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HomeMy WebLinkAboutSOUTH GRAND DISTRO, LLCINSURANCE NOT ON FILE WORK MAY NOT PROCEED CLERK OF COUNCIL DATE: AUG 2 5 2022 OPERATING AGREEMENT FOR NON -RETAIL COMMERCIAL CANNABIS BUSINESSES A-2017-369-79 &:?jk k ?6�4ew4A&J)v This Operating Agreement ("AGREEMENT") is dated f1v IH between the City of Santa Ana, a charter city and municipal corporation ("CITY") and South Grand Distro, LLC("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 MEDICINAL DISTRIBUTION services in whole or in part of its operations transacted and carried -on by OPERATOR at the following subject property location, 1834 South Grand Ave, 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 1 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, 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. 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 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. 1. 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. 4 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: Mary McCullough South Grand Distro, LLC 1834 South Grand Avenue Santa Ana, CA 92705 Tel (714) 231-2834 Email southgranddcc@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. 16. 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 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-2017-369-79 IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT the date and year first above written. ATTEST: DAISY prGOME �Clerk of the Cl--- ii CITY OF SANTA ANA G/ iGG i KRISTINE RIDGE City Manager APPROVED AS TO FORM: OPERATOR LEGAL NAME: SOUTH GRAND DISTRO, LLC SONIA R. CARVALHO SIGNATORY By: NAME: Mary McCullough John M. Funk Sr. Assistant City Attorney TITLE: Manager RECOMMENDED FOR APPROVAL: Minh Thai, Executive Director Planning & Building Agency 0 TAXPAYER ID• 86-1765480 Signature EXHIBIT A COMMUNITY BENEFIT AND SUSTAINABLE BUSINESS PRACTICES PLAN COMMUNITY BENEFITS AND INVESTMENTS PLAN INTRODUCTION Through our Community Benefits and Investments Plan, and many other aspects of our Business Plan, we focus on funding the work of local non -profits, community -based organizations, civic organizations and social service organizations. But our efforts do not stop at simply writing a check. We also include opportunities for volunteerism, charitable giving through in -kind donation drives and sparking the local economy through 132B Partnerships and local hiring. In developing this plan for the City, we looked at past plans created and identified aspects of those plans that made the largest impact when implemented. To create a meaningful plan for Santa Ana, we: • Conducted in-depth research on the demographic makeup of Santa Ana; • Identified non-profit organizations most in need; • Reviewed the profile of each City Council member in an effort to align charitable interests; and • Spoke with local residents to gather their ideas and views associated with areas of need. As a cannabis operator, entering any community has public perception challenges. There are often lingering fear and safety concerns stemming from a period of unregulated -market cannabis trade. Our goal is to be the best community partner possible and present our brand as safe, friendly and deeply engaged in the local community. OUR COMMITMENT We will hire 50% of our employees (including all management positions) from within the local community. COMMUNITY APPROACH Our approach to the communities we serve has five facets: 1. Respect — We must politely introduce ourselves. 2. Honesty — Our word is our bond. Trust is a process. Honesty is key. 3. Understanding — Our approach must fit the community. Listening is golden. 4. Values — Our core values must overlap with the values of those we serve. 5. Unity — Through our financial and service gifts, we show we're part of the community. This plan will evolve based on feedback from the City and the community. We look forward to proving that we're good neighbors through a heart -felt collaboration. PLAN IMPLEMENTATION Our plan implementation includes providing resources in the following areas: • Provide Meaningful Employment Opportunities • Contribute Volunteer Hours • Conduct Community Outreach • Operate Donation Drives • Donate Funds to Local Nonprofits • Support City Programs and City Improvements • Environmental and Sustainability Practices PROVIDE MEANINGFUL EMPLOYMENT OPPORTUNITIES We are dedicated to hiring 50% local residents for the staffing, including management positions. We understand that operating successfully and hiring locally stimulates the local economy and contributes positively to economic development. We have developed a robust Labor, Diversity and Inclusion Plan. The plan paves the way for us to partner with several local non -profits, whose focus is on providing employment opportunities to those most in need. Additionally, we provide a comprehensive Employee Training and Continuing Education Program to each employee, to ensure that customers are not misguided, and cannabis is not misused. CONTRIBUTE VOLUNTEER HOURS We encourage employees to give of themselves through volunteer work. We offer all employees paid time off, in order to volunteer with a local organization of their choosing. Example Volunteer Opportunities Senior Centers Aside from employee -led volunteer hours, we organize statewide service projects, to give back to the community while providing a team building activity. We are a proud supporter of Senior Centers statewide and commits to organizing volunteer hours with a local Senior Center. We have identified the Santa Ana Senior Center as a potential location to volunteer. We know that not all seniors in Santa Ana have access to health care, so we'll also provide seniors in the local community with a public lecture series focused on how cannabis can help seniors with health issues as alternative treatment for chronic illness, as well as a senior discount on our products. CONDUCT COMMUNITY OUTREACH We believe that community outreach is accomplished in a variety of ways. Attending community events, sponsoring community events, and hosting community events are all forms of effective community outreach. OPERATE DONATION DRIVES With the large homeless population in the City of Santa Ana, there is no doubt that local families struggle with nutrition and food insecurity. To combat this very serious problem, we will conduct one annual canned food drives at our location. Guests, staff members and community members at large may bring canned food items to us, and we will collect and deliver all the non-perishable donations to Cantlay Food Distribution Center. Teaming up with this well-known organization will provide an opportunity for us to reach more community members in need. SUPPORT CITY PROGRAMS AND CITY IMPROVEMENTS Funding for Enforcement Against Illegal Cannabis Operations We are a full supporter of decreasing the number of illegal cannabis operations operating in the Santa Ana area. The only way for legal cannabis business owners to be successful, and to ensure that only safe and tested cannabis is distributed to guests, is by only allowing regulated dispensaries to operate. We will contribute funds and provide support to these efforts spearheaded by the City. Public Safety The legalization of cannabis has raised many issues where public safety is concerned. Communities fear that cannabis products will end up in the hands of children. We heavily focus on prevention. From advanced security measures, to utilizing proper and legal packaging, to developing business practices geared to appeal only to adults, we push the importance of public safety in each of our business decisions. We will rely on the City to provide information as to their specific needs in increasing public safety, and eagerly seeks to partner with the City in our efforts. ENVIRONMENTAL AND SUSTAINABILITY PRACTICES Protecting Our Environment The City is conscious of new businesses and the impact new businesses have on the environment, the surrounding communities, conservation, development and use of natural resources, and the open space areas that are important for residents' views and recreation. We will fully implement recycling practices companywide along with promoting the message to our guests to encourage sustainability. We are committed to looking for new and innovative ideas to reduce our carbon footprint and to operate in a way that protects our environment and addresses community concerns. Climate Control System Climate control systems account for a large percentage of the total energy consumed in a cannabis business. In designing our climate control system, we will consult with a mechanical engineer to devise the most energy efficient system possible taking into account: 1. indoor air quality; 2. odor control; 3. energy consumption; 4. greenhouse gas emissions; 5. regulatory compliance; and 6. climate. Should carbon emissions be a concern, we will employ additional procedures to offset any carbon emission. Efficient Heating and Cooling We will use a closed room environment to minimize our electricity costs. A closed room environment does not exchange air with the outside of the building and limits the electricity associated with the cooling of external air. In addition to the cost and energy -savings, closed room environments present the added benefit of decreased odor presence surrounding the premises. We will regularly maintain our climate control and HVAC systems to ensure continuously efficient operations and to reduce energy consumption and energy costs. Maintenance will include periodic efficiency checks, filter replacements, and evaluations of system upgrades. Our facility will be sufficiently insulated to reduce heating or cooling losses. Management Systems and Energy Audits Our facility managers will consider installing a Building Management System (BMS) or Energy Management System (EMS). The U.S. Department of Energy has developed a suite of Specification and Procurement Support Materials to help managers identify the right fit for their facility. We will utilize Xcel's Energy Analysis Program to identify financial incentive programs and to perform a comprehensive energy audit or engineering assistance study (EAS). For example, we can install sub -meters, such as a-mon and Power TakeOff, inside the building to collect power usage data. Reduce Automobile Dependency and Promote Health and Activity Team Member Reward Program We will offer rewards to team members who engage in environmentally friendly behaviors. For example, if team members carpool, ride a bicycle, or take public transportation to work, they will accrue points to be redeemed for prizes. Team members can also acquire points for recycling, using energy efficient practices, and suggesting practices that are later implemented by the company. Air Purification, Noise, and Odor Reduction Our air purification system consists of a series of plenums, arranged side by side, covering the entire ceiling. The plenums will provide air changes at the rate of one room volume every 5 minutes. Not only will the registers take in the air at an astounding rate, but the noise of the equipment will be greatly reduced due to their large size. "Green" Growing Practices We will source our products from growers and manufacturers who follow environmentally friendly business practices, as in our other retail locations. When selecting products, we will follow a careful vetting process, reviewing each supplier's processes to ensure they are pesticide free and eco-friendly. For example, we will seek out cultivators that utilize the collection of rainwater, living soil, and chemical free pest control. Water Conservation Our water conservation and reuse efforts include installing and implementing water efficiency upgrades to our building. As part of our building improvements, we will upgrade all landscaping to a water -wise design, utilizing drought resistant greenery and watering techniques. We will retrofit our location with automatic faucets, set with a timing mechanism to control the flow of water, in all restrooms and break rooms. Waste Disposal Plan Team members will fully comply with all waste disposal regulations outlined in 16 CCR §5054 and Division 30 of the Public Resource Code. Cannabis waste will be disposed of in a secured waste receptacle on our property, which is only accessible to our staff and team members. Cannabis waste will be kept inside the facility only in a secured area. Each type of cannabis waste will be stored in a separate bin: flower, concentrates, edibles, etc. We will contract with GAIACA Cannabis Waste Company to collect and properly dispose of our waste. All waste disposals will be tracked accordingly. Zero Waste Plan We will reduce waste throughout the facility by recycling and reusing whenever possible. We will strive to recycle or compost all waste generated by our business. We plan to achieve a 25% landfill rate upon commencing our business, with a goal of reaching a 0% landfill rate by 2023, We will work with the City to eliminate plastic bags and to utilize local recycling companies to develop economic growth and create jobs. Packaging from inbound materials, waste generated during operations and team member waste will be the main sources of recyclable materials. We will place recycling bins in the team member break areas, office areas, and where inventory is sorted to ensure that all recyclable waste is identified and disposed of properly. We will also greatly reduce the amount of landfill generated within the facility by composting waste, helping to produce quality compost that can be used to inoculate soil with microbial life. Team members will make every effort possible to identify recyclable and compostable materials, separate them from other waste, and place them in appropriate containers to be picked up by our recycling service provider. In addition to recycling, team members will reuse everything possible.