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HomeMy WebLinkAboutROYAL M&D,� � tipti0 iidSURANCr I;."�? I?Ei?UIRED A-2017-401 N'ol"'. °ROCEED CLL,=tK OF COUNCIL Tr. O PZ(o)C A\OPERATING AGREEMENT FOR NON -RETAIL pQz�sh R'{ COMMERCIAL CANNABIS BUSINESSES This Operating Agreement ("AGREEMENT") is dated 8/6/20, between the City of Santa Ana, a charter city and municipal corporation (`CITY") and Royal M&D ' ("OPERATOR"), collectively referred to as "the Parties". This AGREEMENT shall become effective on the date that OPERATOR Is issued a Regulatory Safety Permit by CITY for the operation of a commercial cannabis business conducting ADULT -USE AND'"MEBICINAL MANUFACTURING, DISTRIBUTION, services in whole or in part of its operations transacted and can-ied-on by OPERATOR at the following subject property location, 3220 S Halladay unit A, Santa Ana, CA 92705. 1. Public Benefit. A. Intent. The purpose of this Operating AGREEMENT is to ensure positive community impacts from commercial cannabis business operations through local hiring and local sourcing, community benefit and sustainable business practices, and the collection of required fees and taxes as applicable for the operation of a commercial cannabis business and to provide mitigation options to be used by CITY to compensate for impacts to CITY services, residents, and/or businesses as set forth in Santa Ana Municipal Code Chapter 40. The Parties agree that this AGREEMENT confers substantial private benefits on OPERATOR which should be balanced by commensurate public benefits. As part of the cannabis Regulatory Safety Permit process, OPERATOR agrees to enter into this AGREEMENT. OPERATOR acknowledges that CITY and OPERATOR have had extensive negotiations and proceedings prior to entering into this AGREEMENT, OPERATOR has elected to execute this AGREEMENT as it provides OPERATOR with important economic benefits. Accordingly, the Parties intend to provide consideration to the public to balance the private benefits conferred on OPERATOR by providing mitigation measures to the public and to pay for CITY services. B. Local Hiring and Sourcing. OPERATOR agrees to use its reasonable efforts to hire qualified City of Santa Ana residents living in Santa Ana to work at its commercial cannabis businesses. OPERATOR shall also use reasonable efforts to retain the services of qualified contractors and suppliers who are located in the City of Santa Ana or who employ a significant number of City of Santa Ana residents. OPERATOR shall make a good faith effort to advertise on various social media sites, at local job fairs, and through public agencies and organizations. C. Community Benefit and Sustainable Business Practices Plan. OPERATOR agrees to submit a Community Benefit and Sustainable Business Practices Plan ("Plan") to CITY that is hereby attached and incorporated into this AGREEMENT as ("EXHIBIT A"). Said Plan shall detail OPERATOR's experience working with community -based groups such as school districts, college districts, city or county agencies, non-profit organizations, artist or downtown groups. The Plan shall also include a description of OPERATOR's efforts for recruiting and hiring local persons and businesses. Said Plan must also outline commitments by OPERATOR to engage its staff in community service events or programs in the City of Santa Ana. Plan must also outline and address sustainable business practices. OPERATOR shall adequately document that it has met the Plan's obligations and commitments as a condition of renewal/extension of this AGREEMENT upon expiration of the initial term and any extensions. 2. Records Inspection, Examination and Audit. OPERATOR acknowledges and agrees that CITY is empowered under this Agreement to inspect, examine and audit OPERATOR's books and records (including tax filings and returns), to ascertain the amount of operating fees due and owing. CITY or its authorized agents shall have the power and authority to conduct a full inspection, examination and audit of such books and records (including tax filings and returns) at any reasonable time, including but not limited to, during normal business hours. In the event any such books, records, tax filings and returns cannot be made fully available within the City of Santa Ana, OPERATOR acknowledges and agrees that it shall reimburse CITY for the cost of all transportation, lodging, meals, portal-to-portal travel time, and other incidental costs reasonably incurred by CITY or its authorized agents in obtaining said full inspection, examination and audit. In the event that said records inspection, examination and audit determines that a net operating agreement fee payment deficiency of greater than Five Percent (5%) exists; OPERATOR acknowledges and agrees that it shall reimburse CITY for the full cost of said records inspection, examination and audit reasonably incurred by CITY or its authorized agents. 3. Term. This AGREEMENT shall start on the date indicated above and shall terminate on December 31 °2020 regardless of starting date unless terminated earlier in accordance with Section 9 or 10 of this AGREEMENT. The AGREEMENT will have one (1) two-year extension period until December 31, 2022 exercisable by a writing executed by the City Manager and City Attorney's Office with the approval of OPERATOR. 4. Business License Required. A valid City of Santa Ana Business License is required for all persons engaged in transacting and carrying on any commercial cannabis business activity in the City of Santa Ana. It is unlawful for any person or legal entity to commence, transact or carry -on cannabis business activity in the City of Santa Ana without first having procured a City of Santa Ana cannabis business license. 5. Operating Commercial Cannabis Business. OPERATOR shall not operate a commercial cannabis business authorized under the Santa Ana Municipal Code unless: A. It is the holder of a valid Regulatory Safety Permit issued by CITY in accordance with the procedures and requirements of Article 1 of Chapter 40, of the Santa Ana Municipal Code; and B. At such time as the State of California requires cannabis business facilities and businesses to hold a valid license or permit issued by the State of California, it also holds such license or permit; unless, however, such permit or license is subsequently not required by the State of California for the type or cannabis facility or business operation that is the subject of this AGREEMENT. C. OPERATOR remains in compliance with any and all other laws and regulations pertaining to commercial cannabis businesses. D. OPERATOR shall remain in compliance with the operating requirements applicable to commercial cannabis businesses contained in the City's Municipal Code, 6, OPERATOR Indemnification of CITY. A. OPERATOR will indemnify CITY from any claims, damages, injuries, or liabilities of any kind whatsoever sustained or incurred by CITY resulting from entering Into this AGREEMENT, and OPERATOR's performance andlor breach of this AGREEMENT. B. OPERATOR agrees to defend, at its sole expense, any action against CITY, its agents, officers, and employees related to this AGREEMENT. OPERATOR agrees to indemnify and reimburse CITY for any court costs and attorney fees that CITY may be required to pay as a result of any legal challenge related to this AGREEMENT and/or CITY's approval of a Regulatory Safety Permit. CITY may, at its sole discretion, participate at its own expense in the defense of any such action, but such participation shall not relieve the OPERATOR of its obligation hereunder. 7. OPERATOR Compliance with Laws. OPERATOR agrees to comply with the City of Santa Ana Charter and Municipal Code, including but not limited to Chapters 18, 21 and 40, and the laws and regulations of the State of California, 8. Default and Termination for Cause. This AGREEMENT may be terminated by CITY for cause with thirty (30) days' written notice to OPERATOR. Cause as used in this section, is defined as: A. Failure to comply with the terms of the City of Santa Ana Cannabis Regulatory Safety Permit Issued to OPERATOR by CITY; B. Failure of OPERATOR to maintain a valid active City of Santa Ana Business License as the commercial cannabis business approved by the Regulatory Safety Permit and as operating; C. Failure of OPERATOR to comply with the requirements of the Community Benefits and Sustainable Business Practices Plan; D. Unauthorized transfer by OPERATOR of the City of Santa Ana cannabis business Regulatory Safety Permit issued by CITY; E. Failure by OPERATOR to accurately report gross receipts information or other data necessary for CITY to calculate/confirm operating agreement fees; F. Failure by OPERATOR to pay operating agreement fees and related reimbursement costs within thirty (30) days of the date those fees are due; G. Failure by OPERATOR to cooperate with CITY or CITY's authorized agents in any inspection, examination and audit of OPERATOWs commercial cannabis business books and records (including tax filings and returns), H. OPERATOR shall cure the default resulting from the cause for termination within thirty (30) days of the date of the notice of termination. If OPERATOR fails to cure the default within thirty (30) days of the date of the notice of termination for cause, this AGREEMENT will be terminated. I. This AGREEMENT will automatically terminate if: i. OPERATOR's Regulatory Safety Permit is revoked by CITY or is not renewed by CITY, or IL OPERATOR transfers its Regulatory Safety Permit pursuant to Santa Ana Municipal Code section 40-12. 9. Termination Without Cause. Upon mutual written agreement of the Parties, this AGREEMENT may be terminated with thirty (30) days' notice. 10. Termination - Effect on Prior Obligations. Upon any termination of this AGREEMENT, OPERATOR's obligation to report and remit operating agreement fees due and payable under the terms of this AGREEMENT for each month or fraction of a month of a cannabis business operation engaged in within the City of Santa Ana prior to termination of this AGREEMENT shall continue to be in effect. Past due penalties and late interest charges shall continue to accrue and be applicable until all operating fees due under this AGREEMENT are paid in full. OPERATOR's liability for any remaining unpaid past due penalties and/or late interest charges shall continue until fully satisfied. 11, Remedies. A. It is acknowledged by the parties that CITY would not have entered into this AGREEMENT if it were to be liable in damages under this AGREEMENT, or with respect to this AGREEMENT or the application thereof, except as hereinafter expressly provided. B. Each of the parties hereto may pursue any remedy at law or equitable relief available for the breach of any provision of this AGREEMENT, except that CITY shall not be liable in monetary damages, unless expressly provided for in this AGREEMENT. C. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by arbitration in Orange County California before three arbitrators. The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures pursuant to JAMS' Streamlined Arbitration Rules and 4 Procedures. Judgment on the Award may be entered in any court having jurisdiction. This clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction_ 12. Reimbursement Clause. In consideration of the time and costs incurred by CITY in the drafting and implementation of this AGREEMENT, OPERATOR agrees to pay 12 5.00 to CITY within thirty (30) days of execution of this AGREEMENT. 13. Attorney Fees and Costs. In any action or proceeding between CITY and OPERATOR brought to interpret or enforce this AGREEMENT, or which in any way arises out of the existence of this AGREEMENT or is based upon any term or provision contained herein, the "prevailing party" in such action or proceeding shall be entitled to recover from the non -prevailing party, in addition to all other relief to which the prevailing party may be entitled pursuant to this AGREEMENT, the prevailing party's reasonable attorneys' fees and litigation costs, in an amount to be determined by the court. The prevailing party shall be determined by the court in accordance with California Code of Civil Procedure Section 1032, Fees and costs recoverable pursuant to this Section 17 include those incurred during any appeal from an underlying judgment and in the enforcement of any judgment rendered in any such action or proceeding. 14. Notice. Any notice, tender, demand, delivery, or other communication pursuant to this AGREEMENT shall be in writing and shall be deemed to be properly given if delivered in person or mailed by first class or certified mail, postage prepaid, or sent by fax or other telegraphic communication in the manner provided In this section, to the following persons: To CITY: Clerk of the City Council City of Santa Ana 20 Civic Center Plaza (M-30) P.O. Box 1988 Santa Ana, CA 92702-1988 Fax 714-647-6956 Copies to: Executive Director— Planning and Building Agency City of Santa Ana 20 Civic Center Plaza (M-20) P.O. Box 1988 Santa Ana, California 92702-1988 Fax 714-973-1461 City Attorney City of Santa Ana 20 Civic Center Plaza (M-29) P.O. Box 1988 Santa Ana, California 92702-1988 5 Fax 714-647-6515 To OPERATOR; Royal M&D LLC 3220 S Halladay SANTA ANA, CA 92705 Tel (949) 929 3340 Email info@royal-md.com A party may change its address by giving signed notice in writing to the other party. Thereafter, any communication shall be addressed and transmitted to the new address. If sent by mail, communication shall be effective or deemed to have been given three (3) days after it has been deposited in the United States mall, duly registered or certified, with postage prepaid, and addressed as set forth above. If sent by fax or email document attachment, communication shall be effective or deemed to have been given twenty-four (24) hours after the time set forth on the transmission report issued by the transmitting facsimile machine, addressed as set forth above. For purposes of calculating these time frames, weekends, federal, state, County or City holidays, or City Hall closure dates shall be excluded. 15. Exclusivity and Amendment. This AGREEMENT represents the complete and exclusive statement between CITY and OPERATOR, and supersedes any and all other agreements, oral or written, between the parties. This AGREEMENT may not be modified except by written instrument signed by CITY and by an authorized representative of OPERATOR. Each party to this AGREEMENT acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein. 16. Assignment. OPERATOR may not assign or transfer any interest herein without the prior written consent of CITY and any such assignment or transfer without CITY's prior written consent shall be considered null and void. 17. Discrimination. OPERATOR shall not discriminate because of race, color, creed, religion, sex, marital status, sexual orientation, age, national origin, ancestry, disability, gender identity, gender expression, medical condition, genetic information, military or veteran status. as defined and prohibited by applicable law, in the recruitment, selection, training, utilization, promotion, termination or other employment related activities, OPERATOR affirms that it is an equal opportunity employer and shall comply with all applicable federal, state and local labor laws and regulations. 18. Jurisdiction -Venue. This AGREEMENT has been executed and delivered In the State of California and the validity, interpretation, performance, and enforcement of any of the clauses of this AGREEMENT shall be determined and governed by the laws of the State of California. Both parties further agree that Orange County, California, shall be the venue for any action M or proceeding that may be brought or arise out of, In connection with or by reason of this AGREEMENT. 19. Sgyerablllty. If any part of this AGREEMENT is found to conflict with applicable local or state laws or regulations, such part shall be inoperative, null and void insofar as it conflict with said laws or regulations, or may be modified or suspended as may be necessary to comply with any local or state law or regulation but the remainder of the AGREEMENT shall continue in full force and effect. 20. Counterparts. This AGREEMENT may be executed In counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The execution of this AGREEMENT may be by actual, facsimile or electronic signature. 21. Disclaimer. Despite California's commercial cannabis laws and the terms and conditions of this AGREEMENT or any Regulatory Safety Permit issued pertaining to OPERATOR or the hereinabove specified property location, California commercial cannabis cultivators, transporters, distributors, cannabis testing facility/laboratory businesses or possessors may still be subject to arrest by state or federal officers and prosecuted under state or federal law. The Federal Controlled Substances Act, 21 USC § 801 at. seq., prohibits the manufacture, manufacturing, and possession of cannabis without any exemptions for medical or non -medicinal use. 22. Authority to Bind. Each undersigned represents and warrants that its signature hereinbelow has the power, authority and right to bind their respective parties to each of the terms of this AGREEMENT, and shall indemnify CITY fully, including reasonable costs and attorney's fees, for any injuries or damages to CITY in the event that such authority or power is not, in fact, held by the signatory or is withdrawn. -Signature Page Below- A-2017-401 IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT the date and year first above written. ATTEST: DAISY GOMEZ Clerk of the Council APPROVED AS TO FORM: SONIA R, CARVALHO City Attorney By: '�. � _( Lisa Storck Assistant City Attorney RECOMMENDED FOR APPROVAL: 4 ` Minh Thai, Executive Director Planning & Building Agency CITY OF SANTA ANA KRISTINE RIDGE City Manager OPERATOR LEGAL Royal M&D LLC NAME: SIGNATORY NAME: Keith Scott TITLE: Member TAXPAYER ID: 83-2450132 ignature EXHIBIT A COMMUNITY BENEFIT AND SUSTAINABLE BUSINESS PRACTICES PLAN COMMUNITY RELATIONS PLAN Royal M&D is committed to being a positive asset to the City and hereby designates the individual listed below as the Community Relations Liaison, person responsible for outreach and communication with the surrounding community, including the neighborhood and businesses. Name: Keith Scott II Phone:949-929-3340 Email: info@royal-md.com The Community Relations Liaison shall receive all complaints regarding the Cannabis Business and make good faith attempts to promptly resolve any and all issues. To address community complaints, comments, and concerns, the name and telephone number of the Liaison shall be made publicly available. Liaison contact information shall be conspicuously posted on the main entry doors to the business as well as on file with the City at all times. The Liaison shall be required to respond by phone or email within three (3) business days of contact by a City official concerning the Cannabis Business. Community Applicant values the Cannabis Business opportunity presented by the City and Applicant wants to ensure that all individuals and local businesses— big and small —feel comfortable with recent cannabis developments in their back yard. Applicant will be available through the aforementioned contact to handle all inquiries and concerns regarding Applicant's Commercial Cannabis Business, specifically, or the cannabis industry, generally. We want to be a positive representation of the Santa Ana cannabis industry. Position regarding neighboring cannabis businesses Applicant is a strong believer in working with other cannabis businesses in the City. While we may compete on paper, we believe that building a strong cannabis community that benefits each of our businesses and the community demands that we work together to reach the market, and support the ups and downs that will inevitably affect each of us. To do this, Applicant commits to establishing relationships with local licensed operators. Further, we will seek to establish our primary direct business relationships with local cannabis cultivators, distributors, transporters, and testing labs. Relationships with other local, non -cannabis businesses Local first —Applicant will seek to obtain all of our operating supplies and services locally as a positive Infusion into the local economy. Community Benefits & Involvement As with any major business enterprise, the community and people from that community become vital resources. In return, Royal M&D will commit to the following: • Homeliness o Homeliness has been an increasing concern and specifically in Southern California an epidemic. To do our part in combating this public welfare crisis Royal M&D will commit to forming a relationship with loaves and fishes soup kitchen in the city of Santa Ana. Every Saturday Loaves and Fishes of Santa Ana provides a meal to approx. 1,000 homeless or needy men, women and Children. In addition, the shelter offers Medical care, English classes and other essential services. Royal M&D will help in making sure these services continue and expand by: • Hiring Financial contribution — Royal M&D will commit to donating ten thousand dollars ($10,000) on an annual basis to loaves and fishes sheiter Volunteer hours- on a quarterly basis Royal M&D will commit to 20 hours of volunteer work serving those Inside loaves and fishes shelter. Local hiring Is Important to us and recognize it is essential for the wellbeing of our community. We will make the following steps to ensure we hire local. We have identified a few positons and estimate 50%of staffing can performed by individuals with no previous knowledge of cannabis operation. in orderto hire local we will do the following: ■ Post on local job boards Contacting local business that may have reduced staff due to covid-19 for potential candidate's e.i. local bartenders, waiters, etc. ■ Referrals -the best employees come from referrals. We commit ourselves to using the local community to get locals knowledge of job availability • Face Book Ads low cost and targeted to get word out about jobs ■ Attending local and industry meetings (virtual) ■ We would utilize any additional resources the city can make available Sustainable business Practices o When it comes to sustainability, the most impact we can have is by choosing and sourcing from sustainable vendors. We will do this by sourcing when available re- usable/recycled packaging for our clients products. o Developing an in house recycling program light bulbs, paper products, and electronics. We will facilitate this by partnering with a local waste management vendor • Increased local Business Revenue o Utilization of local contractors and supply stores. o Reducing the local unemployment rate and replacing it with disposable income. • Increased Sales Tax Revenue for the cityfrom increased consumer spending at local businesses (a direct result of employment opportunities). • Increased Property Tax Valuations at the developed property. • Increased Property Tax Revenue o Potential revenue impact upon the City, from the above, indirect and direct revenue streams, could be tremendous. • Increased funding for vital city services • The anticipated tax revenues generated by the Commercial Cannabis Activity will also contribute to local government efforts to maintain and improve its public services such as parks and community centers. Applicant will also offer a slate of additional programs and services to help boost the community through services to aid and support our citizens. These ancillary services will focus partnerships with local non -profits and community support organizations, price supports to seniors, the terminally ill, low-income individuals and veterans, and an eviction defense program assisting persons who have lost their homes to foreclosure. Local Enterprises The proposed Commercial Cannabis Activity presents employment and volunteer opportunities for residents of Santa Ana Ongoing contract services will be needed for security, improvements, landscape, and other support services in addition to building contractors and tradesmen available to local enterprises located in the City and orange County. Local contractors and tradesman will have an opportunity to contract for services through a competitive bid process, based on pricing, experience, and references. Efforts will be made to utilize local businesses and retailers first. Our goal is to stimulate the local economy and build lasting local business relationships. As such, we have identified some local businesses and contractors who will be invited to participate In the competitive bid process. Neighborhood Aesthetics Applicant will seek to revitalize the Proposed Business Location as much as possible to bring a fresh, clean, safe and secure business -front while appropriately blending in with the surrounding neighborhood. Unfortunately, the Proposed Business Location does not afford an opportunity for any landscaping or natural beautification of the building; however, we will ensure that the Proposed Business Location is not a blemish in the community, Public Nuisance The Commercial Cannabis Activity on the Proposed Business Location shall be fully enclosed and not be Visible with the naked eye from any public or private property. There shall be no distribution or physician services provided to the public —Applicant shall not distribute, sell, dispense, or administer cannabis or cannabis products out of its facility to the public, nor provide physician services/patient recommendations on the premises. The Commercial Cannabis Activity shall not be operated as a dispensary. Further, there shall be no on -site consumption of cannabis or cannabis products or alcohol on the premises. Applicant will be operating in a zone that Is almost exclusively dedicated to commercial cannabis activity. As a result, there will be little opportunity for adjacent businesses to be affected by one another's cannabis odors. That said, to avoid becoming a nuisance or having any impact on its neighbors, Applicant shall not adversely affect the health or safety of the nearby residents or businesses by creating dust, glare, heat, noise, smoke, traffic, vibration, or other Impacts and shall not be hazardous due to use or storage of materials, processes, products or wastes. Applicant will implement an odor control process that filters outbound air using carbon filters expressly designed to remove or reduce cannabis odors as well as any other equipment as may be required by the City orthe State. Please see our Noxious Chemical Control plan above, Crime & Vandalism The security -monitored occupation of the Proposed Business Location by Applicant will lower the instances of crime in the surrounding area and ensure that the building maintains free of graffiti and vandalism and in the event that any such defacement occurs Applicant will remedy immediately. Applicant will seek to transfer any high value products (cannabis and cannabis products) from the Proposed Location on a daily basis. Further, we will limit cash an hand to a bare minimum, all of which can serve to reduce the temptation or incentive for break-ins or other bad behavior on or near our site.