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and commitments as a condition of renewal/extension of this AGREEMENT upon expiration of the initial term and any extensions. 2. Operating Fee Rates for Cannabis Testing Facilities/Laboratories: Payment. For each month OPERATOR of the permitted cannabis "testing facility/laboratory business" (as said term is defined in Chapter 40 of the Santa Ana Municipal Code) transacts and carries on cannabis testing facility/laboratory business operations at the above- described property location permitted by CITY, OPERATOR shall pay an operating agreement fee monthly to CITY. The term "month" or "monthly" as used in this AGREEMENT shall refer to a calendar month and shall include any fraction of a calendar month as a whole month. Terms of payment of the operating agreement fee are as follows: A. OPERATOR's operating agreement fee shall begin to accrue on the date that CITY first issues OPERATOR a Regulatory Safety Permit and shall be paid to CITY by the last day of the month following the month for which it is due. B. OPERATOR shall pay CITY a monthly operating agreement fee which is the higher of the following two calculations: L calculated at a rate of Five Percent (5%) of the gross receipts generated or otherwise received; or, ii. calculated at an annual rate of One Dollar and Fifty Cents ($1.50) per square foot based on the gross square footage of OPERATOR's permitted property location (as confirmed by the corresponding "Approved Building Set" or the approved Certificate of Occupancy on file with City of Santa Ana Planning and Building Agency) whichever is the greater of any square footages indicated, prorated monthly to one -twelfth (1/12th) of the annual rate amount. C. OPERATOR shall calculate and report its monthly operating agreement fee based on both of the above calculations each month; remitting the higher amount to CITY. D. OPERATOR shall report its operating agreement fee calculations to CITY using the "Monthly Operating Agreement Reporting Form" set out in "Exhibit B" of this AGREEMENT which is hereby incorporated into this AGREEMENT by reference. 2.1 NULLIFICATION OF MONTHLY OPERATING FEE REQUIREMENT In the event the commercial cannabis testing facility/laboratory business authorized under this Agreement is commenced at the hereinabove described location subsequent to December 20, 2018, then the provisions of this Agreement [Sections 2, 3, 4, 6] relating to the requirement to report and remit monthly Operating Agreement fees for said location are moot and shall be of no effect. 3. Operating Fees Not a Pass -Through Fee; Gross Receipts Defined. A. OPERATOR, as a cannabis testing facility/laboratory business, shall not pass the operating agreement fees or any portion thereof through to the cannabis 2