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HomeMy WebLinkAboutCB LABS SANTA ANAINSURANCE NOT RECUIRED A-2017-386 WORK PnAY PROCEED CLERK OF COUNCIL n''Tr. AUG 3 0 2019 OPERATING AGREEMENT FOR NON -MEDICINAL RETAIL COMMERCIAL CANNABIS BUSINESSES This Operating Agreement ("AGREEMENT") is dated August 6, 2019, between the City of Santa Ana, a charter city and municipal corporation ("CITY') and CB Labs Santa Ana ("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 Testing Services in whole or in part of its operations transacted and carried -on by OPERATOR at the following subject property location, 1910 East Warner, Suite 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 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 foranycourt 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; 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; 3 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. I. This AGREEMENT will automatically terminate if: I. OPERATOR's Regulatory Safety Permit is revoked by CITY or is not renewed by CITY, or H. 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. W 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 AGIREEMENT, 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 5 To OPERATOR: Scot Candell CB Labs, Santa Ana 1910 East Warner, Suite A Santa Ana, CA 92705 Tel (415) 441-1776 Email Candell@candell-law.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. 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, 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. 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. M. 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 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- 7 IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT the date and year first above written. DAISY GOMEZ CLERK OF THE COUNCIL APPROVED AS TO FORM: SONIA R. CARVALHO City Attorney By: 4�k Lisa Storck Assistant City Attorney CITY OF SANTA ANA KRISTINE RIDG City Manager OPERATOR LEGAL NAME: SIGNATORY NAME: TITLE: TAXPAYER ID: RECOMMENDED FOR APPROVAL: SIGNATURE: Minh Thai, Executive Director Planning & Building Agency EXHIBIT A COMMUNITY BENEFIT AND SUSTAINABLE BUSINESS PRACTICES PLAN 0 CB LABS SANTA ANA OPERATING AGREEMENT Exhibit A Community Benefit and Sustainable Business Practices Plan 1901 E. Warner, Suite A Santa Ana, CA 92705 Cannabis Testing (Type 8) OVERVIEW CB Labs has substantial experience working with community -based groups, including local school boards, Rotary clubs, and the Chamber of Commerce. Its CEO started a non-profit 501 c3 organization to benefit financially disadvantaged individuals and families and support the advancement of scientific cannabis research. We have preferences built into recruiting and hiring process to favor local individuals and businesses, as it is in the best interest of both our business and the community to have a staff that lives locally. We plan to give our employees paid time off in order to participate in local community service events and activities, and to actively encourage such participation. Our business is set up to minimize our carbon footprint. Our Standard Operating Procedures include taming off all lights when nobody is in the business, turning down hearing and air conditioning when the business is closed, and recycling waste materials when possible. We look forward to becoming a proactive partner and thriving member of the Santa Ana community. CB LABS SANTA ANA shall implement the following measures when it is ready to 1) hire local employees; 2) retain local contractors and suppliers; and 3) advertise on local sites, job fairs, agencies and organizations: Local Hire Program CB LABS SANTA ANA agrees to use reasonable efforts to hire qualified City of Santa Ana residents living in Santa Ana to work at its cannabis testing facility. Additional criteria evaluation will be given to local Santa Ana applicants. CB LABS SANTA ANA plans to let the City of Santa Ana review the hiring records should the need arise with the consent of the employee with all personal data being redacted. Recruitment Partnerships CB LABS SANTA ANA will make a good faith effort to advertise on various local social media sites, and through public agencies and organizations. CB LABS SANTA ANA anticipates joining the Santa Ana Chamber of Commerce to strength it's connection with other local employers, and further integrate into the fabric of the Santa Ana community. We look forward to potential pathway -to -employment, participation in job fairs, internship and training partnerships with Santa Ana College. Contractors and Suppliers CB LABS SANTA ANA will use reasonable efforts to retain services of qualified contractors and suppliers who are located in the City of Santa Ana. To the maximum extent possible, CB LABS SANTA ANA will seek to engage the following contractors that are based in the City of Santa Ana: 1. Architectural services 2. Branding services 3. Construction services 4. IT services 5. Maintenance and janitorial services 6. Financial services 7. Misc. professional services 8. Local goods and products Community Benefit Once CB LABS SANTA ANA is fully operational, we look forward to strengthening connections with the local community, including giving back to, and/or partnering with, community -based groups such as school districts, college districts, city and non-profit organizations. CB LABS SANTA ANA's CEO started a non-profit 5010 organization to benefit financially disadvantaged individuals and families and support the advancement of scientific cannabis research, this originations reach will include Santa Ana groups. Description of efforts for recruiting and hiring local persons and businesses Partnerships with Local Cannabis Businesses: CB LABS SANTA ANA anticipates joining the Santa Ana Cannabis Association and seek to partner with other local, compliant operators. CB LABS SANTA ANA looks forward to opportunities for collaboration with other licensed commercial operators in the City of Santa Ana. Charitable Giving and Volunteerism The company offers Volunteer Time Off (VTO) to allow employees to support activities that enhance and serve the community in which we live and work. All regular employees are eligible to participate in this program. Fulltime employees will be paid for up to 10 hours and part time employees up to 5 hours of time per calendar year to work with an approved 501C 3 charitable organization in accordance with the company's giving and volunteering guidelines The corresponding pages of our Employee Handbook outlining this policy or attached to this Exhibit. These efforts will be documented and available for review by written request from the City of Santa Ana with the permission of employee Sustainable Business Practices Plan Air Quality and Odor Mitigation CB LABS SANTA ANA is utilizing best available odor control technology including HVAC and industry standard filtration systems. This technology will effectively mitigate odor both inside the facility and prevent odor nuisance outside the facility CB LABS SANTA ANA 's mechanically or naturally ventilated spaces in buildings will meet the minimum requirements of Section 120.1 (Requirements for Ventilation) of the California Energy Code, or the applicable local code, whichever is more stringent. Renewable Energy CB LABS SANTA ANA will endeavor to utilize white light using state of the art LED lamps with full cutoff fixtures to limit glare whenever possible. Water Conservation Methods CB LABS SANTA ANA is proposing to conduct laboratory testing, which requires minimal water usage, compared to other commercial cannabis activities such as nursery, cultivation, or extraction/manufacturing. CB LABS SANTA ANA will maintain water conservation methods throughout its facility, as detailed below. Toilets CB LABS SANTA ANA will utilize low flush toilets whenever possible as a water conserving feature. The effective flush volume of all water closets shall not exceed 1.8 gallons per flush. Waste Management In the event that CB LABS SANTA ANA pursues construction or tenant improvements, the non- hazardous construction and demolition waste generated at the site will be diverted to an offsite recycle, diversion, or salvage facility whenever possible. CB LABS SANTA ANA while a tenant and part of the complex HOA, will strive to provide accessible areas that serve the location. the collection of non -hazardous materials for recycling, including (at a minimum) paper, corrugated cardboard, glass, plastics and organic waste. CB LABS SANTA ANA will use best practices when disposing of cannabis waste products all products shall be unrecognizable and unusable as cannabis at the time of disposal, as required by State regulations regarding appropriate cannabis waste disposals and controls. CB LABS SANTA ANA will contract with a licensed waste hauler to collect and process the cannabis waste. CB LABS SANTA ANA will maintain and make available to the Bureau of Cannabis Control and/or City of Santa Ana upon request, the business name, address, contact person, and contact phone number of the entity hauling waste; obtain documentation from the hauling entity for the subscription to the waste collection service; and maintain a copy of a certified weight ticket or receipt from the solid waste facility for each delivery of cannabis waste.