Loading...
HomeMy WebLinkAboutDIRECT NATURAL ALTERNATIVES, INC. DBA LEGACY KUSH� ti0ti� INSURANCE NOT ON FILE A-2017-369-45 WORK MAY (1�T PROCEED CLERK OF COUNCIL DATE: OPERATING AGREEMENT FOR ADULT -USE RETAIL p•. p� 1�1�AG P )�' COMMERCIAL CANNABIS BUSINESSES This Operating Agreement ("AGREEMENT") is dated May 25 , 2021, between the City of Santa Ana, a charter city and municipal corporation ("CITY") and Direct Natural Alternatives, Inc. dba Legacy Kush ("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 RETAIL services in whole or in part of its operations transacted and carried -on by OPERATOR at the following subject property location, 1714 S Lyon St, 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 1 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, 2022 regardless of starting date unless terminated earlier in accordance with Section 9 or 10 of this AGREEMENT. 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 of 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 and/or 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. 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 OPERATOR's 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. This AGREEMENT will automatically terminate if: i. OPERATOR's Regulatory Safety Permit is revoked by CITY or is not renewed by CITY. or ii. 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 Procedures. Judgment on the Award may be entered in any court having jurisdiction. rd 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 $2,500 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 Fax 714-647-6515 To OPERATOR: Maurice Chou Direct Natural Alternatives, Inc, dba Legacy Kush 1714 S Lyon St SANTA ANA, CA 92705 Tel (949) 400-0418 Email mchou8@gmail.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 mail, 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. Assianment. 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 W or proceeding that may be brought or arise out of, in connection with or by reason of this AGREEMENT. 19. Severability. 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 et. 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-2017-369-45 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: Jose Montoya Deputy City Attorney RECOMMENDED FOR APPROVAL: Minh Thai, Executive Director Planning & Building Agency CITY OF SANTA ANA KRISTI E RIDGE City Manager OPERATOR LEGAL NAME: Direct Natural Alternatives, Inc. DBA Legacy SIGNATORY NAME: Maurice TITLE: CEO 146-94-5849 TAXPAYER ID: S1O cuSigned by:'��, CF66F35568]8438438... EXHIBIT A COMMUNITY BENEFIT AND SUSTAINABLE BUSINESS PRACTICES PLAN Local Hiring and Compensation Packages The Company shall make a good faith effort to hire 80 to 85% of its workforce from local Santa Ana candidates. The Santa Ana WORK Center is the most pertinent and effective tool for us to utilize in accomplishing the task of targeted local hiring. The WORK Center connects Santa Ana residents to all manner of local open positions across a broad array of industries, with a particular interest in those that are unemployed, underemployed, lower skill, youth/new to careers, or need special assistance in navigating a career path. Further, the WORK Center offers a plethora of assistance to job seekers including job databasing and applying assistance, job training, degree programs assistance and vocational classes, and career counseling. In working with them, we have high hopes of attracting some great and urgent talent from the local candidate pool, providing them with a path to gainful employment. This resource is the gold standard for those looking for local employment opportunities and is the one resource that the City itself directs applicants to turn to for job and career opportunities. The WORK Center will be the mainstay of our local recruitment efforts due to its higher local focus and the quality of the job resources it offers. We do, however, want to cast a wide net that captures all possible applicants in the City. Beyond working with the WORK Center, we want to work with local community colleges as well, including those in Santa Ana (especially Santa Ana College) that are highly likely to be providing educational opportunities to Santa Ana students. Many community colleges do a truly phenomenal job of helping match graduating students with sustainable and long-lasting career paths to success. This is particularly true of community colleges, which tend to have students who are lower income and locally based. Further, many of these community college students will be first -generation graduates. That makes Santa Ana College and its Career Center an ideal tool for accomplishing our goal of local equity hiring. As a burgeoning business, we will have several open opportunities that the Santa Ana College Career Center can help fill while providing a higher social good at the same time. Many of the graduating student applicants will have educational backgrounds that adumbrate greatly with our needs: business, marketing, sales, and management. No prior experience will be required for most applicants, as we will provide all the training needed, thus allowing for the largest pool of candidates possible. If neither of these services are able to help us find viable and in -need candidates, we will turn to any number of local private employment agencies to find more local candidates, though we doubt it will come to that point. These are the resources we will use to attract local candidates but does not adequately address how we will sort the applicants and make hiring decisions. We will also ask about prior cannabis convictions, social status history, and demographic background. This information will be voluntary; however, we will state on the employment application that this information will only U help candidates in their chances for hire. The Company shall make a good faith effort to secure most of our roughly 20-person workforce from residents and students of Santa Ana. Not only is the hiring of local persons of utmost importance, but we must also discuss what those jobs will mean for those persons. We will provide quality jobs to local residents, offering high comparative wage rates and a number of auxiliary benefits. In 2020, the Santa Ana minimum wage was $13.00, and this is equivalent to $27,040.00 for a forty -hour work week on an annual basis. This will serve as our base point. The company will be paying our employees above the base point — For instance, the entry level employee will be a Sales Associate will be paid a rate equivalent to $36,000 per annum. That rate allows our employees to be in a better position to afford a sustainable lifestyle. We will also provide employees with numerous benefits that will likely include, but are not limited to healthcare coverage, free professional financial planning, tuition reimbursement, and assistance for educational and training classes and degree programs. Local Sourcing Santa Ana has a largest number of diverse cannabis producers and operators in Orange County. Santa Ana is the hub of cannabis for much of the Southern California area outside of Los Angeles; we will make good faith efforts to support all Santa Ana cultivators, manufacturers, and distributors. We are extremely interested in working with currently operational, pending, and yet to be operational cannabis licenses, and would do so from a radial design - sourcing from Santa Ana as fully as possible, then next other Orange County city suppliers close to Santa Ana (Costa Mesa) as needed, and then on to Los Angeles and Riverside County as needed. Outside of working with local cannabis businesses, there are a plethora of other non -cannabis services and product providers that we need in the surrounding Santa Ana area. The Company shall make good faith efforts to utilizing these local businesses for all the product and services to the extent they serve the best operation of our business. Services that are a must for us are security and guard services, alarm installation and maintenance, delivery vehicle maintenance and repair, renovation and construction, banking services, and consulting, and we will explore the procurement of these services in Santa Ana above all other cities first. Financial Support The Company has made past donations to two local Santa Ana community organizations: Catholic Charities of Orange County 1820 E 16th St Santa Ana, CA 92701 714-347-9600 The mission of Catholic Charities of Orange County is to provide service to people in need, to advocate for justice in social structures, and to call the entire church and other people of good will to do the same. Orangewood Foundation Foster & Community Youth Services 1575 E 17th St Santa Ana, CA 92705 714-619-0200 The Orangewood Foundation serves youth —especially those in or transitioning out of the foster care system —in Santa Ana and the community, providing resources for youth health and HQ wellness, housing, life skills and employment, and education. The Foundation aims to provide young adults in the foster care system and other at -risk youth with safety and security, as well as avenues toward reaching their life, education and professional goals. The Company will support non-profit organizations in Santa Ana in an amount equal to or in excess of $125,000. These community organizations may include, but are not limited to: Santa Ana Promise Program - Santa Ana College (SAC) The goal of Santa Ana Promise is for every citizen of Santa Ana to earn a college degree. Santa Ana Promise is the latest initiative of the Santa Ana Partnership to elevate academic achievement and college attendance for students who attend high schools in the city of Santa Ana. Students who participate will receive guaranteed financial support for their pre -transfer studies at SAC, the opportunity to enroll in academic learning communities at SAC to ensure access to college English and Math courses, access to the university's Early Assessment Program for placement in college level Math and English classes, and much more. DNAI is excited to partner with Santa Ana Promise such as volunteering in workshops or other engagement events for Santa Ana students to learn about the field of horticulture. Delhi Foundation or Delhi Center Delhi Center offers free and discounted classes for all ages, everything from Art to Zumba! After -school tutoring is provided through a partnership with the Santa Ana Public Library and computer skills and ESL classes through Centennial Education Center. Senior programs offer healthy socialization activities, and they help families develop strategies for financial success. DNAI is looking forward to providing support to members of the Santa Ana community through this organization in order to improve access to educational and recreational opportunities for Santa Ana residents. Santa Ana Link/Mercy House Santa Ana Link, run by Mercy House, provides shelter for Santa Ana men, women, and families with minor -aged children experiencing homelessness on an emergency, 24-hour basis. The Company recognizes the extent of the homelessness issue in Santa Ana and the strain it puts on residents and the City itself. The shelter's primary focus is to assist program participants with creating a housing plan, making connections to housing resources and ending their homelessness as quickly as possible. The Company fully supports this mission. Orange County Head Start Head Start is a "comprehensive child development program designed to meet the educational, emotional, social, health, and nutritional needs of children and families," and aims to equip children — especially those from lower socio-economic backgrounds — to deal with their present environments as well as the later life situations that require social competence, empathy, communication, and problem -solving. The Company wants to commit whatever resources it can to the youth development in Santa Ana, ensure a brighter future, and Orange County Head Start is a great place to achieve that. Community Service and Voluntarism In addition to the financial support the Company will make, the Company will have employees dedicate 5 hours a month to volunteering for Santa Ana focused, community -oriented, non-profit organization. The Company will pay the employees time spent performing this volunteer work up to the five hours spent every month. The list of non-profit organizations is likely to include America on Trek, Phoenix House, Boys and Girls Club of Central Orange Coast, Wiseplace, Santa Ana YMCA, Orange County United Way, and Santa Ana Link, amongst others. 11 Green Building and Sustainability Initiatives There are numerous actions we plan to take to lessen our environmental burden, for the Santa Ana community and the world at large. The following programs and measures will be taken as part of the environmental sustainability process: • Explore solar panel installation on the building • Utilize efficient LED lights and other low energy output fixture on the premises • Use Energy Star Certified appliances wherever possible • Installing low -flow appliances wherever possible • Explore the possibility of fitting the roof with or alternatively constructing covered parking stalls with solar panels • Proper waste management including recycling efforts as possible and appropriate for all manner of waste (solid waste, e-waste, clean disposal) • Native, drought resistant landscaping • Encourage and subsidize non -personal vehicle use of customers and employees (carpooling, biking, walking, public transit, etc.) • Use only non -toxic cleaning products wherever possible • Smart climate control and light control system (auto -timers, dimmers, daylight maximization) • Ensure supplies and office materials come from sustainable sources (ink, post -consumer paper and plastic, biodegradable exit packaging/bags) wherever possible • Use a filtration and dispensing system for water to be used by customers and employees • Develop sustainability policies and procedures to reinforce our green business efforts, including powering down equipment at the end of the day and enabling energy saving settings on any computer equipment • Examine the potential for load shifting and demand response solutions to energy needs with the City and the regional utility company. • Purchase reasonable carbon offsets from energy suppliers and utility companies wherever possible 12