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Management Services Agreement
THIS MANAGEMENT SERVICES AGREEMENT (hereinafter, "Agreement"), is made and entered into as of January 31, 2025 (the "Effective Date") by and between the Authentic Fairfield LLC (hereinafter, the "Client"), and SGI Management, LLC (hereinafter, "SGI"), regarding the provision of management services as hereafter described. Client and SGI may hereafter be referred to as a "Party" or collectively as "Parties".
WITNESSETH:
WHEREAS, Client is the owner of a licensed retail commercial cannabis business; and
WHEREAS, SGI manages multiple cannabis businesses and provides services to licensed cannabis businesses; and
WHEREAS, Client and SGI have agreed that SGI will provide the scope of services described in this Agreement in accordance with the terms and conditions of this Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants and representations hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto covenant agree as follows:
1. Appointment, Effective Date and Term.
A. Client hereby engages SGI as manager, and SGI hereby accepts such engagement, on the terms and conditions of this Agreement. This Agreement will be effective on the Effective Date.
B. SGI will perform the services detailed in Exhibit A ("Services''.), attached hereto and made a part hereof, commencing on the Effective Date and expiring four (4) years thereafter (the "Term"), This Agreement will automatically renew for an additional one-year term, unless either party gives notice of intent not to renew within 30 days of the end of the Term.
2. Scope of Authority. Services performed by SGI under this Agreement will be provided on behalf of Client, [ and all obligations undertaken or expenses incurred in connection with the Services will be borne and paid by Client.
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3. Client and SGI Obligations. I
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A. SGI shall supervise, monitor and enforce its performance obligations under this Agreement, !
including, without limitation, SGI's obligation to operate Client's business as a compliant commercial cannabis 1 1 business in the state of California and the City of Fairfield and in accordance with all applicable laws.
B. SGI shall recommend and implement the systems and related equipment necessary for Services.
C. SGI will not enter into third party agreements on behalf of Client or enter into any purchase agreements for Products on behalf of Client without Client's written consent.
D. Each party acknowledges and agrees that there may be various licenses, permits, registrations and taxes (collectively the "Permits") required by law for each party both for the provision of the Services and/or to Client will not contract with any other party for management services and shall work with SGI on an exclusive basis.
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transfer the Products. SGI must obtain and maintain all Permits required and any costs, fees, and penalties associated therewith shall be the sole responsibility of SGI, unless such failure is due to the negligence of Client.
4. SGI Compensation and Expense Reimbursement.
A. Compensation. The consideration provided to SGI from Client in exchange for SGI providing the Services is detailed in Exhibit A.
B.
Services,
Expense Reimbursement. Client will reimburse SGI for approved expenses associated with the
5. Limitations on Use; No License. Neither party may use the other party's Permits or intellectual property without the prior written consent of an authorized representative of the other party. No license or ownership right is granted or implied by the conveying of confidential information and/or intellectual Property by either party. None of the confidential information which may be disclosed will constitute any representation, warranty, assurance, guarantee or inducement by discloser of any kind, and with respect to the non-infringement of any intellectual property rights or other rights of third persons or of discloser.
6. Indemnification. SGI agrees to indemnify, defend and hold harmless Client, and its officers, directors, shareholders, employees, agents, affiliates and assigns, from any and all claims, demands, actions, damages, causes of action and liabilities (including reasonable attorney's fees and costs of litigation) of whatever nature, and whenever made or incurred, pertaining and relating to, and arising from any (1) gross negligence by SGI and/or (2) any material breach by SGI of this Agreement. SGI shall not be liable to Client for any employment and labor related decisions.
Client shall have all final authority with respect to its employees and SGI will only make recommendations with respect to general staff matters such as staffing levels, SOPs, and scheduling, etc.
7. Insurance.
A. During the Term and any applicable Renewal Term, at all times during SGI's involvement, SGI will obtain and keep in effect at its own expenses, to cover the scope of Services provided for in this Agreement, the following insurance, in amounts not less than the amounts set forth below, which each policy naming Client as an additional insured (as applicable):
• Worker's compensation insurance to cover full liability under worker's compensation laws in effect from time to time in the applicable state.
• General liability insurance with the following limits:
$1,000,000 General Aggregate
$1,000,000 Products/Completed Operations
• Comprehensive automobile liability insurance for all vehicles used by SGI with respect to the Services, whether non-owned or hired, with a combined single limit of $1,000,000.
• Excess (Umbrella) liability policy in excess of the limits set forth in the sections above, in the amount of $2,000,000.
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8. Defaults and Remedies.
A. Client Defaults. The following events shall constitute a Client Default: (1) Client commits a material violation of any other term, condition, or provision of this Agreement, and such violation continues for a period of thirty (30) days following Client's receipt of a written notice (the "Cure Period") setting forth the basis of SGI' assertion of a violation. In the event Client undertakes to cure and notwithstanding Client's diligent and continuing good faith efforts, such cure cannot reasonably be completed within the Cure Period, then the Cure Period will be extended for a reasonable time to afford Client an opportunity to effect the cure; provided, however, that in no event will the entire Cure Period exceed sixty (60) total days.
B. SGI Default. SGI is in Default ("SGI Default'') if SGI commits a material violation of any term, condition, or provision of this Agreement, and such violation continues for a period of thirty (30) days following SGI' receipt of a written notice (the "Cure Period") setting forth the basis of Client's assertion of a violation and the manner in which said violation may be cured within the Cure Period. In the event SGI undertakes to cure and notwithstanding SGI's diligent and continuing good faith efforts, such cure cannot reasonably be completed within the Cure Period, then the Cure Period will be extended for a reasonable time to afford SGI an opportunity to effect the cure; provided, however, that in no event will the entire Cure Period exceed sixty (60) total days.
C. SGI Remedies. In the case of a Client Default, SGI will have the right to terminate this Agreement, reserving the right to pursue any further legal and equitable remedies that may be available to SGI hereunder, including but not limited to the right to pursue collection of any amounts owed to SGI and reimbursement of any expenses incurred in doing so.
D. Client Remedies. In the case of a SGI Default, Client may terminate this Agreement reserving the right to pursue any further legal and equitable remedies that may be available to Client hereunder; provided, however, that Client will be obligated to pay all amounts owed under this Agreement through the effective date of the termination for Services rendered (which will be the thirtieth (30"') day after notice of termination has been received by SGI).
E. Force Majeure. I f, because of weather, acts of God, strikes or other labor disputes, vendor delays, or other unavoidable cause, either party is unable to perform its obligations hereunder, such non-performance shall not be considered a breach of the Agreement, provided that if a Force Majeure event lasts for more than 30 days, either party may terminate this Agreement without penalty .
9. Miscellaneous Provisions.
A. Notices. All notices will be hand delivered or sent by certified or registered mail, postage prepaid, return receipt requested, to the following address:
To SGI:
SGI Management, LLC
2001 S. Alameda Street
Los Angeles, CA 90058
Attn: Legal
To Client: Authentic Fairfield LLC
728 Commercial St.
Los Angeles, CA 90012
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otherwise. In furtherance of and not in limitation of the foregoing, nothing contained in this Agreement is intended i
Any notice will be considered to have been given on the date of hand delivery or on the date of receipt or refusal.
B. No Waiver. No waiver of any breach of any covenant, condition or agreement or any right of exercise contained herein will be construed to be a subsequent waiver of that covenant, condition or agreement or of any subsequent breach thereof of this Agreement.
C. Applicable Law. This Agreement and the rights and obligations of the parties hereunder will be governed by the laws of the State of California.
D. Entire Agreement. This Agreement, including any exhibits, schedules and attachments hereto, will constitute the entire Agreement between the parties, and no variance or modification thereof will be valid and enforceable, except by a supplemental Agreement or amendment in writing, executed and approved in the same manner as this Agreement, and there are no promises, agreements, conditions, understandings, warranties or representations, oral or written, express or implied, except as set forth herein.
E. Partial Invalidity. If any part of this Agreement is held invalid, the remainder of this Agreement will remain in full force and effect and the Agreement will be construed as if such invalid provision had not been included herein.
F. Assignment. Except as expressly permitted by this paragraph, neither party may assign this Agreement or delegate its duties or obligations hereunder without the prior written consent of the other party.
G. Benefits and Burdens. This Agreement will inure to the benefit of and bind the parties, their successors-in-interest and, their permitted assigns.
H. Construction. Unless the context clearly indicates otherwise, where appropriate the singular will include the plural and the masculine will include the feminine or neuter, and vice versa, to the extent necessary to give the terms defined herein and/or the terms otherwise used in this Agreement their proper meanings.
I. Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under the present or future laws effective during the term of this Agreement, such provision will be fully severable; this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement, unless to do so renders the performance of the Agreement economically infeasible, in which event the party suffering from the infeasibility may terminate performance under this Agreement.
J. No Third Party Beneficiaries. This Agreement is made solely and specifically among and for the benefit of the parties hereto, and their respective successors and permitted assigns, subject to the express provisions hereof relating to successors and assigns, and no other person or entity will have any rights, interest or claims hereunder or be entitled to any benefits under or on account of this Agreement as a third party beneficiary or I to be for the benefit of any creditor or other person or entity to whom any debts, liabilities or obligations are owed by (or who otherwise has any claim against) the Client or SGI or any officer, director, shareholder or agent thereof; and no such creditor or other person or entity will obtain any right hereunder against either Client or SGI by reason of any debt, liability or obligation (or otherwise).
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K. Relationship of Parties. In its performance of this Agreement, SGI will at all time act as an independent contractor of Client. Nothing contained in this Agreement shall be construed to create a partnership or joint venture between SGI and Client or their successors in interest. This Agreement is for the benefit of Client and SGI and shall not create third party beneficiary rights.
L. Counterpart Execution. This Agreement may be executed in several counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. Delivery of an executed signature page by facsimile transmission or email via PDF or similar electronic formal shall be effective as delivery of a manually executed counterpart hereof.
M. Dispute Resolution. Neither Party may initiate litigation or arbitration proceedings with respect to any dispute until the mediation of such dispute is complete and such mediation shall be administered by JAMS (or if JAMS no longer exists, another mutually acceptable alternative dispute resolution provider) in Los Angeles, California. If any dispute remains between the parties after the mediation is complete, then all claims and disputes arising under or relating to this Agreement be settled by binding arbitration in Los Angeles, CA. An arbitral tribunal of one arbitrator (the "Arbitrator") shall be established in conformity with the Comprehensive Arbitration Rules and Procedures of JAMS or such other rules of a successor ADR provider mutually agreed upon by the parties in effect at the time such arbitration is commenced. In rendering a decision hereunder, the Arbitrator shall take into account the operating standards of the Client and Property standards and other applicable provisions of this Agreement. Issues relating to the conduct of any arbitration and enforcement of any award shall be governed by the Federal Arbitration • Act, 9 U.S.C. §§1-16. An award of arbitration may be confirmed in a court of competent jurisdiction.
[Signatures Appear on Following Page]
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IN WITNESS WHEREOF, Client and SGI have caused this Agreement to be signed as of the Effective Date defined above.
SGI:
SGI Management LLC
By:______________________
Name: James Kim, Manager
CLIENT:
Authentic Fairfield LLC
By:______________________
Name: Tak Sato, President
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Exhibit A
Scope of Services
SGI will provide the following Services for Client in accordance with and subject to the text of the Agreement. In the event of an inconsistency between this Exhibit A and the text of the Agreement, the Agreement will control. The Services will include the following:
• Management
Provide full-service management of Client’s retail cannabis business including (without limitation):
• Accounting
• Compliance
• Legal
• Business Management (inventory, purchasing, etc.)
• Staff Management
Client will hire employees for the facility using a PEO and SGI will manage all aspects of the operation, including compliance. Client will not take any actions regarding the business without collaborating with SGI in advance.
• Compensation
Any expenses will be reimbursed to SGI from the Client.
• Communications
SGI will submit written reports monthly to the Client detailing and summarizing operations, inventory levels, payments, refunds, recalls, damaged Products, concerns and any other areas pertinent to the Services.
Docusign Envelope ID: 05518D2A-4670-4F4B-9F4C-14EED9E203A0