Loading...
HomeMy WebLinkAboutSADG GROUP LLCpFS' INSURANCE NOT ON FILE WORK MAY NOT PROCEED CLERK OF COUNCIL DATE: OPERATING AGREEMENT FOR NON -RETAIL COMMERCIAL CANNABIS BUSINESSES - VgA6(,4\< 0kE,)k 1<P&J1x,VA) 4�- p-2017-369-59 This Operating Agreement ("AGREEMENT') is dated December 13, 2021 , between the City of Santa Ana, a charter city and municipal corporation ("CITY") and -SADG GROUP 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, 2033 SOUTH HATHAWAY, 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. B. OPERATOR agrees to defend, at its sole expense, any action against CITY, its agents, officers, and employees related to this AGREEMENT. OPERATOR agrees to indemnify and reimburse CITY for any court costs and attorney fees that CITY may be required to pay as a result of any legal challenge related to this AGREEMENT and/or CITY's approval of a Regulatory Safety Permit. CITY may, at its sole discretion, participate at its own expense in the defense of any such action, but such participation shall not relieve the OPERATOR of its obligation hereunder. 7. OPERATOR Compliance with Laws. OPERATOR agrees to comply with the City of Santa Ana Charter and Municipal Code, including but not limited to Chapters 18, 21 and 40, and the laws and regulations of the State of California. 8. Default and Termination for Cause. This AGREEMENT may be terminated by CITY for cause with thirty (30) days' written notice to OPERATOR. Cause as used in this section, is defined as: A. Failure to comply with the terms of the City of Santa Ana Cannabis Regulatory Safety Permit issued to OPERATOR by CITY; B. Failure of OPERATOR to maintain a valid active City of Santa Ana Business License as the commercial cannabis business approved by the Regulatory Safety Permit and as operating; C. Failure of OPERATOR to comply with the requirements of the Community Benefits and Sustainable Business Practices Plan; D. Unauthorized transfer by OPERATOR of the City of Santa Ana cannabis business Regulatory Safety Permit issued by CITY; E. Failure by OPERATOR to accurately report gross receipts information or other data necessary for CITY to calculate/confirm operating agreement fees; F. Failure by OPERATOR to pay operating agreement fees and related reimbursement costs within thirty (30) days of the date those fees are due; G. Failure by OPERATOR to cooperate with CITY or CITY's authorized agents in any inspection, examination and audit of 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 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 $2,600 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 5 To OPERATOR: LUKE NGUYEN SADG GROUP LLC 2033 SOUTH HATHAWAY SANTA ANA, CA 92705 Tel (949) 299-8751 SADGGROUPLLC@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. 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. M 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 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. ATTEST: AISY GOMEZ Clerk of the Council APPROVED AS TO FORM: SONIA R. CARVALHO City Attorney By: 4- m;J;i� Jose Montoya Deputy City Attorney RECOMMENDED FOR APPROVAL: Minh Tha xecutive Director Planning & Building Agency CITY OF SANTA ANA KRIS ISf NE RIDGE City Manager OPERATOR LEGAL NAME: _SADG GROUP LLC SIGNATORY NAME: _LUKE NGUYEN TITLE: MANAGING MEMBER TAXPAYE ID: 85-1844328 Signatu COMMUNITY BENEFIT Local Hiring Commitment SADG Group LLC wants to assist in allowing the community to thrive and hiring from the community we serve is a great way to do that. Local hiring provides a host of other benefits to us, the employees directly, and the community indirectly. These include investments in the city's residents as people by providing them pay, benefits, skills, and a path out of poverty or debt. We will facilitate resources of larger discretionary income to spend in the local economy, which will increase city revenue through purchases, and lessen the need for city -provided services. SADG Group LLC intends to hire at least 90% of its staff from those that live in Santa Ana. Recruiting ads will only run locally to gather resumes from individuals in that area with a consumer experience background. (Indeed, advertisements are geo-centered to specific towns/local areas near the store location). We do not want to employ individuals that are not local to the store location where they work. Director of Retail will only approve new hires that live near the location. Our company policy is to promote from within each store's staff. Store managers are evaluated positively when they hire, train, and promote within that local specific store staff. In combination with these resources, we will use to attract local candidates, we will also be considering additional factors. For example, priority will be given to all applicants whose home address is in Santa Ana. 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 help candidates in their chances for hire. In the unlikely event that no qualified candidate from the city can be found for a specific job, we will incentivize anyone hired for such posts to move into Santa Ana via moving assistance subsidization and bonus. This incentive helps to meet three goals we have for SADG Group LLC 1) creating a sense of community among our employees so they feel more invested in our success; 2) easily building rapport with customers; and 3) shortening commutes for environmental and productivity reasons. As stated previously, we will source local financial planners and real estate agents to assist our employees in this process. Local Sourcing Commitments SADG Group will work hard to establish relationships with all types of cannabis businesses - cultivators, manufacturers, distributors, and retailers across Santa Ana. 1. Upon opening, sell products from the cannabis businesses based in Orange County, and to a lesser extent the Los Angeles County area, with the goal of using providers as close to Santa Ana as possible until we can turn to Santa Ana operators. 2. Distribute product lines that are dedicated to a variety of cannabis products produced in Santa Ana. We will direct customers to purchase Santa Ana -made products that meet their needs, and further drive sales for "Made in Santa Ana" brands. 3. Meet with Santa Ana cultivators about distributing their product. If contracts are agreed to from all vendors, we will be selling raw products from Santa Ana cultivators. 4. We will use a Santa Ana based testing lab for all our testing needs. 5. Meet with manufacturers across Orange County and discuss their integration of cannabis grown in Santa Ana as some or all the product they manufacture. In the garnishing of contracts with these manufacturers, the use of Santa Ana -grown cannabis will be a deciding factor in our selling of that manufacturer's product. Outside of working with local cannabis businesses, there are many other non -cannabis service and product providers in the surrounding area. We commit to utilizing these local businesses for all the product and service needs we have for the best operation of our business. Services that are of necessity for us are security guard services, alarm installation along with maintenance, delivery vehicles as well as their maintenance or repair, renovation, construction, banking services, and consulting. Plenty of options exist from businesses in Santa Ana to meet each one of these needs. We will exhaust all Santa Ana options before looking elsewhere - beginning in cities that surround Santa Ana, and then further outward as needed. Participation in Local Events SADG Group LLC will provide financial support to local charities and organizations. We will prioritize giving back to youth and family groups. We plan to make a number of financial donations to the following organizations: Santa Ana Public School Foundation, Santa Ana College, Girl Scout Troop 6357, and Kidworks OC. We will also support the work of local organizations who work to make Santa Ana a safer and more beautiful city. Com-Link is another organization we will work closely with. They are a group of leaders from the sixty neighborhood associations within Santa Ana. These neighborhood leaders partner with the city to address issues and to foster an exchange of ideas amongst the network. Aside from making financial contributions, we are eager to dedicate our time to these local groups. We plan to organize quarterly volunteer events with our staff. We are very excited to work with Southwest Community Center where we will work in the soup kitchen and distribute meals to the homeless. The Southwest Community Center provides food, clothing, shelter, guidance, health and referral services to economically disadvantaged individuals and families. During Christmas season, we will also work with them to shop for donations they will be in need of to make the holidays special for the families that come for their services. Charitable giving will always remain the foundation of SADG Group's business plan. In the coming years, we will continue to support local non -profits, organizations, and community associations that benefit the city and residents. Sustainable Busines Practices SADG Group LLC will manage its operations with internal governance policies, which will require energy efficiency and environmentally sound infrastructure and procedures. The State of California and many of its localities have stated legal requirements regarding energy and water use, and we will not only be adhering to those regulations but shall utilize as many environmentally sound practices as possible. These practices include using drought- friendly landscaping features, energy -efficient LED lighting with timers and motion detectors for all outside areas. Inside our facility, indoor lighting shall be controlled by motion detectors and timers in low - traffic areas. Our water fixtures will all be low -flow and help us observe and maintain the desired water conservation guidelines set forth by the City of Santa Ana. Our parking lot, exterior lighting, and building facility will all be augmented by a fully integrated solar power system because the location is an ideal candidate for the installation of solar power. We wil utilize a Santa Ana -based solar installation contractor for this project in keeping with our commitment to the local community. Our Standard of Procedures will guarantee that our waste is sorted to the standards set forth by the City and Waste Management Services. We will be actively sorting our standard waste from our mixed recyclables and other debris. We will also be incentivizing carpools and mass transit as ways for our employees to travel to and from work, minimizing our overall carbon footprint. We will participate in LEED-compliant practices to meet certification requirements, ensuring that we have the most energy -efficient facilities in the cities in which we operate. To be even more sustainable, we will use recycled and renewable materials in our renovation. SADG Group LLC will be using items like bamboo, wood, recycled steel, and precast concrete. The list of these construction materials will come from California's Green Building Standards list (CALGreen). In addition, we will be using vendors who specialize in sourcing other environmentally friendly materials for finishing this project. These are a few of the proven practices we will use, which will show to reduce our energy and water footprint. We are confident these practices will be effective and closely monitor our environmental impact through quarterly reviews by management specific to our consumption, waste, and overall impact on our shared community.