be generated, one to be placed inside the

shipping container, and one attached to the outside.

All packaging and labeling at the retail dispensary will comply with HRS, Section 329D-

11, at a minimum, for the sale of the product to the patient. The packaging for marijuana will be

placed in ASTM child-resistant, opaque bags or containers and will contain no more than the

patient’s allowable purchase amount which will be verified by the inventory tracking system.

The packaging for manufactured marijuana products will be pre-packaged in ASTM child-

resistant, opaque packaging and contain no more than 100 milligrams of THC per package. In

addition, all manufactured marijuana product packaging will be in accordance with HRS,

Section 329D-9 (see Appendix E(10.1) for packaging and labeling plan and Appendix E(10.2)

for sample label).

BioTrackTHC will automatically print the container-client specific label upon completion

of a sale to a qualifying patient. The name and address of the recipient, the quantity delivered,

and the product name, potency, batch number, and lot number of the product can all be recorded

for each distribution. For a full list of fields currently integrated into BioTrackTHC, see

Appendix E(10.3).

BioTrackTHC will also assist us in tracking chain of custody from plant clone to point of

sale, in accordance with HAR, Section 11-850-61. At the point the shipment arrives at the retail

dispensary, the retail dispensary manager shall log into the BioTrackTHC system in order to

check in the shipment. The system will now indicate the shipment has arrived to the dispensary.

The tamper evident shipping containers and their contents are visually inspected in full security

camera view to ensure they are secure, undamaged, appropriately labeled, and reconciled against

the shipping manifest. This duty will be performed by an approved manager and another

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employee. The manager will sign and date the shipping manifest and return it to the driver to be

returned to the production center. Should there be damage or a discrepancy, it will be

immediately declared to the production center for investigation and returned. The shipping

container will then be opened and the products will be removed in full view of the security

camera with the aid of another employee to be properly reconciled to the shipping manifest.

Each product will then be entered into the BioTrackTHC inventory tracking system in order to

update inventory levels. At this time the medical marijuana and manufactured marijuana

products received will be physically added to retail dispensing inventory.

To complete the chain of custody to a qualifying patient, the BioTrackTHC system will

be utilized to transact the sale. To ensure that no sales are authorized in excess of legal limits, as

set out in HRS, Section 329D-7 and Section 329D-13, the system shall automatically prohibit the

sale and will not be able to be manually overridden. Assuming the patient is within their

allowable purchase limit, the system will now indicate that the patient has taken custody of the

product.

HKM has solicited proposals for our exit bags which will comply with state law by being

child resistant and opaque as well as contribute to public safety. Multiple products can be placed

in the exit bag for convenience to the patient (see Appendix E(10.4) for sample exit bag).


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APPENDIX E(10.1)

Packaging and Labeling Plan

Labeling requirements on content and format for medical marijuana will conform to state

mandated regulations and the FDA’s CFR Title 21, part 201. Marijuana infused products will be

individually packaged and labeled immediately at the point of preparation. All marijuana

infused products that are shipped to a dispensary from the cultivation center will be in ASTM

certified child resistant packaging and will conform to the requirements Title 16 CFR 1700 of the

Poison Prevention Packaging Act. The packaging will protect the product from contamination

and will not impart any toxic or harmful substance to the marijuana or manufactured product.

Standardized machinery will provide accurate and consistent packaging and labeling of all

products.

Marijuana products will adhere to the same standards assigned to pharmaceutical

consumer packaging with exceptional deference to assuring child safety. Marijuana products

will be limited to 10 milligrams of THC per dose or serving and one container will not contain

more than 100 milligrams total THC. Each packaged and labeled product will bear a clear

warning to keep the package and its contents away from children. A SAFETY NOTICE on the

label will include the dosing information along with the Poison Control Center emergency

telephone number in case of accidental ingestion or adverse effect.

Marijuana and marijuana extract utilized in the creation of all marijuana infused products

will be lab tested for cannabinoid profile, microbiological contaminants, mycotoxins, pesticide

active ingredients, residual solvent, and active ingredient analysis. The accurate cannabinoid

profile information will be utilized in the production formulations and standard operating

procedures for marijuana infused product production to ensure accurate cannabinoid dosing and

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labeling. Marijuana Infused Products will be assigned a Production Batch Number that utilizes

verified and accurate lab test results. This system allows the marijuana infused product to be

directly traced to the marijuana plant(s) from which the cannabinoid profiles originate. This

process allows for accurate test result information to be displayed on the marijuana infused

product label as well as being integral to seed-to-sale traceability.

Incorporated into the product label, will be a blank area. A separate batch-label sticker

will be created for each unit of product that will be affixed to the product within this designated

space subsequent to testing and certification, and prior to shipment. The separate label-sticker

will have all the information relevant to that batch/lot including testing results, product lot-

number and expiration date (FDA cGMP Sec 211.137 Expiration Dating). The Quality Control

Manager for HKM will review and approve the information on production batch sticker before

the stickers are utilized.

Products will contain non-cannabis ingredients. All non-cannabis ingredients will be

listed in a weighted format per FDA guidance. The most dominant ingredient will be listed first

and the least dominant will be listed last. This information will be printed within a designated

area on the product label and will be clearly legible showing non-cannabis ingredients contained

within an outlined box.

Product labels will be completely wrapped in opaque 4mm shrink-wrapped labels. The

labels of marijuana infused products will be designed with black lettering with no pictures or

graphics. Information represented on the labels will include but not be limited to the following

information:

PRODUCT LABEL CONTENT:

1. The name of the Production Center;

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2. Instructions for use;

3. An inventory tracking barcode for use by tracking software that will match the product

with a producer batch and lot number to facilitate any warnings or recalls the DOH or

producer deems appropriate;

4. Type of extraction method used, including solvents, gases or other chemicals or

compounds used to produce the marijuana product;

5. All ingredients of the item, including any colors, artificial flavors and preservatives,

listed in descending order by predominance of weight shown with common or usual

names;

6. Allergen labeling;

7. The statement “For Medical Use Only”;

8. The statement “This product may be unlawful outside of the State of Hawaii and is

unlawful to possess or use under federal law.”;

9. The statement “This product has intoxicating effects and may be habit forming.”;

10. The statement “Smoking is hazardous to your health.”;

11. The statement “There may be health risks associated with consumption of this product.”;

12. The statement “This product is not recommended for use by women who are pregnant or

breastfeeding.”;

13. The statement “Marijuana can impair concentration, coordination and judgement. Do not

operate a vehicle or machinery under the influence of this drug.”;

14. The statement “When eaten or swallowed, the effects of this drug may be delayed by two

or more hours.”;

15. The statement “This product is not for resale or transfer to another person.”; and

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16. The identification of the independent testing laboratory.

PRODUCTION BATCH STICKER UNIQUE TO EACH BATCH:

1. Dispensary License Number;

2. The date of packaging and "use by" date;

3. Production Batch Number;

4. Marijuana Concentrate Batch Number;

5. The pre-mixed total weight (in ounces or grams) of usable cannabis in the package; and

6. A list of the following cannabinoid content by weight;

• THC

• THCA

• Total THC

• CBD

• CBDA

• Total CBD

Chain of Custody

Medical marijuana product production begins with lab tested and approved marijuana

extract. All product production staff will be trained in HKM’s SOPs (see Standard Operating

Procedures).

An employee of the Extraction Area will deliver medical marijuana extract from the

Extraction Area into the Production Area. All medical marijuana extract moved into the

Production Area will be documented and inventoried by an employee of the Production Area.

The chain of custody of the marijuana extract from extraction area to the production area will be

documented in the BioTrack inventory tracking software. A designated production employee

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will conduct daily inventory of all medical marijuana extract and products within the production

area at the beginning and ending of every day.

All non-marijuana products will be inventoried and inspected before being brought into

the Production Area and will be stored in a separate storage area or in climate-controlled coolers

or freezers on stainless steel racks. Layout of the Production Area will be segregated into 4 main

areas: storage, production, packaging, and sanitation.

The workflow and movement of supplies and products will be efficient in utilizing space

to ensure best practices in safety, sanitation and security. The extraction and production areas

will each have designated sanitation areas that will include a triple-compartment sink along with

sufficient storage area for cleaning supplies, chemicals and sanitizer.

Medical marijuana product production will be under the supervision of a certified food

sanitation manager. Staff employed within the production area will have a recognized food

handler certification and will manage, prepare, package and label all medical marijuana products

for distribution to a dispensing facility. The Production and Extraction Areas will be considered

“Limited Access Areas” with entry permitted only to employees validated to work in those areas.

Medical marijuana products will be non-hazardous and certified shelf-stable. Approved

non-marijuana ingredients will be received and stored accordingly. The lot and batch numbers

of all approved non-marijuana ingredients will be logged and recorded to assist in the event of a

product recall. Employee and product health and security will be a priority of the production

area.

Inventory of all marijuana products will be performed and recorded throughout each day.

More than one employee including a manager will verify the inventory results. All staff will be

trained in internal Standard Operating Procedures (SOP) of the production areas. A designated

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Compliance Officer will be on site at all times of production to ensure compliance with all state

and local laws and to ensure accurate marijuana inventory tracking utilizing the BioTrack

inventory tracking software. All medical marijuana products will be secured at all times and

tracked throughout the extraction and production processes within the production area using

internal protocols and the BioTrack inventory tracking software. All medical marijuana products

will be assigned a lot number on the product label before shipment as to be traceable from seed-

to-sale.


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APPENDIX E(10.2)

Sample Label Image

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APPENDIX E(10.3)

BioTrackTHC Label Fields (Current as of 1/20/16)

Custom Text Fields, Images, Lines, Additives, Barcode, Batch #, Custom Batch #,

Customer Medical Marijuana ID #, Customer Name, Date, Date and Time, Employee Name,

Employee License #, Grow (Production) License #, Harvest Date, Inventory Grade, License #,

MITS ID, Package Date, Package Weight, Plant Birthdate, Product Expiration, Product

Ingredients, Product Name, Strain, Strain Type, Testing Date, Testing Lab, Usable Weight,

Weight, Test Results (including: CBC, CBD, CBD-A, CBG, CBN, D8-THC, D9-THC, D9-

THC-A, H20, Heavy Metals, Mold, Mildew, Total THC, Total Cannabinoids)

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APPENDIX E(10.4)

Sample Exit Bags

Courtesy of FunkSac™


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SECTION E(11)

The following is a summary of HKM’s plan for secure disposal of marijuana and

manufactured marijuana products in order to comply with HRS, Chapter 329D and all applicable

rules promulgated thereunder.

Upon award of a Hawaii dispensary license and prior to handling of any marijuana, HKM

shall apply to the department of public safety narcotics enforcement division (“NED”) and obtain

a certificate to possess and handle marijuana and manufactured marijuana products. Ultimately,

HKM intends to destroy or dispose of unused, unsold, contaminated, expired, or mishandled

marijuana or manufactured marijuana products by a means prescribed by the DOH or the NED

administrator in accordance with HAR, Section 11-850-43. Upon approval by the NED, HKM

will establish written policies and procedures to be followed by all employees in regard to

destruction and disposal of all unused, unsold, contaminated, expired, or mishandled marijuana

and manufactured marijuana products as part of its standard operating procedures.

To ensure the secure destruction and disposal of marijuana and manufactured marijuana

products, HKM intends to implement a robust disposal protocol at our production center.

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All forthcoming destruction and disposal procedures will be performed by an approved

full time staff member in the presence of a manager, to ensure double verification of the process.

In addition, security systems will monitor the process in its entirety, limiting the potential for

diversion within the interior or exterior of the production center.

All wasted material will be deemed not only unusable, but also unrecognizable prior to

leaving our facilities in accordance with the following procedures:

Procedure 1: HKM will assure proper waste inventory tracking;

● HKM will maintain accurate and comprehensive records regarding any waste material

produced through the trimming or pruning of a medical marijuana plant prior to harvest,

which must include weighing and documenting all waste. Records of waste produced

prior to harvest will be maintained on the premises of HKM. Waste produced prior or

subsequent to harvest will be disposed of in accordance with this policy and made

unusable and unrecognizable.

●

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● HKM will maintain accurate and comprehensive records regarding waste material that

accounts for, reconciles, and evidences all waste activity related to the disposal of

medical marijuana and manufactured marijuana products and will be made available to

the department or law enforcement upon request.

Procedure 2:

; including unviable plants, plant stalks, plant

stems, and plant fan leaves, with non-consumable, solid wastes listed below such that the

resulting mixture is at least fifty percent non-marijuana waste including:

● Paper waste;

● Cardboard waste;

● Spent soil waste (dirt);

● Grease or other compostable oil waste;

● Bokashi, or other compost activators; or

● Other wastes approved by the NED that will render all medical marijuana and

manufactured marijuana product waste unusable and unrecognizable.

● All wasted marijuana and manufactured products to be destroyed shall be mixed so that at

least 50% of the total mixture is composed of items listed above and treated with an

environmentally friendly sanitizing agent to substantially diminish the remaining

tetrahydrocannabinol (THC) content.

Procedure 3:

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●

Procedure 4:

● HKM will designate a manager to monitor the current contract to be sure it is current and

on record for inspection by the department as necessary.

● HKM’s manager will meet the third-party waste disposal agent and validate their

authority to remove marijuana waste that has been rendered unusable and unrecognizable.

● HKM’s manager will document the waste pick up in the inventory tracking system.

● Records will be maintained on premise for a minimum of 6 years.

● HKM will maintain an independent log of such disposal that will be kept at the

production center for inspection by DOH officials or law enforcement as required.

For a summary flowchart and representative photos see Section 11.1 of Appendix E(11).

Our recommended destruction and disposal process will ensure that wasted marijuana by-

products and inventory does not become available to unauthorized persons and will be

documented as subtracted from inventory via BioTrackTHC. The BioTrackTHC tracking system

will track and report on all disposal of marijuana and manufactured marijuana products from our

production center and retail dispensary. The system allows for the adjustment of inventory

quantities as the result of both non-sales operational activities (such as disposal, wastage,

moisture loss, mistakes, and inventory audits) and external factors (such as theft and seizure by

5 1380791_2

law enforcement). Data related to disposal information may include but is not limited to: the

amount disposed, reasons for disposal, day/time of disposal, identity of the employee(s)

conducting the disposal, and manner of disposal in addition to all product-related data such as

inventory classification.


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SECTION E(12)

HKM has the ability to ensure product safety in accordance with HRS, Sections 329D-8,

10 and 11, and HAR, Chapter 11-850. Product safety is paramount for business best practices,

ensuring that all marijuana and manufactured marijuana products are safe for use or consumption

by qualifying patients. HKM will fully comply with HAR, Section 11-850-75, concerning

quality control, health, safety and sanitation standards as well as HRS, Sections 329D-8, 10, and

11. The 6 principles of product safety are quality assurance, environmental control, integrated

pest management, cleaning and sanitation, consistent execution of all SOPs, and rigorous

laboratory testing for potency, microbials, residual solvents, heavy metals, and toxins. As

required within HAR, Section 11-850-71, HKM intends to establish and maintain a written

policy and procedure that includes:

1. Safe and appropriate use of equipment;

2. Effective training and monitoring of employees and subcontractors who participate in

the production of marijuana and manufactured marijuana products;

3. Adequate protocols for laboratory testing of marijuana;

4. Safe and appropriate storage and disposal or destruction of marijuana at all stages of

production and sale, ensuring there is no diversion to unauthorized persons; and

5. State compliant packaging and labeling.

Quality control is necessary in every level of plant husbandry from propagation within a

production center to being sold in the retail dispensary. The cultivation team will be our first line

of defense with their daily “scouting” duties. With clone propagation and management, the

cloner is looking daily for molds, mildew or other pathogenic afflictions. Through the plant life-

cycle from early, mid and late vegetative stage and on through flowering, the cultivation staff

2 1380794_2

will always have eyes on the plant. While performing the various tasks of feeding, transplanting,

topping, de-fanning, pruning, and netting, human eyes provide the best initial source of

identifying afflictions. Through daily scouting, cultivators will actively look for molds, mildews

and other pathogenic outbreaks in order to be proactive with regard to the medical marijuana

crop, instead of reactive. As the plants are harvested and transferred to trim, dry and cure, each

department is actively looking for afflictions to the plants that may have escaped the notice of the

cultivation team. Should an issue be discovered, the plant will be segregated and reported to the

cultivation team who will, through the BioTrack system, locate the flower room from which the

plant came and look for any other issues in that room to treat and quarantine before it may spread

throughout the production center.

Within the production center, HKM will strive to maintain complete control over all

environments containing marijuana or manufactured marijuana products. Controlling the

environment is critical to the overall health of the facility. Deploying Stulz Air Technology

HVAC Systems, or similar cleanroom atmospheric control equipment, will aid in the creation of

a nearly aseptic, exceptionally clean environment. These systems will provide all elements

necessary to successfully creating and managing a controlled environment, including human

management of temperature, humidity, and carbon dioxide levels.

Through adoption of a proper Integrated Pest Management (“IPM”) protocol, HKM can

mitigate or eliminate several potential production center issues (see Section 12.1 of

Appendix E(12)). IPM should only utilize organic, oil-based treatments that contain no harsh

toxins that could potentially harm the cultivation team or ultimately a qualifying patient.

Actively scouting for issues is by far the most important part of IPM. Scouting involves having

3 1380794_2

trained human eyes on the plants, actively looking for pests, molds or other afflictions and

quickly treating the plants.

Cleaning and sanitation of the facility and all equipment is another critical element with

regard to product safety and maintaining a safe work environment both in the production center

as well as retail dispensary (see Section 12.2 of Appendix E(12)). Wash stations, lockers and

work clothing will be provided. Daily cleaning checklist will be used by staff to ensure

compliance with regard to HAR, Section 11-850-75, quality control, health, safety, and

sanitation standards.

Rigorous health, safety, and sanitation standard will also apply to staff or any other

persons who may come in contact with medical marijuana and medical marijuana products while

at the production center or retail dispensary. HKM intends to ensure its production center and

retail dispensary is well-equipped to provide sanitary working conditions for staff, addressing all

requirements set forth within HAR, Section 11-850-75. This includes, but is not limited to,

excluding contact from staff and persons with illness, open lesion or wounds, or any other source

of contamination, providing ample hand washing facilities and hand cleaning preparations, and

requiring all staff to conform to hygienic best practices while on duty. Additionally, no animals

will be permitted within the facilities, except for service animals in accordance with HRS,

Section 347-2.5. Additionally, HKM will not alter marijuana or manufactured marijuana

products to change their appearance, flavor, or smell in a way that would appeal to minors.

A clean and sterile facility is a healthy facility. All floors, walls and ceilings will be

adequately cleaned and kept sanitary. Adequate screening will be installed to protect against the

entry of pests and other pathogens. All litter, waste, and rubbish will be removed and disposed

of to minimize the development of odor or attract pests or vermin. HKM plans to maintain any

4 1380794_2

environmentally friendly cleaning compounds, sanitizing agents, and bait traps in a manner that

is in accordance with local, state, and federal law. In addition, HKM will maintain an MSDS for

every hazardous chemical on premise and make them available to employees as part of our

Right-to-Know provisions – which says employees have the right to know about the chemicals to

which they are exposed. The other key responsibilities we have are:

● Maintaining a hazard communication program detailing the plans in place for the safe

handling of chemicals;

● Maintaining a written chemical inventory of every hazard chemical in the facility to

which employees are exposed;

● Maintaining proper labels and warning signs associated with said chemicals; and

● Training employees on chemical hazards and necessary precautions.

Retail dispensary staff will be required to use nitrile gloves whenever in contact with

medical marijuana, to ensure there is no contamination between staff and the medical marijuana

or manufactured marijuana products (see Section 12.3 of Appendix E(12.3)). HKM will ensure

dispensary agents maintain proper cleaning and equipment maintenance logs in a secured file to

be readily available to the DOH or law enforcement for inspection as necessary. A cleaning

checklist is an effective tool to ensure no essential cleaning and sanitation tasks are overlooked.

HKM will generate maintenance logs to be used within all licensed facilities and kept on file for

inspection. A janitorial service will be called in nightly for thorough vacuuming and sanitation.

In order to assure product safety in regard to laboratory testing, HKM shall maintain

testable product samples in a secure tamper-proof manner for verification testing as directed by

the DOH. A certified laboratory will test and analyze a statistically representative sample from

each batch of marijuana or manufactured marijuana product according to standard operating

5 1380794_2

procedures prepared by the laboratory and approved by the DOH. HK Dispensary shall ensure

and verify that each sample is tested and analyzed for each of the items described in HAR,

Section 11-850-85(c), and may obtain results from different laboratories for different items if a

laboratory cannot perform all the tests. Internal testing for chemical, microbiological, or other

testing, as necessary to augment independent third party testing will help in the effort to provide

safety to all involved parties. Using the BioTrack system also ensures product safety, as after a

testing laboratory has entered sample test results into the BioTrack system, we will retrieve the

testing laboratory results and the system applies those results to the original lot from which the

sample came. Only if the inventory item has a status of “Passed QA” can it be placed on a

manifest. We cannot, under any circumstances, place an item on the transportation manifest if

that item requires testing and does not have a “Passed QA” status (e.g., not yet tested or failed

testing). (See Section E(9) and Section 9.1 of Appendix E(9)).

As an overarching precaution in the event a qualifying patient experiences any unwanted

side-effect or adverse effects, HKM will have a product alert and recall protocol in place (see

Section 12.4 of Appendix E(12.4)).


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APPENDIX E(12)

12.1 - Integrated Pest Management and Environmental Monitoring

Regular environmental monitoring (EM) ensures the growing environment remains

optimized, and helps detect potential problems early on to allow correction before they become

serious or damaging. A history of EM data exposes causal factors related to environmental,

disease, or pest problems. It can indicate if the environment control systems (such as the HVAC)

have sufficient capacity to control the internal environment even when significant inter-seasonal

fluctuations are happening in the outside environment. Regular data collection also reveals the

effect of an environmental adjustment on the plants.

A critical element to EM is “scouting” for pests and pathogens. Scouting is by far the

most critical element to Integrated Pest Management (IPM). Scouting is the process of actively

inspecting each plant for afflictions or other alerts. During the vegetative stage of the plant

lifecycle, including mother plants, daily watch for any alerts during cloning, watering, topping

and transporting. Scouting by cultivation staff allows a production center to operate proactively

versus reactively in regard to plant afflictions including pests and pathogens.

As with any other intensely cultivated and selectively bred agricultural crop, medical

marijuana is beset by a number of pathologies that require immediate intervention to avoid

serious or catastrophic crop losses, and the possible loss of valuable or rare genetic strains.

Some marijuana strains have spent their entire existence in completely artificial environments,

and after several decades there have been significant selective pressures on pests and disease

organisms to adapt. The consequences of this are now being seen in the form of highly resistant

types of red spider mites and powdery mildew fungus.

A modern integrated holistic approach to prevention and control of plant pathologies is

2 1381180_1

Integrated Pest Management (IPM). IPM programs combine cultural and environmental

controls, regular EM and disease scouting, application of organic pesticides and fungicides, and

application of treatment for established diseases and high pressure situations. The focus of an

IPM program will largely depend on the options that are realistically available to the cultivator.

Resistance buildup can be avoided or delayed with proper treatment rotation, and residual

levels in the product will be at (or preferably below) the EPA’s residual limits for hops and food

crops. Hops are a reasonable parallel due to its close relation to the marijuana plant. All

incoming plants must be quarantined for at least two weeks to ensure any diseases or pests they

may have cannot spread into the production center. Quarantined areas must be under strict

contamination control and monitored by trained staff.

Integrated Pest Management – Mother Plants and the Vegetative Phase

Scouting is the most important part of IPM. During scouting, a cultivator is looking for

any potential afflictions such as mold, powdery mildew, bug infestations or other pathogenic

outbreaks. Scouting should be performed during cloning, watering, feeding, topping,

transplanting and shuffling. The key is to identify a plant issue before it becomes an epidemic

within the production center. The culture that should be engendered is that of being proactive

instead of reactive.

HKM will establish the use of safe, organic, oil-based treatments. Chemicals and other

heavy pesticides should never be used as they pose a danger to both cultivators as well as the end

medical marijuana patients. The FDA has not made a position on IPM with regard to medical

marijuana as it is considered a Schedule 1 controlled substance at the federal level. As such,

only State approved organic oil-based treatments will be implemented.

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12.2 - Production Center Cleaning and Sanitation Practices

Equipment that will typically come in contact with medical marijuana plants are pots,

vegetative racks, transplanting tables, wheeled transport racks, flowering systems, trays, machine

trimmer, scissors, drying racks and cure buckets. All these items need to be properly sterilized

and disinfected prior to reuse. This is important as much to prevent the contamination of the

equipment as it is for plants to not get contaminated through contact. Pots are reused once a

plant has been harvested and removed from the pot. The old grow medium is removed from the

pot and used to mix with discarded plant matter that is then sterilized as part of the destruction

protocol. It must be rendered unusable and unrecognizable. The pot will be cleaned and

sanitized to remove the salt-based nutrient sediments that form at the bottom of the pot through

several months of nutrient feedings.

Vegetative racks house plants for eight to ten weeks and will have contamination built up

through feeding runoff and pesticide, miticide, and fungicide management. Once the plants on

the vegetative racks have moved on from this phase of their life-cycle to the flowering phase,

these racks will be cleaned and sterilized. The transplanting tables that are used for repotting

from a clone dome to a 1-gallon to a 5-gallon pot will likewise require cleaning and disinfecting.

When a flowering system is harvested, and prior to repopulation, the tables will be

rigorously cleaned and disinfected. All screen of green (ScrOG) material, trellis netting, bell

wire and plant matter will be removed from the harvest. Transporting racks that port the plants

from late vegetative stage to a flowering system will be cleaned between transport.

All scissors that are used to hand trim the plant into its basic byproducts will be

disinfected with 90% isopropyl alcohol after trimming and before starting a new plant trim. The

trimmed product goes into large aluminum trays that will then be taken to the dry/cure

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department to dry for a week to 10 days. Once the trimmings have fully dried and have been

stored or packaged, the aluminum trays can be reused once they have been thoroughly cleaned

and disinfected. The machine trimmer will need to be cleaned each day after use. It is crucial

that plants with powdery mold or mildew never go through the machine. Sticky resins will need

to be removed and thoroughly sanitized prior to running plants through the next day.

The wire hanging racks will also be cleaned after the removal of fully dried flower and

prior to repopulation. All cure buckets are used for the batching and curing of product. The

product will cure in a bucket anywhere from two weeks to two months. After product is done

curing and prior to repopulation, the buckets must be cleaned and disinfected. Sticky resins can

form on the inside of the container and must be removed. A record of all cleaning shall be

maintained daily and weekly and should be held for six years.

HKM will ensure cultivation staff maintain proper cleaning and equipment maintenance

logs in a secured file to be readily available to the DOH for inspection as necessary. Everything

in the facility needs to be cleaned with a State-approved sanitizing agent, including but not

limited to: tables, racks, floors, walls, lighting hoods, fans, trays, buckets, pots, HVAC

equipment, glass, and water system equipment to mitigate the risk of crop loss due to pests,

molds, mildews and other airborne contaminants. Some larger equipment and mechanical units

will require cleaning on a monthly, quarterly, biannual, or annual basis.

12.3 - Retail Dispensing Location Cleaning and Sanitation Practices

As part of the standard operating procedure, HKM will seek to maintain the highest

standard of cleanliness of any building or equipment used to store or display medical cannabis.

A clean and sterile facility is a healthy facility. Floors will be swept and mopped every day and

a janitorial service or in-house maintenance team will be called in weekly for thorough

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vacuuming and sanitation. Soap, water, rubbing alcohol and other sanitizing solutions will be

used when cleaning. The person cleaning will also wear clean clothing, protective gloves and

goggles and will be required to spray down with an alcohol spray solution prior to entering

rooms in which medical marijuana is stored.

The equipment that will typically come in contact with medical marijuana and

manufactured marijuana products within a retail dispensing facility are, but not limited to:

display jars, chopsticks/tongs, scales, weighing trays, and holding containers. All of these items

need to be properly sterilized and disinfected prior to reuse. This is important as much to prevent

the contamination of the equipment as it is for the medical marijuana to not get contaminated

through contact. Larger pieces of equipment and furniture, like display cases and furniture

within the patient waiting area, will also be cleaned regularly by a professional cleaning service

to ensure the utmost sanitation within the dispensary. Retail dispensary staff will be required to

use nitrile gloves whenever in contact with medical marijuana and manufactured marijuana

products to ensure there is no contamination.

12.4 - Marijuana and Manufactured Marijuana Product Alert & Recall

HKM has drafted a marijuana and manufactured marijuana product alert and recall

protocol in the event of a serious adverse event experienced by a qualifying patient.

Stage 1: Upon serving notice to a staff member of the retail dispensary by a qualified

patient or authorized caregiver of a particular and specific negative effect (e.g., persistent

debilitating headaches) thought to be the result of ingestion of an approved marijuana or

manufactured marijuana product, the Dispensary Manager shall note the effect in a common log

format (logs to be maintained and shared by the Dispensary Manager and the General Manager)

as well as the batch and other control information related to the suspect product.

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Stage 2: Upon the second notice to a member of the retail dispensary by a qualified

patient or authorized caregiver of a particular and specific negative effect (e.g.,: persistent

debilitating headaches) the Dispensary Manager shall note the reoccurrence of the same effect in

log format, immediately notify the General Manager of the second similar occurrence, and

ensure that the batch (or lot) present in the dispensary is quarantined in a separate secured

location in a secured area. The General Manager (or in the absence of access to the General

Manager, an approved member of the Management Team) shall immediately notify the supplied

network of General Managers, Dispensary Managers, and/or Clinical Directors to quarantine the

suspect batches (or lots) and shall cause a random sampling of two products within the suspect

batch (or lot) to be submitted for immediate (expedited if available) third party laboratory testing

for contamination of any kind.

If the testing results for both samples come back with no contamination indicators, the

products under quarantine shall remain in quarantine for an additional five business days to

insure there are no further reports of similar effects experienced by other qualified patients or

authorized caregivers. Once the five business day period has passed with no similar reports, the

product may be moved back into active inventory provided it can still meet the shelf life

requirements mandated by the State guidelines.

Should the test result for either sample come back showing a positive test result for

contaminants then recall procedures would begin immediately. Through the use of the POS

tracking system all qualified patients and authorized caregivers would be identified and all

means necessary to contact said patients and authorized caregivers would be made via email,

texts, and voicemail to ensure the return of the recalled product until all such products are

returned or verified as having been consumed.

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Stage 3: Upon serving notice to a member of the retail dispensary by a qualified patient

or authorized caregiver of a third particular and specific negative effect (e.g.,: persistent

debilitating headaches) thought to be the result of ingestion of an approved marijuana or

manufactured marijuana product, the Dispensary Manager shall note the effect in a common log

format, immediately notify the General Manager of the third similar occurrence, and ensure that

the batch (or lot) present in the dispensary is quarantined in a separate secured location. Upon

this third incident, all products within the reference batches (or lots) shall be subject to an

immediate recall notice to all qualified patients and authorized caregivers through use of the POS

tracking system database to identify the aforementioned patients and authorized caregivers and

will continue to follow up via email, texts, and voicemail to ensure the return of the recalled

product until all such products are returned or verified as having been consumed.

NOTE: Our seed to sale software provider, BioTrackTHC, has specifically designed

elements within its software to assist as well as manage the overall recall process. HKM will be

relying upon these sales records for management of the process. (Please see the BioTrackTHC

State referenced compliance elements for further delineation).

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SECTION E(13)

As

previously noted, MFM began as a small grocery business in 1926 (incorporated in 1958)

serving the plantation community in Waimea, Kauaʻi. The business expanded to include general

merchandise, furniture and other business lines, but later focused on the grocery business in the

1990s operating stores throughout the Island of Kauaʻi. Through these diverse business

operations, MFM was subject to many license requirements in order to operate such businesses.

This included, without limitation, licenses for liquid fuel, liquor and tobacco sales, food

manufacturing, farm produce and food sales, and software.

Mr. Kawakami was diligent in the operation of the MFM business and took great pride in

maintaining and growing the business throughout the years. In order to do this, he was required

to navigate through the ever changing regulatory landscape and the ever increasing licensing and

permitting requirements. He knows what it takes to operate a regulated business and to comply

with all legal requirements to keep a business in good standing with all applicable federal and

state governmental agencies. Similarly, MFM contracted with many private vendors, suppliers,

contractors and consultants in connection with the operation of the business. As such, Mr.

Kawakami has the experience and wherewithal to deal with governmental agencies, third parties,

employees, lenders, attorneys, accountants and others in order to obtain the necessary licenses,

permits, materials and services and to own, manage and operate a medical marijuana dispensary

on the Island of Kauaʻi.

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Additionally, as previously noted, HKM’s goal is to provide a safe and secure business

that serves Kauaʻi with Aloha. We plan to run an efficient operation focused on people, process,

and product to ensure the highest level of product and service to the people of Kauaʻi and the

State of Hawaii. We are a locally-owned company.

to qualified charitable

organizations on the Island of Kauaʻi, the vast amount of any profits derived by HKM will

remain in Hawaii, will help to stimulate the island economy, and will ultimately benefit the

people of Kauaʻi that we serve.

Lastly, Mr. Kawakami has a stellar reputation in the business community and is seen as

someone with great integrity, dedication, and moral character (see Appendix E(13) for character

reference letters). There should be no doubt that he can and will timely open the medical

marijuana dispensary on the Island of Kauaʻi and successfully operate the same in accordance

with all applicable State laws, rules and regulations and in a manner that will serve the people of

Kauaʻi with Aloha.

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APPENDIX E(13)

Character Reference Letters for Charles Kawakami

(see attached)