Updated July 17, 2022

The purpose of these terms and conditions is to outline the services Collateral Base, LLC (the “Firm”) offers you in regards to your cannabis company (the “Company” or “Client”) as outside in-house general counsel or consultant, and the fees we will charge for those services.

SERVICES TO BE PROVIDED

On an hourly basis, the Firm will provide general, legal, and strategic business advice to the you regarding corporate matters on all business issues that pertain to the Company. Specifically, our services include, but are not limited to the following (the “Hourly Services”):

• Assistance with corporate formation & governance
• Assistance with regulatory compliance with applications
• Negotiating real estate leases.
• Assisting with regulatory interactions for compliance with cannabis license.
• Providing access to contact templates required to operate the Client’s company.
• Business analysis and counseling regarding issues and contracts the Client requires to operate its business in a way to secure its assets and reduce its liabilities.
• Correspondence and conferences regarding matters.
• Drafting Business Plans or Financial Models for investors, but not for cannabis license applications unless Client and Firm enter into a different agreement for such application(s).
• Drafting a service and sales contract for the business’s operations.
• Commercial contracts, licensing agreements, and other transactions.
• Corporate governance matters, including board and shareholder resolutions and regular and special meeting minutes and attendance.
• Employment matters, including hiring and termination of employees and drafting of employment agreements and employee handbooks.
• Executive compensation and stock agreements.
• Oversight and regular communication regarding prospective and pending legal action, including arbitration and litigation (but not being of record in litigation);

While this proposal contains comprehensive general counseling services at a reasonable flat fee, the following matters are specifically excluded from this arrangement:

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• Mergers & Acquisitions.
• Representation in other adversarial proceedings such as government investigations.
• Government relations and lobbying on specific matters.
• Drafting Work Product for Cannabis Applications.
• Tax advice.

FEE PROPOSAL

Monthly Retainer. For access to the Client areas our Firm maintains and for access to the form library for your company’s usage, the Firm charges a monthly maintenance fee of  (the “Monthly Fee”). The Monthly Fee includes a 30-minute monthly consultation with a lawyer in the Firm to keep track of the Company’s business needs.  The Monthly Fee includes being a client of the Firm, which expressly reveres the right to have our Firm of winning cannabis license application writers complete your cannabis business application and gaining access to our Client Area filled with flat fee and some complementary documents required to operate the Company, it is not included in Hourly Services or M&A Services whose fees are provided in more detail below. The Monthly Fee includes email support from Firm paralegals up to 1 hour of time. Time for email correspondences is recorded in one-tenth (.1) of an hour. Email support means the Client email will be followed up by a Firm paralegal in one business day.  

Hourly Services. For the Hourly Services the Client desires, we propose a flat fee of $5,000.00 per 15-hour bulk purchase, or $3,000.00 per 8-hour bulk purchase, or $400 per hour for the Services discussed above, with a month-to-month term. If there is any additional work outside of the scope of the work mentioned above, the Firm will arrange for a separate fee arrangement with a separate legal services agreement.

The flat fee includes 15 bulk hours at a rate of only $333.33 per hour (discounted from the hourly rate of $400.00).  Any overages shall be at our hourly rate of $400, or in a new bulk purchase. The Firm also employs a financial modeler, paralegals and an offshore attorney that offer hourly rates of only $120.00 to help control costs while providing quality services. Unused hours can be rolled over up to three (3) months before they expire but must be at least .5 hours per month for a conference with the Firm to discuss business operations.  If hours expire, the Parties will discuss the necessity for an outside general counsel and reexamine this Agreement due to lack of usage. 

When the Client’s hours dip below 2 remaining hours, a new invoice for another 15-hour bulk purchase will be emailed for payment. Client’s failure to timely pay an invoice when due to the Firm shall result in interest bearing at one percent (1%) per month until paid in full.  Client agrees to pay any attorney’s fees incurred in collection of amounts it owes to the Firm.

Mergers & Acquisitions (M&A) Services. For M&A Services to exit the license and sell it to a third party, or place capital and raise new Company funds, the Firm will open a new matter and offer Client a contingency fee based on the Lehman and Double Lehman formulas. The Lehman Formula is calculated by million-dollar amounts, and the Double Lehman walks down a contingency percentage as agreed between Client and Firm.

GENERAL TERMS & CONDITIONS

Client acknowledges and agrees that the Firm is one of the few in the Cannabis Industry and works for its general benefit and its owners may participate in it. However, the Firm will not directly compete with Client and any potential conflicts are waived except those that cannot be waived which will be handled as they arise.

Duty of Candor. Client understands that this is a confidential relationship with Firm to further Client’s legitimate business interests. Client shall conduct its relationship with this firm in complete good faith and with all due candor and disclose any material facts necessary to provide the Services that the Client desires. Failure to provide sufficient information regarding Client’s business shall result in possible termination of this agreement and disengagement from the Firm.

Non-Exclusivity. Client understands, acknowledges, and agrees that Firm is engaged in the business of rendering the Services and similar services to others, including, without limitation, other prospective owners and operators of adult use applicants and operators in the United States, and, further, that Attorney will be permitted to, and intends to, render such services for and on behalf of Attorney’s current clients and prospective clients, and will waive any conflict of interest that may arise if or when it develops if possible, or else Firm may have to withdraw representation.

Non-Circumvention. The Client, intending to be legally bound, hereby irrevocably agree not to circumvent, avoid, bypass, or obviate each other, directly or indirectly, or avoid payment of fees, commissions, or any other form of compensation in any transaction owed to that person or entity and arising from the Work Product disclosed or any company or individual revealed by either Party to the other, including those that are revealed from initial introductions and any succeeding introductions to other parties. This Agreement further confirms that each of the undersigned parties agree not to make any contact with or deal with any institution, corporation, individual, buyer, or seller introduced by and to each Party, and/or their associates, without the express written permission of the Firm. All such parties referred to herein, at least the originating introducing parties from which other introductions may originate, will be identified in a writing between the signatories to this Agreement prior to or immediately thereafter such introductions are made.

Conflict Waiver. Notwithstanding that the Client has been represented by the Firm in connection with its operations, the Company agrees that after any change in its ownership, the Firm may represent any of its owners, and/or their affiliates in matters related to any possible changes of ownership, including without limitation in respect of any indemnification claims. The Client hereby acknowledges, on behalf of itself and its Affiliates, that it has had an opportunity to ask for and has obtained information relevant to such representation, including disclosure of the reasonably foreseeable adverse consequences of such representation, and it hereby waives any conflict arising out of such future representation.

Independent Counsel. The Client is independently represented in making this Agreement and has been granted an opportunity to have this Agreement reviewed by independent counsel and have provided their informed consent of the same.

Indemnification & Insurance. The Firm maintains malpractice insurance with a multi-state and securities rider with a $1,000,000 claim limit. Client understands that the cannabis industry frequently exceeds this limit and indemnifies Firm against any loss that exceeds the malpractice limits maintained by the Firm. 

In-house counsel: all the Firm’s lawyers will be admitted in a jurisdiction in the United States, but perhaps not yet in all states where the Client’s cannabis business operates. The Firm will act solely as an in-house type relationship with the Company and help coordinate local counsel if required by the representations. The Client agrees the Firm shall be acting in a consulting capacity for a niche business issue to the extent a general counsel relationship is prohibited by local rules. Firm can be requested to be licensed in the state and will do so in a timely fashion, but Firm acts as a solely a business consultant in New Jersey, Virginia, Mississippi, and New Mexico, and can assist Client in securing outside local counsel.

Business acquisition: The Firm’s lawyers are investors in the cannabis industry and occasionally become partners with their clients as a minority equity holder in their cannabis business operations. Client agrees any terms of such will be fair and reasonable and fully disclosed in a manner than can be reasonably understood by the Client. The Client shall be advised on seeing independent counsel regarding any such relationship and the transaction cannot close unless the Client gives informed consent in writing, detailing the essential terms and the Firm’s role in the transaction.  Client agrees to accept these terms and to establish an Insider Trading Policy before any marketing of securities to investors for capitalizing their cannabis venture. In addition, the parties will need to enter into a policy against insider trading upon closing on any transaction that restructures its ownership structure.

Our fees and costs will be billed and payable monthly. 

EXPENSES

Printing and Copying:    In the event contract printing is required, it will be placed with either union or nonunion shops as the Client might direct and billed at cost with the firm advancing the expense. 

Filing & Governmental Fees: Any fees to a state for filing anything in court, or recording anything at the county level, or fees for any applications to the state of municipal government is not included in the hourly quote and will be paid by Client.

Consultants: Firm may negotiate and pass along costs for certain consulting measures for optimal operations of their Client’s licensed cannabis business operations, which costs may be included in license application services, or disclosed in subsequent change orders. Firm lawyers not licensed in a particular jurisdiction may also be included in these consulting fees.  Client again agrees to not circumvent Firm from any consultant introduced to Client by Firm.

Mileage:  To the fullest extent possible the firm utilizes video-conference capabilities, but occasional travel may be required, which will be incurred at a fixed rate of $90.00 per hour and is inclusive of mileage costs.

Insurance: Firm shall pay at its own expense for insurance of up to one-million dollars per liability and Client agrees such insurance is sufficient and will hold harmless Firm for any amounts in excess of the coverage.

Postage: Postage on routine mailings will be paid for by the firm.  In the event certified, courier, special service, express or multiple copy mailings or delivery are required, postage and delivery fees will be charged to the Client at cost.

Computer Research:   The majority of research conducted by the firm via computer (Westlaw) is paid for by the firm as a part of its general library resources.  On rare occasions, unusual data bases may require extra charges which will be billed at cost. At no additional cost, however, is the subscription to Illinois Institute of Continued Legal Education (IICLE) smartbooks, which contains in depth knowledge and research on hundreds of actionable issues.

Updates to Representation: Client agrees to reasonable updates to this engagement upon notice from Firm to client without objection after thirty days of receipt of the policy updates by communication to email address for client on this agreement.

Communication:  If you have questions regarding the status of this matter, please call or write.  If you find e-mail communication desirable, you can contact me at tom@collateralbase.com.

If you find the terms of our engagement Agreement to be adequately set forth above and you are in agreement with the fee proposal contained herein, please execute this Agreement enclosed herein and return it to me to the email address above. 

TERMS AND CONDITIONS

1. Engagement of Our Services

The law firm of Collateral Base, LLC (the “Firm”) has undertaken to represent you and to act on your behalf. Any expressions on our part concerning the outcome of your legal or consulting matters are expressions of our best professional judgment and are not guarantees. Also, our opinions are necessarily limited by our knowledge of the facts and are based on the state of the law at the time they are expressed.

2. The Scope of Our Representation

Our clients in this matter are the persons or entities identified (“client” or “clients”) in our engagement letter (“engagement letter”) to which this Statement of Engagement Terms is attached. Unless specifically identified in the engagement letter, our representation of the client does not include representation of (i) parent companies or other owners of the client, (ii) subsidiaries or other affiliates of the client, (iii) partners of the client, (iv) family members of the client, or (v) beneficial owners of the client.

The clients are hiring the Firm to represent them in connection with issues or claims arising out of the matters identified in the engagement letter, and only those matters unless specifically agreed in a writing signed by the Firm. We will provide services of a strictly legal nature related to the matters described in the engagement letter and their terms and conditions. You will promptly and timely provide us with the factual information and materials that we require to perform such services, and you will make such business or technical decisions and determinations as are appropriate. You will not rely on us for business, investment, tax or accounting decisions, unless otherwise specified in the engagement letter.

Further, as to any cannabis related work, there is no guarantee that the current or future administrations will continue the discretionary position of non-enforcement and state deference with respect to cannabis regulation or that you will be awarded a license in the jurisdiction for which you are applying. Under the law, our representation is limited to providing advice and guidance on the validity, scope, meaning and limitations of state law.  Any advice, assistance, or counsel we provide should not be interpreted as any interpretation of any federal laws or as a confirmation that any action or omission is in compliance with federal law.

In the event that you ask us to provide legal services in a state/jurisdiction in which our attorneys are not licensed, we will work with local counsel that is licensed in that state/jurisdiction to provide assistance for you in that state/jurisdiction.   Our Firm has or will obtain either local counsel in each state where we are assisting you in the event an attorney in our firm is not licensed there.   Their fees will be included within our budget.

Finally, should any state in which we provide services to you adopt or amend its Rules of Professional Conduct for attorneys, we reserve the right to amend the terms and conditions of the engagement letter to conform to any changes.

3. Relationships With Other Clients

In representing you, it is important that you receive advice from lawyers who are free from conflicts of interest. We represent a diverse group of clients on a variety of legal matters, including those in the cannabis space.

In the cannabis space, you expressly acknowledge that our Firm will be submitting applications and applying for cannabis licenses on behalf of other clients who may be directly competing with you for the same or similar license.   In addition, members or employees of our Firm may have an equity stake or serve on the board of various cannabis companies that may be competitive to you.  You hereby expressly waive any conflict of interest as it relates our Firm representing other clients on applications and licensing within the cannabis space and any conflict of interest as it relates to members or employees of our Firm having an equity stake in or a board role in any cannabis company.

Further, it is possible that we represent current clients or may be asked in the future to represent new clients in the same general field of interest or business. We have conducted an internal review and have not identified any conflict of interest implicated by our common representation of you and any other existing client of the Firm.

We have specifically considered any persons and business you have identified as being adverse in this matter, if any, and found no conflict. However, conflicts of interest are at times difficult to identify and can sometimes arise as a result of client activities or other developments of which we may be unaware. We will make reasonable efforts to identify and resolve those conflict situations and to establish appropriate mechanisms to safeguard your interests. In an appropriate situation, we may provide you with full information regarding a potential conflict of interest and ask you to waive the potential conflict.

4. Who Will Provide the Legal Services

The principal attorney contacts for this matter are identified in the engagement letter. Subject to the decision of these principal attorneys, your work or parts of it may be performed from time to time by other lawyers, law clerks, paralegals, and legal assistants in the Firm as well as consultants outside of the Firm. Such delegation may be for the purpose of involving lawyers or individuals with special expertise in a given area, license in a particular jurisdiction or for the purpose of providing services on the most efficient and timely basis.

5. Responsibilities of the Parties

The Firm will provide those legal services reasonably required to represent the clients and will take reasonable steps to keep clients informed of progress and developments, and to respond promptly to inquiries and communications. The clients agree to cooperate with the Firm, to keep the Firm informed of any information and developments which may come to clients’ attention, and to abide by these terms. The clients agree to appear at all legal proceedings when the Firm deems it necessary, and generally to cooperate fully with the Firm in all matters related to the preparation and presentation of the clients’ claims. If the clients believe that any portion of the fees payable to the Firm may be covered by a policy of insurance, it is the responsibility of clients to bring such policy to the attention of the Firm for review.

6. Legal Fees

The time of each attorney who may work on your project may be billed at a differing hourly rate. Each attorney’s rate depends on his or her experience and skill for the type of work required by the project, and the novelty and complexity of the issues involved. These rates may be adjusted on an annual basis. Paralegals and clerks also have hourly rates. Time spent on a project is recorded on a daily basis. Such time may include research, investigation, telephone calls, travel, conferences, court appearances, preparation, drafting, correspondence and organizing evidence and materials.  Hourly rates and fees may be adjusted on a periodic basis by the Firm.

7. Costs and Litigation Expenses

Charges, in addition to time charges, will be made for certain items. Examples include charges for travel, postage, overnight delivery, deposition or transcript fees, witness fees, filing fees, court costs, messenger service, copies and other supply costs, and secretarial overtime. To aid in the preparation and presentation of the clients’ case, it may be necessary to hire expert witnesses, consultants and/or investigators. The Firm will select any expert witnesses, consultants or investigators to be hired, after consultation with clients.  In addition to fees and costs described above, clients must reimburse the Firm for expenses and advances the Firm may incur, in its discretion, on clients’ behalf.

8. Payment Terms

Statements for fees and disbursements will be sent monthly. Payment is due upon receipt. If any balance remains unpaid for more than thirty (30) days, and no arrangements have been made in writing to pay the balance, we reserve the right to postpone or defer providing additional services or to discontinue our representation if your matter and/or case has not reached its conclusion. We may have performed certain legal services and incurred charges before you sign the engagement letter. If so, we will bill for these services and charges in our first statement. We reserve the right to charge a service fee of one percent (1%) per month with respect to any fees and expenses not paid within thirty (30) days.

9. Confidentiality and Related Matters

As a matter of professional responsibility, we are required to preserve the confidences and secrets of our clients. This professional obligation and the legal privilege for attorney-client communications exist to encourage candid and complete communication between a client and his or her lawyer. We can perform at our best only if we are aware of all information that may be relevant to our representation of you. Consequently, we trust that our attorney-client relationship with you will be based on mutual confidence and unrestrained communication. Additionally, you should be aware that, in instances in which we represent a corporation or other entity, our client relationship is with the entity and not with its individual executives, shareholders, members, directors, managers, partners, trustees or persons or business organizations that have a relationship to you. Of course, we sometimes also represent individuals and persons related to an entity client in matters that we believe do not conflict with the interests of the entity, but any such representation will be the subject of a specific, separate engagement letter.

10. Use of E-mail to Transmit Documents

The Firm may use unencrypted e-mail to transmit client documents, believing that e-mail offers a reasonably secure, efficient means of transmitting information. Please advise us if you have highly sensitive information you do not want transmitted in such a manner.

11. Indemnification & Insurance.

The Firm maintains malpractice insurance with a multi-state and securities rider with a $1,000,000 claim limit. Client understands that the cannabis industry frequently exceeds this limit and indemnifies Firm against any loss that exceeds the malpractice limits maintained by the Firm.

12. Use of Your Name

Subject to any limitations you communicate to us in writing, you agree that we may describe, using solely public information, cases and other matters in which we have acted as your counsel, in informational material, including the Firm’s web sites. We will not use your name in any such description without your advance consent.

13. Termination

Either clients or the Firm may terminate the engagement at any time for any reason by written notice, subject on our part to applicable rules of professional conduct. In the event of termination of our engagement, we will, at your request, return whatever papers and property you have provided to us. Additionally, we will deliver to you all of the other material in our files relating to our representation of you, to which you are entitled under the applicable rules of professional conduct, provided that we reserve the right to make and retain a copy, at your expense, of all material delivered to you.

Circumstances and types of conduct which may require us to withdraw from representing a client or which will clearly be a basis for our withdrawal include, for example, breach of these terms, client’s refusal to cooperate with the Firm or to follow the Firm’s advice on a material matter, or any other fact or circumstance that would render the Firm’s continuing representation unlawful or unethical. We try to identify in advance and discuss with our clients any situation which may lead to withdrawal, and if withdrawal ever becomes necessary, we will immediately give you written notice of our withdrawal. If permission for withdrawal is required by a court, we will promptly apply for such permission and you agree to engage a successor counsel to represent you.

Unless previously terminated, our representation of you will terminate upon our completion of any services that you have retained us to perform. Following such termination, any otherwise non-public information you have supplied to us which is retained by us will be kept confidential in accordance with applicable rules of professional conduct. If you later retain us to perform further or additional services, our attorney-client relationship will be revived subject to these terms of engagement, as they may be supplemented at that time. You agree that unless you engage us after completion of a matter to provide additional advice on issues arising with respect to that matter, the Firm has no continuing obligation to advise you in connection with future legal developments pertaining to the matter.

Notwithstanding the Firm’s withdrawal or the clients’ notice of discharge, and without regard to the reasons for the withdrawal or discharge, clients, jointly and severally, will remain obligated to pay the Firm for all costs incurred prior to the termination and, in the event that there is any net recovery obtained by clients after conclusion of the Firms’ services, clients remain obligated to pay the Firm for all services rendered prior to the date of withdrawal or discharge.

14. Retention of Files

For various reasons, including the minimization of unnecessary storage expense, the firm generally retains client files for five years after termination of the engagement. After five years, we may destroy, or otherwise dispose of any such document or other material without additional notice to you.