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HomeMy WebLinkAboutADSSA MANUFACTURING LLCINSURANCE NOT REQUIRED WORK INAY PROCEED CLERK OF COUNCIL OPERATING AGREEMENT FOR nnrc' JAN 2 2 2013 CANNABIS MANUFACTURING BUSINESS 0; WO This Operating Agreement ("AGREEMENT") is dated December 17, 2018, between the City of Santa Ana, a charter city and municipal corporation ("CITY") and ADSSA Manufacturing LLC, a California Domestic 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 cannabis manufacturing business conducting cannabis manufacturing services in whole or in part of its operations transacted and carried -on by OPERATOR at the following subject property location, 1910 E. Warner Ave. Unit C, Santa Ana, California 92705. 1. Public Benefit. A. Intent. The purpose of this Operating AGREEMENT is to collect fees for the operation of a cannabis manufacturing business and to provide fees for 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 as a result of the operating agreement fees collected. 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 cannabis manufacturing business. 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. Operating Fee Rates for Cannabis Manufacturina Businesses: Payment For each month OPERATOR of the permitted cannabis "manufacturing business" (as said term is defined in Chapter 40 of the Santa Ana Municipal Code) transacts and carries on cannabis manufacturing 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. OPERATOR shall pay CITY a monthly operating agreement fee which is the higher of the following two calculations: I. calculated at a rate of Six Percent (6%) of the gross receipts generated or otherwise received; or, ii. calculated at an annual rate of Ten Dollars ($10.00) 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 manufacturing business authorized under this Operating 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 the above-described subject property 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 manufacturing business, shall not pass the operating agreement fees or any portion thereof through to the cannabis manufacturing business' customer in any fashion except as part of the basic product sales and/or service price. B. For the purposes of this AGREEMENT, "gross receipts" shall mean any and all of the following with respect to OPERATOR's business transacted and carried -on at, from, or in direct connection with, OPERATOR's City of Santa Ana permitted and licensed business location or branch facility, hereinabove referenced as "subject property location": • Transfer of title or possession, exchange or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible and/or intangible personal property for consideration, including any monetary consideration for cannabis manufacturing business services and/or related goods or services; • Anything else of value obtained by a cannabis manufacturing business; • The total amount of the sale price of all sales and services; • The total amount charged or received for the performance of any act, service or employment of whatever nature it may be, whether or not such service, act or employment is done as a part of or in connection with the sale of goods, wares, merchandise, for which a charge is made or credit allowed, including all refunds, cash credits and properties of any amount or nature; • Any amount for which credit is allowed by the seller to the purchaser without any deduction therefrom, on account of the cost of the property sold, the cost of materials used, the labor or service cost, interest paid or payable, losses, or any other expense whatsoever; provided that cash discounts allowed or payment on sales shall not be included; C. "Gross receipts" shall not include the following: • The amount of federal transaction taxes (sales, use, excise, value added) imposed on or with respect to sales made or services provided whether or not the amount of such taxes is stated as a separate charge; The amount of any California state excise tax or state cultivation tax regardless of whether or not the amount of such excise tax or cultivation tax is stated to customers as a separate charge, or any California state, city or city and county sales or use tax (including any city or city and county transaction and use tax) required by law to be included in or added to the purchase price and collected from the consumer or purchaser, or such part of the sales price of any property previously sold and returned by the purchaser to the seller which is refunded by the seller by way of cash or credit allowances given or taken as part payment on any property so accepted for resale; or D. "Gross receipts" shall be calculated without any deduction on account of any of the following: 4 The cost of tangible or intangible property sold or bartered; The cost of materials or products used, labor or service cost, interest paid, losses, or other expense; The cost of transportation of cannabis, or other property or product; The amount of any federal or state income taxes or franchise taxes; and Any other business costs or expenses, unless otherwise specifically exempted pursuant to Section 3C of this Agreement. 4. Remittance and Reporting. Beginning as set forth above and monthly thereafter, OPERATOR shall report and remit payment to CITY of the applicable operating agreement fee set forth in Section 2 of this AGREEMENT. OPERATOR shall report to CITY any gross receipts received during the preceding monthly reporting period and shall remit to CITY on or before the last day of the month following the operating agreement fee due and owing during said period as applicable in accordance with Section 2 of this AGREEMENT. When the last day of the month falls on a City Holiday or City Hall Closure Day then the reporting/remittance date shall fall on the next City business day following. The operating agreement fee shall be acknowledged and agreed by CITY to be paid timely if paid on said date. When reporting/remitting is made by mail, the postmark date shall serve as proof of timely reporting/remittance. 5. 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. 6, Past due date — Past due penalty; Late interest. A. Any OPERATOR entity or individual who fails to pay the operating agreement fees required by this AGREEMENT when due shall be subject to past due penalties and interest as set forth herein. i. OPERATOR shall be considered past due if the required monthly operating agreement fee is not paid by the last day of the month following the month for which it is due. ii. For failure to fully pay any monthly fee when due, the following past due penalty and late interest charges shall be added to the unpaid balance amount owing: 1) A past due penalty of Twenty -Five Percent (25%) per month; 2) A late interest charge of One and One Half Percent (1.5%) per month added to the unpaid balance amount owing, inclusive of any prior past due penalty or late interest charges accrued. B. CITY is not required to send a past due notice or other bill or invoice to OPERATOR, or any other person subject to the provisions of this AGREEMENT and failure to send such notice, bill or invoice shall not affect the validity of any operating fee, late penalty or late interest charge due under the provisions of this AGREEMENT. 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 12 or 13 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. 8. Business License Required. A valid City of Santa Ana Business License is required for all persons engaged in transacting and carrying on any cannabis manufacturing business activity in the City of Santa Ana. It is unlawful for any person or legal entity to commence, transact or carry -on manufacturing business activity in the City of Santa Ana without first having procured a City of Santa Ana cannabis manufacturing business license. 9. Operating Cannabis Manufacturina Business. OPERATOR shall not operate a cannabis manufacturing 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 Manufacturing 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 including a cannabis manufacturing business. D. OPERATOR shall remain in compliance with the operating requirements applicable to cannabis manufacturing centers contained in the City's Municipal Code. 10. 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. 11. 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. 12. 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 a cannabis manufacturing business; 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 manufacturing business Regulatory Safety Permit issued by CITY; 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 cannabis manufacturing 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. 13. Termination Without Cause. Upon mutual written agreement of the parties this AGREEMENT may be terminated with thirty (30) days notice. 14. 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 manufacturing 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. 15. 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. This clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction. 16. 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. 17. 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. 18. 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: Albsi)A MA+uvFAc'TvZi�Fl ltvL i Wt t7 E. 1.JARwek AVe .S v �,C _ ShNT/- tlnl�CA 9 70 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. 19. 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. 20. 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. 21. Discrimination. OPERATOR shall not discriminate because of race, color, creed, religion, sex, marital status, sexual orientation, age, national origin, ancestry, or disability, 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. 22. 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. 23. 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. 24. 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. 26. 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. 26. 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 - W] IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT the date and year first above written. ATTEST: CITY OF SANTA ANA MARIA D. HUIZAR J/T RAUL GODINEZ II Clerk of the Council City Manager APPROVED AS TO FORM: OPERATOR SONIA R. CARVALHO LEGAL City Attorney NAME:_/ D55l MAot)ACTu�wc C'L ��. SIGNATORY By: `c ' ..y�.o� NAME: Lisa Storck Assistant City Attorney TITLE: KXA1 AG, fL TAXPAYER ID: RECOMMENDED FOR APPROVAL: Minh Thai, Executive Director Planning & Building Agency 11 ADSSA MANUFACTURING, LLC Community Benefits We intend to create new local jobs, support the City of Santa Ana's businesses, while strongly advocating sober living and related community issues. We anticipate hiring new full-time employees from the local area and contract as much as possible with local vendors, especially those that can provide high quality cannabinoid extracts and isolates. Our company will prioritize supplying the City's cannabis retailers with our highly demanded products. These mandates should have a significant multiplier effect on supporting jobs and businesses. ADSSA Manufacturing will also be providing significant training and education that directly improves the skill sets of the community's employee base. As both our transdermal patch and sublingual pill manufacturing equipment is state-of-the-art, the training by the Company of new employees will be substantial. In addition to the manufacturing of these highly sophisticated medical products, our employee base will be educated in testing and cGMP (Good Manufacturing Practice) production requirements. Both the direct and indirect consequences of these new jobs and higher skill levels will greatly benefit the City's economy. Equally important, we intend to support the community through direct participation and donation. Specifically, we would work with the City to establish a sober living facility based upon a model, Beacon of Hope, that was successfully implemented by one of our associates in Los Angeles (wwyvI}eaccn�gfVx pe.I). We would like to replicate this professionally managed sober/transitional residence for men in the City of Santa Ana. The Los Angeles facility can house up to 85 men in a structured, safe and nurturing environment for those recovering from drug and alcohol abuse. The facility would provide three daily meals, shared clean and fully furnished rooms, TV and entertainment rooms, computer room, Wi-Fl and exercise areas. The goal of providing a transitional home is further accomplished by offering Alcoholic Anonymous and Narcotics Anonymous meetings, counseling and mentoring, along with career advice and assistance with school enrollment. At Beacon of Hope in Los Angeles they have been able to provide this critical, yet rare, transitional experience for those at an affordable price of approximately $600 per month per resident. We at ADSSA Manufacturing have immense passion driving us to do what we can to improve the lives of the patients using our products as well as for the community that we live and work.