Cudahy City Council
June 4, 2024

Under Section 14 of the development agreement, the operators gave the City notice of its “default” and “breach” of the agreements, specifying “the nature of the alleged default and the manner in which said default may be satisfactorily cured.” (Dev. Agmt. § 14(a)). The City’s “failure” to cure within 30 days “shall constitute a default.” (Id.) “After notice and expiration” of the 30 days to cure, the cannabis operators “may institute legal proceedings.” (Id.) We made every effort to give the City detailed notice to cure. Having been rebuffed by the City with its silence, we will proceed with litigation. We also provided a detailed demand for damages. (Gov. Code §§ 905, 945.4). We view the City’s silence to our 36-page Notice to cure and the City manager's February 1, 2024 letter as a rejection of our damage claims. We will accordingly proceed with litigation.

This week, we will file a complaint against the City in state court seeking $26.4 million in damages for breach of the development agreements. The state lawsuit will also seek damages for the City’s failure to comply with the cannabis operators’ rights to bond the illegal fees and proceed under protest. The state lawsuit will also seek to invalidate the operating fees as an illegal tax and illegal impact fees (Notice at pgs. 21-23). The state lawsuit will also seek damages for civil rights violations of the cannabis operators’ rights to due process and equal protection. Lastly, we will seek injunctive relief to stop the retaliation identified in the 36-page Notice and repeated in the recent letter on February 1, 2024.

Besides the state lawsuit against the City, we will file a federal lawsuit seeking civil RICO damages of $26.4 million (trebled to $79.2 million) against city manager Alfonso Noyola, vice mayor Elizabeth Alcantar, councilmembers Daisy Lomeli, Martin Fuentes, and Cynthia Gonzalez, finance director Joshua Calhoun, senior planner Cecilia Madrigal-Gonzalez, and building official Raul Diaz.

On February 1, 2024, the City manager informed us he intended to proceed with the retaliation, even after all the violations were identified in great detail. Instead of reaching out to resolve the apparent breaches and damages to the cannabis operators, who have been waiting 68 months to open after spending $10 million, the City, its officials, and employees have decided to continue retaliating. We have complied with all the efforts to cure and provided detailed notice of our demand for damages (Gov. Code §§ 905, 945.4) and to proceed under protest by posting a bond of the Illegal fees (Gov. Code § 66020).

February 5, 2024 Notice Letter to City on Failure to Cure and Upcoming Litigation . . . . . . . . . . . . . . . . . PAGE 5

Our efforts to have the City cure its numerous breaches have been unsuccessful. After 68 months, the city, its officials, and its employees have refused to allow the cannabis operators to open. We will file two lawsuits this week for damages and to force the City to comply with its contractual promises in the development agreements.

Respectfully submitted,
LAW OFFICE OF SEBASTIAN RUCCI, P.C.

Sebastian Rucci
cc: cannabis operators
February 5, 2024 Notice Letter to City on Failure to Cure and Upcoming Litigation . . . . . . . . . . . . . . . . . PAGE 6

Attachment M

Attachment NPage 1028 of 4584

Attachment OPage 1039 of 4584

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STAFF REPORT
Date: June 4, 2024
To: Honorable Mayor/Chair and City Council/Agency Members From: Alfonso Noyola, City Manager
By: Juan Arauz, AICP, Community Development Director
Subject: Introduction and adoption by first reading of Ordinance No. 747 Repealing Ordinance No. 678 terminating Development Agreement No. 18-016C, between the City of Cudahy and Genius Distribution, LLC

RECOMMENDATION
City staff recommends that the City Council take the following action(s):

1. Open public hearing and receive comments and testimony; and

2. Make a determination that Genius Distribution, LLC (“Operator”) is not in compliance with the terms and conditions of its Development Agreement (“DA”) No. 18-016C and find that the Operator is in default of contractual obligations set forth in the DA; and

3. Introduce and adopt by first reading Ordinance No. 747 (Attachment A) repealing Ordinance No. 678 terminating DA No. 18-016C, between the City of Cudahy and Genius Distribution, LLC; and

4. Determine that these actions are exempt from the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines Section 15321 (Enforcement Actions by Regulatory Agencies).

SUMMARY
Pursuant to the terms and conditions of DA No. 18-016C and CCP No. 18-0019, it is the City’s purpose and intent to regulate cannabis activities within the City in a responsible manner to protect the health, safety, and welfare of the residents of Cudahy and to enforce rules and regulations consistent with California’s Cannabis laws. Cannabis operators with development agreements are obligated to comply with all provisions of the Cudahy Municipal Code (“CMC”), obligations of the DA, and conditions of approval under the CCP, and applicable state and local Item Number
13B

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laws and related regulations. This report provides a summary of the unrefuted evidence offered at an administrative review hearing; a decision by a third-party hearing officer (“Hearing Officer”) on November 14, 2023 finding the Operator in default of the DA and out of compliance with the CCP; the public hearing by the Planning Commission , determining that the Operator has failed to comply with the terms and conditions of its DA, despite being provided with ample notice and several opportunities to achieve compliance, thereby recommending to the City Council that it repeal Ordinance No. 678 and DA No. 18-016C through the adoption of Planning Commission Resolution No. 2024. Therefore, City staff recommends the City Council adopt Ordinance No. 747 repealing Ordinance No. 678 terminating DA18-016C.

BACKGROUND

1. On September 11, 2017, the City adopted Ordinance No. 673 (Attachment B) establishing the City’s commercial cannabis production activity regulations codified in Chapter 5.20 of the Cudahy Municipal Code (“CMC”). CMC Section 5.20.040 authorizes medicinal commercial cannabis activities within a designated overlay zone, pursuant to a development agreement adopted in accordance with the Development Agreement Law (Govt. Code Section 65864 et seq.) and Chapter 20.28 of the CMC.

2. On April 30, 2018, the Planning Commission recommended approval of CCP No. 18-0019 for cannabis distribution at 4916 Cecilia Street, as illustrated in Figure 1 below, subject to the execution of a development agreement between the City and the Operator for cannabis distribution. The Operator is one of seven tenants at the Site which all have separate Development Agreements with the City but share an interest in CCP No. 18-0019 and are subject to the same conditions of approval. As discussed in further detail below, the conditions of approval of CCP No. 18-0019 require the Operator to make timely payments of the fees due under the Development Agreement.

Figure 1 – Aerial of the Site.

3. On May 15, 2018, the City Council adopted Resolution No. 18-17 (Attachment C) approving the issuance of CCP No. 18-0019 with conditions of approval to the Operator, 4916 Cecilia

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subject to the execution of a development agreement with the City.

4. On June 5, 2018, the City Council adopted Ordinance No. 678 (Attachment D) approving Development Agreement No. 18-016C by and between the Operator and the City authorizing commercial cannabis distribution activities at the Site as illustrated in Figure 2, below. The DA requires the Operator to make timely payments for Community Benefit Fees; Cost Recovery Fees; and Non-Operating Fees.1
Figure 2 – Floor Plan

5. On October 2, 2019, the City provided the Operator with a Notice of Delinquency (Attachment F – pg. 180) due to failure to pay the various fees due under CCP 18-0019 and DA No. 18-016C, prior to placing the Operator in default status due to payment noncompliance with the DA, inclusive of the non-payment of Community Benefit Fees, Cost Recovery Fees, and Non-Operating Fees in the amount of Eight thousand eight hundred ninety-one dollars and seventy-six cents ($8,891.76). The Operator was given no later than October 17, 2019, to cure the amount, however the delinquency was not timely cured.

6. On May 4, 2021, the City provided the Operator with a Notice of Default (Attachment F – pgs. 182-183) due to non-compliance with the payment of fees and associated penalties in the amount of Forty-one thousand four hundred sixty-eight dollars and thirty-five cents ($41,468.35). The Operator was given no later than 30 days to cure the default, however, the default was not timely cured.

7. On September 2, 2021, the City notified the Operator of their failure to sign the DA (Attachment F – pgs. 185). The DA was signed January 19, 2023.

8. On December 7, 2022, the City Manager offered a Cannabis Deferment and Payment 1 As used herein, the term Non-Operating Fees and Operating Fees are used interchangeably.

Unit D
4916 Cecilia

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Program (Attachment F – pgs. 187-188) to assist cannabis Operators with accumulated Community Benefits, Cost Recovery and Non-Operating Fees by deferring and providing additional time for payment without penalty. Under the program:
a. Unpaid Non-Operating Fees would be deferred (without penalty) until six (6) months after the Operator was issued a Certificate of Occupancy, and then repay already accumulated Non-Operating Fees within twelve (12) months; and b. Operators would continue to be responsible for the timely payment of Community Benefit Fees and Cost Recovery Fees, as they accumulated; and c. Previously incurred Community Benefit Fees and Cost Recovery Fees would be subject to a payment plan and require timely payments.

All cannabis operators that were interested in participating in the program were given no later than January 31, 2023, to execute an agreement to participate in the Deferment and Payment Program. The City received interest from the Operator and due to the good faith negotiations between both parties, the City extended the opportunity for the Operator to participate.

9. On February 1, 2023, the City’s Finance Department presented the Operator with a Letter Agreement agreeing to the Deferment and Payment Program to forbear the outstanding payments due (“Letter Agreement”) (Attachment F – pgs. 190-196). The Operator accepted the proposed terms and executed the Letter Agreement on February 2, 2023, and agreed to commence payments on March 1, 2023. The Operator also acknowledged and agreed “that the past due amounts stated [in the Letter Agreement] are true and correct and are in fact presently due and owing. The parties agree that the Operator is in ‘default status’ on its obligations under its Development Agreement with the City.”

10. Between April and June 2023, the City provided the Operator with three Notices of Delinquency (Attachment F – pgs. 198-212) and provided an opportunity for the Operator to cure outstanding payments due. However, the default on the Letter Agreement was not timely cured and therefore was terminated and no longer in full force and effect as of June 16, 2023. Accordingly, the total of all past due amounts at the time the Letter Agreement was terminated and an amount of One hundred thirty-two thousand forty-six dollars and seventy-nine cents ($132,046.79) was due and owed.

11. On June 23, 2023, the City sent a Final Demand Letter (Attachment E) demanding the Operator to respond to the following demands: 1) Proof of revival of the LLC’s entity status with the State; 2) Forwarding payment for all past due amounts; and 3) Contact the City to revise the CCP’s Schedule of Performance and for further information to become compliant with the DA and CCP. The Operator did not respond in a timely manner and has failed to make any attempt to cure the defaults.

12. On August 9, 2023, the City issued an Escrow Account Letter (Attachment F – pgs. 218- 219) requiring all cannabis operators to open an escrow account by September 15, 2023,

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to ensure payment of Cost Recovery Fees. As of the writing of this report, the Operator has not opened an escrow account nor made any payments into the account.

13. On October 12, 2023, the City issued the Operator a Notice of Review Hearing (Attachment F – pgs. 221-222) with the hearing date, time, and place. The Notice of Review Hearing requested the Operator to contact staff to confirm appearance at the Review Hearing and advised the Operator to respond within ten days of the date of the letter to confirm appearance Review Hearing or otherwise waive the right to present evidence at the hearing (Attachment I). The notice also informed the Operator that it was responsible for the cost of the Review Hearing and requested the Operator to deliver a cashier’s check three days prior to the scheduled hearing or would otherwise constitute further default on the DA. The City did not receive a timely response from the Operator nor payment for the cost of the Review Hearing.

14. On October 24, 2023, the City issued a letter (Attachment F – pgs. 224-225) updating the Operator on their payment and fees related to the DA by correcting the amount due to an error in the total amount billed. The City provided a credit in the amount of Fourteen thousand nine hundred fifty dollars and fifty cents ($14,950.50).

15. As of October 24, 2023, Operator owed the City One hundred thirty thousand six hundred eleven dollars and seventy-four cents ($130,611.74). Operator has continued to fail to make payments and as of the writing of this report owes One hundred fifty thousand eight hundred fifty-one dollars and sixty-seven cents. ($150,851.67). Community Benefit Fees, Cost-Recovery and Non-Operating Fees plus penalties continue to accrue and the total amount due may be higher as of the date of this staff report.

16. On November 2, 2023, the City sent a follow up notice to the Notice of Review to the Operator confirming that it had not received any communication from the Operator confirming attendance at the Review Hearing and that the ability to present before the hearing officer had been waived (Attachment G). The City did not receive a timely response from the Operator.

17. On November 14, 2023, the duly appointed third-party Hearing Officer, Steve Napolitano, conducted a Review Hearing as authorized under the CMC Section 5.20.080(7) and Article 19 of the DA No. 18-016C to hear and consider information and evidence submitted by City staff through an Administrative Record (Attachment F) and the Operator. No representation from the Operator was present at the hearing nor did the Operatorsubmit any information or evidence for consideration.

18. On January 14, 2024, the Hearing Officer issued a written decision and order (Attachment H) finding evidence showing the Operator, despite considerable notice and opportunities to cure outstanding issues, has breached the terms and conditions of the DA and CCP and recommends the Planning Commission and City Council repeal Ordinance No. 678 terminating DA No. 18-016C and revoke the related interest in CCP No. 18-0019.

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19. Approximately two months after the Review Hearing, on January 6, 2024, an attorney who appears to represent the Operator submitted a letter to the City alleging the City was in default with the terms of DA No. 18-016C (“Notice to Cure Breach”) (Attachment I).

The Notice to Cure Breach alleged the City had breached DA No. 18-016C by (a) failing to waive fees pursuant to the Article 23.i of the DA (Force Majeure); (b) failing to “expedite” approvals and by seeking fees for delays allegedly caused by the City; (c) requiring the Operator to pay Non-Operating Fees as required by the DA; (d) implementing fees that violate The Mitigation Fee Act (Govt. Code § 65864-65869.5); and (e) failing to conduct an annual hearing to determine compliance with the DA No. 18-016C. The Notice to Cure Breach also alleged the City was liable under the Civil RICO statute. The Operator demanded that the City (i) waive all accumulated Non-Operating Fees for a period of 15 months; (ii) “waive all fees during any delays caused by the City[;]” (iii) “waive all fees when the City was in default under the agreements[;]” (iv) issue certificate of occupancy to the Operator; (v) halt the hearing process before the third-party Hearing Officer; and (vi) expedite the processing of all permit applications.

20. On January 8, 2024, the City received a request to submit the Notice to Cure Breach into the administrative record for the hearing that took place on November 14, 2023 (Attachment J).

21. On March 18, 2024, pursuant to State law and the CMC, the Planning Commission held a duly noticed public hearing to consider the Hearing Officer’s recommendation to repeal Ordinance No. 678 and terminate DA No. 18-016C. Hours before the hearing, the attorney representing the Operator requested that a comment letter be submitted into the record for the May 18 Planning Commission hearing (Attachment K).2 The Planning Commission considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents. No representation from the Operator was present at the hearing. After closing public hearing, the Planning Commission adopted Resolution No. 2024-04 (Attachment L), recommending the City Council repeal Ordinance No. 678 and terminate related DA No. 18-016C.

DISCUSSION/ANALYSIS
During a review of the Operator’s compliance with the Development Agreement, the burden is upon the Operator to demonstrate good faith compliance with the terms of the Development Agreement under Article 19. Pursuant to Government Code Section 65868.1 and Articles 19 and 19.d of the Development Agreement, if the City Council determines, based on substantial evidence, that the Operator has not complied in good faith with the terms of the conditions of the DA, the City Council may terminate the DA, or alternatively may choose to modify and impose conditions reasonably necessary to protect the interests of the City. 2 The City assumes that the request to add the letter to the May 18 Planning Commission hearing was a typo and was intended to be submitted into the record for the March 18, 2024 Planning Commission hearing. The City accepted the letter as a public comment into the record. All Planning Commissioners and City Council members were also addressed in the communication.

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Conversely, if the Operator is found to be in compliance with the DA, the Operator may request the City to issue a Certificate of Compliance pursuant to Article 19.e. Any decision to terminate a development agreement must be reviewed by the Planning Commission prior to review by the City Council. Gov. Code § 65867 Under Article 19.d, the decision to terminate a development agreement by the City Council is final.

As it relates to the CCP, pursuant to the CMC Sections 5.20.080(6) and 5.20.080(7), any material violations of Chapter 5.20, any other relevant city law or state law, condition of approval, or any other required agreement or covenant, such as a development agreement, by a cannabis permittee, or cannabis permittee’s agent, is grounds for suspending or revoking the relevant cannabis permit. The decision to suspend or revoke a commercial cannabis permit is with the City Manager or his designee. Furthermore, pursuant to CMC Section 5.20.080, any decision regarding the suspension or revocation may be appealed to the City Council.

The City has appointed a third-party hearing officer to conduct a review of the Operator’s compliance with CCP No. 18-0019 and DA No. 18-016C. The findings and determinations made by the Hearing Officer inform any subsequent action to terminate or modify the Development Agreement and suspension or revocation of the CCP. As stated above, and further described in Attachment H the Hearing Officer issued a written decision making several findings of fact and conclusions and determined that Genius Distribution, LLC breached the terms and conditions pursuant to DA No. 18-016C and CCP No. 18-0019, based on a preponderance of the evidence, in the following material aspects:

1. Violation #1: Breach of Payment Obligations. Pursuant to the terms of the DA, the Operator is responsible for timely payment of Community Benefit Fees (Article 5.b); Cost Recovery Fees (Article 8); and Operating Fees (Article 7.c). The Operator is also obligated to pay the fees due under the DA pursuant to CCP Condition of Approval No. 45; and timely payment for Non-Operating Fees pursuant to Condition of Approval No. 13 (Attachment F pgs. 54-69). Conditions of Approval 1(a) and 1(b) require the Operator to pay all City-issued invoices within 30 days of receipt. Pursuant to the terms of the DA, Operators that are more than 30 days past due on operating fees are subject to a penalty equal to twenty-five percent (25%). In addition, a ten percent (10%) penalty shall be added to the first day of each calendar month following the imposition of the initial 25% penalty, if the fee remains unpaid in whole or in part, up to a maximum of the one hundred percent (100%) of the payable fee. The conditions of approval for CCP No. 18- 0019 are incorporated into the DA through Article 18 and require the Owner to comply with all conditions contained therein (Attachment F – pgs. 77-119). The City offered the Operator relief in the form of the Cannabis Deferment and Payment Program. The City executed a Letter Agreement to grant the Operator relief in the form of deferred payment obligations of the Operating Fees and a payment schedule for past-due Community Benefit Fees and Cost Recovery Fees; and an obligation to remain current on recurring fees under the DA. The Operator did not make any timely payments in the three months that followed the execution of the Letter Agreement between March to May 2023.

As of October 24, 2023, the City reported that the Operator is past due in the amount of One

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hundred thirty thousand six hundred eleven dollars and seventy-four cents ($130,611.74) and past-due payments continue to accumulate, including late payment penalties. As of the writing of this report, the Operator now owes the City $150,851.67.

Table 1. Summary of Past and Current Amounts Due as of May 14, 2024 Type ment Amount Due
munity Benefit Program 381.27
Recovery Fees 977.58
-Operating Fees 105.04
alties (Late Payments) 87.78
AL 0,851.67
Based on the evidence submitted by the City, the Hearing Officer found that “based on the unrefuted evidence presented by the City...a preponderance of the evidence shows that [Operator] breached multiple conditions of the DA and CCP. Despite multiple attempts and notices by the City to gain compliance, the evidence shows that [Operator] failed to comply with their payment obligations, which constitutes the necessary grounds for termination of the DA and revocation of the CCP under the CMC” (Attachment H). The Hearing Officer’s determination was ratified by the Planning Commission through the adoption of Resolution No. 2024-04 which recommends that the City Council find that Operator is in default of the terms set forth in DA No. 18-016C and repeal Ordinance No. 678 and terminate the related DA.

2. Violation #2: Failure to comply with state law - Suspended Status with the Secretary of State (SOS) and Franchise Tax Board (FTB). Pursuant to Article 4.a of the DA, the Operator must be a lawful entity capable of operating in accordance with state laws. A Certificate of Status dated October 31, 2023, states: “The above-referenced entity’s powers, rights, and privileges are suspended in California. As of the date of the Review Hearing on November 14, 2023, the Operator’s entity status was “FTB/SOS Suspended.” The Hearing Officer further determined “[a]ccording to the California Franchise Tax Board website, a suspended entity cannot do business in California until they cure the reason for their suspension, which is supported by Rev. and Tax Code Sec. 23303 and case law cited by the City: Casiopea Bovet, LLC v. Chiang (2017) 12 Cal.App.5th 656, 662; City of San Diego v. San Diegan for Open Government (2016) 3 Cal.App.5th 568, 577” (Attachment H).

Despite notice of default and opportunity to cure, the Operator’s status remained “suspended” at the time of the Review Hearing. Non-compliance with state law due to the Operator's legal status as a California limited liability is suspended by the State’s Secretary of State, as such, the Operator is unable to operate in the State of California.

3. Violation #3: Failure to Implement the Project Under Prescribed Time Limits. CCP Condition of Approval No. 51.A set a 90-day time frame in which the Operator must complete construction of Phase I of the Project. The 90-day period began following the 15-day appeal period from the date of the CCP approval, or June 20, 2018, meaning the

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Operator needed to complete Phase I by September 18, 2018. CCP Condition of Approval

51.A.iii sets a 180-day time limitation from the effective date of the CCP to complete all tenant improvements, construction, and obtain a certificate of occupancy from the Building Department, or December 17, 2018. The Operator was given a notice of default and opportunity to cure pursuant to the City’s Final Demand Letter to the Operator (Attachment E), with no response from the Operator. The Operator has failed to provide any evidence that it has obtained a Zoning Clearance, completed construction of Phase I, or completed the tenant improvements, obtained a certificate of occupancy, or otherwise complete Phase II within the prescribed time periods. Nor does the City have any record of any request by the Operator for an extension of time to the City Manager and there is no evidence to demonstrate the Operator has made substantial progress, such as submitting an application for a Zoning Clearance or building permit plan check.

Allegations of Default on Behalf of the City:

As an initial matter, the Notice to Cure Breach offered as evidence to demonstrate compliance with the DA and CCP was untimely submitted, nor does it actually offer evidence of Operator’s compliance with the CCP and DA. The request was made nearly two months after the Review Hearing that took place on November 14, 2023, after providing the Operator with multiple notices, and need not be considered. However, the City shall respond to the allegations made by the Operator’s representative which are largely unsupported by the evidence, the law, or both.

1. Operator is not Excused for Performance Pursuant to Force Majeure. The DA provides a Force Majeure clause at Article 23.i, which applies to unforeseen events that include “war, insurrection, acts of God, local, state or national emergencies, strikes and other labor difficulties beyond the party’s control, or any default by the City hereunder, which Force Majeure event substantially interferes with the development, construction or operation of the Project” (emphasis added).

Operator has failed to make a substantiated showing that the circumstances of Force Majeure were present during the time of default. The City provided the Operator with the first notice that it was in breach of the DA and CCP, approximately five months prior to the Governor’s issuance of Executive Order N-22-20 (Attachment M). The Operator was provided 30 days to cure the default pursuant to Article 14.a of the DA (Attachment F – pgs. 77-119). During this time, Operator did not cure the default, nor take diligent efforts to cure the default. City issued a subsequent notice to Operator on May 4, 2021 (Attachment F – pgs. 182-183) – during the unsupported allegation of the City’s closure.

Further, City Hall was not closed for a 15-month period. During the height of the pandemic, City Hall’s physical premises were closed to the public, however, the City continued to conduct business, and process requests, including applications for building permits which could be dropped off at the front of City Hall. Additionally, both commercial cannabis activities, inclusive of cannabis manufacturing, and commercial construction were permitted by the authority granted to the State Public Health Officer pursuant to Executive Order N-33-20 (Attachment M). The State permitted cannabis activities and

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construction to continue through the height of the pandemic and operators were able to continue processing applications, such as building permits, during this time.

The Notice to Cure Breach alleges that the Operator has invested $10 million from the onset of the COVID-19 pandemic to present day but has not provided any evidence to substantiate this point. However, if the Operator was prohibited from engaging in activities that would have allowed them to pursue the operation of a cannabis business, it is unclear how the Operator could have been prohibited from investing $10 million into the Project and been prohibited from moving forward with implementation of the Project at the same time.

Even assuming arguendo that there was an event of Force Majeure, Article 23.i3 does not excuse performance, but only provides the Owner with an extension of time. There is no excusal of performance under Force Majeure nor does Article 23.i grant the City the ability to waive fees. Any allegation that City “agreed” not to charge fees during the COVID-19 pandemic or other delays are unsupported by any evidence in the administrative record.

The Operator acknowledged all fees, inclusive of Cost-Recovery Fees, Community Benefit Fees, and Non-Operating Fees accrued upon signing a Letter Agreement with the City on February 2, 2023, in which the Operator acknowledged and agreed “that the past due amounts stated are true and correct and are in fact presently due and owing. The parties agree that the Operator is in ‘default status’ on its obligations under the Development Agreement with the City…[and would] remain in ‘default status’ on its Development Agreement until all past due fees set forth in [the] Letter Agreement have been paid and Operator is in full compliance with all terms of its Development Agreement” (Attachment F – pgs. 190-196).

2. Operator Has Failed to Demonstrate How the City has Failed to Expedite Approvals. The Notice to Cure Breach asserts the City has delayed in approving certain plans, however the City has no record of the Operators attempt to apply for and obtain a Zoning Clearance or implement the multiple phases of the Project as described in Violation #3, above.

Operator failed to offer any evidence that it complied with the timelines and requirements set forth in the CCP and DA. Further, as stated above, the Operator has been in default since 2019. Despite this, the City provided a pathway to achieve compliance with multiple defaults, including the schedule of performance, which the Operator did not timely attempt to cure any default.

Any allegation by the Operator that the City’s duty to review building plans was limited by the annual review process under Article 19 of the Development Agreement is unfounded and expressly contradicted in the DA terms. It’s unclear why the Operator is under the impression that its Project would be constructed and operated without any 3 In full, Article 23.i states “If delays are caused by unforeseen events beyond the control of Owner, such delays will entitle Owner to an extension of time as provided in this section. Such unforeseen events (‘Force Majeure’) shall mean war, insurrection, acts of God, local, state or national emergencies, strikes and other labor difficulties beyond the party’s control, or any default by the City hereunder, which Force Majeure event substantially interferes with the development, construction or operation of the Project.”

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review of permit applications, etc., other than the reviews contemplated under Section 19 of the Development Agreement and is contrary to law. CMC Section 15.04.010 requires all development projects to comply with the Los Angeles Building Code requirements. Title 15 of the CMC also requires projects to comply with Los Angeles County’s Electrical Code requirements (Chapter 15.08), Plumbing Code requirements (Chapter 15.12), and Mechanical Code (Chapter 15.16). Providing comments to ensure that a project applicant complies with such state and local requirements does not constitute a delay on the City’s part, but enforcement of the Operator’s requirement to comply with state, local and federal regulations. At no time does the Notice allege the City refused to accept or review plans or other submissions by the Operator. If anything, this assertion cuts against Operator’s own argument and would result in further delays for the Operator to implement the Project.

3. There is No Evidence in the Administrative Record to Support a Finding that the City Did Not Intend for the Non-Operating Fees Not to Apply. To support the notion that NonOperating Fees would not apply the Operator’s representative submitted statements by a former councilmember who now acts as a consultant to many of the defaulting operators and other persons affiliated with the Operator.4 Any assertion that Non-Operating Fees were not intended to apply are directly contradicted by language in Article 7.c(1) which states the Operator shall be charged a “monthly operating fee of [.42 x total square foot of the ’Premises‘] until Owner is operating on the Premises and selling product under its City Regulatory Permit and State Regulatory Permit. Once Owner is operational and generating revenue, the monthly operating fee is [.42 x total square foot of ’Production Space‘] or a monthly operating fee based on gross receipts. DA Article 7.c(i) (emphasis added). The Development Agreement further provides that “Operating Fees shall begin to accrue ninety (90) days after the end of the month of the Effective Date of the Agreement.” Id. The language provided in the Development Agreement plainly states a formula that applies for Operating Fees for when the Operator is operating based on square footage or gross receipts or a formula based on square footage when the Operator is not operating or in “non-operation.” To argue that there is no such thing as Non-Operating Fees merely because those exact words is a matter of semantics. Further, there is no language in the DA language that discusses or implies the intent for such fees to apply only to operators who “squat” on licenses as represented in a declaration submitted by the consultant.

Failure to pay such fees are out of compliance with Conditions of Approval Nos. 1(a) and (b), requiring payment of all City-issued invoices within thirty days of receipt (Attachment F- pgs. 54-69). Non-payment of Non-Operating Fees is also in violation of Conditions of Approval 13, 21, 37, and 45.
4 The Operator’s attorney offered a statement by Daffodil Tyminski that was submitted to the City pursuant to Evidence Code Section 1152 and 1154, which protects the confidentiality of statements made during settlement or negotiation discussions. Based on this submitted statement it appears that the Operator has waived that privilege afforded by those previous statements.

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4. The Assertion that Non-Operating Fees are Illegal Impact Fees is Not Supported by the Law. Non-Operating Fees are a part of the Development Agreement entered into between the City and the Operator and was enacted via ordinance pursuant to Development Agreement Law (Govt. Code §§ 65864-65869.5). Fees imposed by development agreements are expressly exempt from the Mitigation Fee Act. (Govt. Code § 66000(b) (“’Fee’ means a monetary exaction other than a tax or special assessment…but does not include…fees collected under development agreements adopted pursuant to Article 2.5 (commencing with Section 65864) of Chapter 4…”).) Therefore, the fees agreed to by the Operator through the execution of the DA and subsequent Letter Agreement are not subject to the Mitigation Fee Act.

Even if the Mitigation Fee Act was applicable to the past due fees, to properly contest, the Non-Operating Fees, the Operator would have been required to tender the required payment in full and serve written notice to the City that informs the City that payment has been tendered under protest accompanied by a statement of facts. (Govt. Code § 66020(a).) However, such protests must be filed at the time of the approval of the development or within ninety (90) days of the imposition of fees. The City and Operator entered into the Development Agreement on June 5, 2018. The 90-day statute of limitations to protest such fees ended on September 3, 2023, and Operator has not tendered payment in full as required by Government Code Section 66020(a). Therefore, any opportunity to protest under the Mitigation Fee Act has long since passed.

Further, as stated above, Operator does not contest that it previously acknowledged that all of the fees due, inclusive of Non-Operating Fees, were presently due and owing at the time it signed a Letter Agreement.

5. There is No Requirement to Perform an Annual Review. Operator points to CMC Section

20.84.600 and Government Code Section 65865.1 to assert the City is in breach of the Development Agreement by failing to conduct a periodic review of the Operator’s compliance with the Development Agreement. However, Operator’s assertion is directly contradicted by the express language in the Development Agreement. Article 19.f of the Development Agreement expressly provides that “City’s failure to conduct a periodic review of this Agreement shall not constitute a breach of this Agreement.” Nor does the City have any record of the Operator requesting an annual review to demonstrate compliance with the DA or CCP.

6. The City Has Not Breached the Ability for the City Council to Make a Final Determination on the Operator’s Compliance with the Development Agreement and Whether to Modify or Terminate the DA, or Otherwise Find the Operator in Compliance. The plain language in Article 19.d of the Development Agreement provides that “[a]t the time and place set for the Review Hearing, Owner shall be given an opportunity to be heard. If City Council finds, based upon substantial evidence, that Owner has not complied in good faith with the terms or conditions of this Agreement, City Council may terminate this Agreement notwithstanding any other provision of this Agreement to the contrary, or modify this Agreement and impose such conditions as are reasonably necessary to protect the

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interests of the City.” The City has retained a third-party hearing officer for the purpose of hearing the evidence and making a recommendation to the City Manager, Planning Commission and City Council to “adopt an ordinance repealing Ordinance No. 678 and terminate Development Agreement No. 18-016C and revoke Operator’s interest under CCP18-0019 (Attachment H)”. The Operator has been provided an opportunity to be heard at the administrative hearing conducted by a third-party hearing officer, whose findings and determinations were sent to the Planning Commission and now City Council.

No one has denied the Operator the opportunity to be “heard” before the City Council, but the Operator ignores the procedural requirements that require the repeal of an ordinance to terminate a development agreement, which includes a process by which the Operator may address the Planning Commission as well as the City Council.

Further, there is nothing in Article 19.d or the CMC that prohibits the City from appointing a third-party hearing officer from conducting the initial hearing and forwarding findings to City decisionmakers for the purpose of determining whether to take any action to modify or terminate the Development Agreement or Commercial Cannabis Permitso long as the City Council’s determination and actions are supported by substantial evidence. All such findings and recommendations made by the hearing officer shall be forwarded to the appropriate decisionmakers for final disposition. The City has provided Operator with more than 30 days’ notice of the November 14, 2023 hearing, requesting Operator to provide evidence of compliance at least 10 days prior to the hearing (Attachment F – pgs. 221-222). The Operator provided no response. The City sent a follow up communication informing Operator that it did not submit any documentation and has waived its rights at the Review Hearing (Attachment G). Operator instead submitted a Notice to Cure Breach approximately two months afterthe Review Hearing alleging the City is in default of DA18- 016C. Pursuant to Article 14.d of DA18-016C, Operator’s remedies for a default are limited to a termination of the Development Agreement.

CMC Section 5.20.080(6)(a) permits the City Manager to revoke an operator’s interest in a CCP upon a determination “that the cannabis permittee has failed to comply with [Chapter 5.20], any condition of approval, or any agreement or covenant as required pursuant to this chapter.” The City Manager’s decision to revoke the operator’s interest in a CCP may be appealed to a third-party hearing officer or to the City Council. CMC §

5.20.080(7). As determined by the Hearing Officer, there is a preponderance of evidence to support a finding that the Operator is out of compliance with the DA and CCP.

7. Operator’s Assertion for Damages under the Development Agreement are Improper.

Even if the City were in default of the DA, which it is not, the Operator’s remedies are limited under the DA. Pursuant to Articles 14.a and 14.b of the DA, the Operator may only seek monetary damages if there is a showing of “bad faith intentional acts [or] the grossly negligent or malicious acts of City and its officials, officers, agents and employees.” Pursuant to Article 14.d of the DA, even if the City were in default, which it is not, the Operator’s remedies would otherwise be limited to a cancellation of the Development Agreement after providing a 60-day notice of default. Operator’s notice did not provide

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60-day notice, but 30-day notice.

Based on the evidence provided by the City, which was unrefuted, the Hearing Officer found that the Operator “has breached the terms and conditions of DA 18-016C and [Operator’s] portion of its CCP and recommends to the Planning Commission and/or City Council repeal Ordinance No. 678 and terminate DA [No.] 18-016C...” (Attachment H).

Pursuant to CMC Section 20.84.070, DA 18-016C and CCP No. 18-0019 were processed concurrently and approved collectively under Ordinance No. 678. To repeal Ordinance No. 678, the repeal shall occur in the same manner as the original proceedings and pursuant to CMC Section 20.84.500.

PUBLIC NOTICE AND COMMENTS

This item was noticed in accordance with the City’s public notice requirements, which involved mailed notices to property owners and tenants within 300 feet of the Site and publication in the local paper (Attachment N). As of the writing of this report, City staff have not received any public comments.

ENVIRONMENTAL ANALYSIS

The action(s) have been assessed in accordance with the California Environmental Quality Act (“CEQA”) (Pub. Res. Code § 21000 et seq.), CEQA Guidelines (Cal, Code Regs., tit. 14, § 15000 et seq.) and the environmental regulations of the City. The Project is categorically exempt from the requirements of CEQA pursuant to CEQA Guidelines Section 15321 - Class 21 (Enforcement Actions by Regulatory Agencies). This exemption is applicable to “[a]ctions by regulatory agencies to enforce or revoke a lease, permit, license, certificate, or other entitlement for use issues, adopted, or prescribed by the regulatory agency or enforcement or a law, general rule, standard, or objective, administered or adopted by the regulatory agency.” If the City Council adopts Ordinance No. 747 to repeal Ordinance No. 678 and terminate DA No. 2018-016C, it would be an enforcement action. Therefore, the action(s) are categorically exempt from the provisions of CEQA.

CONCLUSION
As discussed above and based on the preponderance of unrefuted evidence offered at the administrative review hearing; and the Planning Commission’s finding that the Operator has failed to comply with their terms and conditions of the DA, thereby recommending to the City Council that it repeal Ordinance No. 678 and terminate DA No. 18-016C through the adoption of Planning Commission Resolution No. 2024-05. As stated above, the Operator has failed to comply with their obligations under the DA and CCP, despite being provided with ample notice and several opportunities to achieve compliance. Therefore, City staff recommends the City Council adopt Ordinance No. 747 repealing Ordinance No. 678 terminating DA18-016C.

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ATTACHMENT(S)
A. Draft City Council Ordinance No. 747
B. Ordinance No. 673
C. Resolution No. 18-17
D. Ordinance No. 678
E. Final Demand Letter dated June 23, 2023
F. Administrative Record for Genius Distribution, LLC
G. Review Hearing Waiver dated November 2, 2023
H. Decision and Order for Genius Distribution, LLC
I. S. Rucci Email dated January 6, 2024
J. S. Rucci Email dated January 8, 2024
K. S. Rucci Planning Commission Comment Letter dated March 18, 2024 L. Planning Commission Resolution No. 2024-04
M. Executive Order No. N-22-20
N. Newspaper Publication

ORDINANCE NO. 747

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF CUDAHY REPEALING ORDINANCE NO. 678 AND

TERMINATING RELATED DEVELOPMENT AGREEMENT
NO. 18-016C BETWEEN GENIUS DISTRIBUTION, LLC
AND THE CITY OF CUDAHY.

WHEREAS, the City of Cudahy (the “City”) is a general law city, incorporated under the laws of the State of California; and
WHEREAS, pursuant to its police power, the City may enact and enforce laws within its boundaries that promote the public health, safety, or general welfare of the community, and are not in conflict with general laws; and WHEREAS, to strengthen the public planning process, encourage private participation in comprehensive planning and reduce the economic risk of development, the California State Legislature adopted Section 65864 et seq. of the California Government Code (the “Development Agreement Statute"); and WHEREAS, the Development Agreement Statute authorizes the City to enter into a development agreement with a person having legal or equitable interest in real property for the development of such property in order to establish certain development rights in exchange for public benefits; and
WHEREAS, in accordance with the Development Agreement Statute, the City Council adopted Ordinance No. 690 in 2018 establishing the procedures and requirements for the consideration of development agreement with the City and are contained within Cudahy Municipal Code (“CMC”) Sections 20.84.530 through

20.84.640; and
WHEREAS, on September 11, 2017, the City Council adopted Ordinance No. 673 establishing regulations for commercial cannabis activities, in a specified Overlay Zone through an acquisition of a Commercial Cannabis Permit and execution of a development agreement with the City; and
WHEREAS, on April 30, 2018, the City Planning Commission (“Planning Commission”) conducted a properly noticed public hearing to consider an application by Genius Distribution, LLC (“Operator”) for approval of a Commercial Cannabis Permit to allow non-store front commercial cannabis manufacturing activities at 4916 Cecilia Street, Unit D (“Site”); and
WHEREAS, at this hearing, the Planning Commission heard and considered verbal and written testimony and evidence, and recommended approval of the Commercial Cannabis Permit subject to Operator’s execution of a development agreement with the City; and
WHEREAS, on May 15, 2018, the City Council conducted a properly noticed Attachment APage 1056 of 4584
Ordinance No. 747

public hearing to consider the issuance of the Commercial Cannabis Permit (“CCP”) No. 18-0019 and Development Agreement (“DA”) No. 18-016C at which the City Council heard and considered both written and oral testimony and evidence and subsequently approved, and adopted Resolution No. 18-17 for CCP No. 18-0019; and WHEREAS, at the same hearing the City Council considered and approved CCP No. 18-0019, it also conducted the first reading of Ordinance No. 678 which authorized the execution of DA No. 18-016C between the Operator and the City; and WHEREAS, on June 5, 2018, the City Council adopted, on second reading, Ordinance No. 678 approving DA No. 18-016C and authorizing the Mayor to execute the DA on behalf of the City; and
WHEREAS, the effective date of the Development Agreement is July 5, 2018 (“Effective Date”); and
WHEREAS, upon the Effective Date of Ordinance No. 678, the Operator was granted the permission to conduct commercial cannabis retail delivery activities provided, among other things, it apply for and receive a Zoning Clearance pursuant to the CMC’s requirements, receive State licensing approval from the Department of Cannabis Control, and comply with the terms outlined in the DA and conditions of approval under the CCP inclusive of the timely payment of Community Benefit Fees, Cost Recovery Fees and Operating/Non-Operating Fees and applicable penalties and interest; and WHEREAS, the Operator has not complied with the terms and conditions of the DA and CCP despite multiple notices and opportunities to cure, and remains in material breach of thereof; and
WHEREAS, on October 12, 2023, the City provided notice to the Operator that it would be conducting a Review Hearing (“Review Hearing”) under Article 19 of DA No. 18-016C which informed the Operator of the burden to prove compliance with the DA and CCP; and
WHEREAS, the Operator never provided a timely response to the City’s notice for a Review Hearing; and
WHEREAS, on November 2, 2023, the City sent a follow up notice informing the Operator it had not received any response to the Review Hearing Notice; and WHEREAS, the Operator did not respond to the follow up notice; and WHEREAS, on November 14, 2023, Steve Napolitano, Esq., a duly appointed third-party hearing officer for the City (“Hearing Officer”), conducted a properly noticed Review Hearing; and
WHEREAS, the Operator did not participate at the Review Hearing, was not present at the hearing and did not present any evidence for consideration prior to or during the hearing, and the Hearing Officer heard and considered information and

Ordinance No. 747

evidence by City staff, which a true and correct copy of the staff report and supporting evidence is attached hereto as Exhibit “A” and incorporated herein by reference; and WHEREAS, the Hearing Officer heard and considered information and evidence by City staff; and
WHEREAS, on January 14, 2024, the Hearing Officer issued a written decision and order (the “Decision”), incorporated by reference and attached hereto as Exhibit “B”, making several findings of fact and conclusions of law with respect to the Operators noncompliance with the DA and CCP based on a preponderance of the evidence; and WHEREAS, the Hearing Officer determined that Operator breached its payment obligations due to the Operator’s non-payment of fees and penalties due and owed to the City totaling $145,818.40 which continue to accumulate; and WHEREAS, the Operator continues to fail to meet its payment obligations and the total amount due to the City as of May 14, 2024 is $150,851.67; and WHEREAS, the Operator breached its obligation to maintain its legal status with the State of California, as the Operator’s LLC entity status has been suspended by the State of California; and
WHEREAS, the Operator had breached its obligation to implement the Project within the prescribed time periods contained within CCP No. 18-0019 Condition of Approval No. 51 (Time Limits), because there is no evidence that the Operator has made a diligent effort to implement the Project in any fashion inclusive of an application for a Zoning Clearance to permit the commercial cannabis activities; and WHEREAS, the Hearing Officer has recommended that the City Council adopt an ordinance repealing Ordinance No. 678 terminating DA 18-016C and revoking the related interest in CCP 18-0019; and
WHEREAS, pursuant to state law and the CMC, the Planning Commission duly noticed, agendized, and conducted a public hearing on this matter on March 18, 2024; and
WHEREAS, the Planning Commission considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents relating to the repeal of Ordinance No. 678; and
WHEREAS, after the close of such public hearing, the Planning Commission adopted Resolution No. 2024-04, attached hereto and incorporated by reference as Exhibit “C,” recommending the City Council repeal Ordinance No. 678 and terminate related DA No. 18-016C; and
WHEREAS, pursuant to state law and the CMC, the City Council duly noticed, agendized, and conducted a public hearing on this matter; and

Ordinance No. 747

WHEREAS, the City Council considered all public comments received before and during the public hearing, the presentation by City staff, the relevant staff report, administrative record, and all other pertinent documents relating to the repeal of Ordinance No. 678; and
WHEREAS, after the close of such public hearing, the City Council introduced and adopted by first reading Ordinance No. 2024-04 repealing Ordinance No. 678 and terminating related DA No. 18-016C.

NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF CUDAHY DOES HEREBYORDAIN AS FOLLOWS:

SECTION 1. RECITALS
That the above Recitals are true and correct and are incorporated as though fully set forth herein.

SECTION 2. ADOPTION OF HEARING OFFICER’S FINDINGS OF FACT AND

CONCLUSIONS OF LAW
The City Council has reviewed and considered the Decision by the Hearing Officer (Exhibit “B”) issued on January 14, 2024, on this matter. For the reasons stated in the Decision, and as recommended by the Planning Commission (Exhibit “C”), the City Council adopts the Hearing Officer’s findings of fact and conclusions of law as its own and determines that Genius Distribution, LLC is not in compliance with the terms and conditions of the Development Agreement No. 18-016C and finds that Genius Distribution, LLC is in default of its contractual obligations set forth in said Development Agreement and has breached its Conditions of Approval for CCP No. 18-0019 by a showing of the preponderance of the evidence.

SECTION 3. TERMINATION OF DEVELOPMENT AGREEMENT
Pursuant to Article 19(d) of the Development Agreement, the City Council may terminate Development Agreement No.18-016C in its entirety. For the reasons stated in the Decision, and as recommended by the Planning Commission, the City Council hereby adopts this Ordinance repealing Ordinance No. 678 and terminating DA No. 18- 016C in its entirety.

SECTION 4. SEVERABILITY
If any section, subsection, sentence, clause, phrase, or portion of this Ordinance is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have adopted this Ordinance, and each section, subsection, subdivision, sentence, clause, phrase, or portion thereof, irrespective of the fact that any one or more sections, subsections, subdivisions, sentences, clauses, phrases, or portions might subsequently be declared invalid or unconstitutional.

Ordinance No. 747

SECTION 5. CALIFORNIA ENVIRONMENTAL QUALITY ACT
The City Council has determined that this Ordinance is categorically exempt from the California Environmental Quality Act (“CEQA”) (Pub. Res. Code § 21000 et seq.) and CEQA Guidelines (Cal. Code Regs., tit. 14, § 21000 et seq.) pursuant to CEQA Guidelines Section 15321 (Class 21) because the repeal of Ordinance No. 678 and termination of DA No. 18-016C is an enforcement action to revoke an entitlement interest.

SECTION 6. PUBLICATION
The City Clerk shall certify the passage and adoption of this Ordinance and shall cause this Ordinance to be published and/or posted as required by law, which shall take full force and effect thirty days from its adoption.

PASSED, APPROVED, AND ADOPTED by the City Council of the City of Cudahy at the regular meeting of this ______ day of _____ 2024. ______________________________
Jose R. Gonzalez
Mayor
ATTEST:
____________________________
Richard Iglesias
City Clerk

Ordinance No. 747

CERTIFICATION

STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS:

CITY OF CUDAHY )
I, Richard Iglesias, City Clerk of the City of Cudahy, hereby certify that the foregoing Ordinance No. 747 was introduced for a first reading on the _____ day of ____ 2024 and approved for a second reading and adopted by said Council at its regular meeting held on the ______ day of ______ 2024 by the following vote, to-wit:

AYES:

NOES:

ABSENT:

ABSTAIN:

Richard Iglesias
City Clerk

Ordinance No. 747

EXHIBIT “A”
EVIDENCE SUBMITTED BY THE CITY (“ADMINISTRATIVE RECORD”)

ADMINISTRATIVE RECORD FOR

REVIEW HEARING
Genius Distribution, LLC
November 14, 2023
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HEARING REVIEW STAFF REPORT
Date: November 14, 2023
To: Hearing Officer, Steve Napolitano
From: Juan Arauz, AICP, Community Development Director
Prepared By: Cecilia Madrigal-Gonzalez, Senior Planner
Concurrence: Joshua Calhoun, Finance Director, Glenn Ward Calsada, Special Counsel, Raul Diaz, Building Official and Paloma McEvoy, Assistant City Attorney.

Subject: Compliance Review Hearing relating to Commercial Cannabis (“CCP”) 18-0019 and Development Agreement (“DA”) 18-016C between Genius Distribution, LLC (“Operator”) and the City of Cudahy (“City”).

RECOMMENDATION
Staff recommends that the Hearing Officer take the following action(s):

1. Hear the evidence presented by the City; and

2. Make a determination that the Operator is not in compliance with the terms and conditions of its DA with the City and find that the Operator is in default of contractual obligations set forth in the DA and conditions of approval of CCP18-0019; and

3. Make a determination that the Operator is not in compliance with the conditions of approval set forth in CCP 18-0019; and

4. Make a recommendation to the City Manager for the Planning Commission and City Council to adopt an ordinance repealing Ordinance No. 678 terminating Development Agreement No. 18-016C and revoking the Operator’s interest under CCP18-0019.

BACKGROUND/TIMELINE
On September 11, 2017, the City adopted Ordinance No. 673 (Attachment A) establishing the City of Cudahy's commercial cannabis production activity regulations codified in Chapter 5.20 of the Cudahy Municipal Code (“CMC”). CMC Section 5.20.040 authorizes medicinal commercial cannabis activities within a designated overlay zone, pursuant to a development agreement adopted in accordance with the Development Agreement Law (Govt. Code Section 65864 et seq.) and Chapter 20.28 of the CMC.

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On April 30, 2018, the Planning Commission recommended the City Council to approve CCP18- 0019 for cannabis delivery at 4916 Cecilia St Unit D., subject to the approval of a development agreement between the City of Cudahy (“City”) and Genius Distribution, LLC (“Operator”) for cannabis distribution.

On May 15, 2018, the City Council adopted Resolution No. 18-17 (Attachment B) approving the issuance of CCP18-0019 (Attachment C) with conditions of approval to the Operator upon the execution of a development agreement with the City.

On June 5, 2018, the City Council adopted Ordinance No. 678 (Attachment D) approving DA18- 016C (Attachment E) inclusive of exhibits A-F (Attachment F) between the Operator and the City authorizing commercial cannabis distribution activities at 4916 Cecelia Street Unit D (“Site”) as illustrated in Figures 1 and 2 below. Recital I of the Development Agreement permits the Operator to utilize approximately 809 square feet of the Site for cannabis distribution activities, inclusive of warehousing and workspace. The Operator is one of seven tenants at the Site which all have separate development agreements with the City but fall under the same CCP conditions of approval.

FIGURE 1 – AERIAL OF SITE
Site
4916 Cecelia St.

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FIGURE 2 – FLOOR PLAN
On October 2, 2019, the City provided the Operator with a Notice of Delinquency (Attachment G) prior to placing the Operator in default status due to payment non-compliance with the Development Agreement, inclusive of the payment of Community Benefit Fees, Cost Recovery Fees, and Non-Operating Fees in the amount of eight thousand nine hundred and ninety-one dollars and seventy-six cents ($8,891.76). The Operator was given no later than October 17, 2019, to cure the amount, however, the delinquency was not timely cured.

On May 4, 2021, the City provided the Operator with a Notice of Default (Attachment H) due to payment non-compliance with the payment of fees due in the amount of forty-one thousand four hundred and sixty-eight dollars and thirty-five cents ($41,468.35). The Operator was given no later than 30 days to cure the default, however, the default was not timely cured.

On September 2, 2021, the City notified the Operator of their failure to sign the DA (Attachment I). The DA was not signed until January 19, 2023.

On December 7, 2022, the City Manager offered a Cannabis Deferment and Payment Program (Attachment J) to assist cannabis operators with the accumulated non-operating and other fees by deferring and providing additional time for payment without penalty. All cannabis operators interested in participating in this program were given no later than January 31, 2023, to execute a payment agreement. The City received interest from the Operator and due to their good-faith negotiations the City extended the deadline of the deferment and payment program. Under the program:
(a) Unpaid Non-operating Fees would be deferred (without penalty) until six (6) months after the Operator was issued a Certificate of Occupancy; and then repay accumulated NonOperating Fees within twelve (12) months; and (b) Operators would continue to be responsible for the timely payment of Community Benefit Fees and Cost Recovery Fees as they accumulated; and Unit D
4916 Cecelia St.

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(c) Past due Community Benefit Fees and Cost Recovery Fees would be subject to a payment plan and require timely payments.

On February 1, 2023, the City’s Finance Department presented the Operator with a Letter of Agreement agreeing to a payment plan to forbear outstanding payment due on the DA (Attachment K). The Operator accepted the proposed terms on the same day which agreed to begin payments on March 1, 2023. The Operator also acknowledged and agreed “that the past due amounts stated are true and correct and are in fact presently due and owing. The parties agree that the Operator is in ‘default status’ on its obligations under its Development Agreement with the City.”
Between April and June 2023, the City notified the Operator with three (3) notices of delinquency (Attachment L) and provided an opportunity to cure outstanding payments due. However, the default on the Letter Agreement was not timely cured and therefore was terminated and no longer in full force and effect as of June 16, 2023. Accordingly, the total of all past due amounts at the time the Letter Agreement was terminated and an amount of $132,046.79 was due and owed.

On June 23, 2023, the City sent a Final Demand Letter (Attachment M) demanding the Operator to respond to the following demands: 1) Proof of the revival (or request for revival) of the LLC’s entity status with the California Secretary of State; 2) Forwarding payment for the total past due amounts and 3) Contact City staff for a meeting to revise the CCP’s Schedule of Performance and for further information to become compliant with the DA and CCP. The Operator did not respond in a timely manner and has failed to make any attempt to cure any defaults.

On August 9, 2023, the City issued Escrow Account Letters (Attachment N) requiring all cannabis operators to open an escrow account by September 15, 2023, to ensure payment of Cost Recovery Fees. As of the writing of this report, the Operator has not opened an escrow account nor made any payments into the account.

On October 12, 2023, the City issued to the Operator a Notice of Review Hearing (Attachment O) with the hearing date, time, and place.

On October 24, 2023, the City issued a letter (Attachment P) updating the Operator on their payment and fees related to the DA by correcting the amount due to an error in the total amount billed. The City provided a credit in the amount of fourteen thousand nine hundred fifty dollars and fifty cents ($14,950.50). As of the writing of this report, Operator owes the City one-hundred thirty thousand and six hundred eleven dollars and seventy-four cents ($130,611.74).

Community Benefit Fees, Cost-Recovery and Non-operating Fees plus penalties continue to accrue and the total amount due may be higher as of the date of the Review Hearing on November 14, 2023.

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DISCUSSION/ANALYSIS
Under Section 19 of the Development Agreement, if the “City finds and determines based on substantial evidence that, Owner or Landlord executing [the] Agreement, or successor in interest thereto, has not complied in good faith with the terms or conditions of the Agreement, City may terminate or modify [the] Agreement (except that no modification shall increase Owner’s liability nor reduce Owner’s rights).”
Pursuant to the CMC Section 5.20.080(6)(a), “[a]ny material violations of this chapter or any other relevant city law by a cannabis permittee, or cannabis permittee’s agent, is ground for suspending or revoking the relevant cannabis permit.” To suspend or revoke a cannabis permit the City Manager must determine “that the cannabis permittee has failed to comply with any conditions of approval, or any agreement or covenant.”
City staff recommends that the Hearing Officer review the material violations and evidence and make the following findings in support of finding the Operator to be in default of the DA18-016C and in violation of the conditions of approval for CCP18-0019.

Violation #1. Breach of Payment Obligations. Pursuant to the DA Article. 5.b (Community Benefit Fees), Article. 7.c (Operating Fees) and Article. 8 (Cost Recovery Fees), the Operator must pay the City an annual community benefit fee in the amount of $9,523.86 ($1,904.77 down payment and monthly payments in the amount of $761.91), a cost recovery fee, and an operating [or nonoperating] fee each year since 2018. The Operator is also obliged to make payments for these fees in Condition of Approval No. 45; the obligation for Non-Operating Fees is also repeated in Condition of Approval No. 37 for distribution activities. The Operator has not made the required timely payments and as of October 24, 2023, is past due in the amount of $130,611.74 as shown in Table 1 below. Past-due payments continue to accumulate, including late payment penalties.

The Operator must pay all required DA fees in accordance with DA terms. Failure to pay fees constitutes a breach of the DA and may result in suspension or immediate revocation of the DA.

Accordingly, the Operator is in breach of its payment obligation under DA No. 18-016C.

TABLE 1 – SUMMARY OF PAST AND CURRENT AMOUNTS DUE AS OF OCTOBER 24, 2023.

Fee Type Payment Amount Due
Community Benefit Program $43,047.90
Cost Recovery Fee $62,827.86
Non-operating Fee $20,726.58
Penalties (Late Payment) $4,009.40
TOTAL: $130,611.74
Finding 1. The Operator breached the terms of Development Agreement No. 18-016C by failing to make all required payments to the City that are required pursuant to the terms of Development Agreement No. 18-016C.

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Evidence: On June 5, 2018, Genius Distribution, LLC executed Development Agreement No. 18- 016C, which is a legally binding contract between the Operator and the City of Cudahy pursuant to DA Art. 5.b [Community Benefit Fees], Art. 7.c [Operating Fees] Art. 8 [Cost Recovery Fees].In December 2022, the City offered a deferment and payment plan option to the Operator which was accepted and the first payment was due on March 1, 2023. The Operator did not make a single required payment in March, April and May of 2023. The Operator did not cure the delinquency and as a result, the payment plan was null and voided on June 16, 2023. Proper notice of default was given with the opportunity to cure, but the Operator has failed to fulfill its monetary obligations owed to the City. This failure is a material breach of the DA and grounds for termination of the DA.

First, in the event that the Operator asserts that City Officials previously made representations that nonretail cannabis operators would not have to pay Non-Operating Fees – no such authority is granted under the CMC nor the Development Agreement.

Forgiveness of fees due to a government agency, if not for a public purpose, constitutes an unlawful gift of public funds in violation of Article XVI, Section 6 of the California Constitution.

The Operator has requested the City forgive Non-Operating Fees spanning the course of an 18- month period and has failed to provide any evidence that the forgiveness of this debt would somehow fulfill a public purpose.

Second, if the Operator asserts that it was unable to move forward with its project due to closures at City Hall caused by the COVID-19 pandemic, this argument would similarly fail. During the height of the pandemic, City Hall’s physical premises were closed to the public, however, the City continued to conduct business, and process requests, including applications for building permits which could be dropped off at the front of City Hall.

Third, if the Operator asserts that the Contested Fees are subject to the Mitigation Fee Act, such assertion is not supported by the law. The Contested Fees are a part of the Development Agreement entered into between the City and the Operator and was enacted via ordinance pursuant to Development Agreement Law (Gov. Code §§ 65864-65869.5). Fees imposed by development agreements are expressly exempt from the Mitigation Fee Act. Gov. Code § 66000(b) (“ ’Fee’ means a monetary exaction other than a tax or special assessment…but does not include…fees collected under development agreements adopted pursuant to Article 2.5 (commencing with Section 65864) of Chapter 4…”). Therefore, the Contested Fees are not subject to the Mitigation Fee Act.

Further, even if the Mitigation Fee Act was applicable to the Contested Fees, to properly contest the Contested Fees, the Operator would have been required to tender the required payment, in full and serve written notice to the City that informs the City that payment has been tendered under protest accompanied by a statement of facts.

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Gov. Code § 66020(a). However, such protests must be filed at the time of the approval of the development or within ninety (90) days of the imposition of fees. The City and Operator entered into the Development Agreement on June 5, 2018. The 90-day statute of limitations to protest such fees ended on September 3, 2023, and has Operator tendered payment in full as required by Government Code Section 66020(a). Therefore, any opportunity to protest under the Mitigation Fee Act has long since passed.

Fourth, if the issue is raised by the Operator, the holdings in Nollan v. California Coastal Commission and Dolan v. City of Tigard do not apply to the Contested Fees. Nollan, (1987) 483 U.S. 825; Dolan, (1994) 512 U.S. 374. The U.S. Supreme Court holding in Nollan requires exactions to (1) bear a nexus to the burdens imposed by development; and (2) substantially advance a legitimate state interest. The 5-4 U.S. Supreme Court decision in Dolan refines the second prong of the Nollan test and requires development conditions to have a “rough proportionality” to a proposed development’s impact. Dolan at p. 391.

However, the holdings in these cases are inapplicable to Contested Fees. Here, the Court notably limited the holding to adjudicative decisions, and not legislative decisions. Id., at p. 385; see also Lingle v. Chevron U.S.A., (2005) 544 U.S. 528, 547 (reaffirming that the rough proportionality requirement applies to adjudicative decisions and not legislative decisions), Leroy Land Development v. Tahoe Regional Planning Agency (1991) 939 F.2d 696, 698 (holding that separately negotiated agreements are not subject to an unconstitutional “takings” analysis because the agreements were entered into voluntarily, in good faith and supported by consideration). In consideration for those Contested Fees, Operator received a ten (10) year term with an option to renew for another ten (10) year term to operate a medicinal commercial cannabis facility.

Finding 2: The Operator has failed to comply with Conditions of Approval No. 1(a) and (b) of the CCP, which required the Operator to pay all City-issued invoices within 30 days of receipt thereof.

Evidence: The City approved Development Agreement No. 18-016C subject to Conditions of Approval, which are incorporated as part of Development Agreement No. 18-016C. Condition of Approval 1(b) provides that the Operator is required to pay all City-issued invoices within 30 days of receipt thereof. The City has sent the Operator regular monthly invoices since 2019 (Attachment Q). The current outstanding fees owed by the Operator have been owed to the City for longer than 30 days. Despite demand and after proper notice of default and the opportunity to cure the Operator has failed to cure its monetary obligations owed to the City.

Finding 3: Pursuant to Condition of Approval Nos. 37 and 45, the Operator, LLC’s failure to pay Non-Operating Fees due under the Development Agreement and all fees due under the Development Agreement, respectively, constitutes a cross-breach of Development Agreement No. 18-016C and is grounds for revocation of the Operator’s interest in the CCP for the Site.

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Evidence. Pursuant to the foregoing evidence, the Operator’s non-payment of fees due under the DA and grounds for revocation of the Operator's interest in the CCP for the Site.

Violation #2. Non-Compliance with State Law. The DA sets forth standard operating procedures as mentioned in DA Art. 4.a. [Facility Operations]. At all times, the operator must be a lawful entity.

Finding 4: The Operator is unable to lawfully operate the LLC due to the Suspended status with the Secretary of State and is therefore in breach of DA Art. 4.a.

Evidence: The City has learned that the Operator’s legal status as a California limited liability company, Genius Distribution LLC, is suspended. Attachment R shows the Certificate of Status with the Secretary of State of California dated October 31, 2023. The Certificate of Status for Genius Distribution, LLC states: “The above-referenced entity’s powers, rights, and privileges are suspended in California.” See, Rev. & Tax Code Sec. 23301. Despite notice of default and opportunity to cure, the Operator’s entity status remains “FTB/SOS” suspended by the California Secretary of State and, as such, the entity is unable to operate in the State of California.

A suspended business entity becomes essentially prohibited from legally operating within the State of California unless and until such suspended status is withdrawn. The consequences of this suspended status include, without limitation, the business entity being unable to sell, transfer, or exchange real property in California, as well as risking any contracts entered by the business entity during the time of suspension being voidable at the option of the other party.

See, e.g., Casiopea Bovet, LLC v. Chiang (2017) 12 Cal.App.5th 656, 662; City of San Diego v. San Diegans for Open Government (2016) 3 Cal.App.5th 568, 577. Additionally, the suspended business entity may lose its ability to prosecute or defend legal actions (i.e., file or defend lawsuits). See City of San Diego, supra, 3 Cal.App.5th at p. 577.

Violation #3. Breach of Conditions of Approval No. 51 (Time Limits) under CCP 18-0019. CCP Condition No. 51.A. states the approval decision for this CCP becomes effective upon the expiration of the 15-day appeal period following the approval decision, or when any appeals of the decision are finally resolved. The CCP effective date for the Development Agreement was June 20, 2018. No appeal was ever filed and thus CCP Condition No. 51.A.i sets a 90-day time limit from the effective date of the CCP for the Permittee to obtain a Zoning Clearance. CCP Condition No. 51A.ii sets a 90-day time limit from the effective date of the CCP for the Permittee to complete construction of Phase I, or until September 18, 2018. CCP Condition No. 51A.iii sets a 180-day time limit from the effective date of the CCP for the Permittee to complete all Tenant Improvements and construction and to obtain a Certificate of Occupancy from the City Building Department, or until December 17, 2018. The City Manager may grant an extension of time if the Permittee has made a diligent effort to implement the Project.

Finding 5: The Operator has not obtained a Zoning Clearance pursuant to Chapter 20.84 of the Administrative Record - Review Hearing for Genius Distribution, LLC Page 9 of 329 Page 1071 of 4584 “Serving The People” "Sirviendo A La Comunidad"

CMC, nor has the Operator applied for a building permit to complete tenant improvements or otherwise obtained a certificate of occupancy. Therefore, the Operator breached its conditions of approval for CCP18-0019 by failing to implement the Project within the time limits set forth in Conditions of Approval No. 51.

Evidence: The Operator has not provided the City with any evidence it has obtained a Zoning Clearance, completed construction of Phase I, completed all Tenants Improvements, or obtained a Certificate of Occupancy for the Site within the time limits set forth in Condition of Approval No. 51. Without an extension, the deadlines expired in 2019. The City has no record of any request by the Operator to the City Manager for an extension of time and there is nor is there evidence that the Operator has made diligent efforts to comply, such as submitting for a zoning clearance or submitting for a building permit plan check. Despite notice of default and opportunity to cure, The Operator remains in breach of its conditions of approval by failing to implement the Project within the time limits set forth in the Conditions for Approval No. 51.

NOTICE
Pursuant to Section 22 of the Development Agreement the City sent a Review Hearing notice via certified mail, and a courtesy email notice, to all concerned parties on October 12, 2023. The notice advised that the Review Hearing would be held on the hearing date at such location designated in Attachment O. Proof of certified mailing is provided in Attachment S.

ENVIRONMENTAL ANALYSIS
The action(s) have been assessed in accordance with the California Environmental Quality Act (CEQA) (Pub. Res. Code § 21000 et seq.) and the environmental regulations of the City. The Project is expected to be categorically exempt from the requirements to prepare additional environmental documentation per CEQA Guidelines Section 15321. Class 21 (Enforcement Actions by Regulatory Agencies) is applicable to “Actions by regulatory agencies to enforce or revoke a lease, permit, license, certificate, or other entitlement for use issues, adopted, or prescribed by the regulatory agency or enforcement or a law, general rule, standard, or objective, administered or adopted by the regulatory agency.” Therefore, the action(s) are categorically exempt from the provisions of CEQA.

CONCLUSION
It is the City’s purpose and intent to regulate cannabis activities within the City in a responsible manner to protect the health, safety, and welfare of the residents of Cudahy and to enforce rules and regulations consistent with California Cannabis laws. Cannabis Operators with development agreements are obligated to comply with all provisions of the CMC, obligations of the DA and conditions of approval under the CCP. As discussed above and based on the evidence attached to this report, the Operator has failed to comply with their obligations despite being provided with ample notice and opportunities to achieve compliance. Therefore, staff recommends the Hearing Officer after independent review, consideration, analysis of staff’s report and the information presented, oral and written testimony by all parties and their witnesses, and the record as a whole – make a determination the Operator, Genius Distribution, LLC, has breached Administrative Record - Review Hearing for Genius Distribution, LLC Page 10 of 329 Page 1072 of 4584 “Serving The People” "Sirviendo A La Comunidad"

the terms and conditions DA No. 18-016C and recommend that the Planning Commission and City Council repeal Ordinance No. 678 and terminate DA18-016C and revoke their interest under CCP18-0019.

ATTACHMENT(S)
A. Ordinance No. 673
B. City Council Resolution No. 18-17
C. CCP18-0019 Conditions of Approval
D. Ordinance No. 678
E. Development Agreement No. 18-016C
F. Exhibit A-F of Development Agreement No. 18-016C
G. Correspondence Letter – Notice of Delinquency dated October 2, 2019 H. Correspondence Letter – Notice of Default dated May 4, 2021 I. Correspondence Letter - Notice of Missing DA Signatures dated September 2, 2021 J. Correspondence Letter – Notice of Cannabis Deferment and Payment Program dated December 7, 2022
K. Letter Agreement (Payment Plan) dated February 1, 2023 L. Correspondence Letter – April, May, and June Delinquency notices.

M. Final Demand Letter dated June 23, 2023
N. Correspondence – Notice of Escrow Account dated August 9, 2023 O. Notice of Review Hearing dated October 12, 2023
P. Correspondence – Notice of updated payment of fees dated October 24, 2023 Q. Invoices from 2019 to September 15, 2023
R. Certificate of Status dated October 31, 2023
S. Proof of certified mailing of Final Demand Letter
Administrative Record - Review Hearing for Genius Distribution, LLC Page 11 of 329 Page 1073 of 4584 ATTACHMENT A.

Ordinance No. 673
Administrative Record - Review Hearing for Genius Distribution, LLC Page 12 of 329 Page 1074 of 4584 ORDINANCE NO. 673

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
CUDAHY AMENDING TITLE 5 (BUSINESS LICENSES AND
REGULATIONS) AND TITLE 20 (ZONING) OF THE

CUDAHY MUNICIPAL CODE TO PROHIBIT CANNABIS

RETAILERS/DISPENSARIES CITYWIDE AND TO

ESTABLISH REGULATIONS AND A DISCRETIONARY

REVIEW PROCESS FOR THE ALLOWANCE OF

MEDICINAL-ONLY COMMERCIAL CANNABIS ACTIVITIES
(CULTIVATION, DISTRIBUTION, MANUFACTURING,

DELIVERIES, MICROBUSINESS, AND LABORATORY

TESTING) IN A SPECIFIED OVERLAY ZONE THROUGH A

DEVELOPMENT AGREEMENT
WHEREAS, in 1996, the California Legislature approved Proposition 215, also known as the Compassionate Use Act (the "CUA"), which was codified under Health and Safety Code Section 11262.5 et sec. and was intended to enable persons in need of medical marijuana for specified medical purposes, such as cancer, anorexia, AIDS, chronic pain, glaucoma and arthritis, to obtain and use marijuana under limited circumstances and where recommended by a physician. The CUA provides that "nothing in this section shall be construed or supersede legislation prohibiting persons from engaging in conduct that endangers others, or to condone the diversion of marijuana for non-medical purposes.";
WHEREAS, in 2004, the California Legislature enacted the Medical Marijuana Program Act (Health & Saf. Code, § 11362.7 et seq.)(the "MMP"), which clarified the scope of the CUA, created a state-approved voluntary medical marijuana identification card program, and authorized cities to adopt and enforce rules and regulations consistent with the MMP. Assembly Bill 2650 (2010) and Assembly Bill 1300 (2011) amended the MMP to expressly recognize the authority of counties and cities to "[a]dopt local ordinances that regulate the location, operation, or establishment of a medical marijuana cooperative or collective" and to civilly and criminally enforce such ordinances;
WHEREAS, the Federal Controlled Substances Act (21 U.S. C., § 801 et seq.) makes it unlawful under federal law for any person to cultivate, manufacture, distribute or dispense, or possess with intent to manufacture, distribute, or dispense marijuana.

Despite such federal prohibition, on August 29, 2013, the United States Department of Justice issued a memorandum (the "Cole Memo") stating that, notwithstanding the federal classification of marijuana as a schedule 1 controlled substance, jurisdictions that have legalized marijuana in some form are less likely to be subject to federal enforcement under the Controlled Substances Act if they have implemented strong and effective regulatory and enforcement systems to follow eight guiding principles: (1) preventing the distribution of marijuana to minors; (2) preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels; (3) preventing the

Administrative Record - Review Hearing for Genius Distribution, LLC Page 13 of 329 Page 1075 of 4584 diversion of marijuana from states where it is legal under state law in some form to other states; (4) preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity; (5) preventing violence and the use of firearms in the cultivation and distribution of marijuana; (6) preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; (7) preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and (8) preventing marijuana possession or use on federal property;
WHEREAS, in September 2015, the California State Legislature enacted, and Governor Brown signed into law three bills - Assembly Bill 243, Assembly Bill 266, and Senate Bill 643 - which together comprise the Medical Marijuana Regulation and Safety Act (the "MMRSA"). The MMRSA created a comprehensive dual state licensing system for the cultivation, manufacture, retail, sale, transport, distribution, delivery, and testing of medical cannabis;
WHEREAS, on August 22, 2016, the City Council of the City of Cudahy (the "City Council" of the "City") adopted Interim Urgency Ordinance No. 656U to establish a temporary moratorium on medical "commercial cannabis activities," as defined under the MMRSA, for a period of 45 days and extended such moratorium for an additional period of 22 months and 15 days under Interim Urgency Ordinance No. 661, on September 26, 2016;
WHEREAS, the MMRSA was renamed the Medical Cannabis Regulation and Safety Act (the "MCRSA") under Senate Bill 837 in June 2016, which also made substantive changes to the applicable state laws, which affect the various state agencies involved in regulating cannabis businesses as well as potential licensees; WHEREAS, on November 8, 2016, the Control, Regulate, and Tax Adult Use of Marijuana Act ("AUMA") was approved California voters as Proposition 64 and became effective on November 9, 2016, pursuant to the California Constitution (Cal. Const., art.

II, § 10(a).). Proposition 64 legalized the nonmedical use of cannabis by persons 21 years of age and over, and the personal cultivation of up to six (6) cannabis plants. On November 14, 2016, the City Council adopted Urgency Ordinance No. 663 to prohibit outdoor personal marijuana cultivation and establish regulations and a permitting process for indoor personal marijuana cultivation;
WHEREAS, AUMA also created a state regulatory and licensing system j governing the commercial cultivation, testing, and distribution of nonmedical cannabis, and the manufacturing of nonmedical cannabis products. On January 9, 2017, Interim Urgency Ordinance No. 666 was adopted by the City Council to establish a temporary moratorium on nonmedical "commercial cannabis activities" for a period of 45 days and extended such moratorium for an additional period of 22 months and 15 days under Interim Urgency Ordinance No. 667, on February 27, 2017; Page2
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I
)
WHEREAS, on June 27, 2017, Governor Brown signed the Legislature-approved Senate Bill 94. SB 94 combined elements of the MCRSA and AUMA to establish a streamlined singular regulatory and licensing structure for both medical and nonmedical cannabis activities given that there were discrepancies between the MCRSA and AUMA. The new consolidated provisions under SB 94 is now known as the Medicinal and Adult-Use Cannabis Regulation and Safety Act ("MAUCRSA") to be governed by the California Bureau of Cannabis Control. MAUCRSA refers to medical cannabis as "medicinal cannabis" and nonmedical/recreational cannabis as "adult-use cannabis"; WHEREAS, on June 27, 2017, the as part of an Economic Development Ad Hoc Committee presentation on revenue-generating opportunities, commercial cannabis regulations and strategies were offered to and discussed by the City Council; WHEREAS, the City seeks to establish an overlay zone in the City in which certain medicinal-only commercial cannabis activities can be conducted in accordance with MAUCRSA and the City's police power under Section 7 of Article XI of the California Constitution;
WHEREAS, it is the purpose and intent of the City to regulate medicinal cannabis in a manner that is consistent with the Cole Memo and promotes the health, safety, and general welfare of the residents and businesses within the City, while limiting any negative impacts;
WHEREAS, the City intends to be on the forefront of groundbreaking research, science, innovation, and development of treatment for symptoms and cures in the field of medicinal cannabis, as scientific research, studies, and data have established that medicinal cannabis can help patients with a vast array of medical conditions; WHEREAS, the City desires to reduce the illegal market for cannabis while minimizing the chances of social harm and creating jobs and revenue for the City; and WHEREAS, nothing in this Ordinance shall be construed to allow persons to engage in conduct that violates the law, endangers others, causes a public nuisance, allows the illegal use or diversion of cannabis, or allows any activity relating to cannabis that is otherwise illegal under California state law, as amended.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CUDAHY DOES ORDAIN AS FOLLOWS:

SECTION 1. The above recitals are true and correct and are incorporated herein.

SECTION 2. Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended by the addition of a new Chapter 20.120 (Commercial Cannabis Overlay Zone), which shall read as follows:

Chapter 20.120 - Commercial Cannabis Overlay Zone.

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20.120.010 Definitions
For purposes of this Chapter 20.120, the following definitions shall apply:
"Commercial cannabis activities" mean the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery or sale of cannabis and cannabis products. ) "Cannabis" means all parts of the Cannabis sativa Linnaeus, Cannabis indica, or j Cannabis ruderalis, whether growing or not; the seeds thereof; the resin, whether crude or purified, extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. "Cannabis" also means the separated resin, whether crude or purified, obtained from cannabis. "Cannabis" also means marijuana as defined by Section 11018 of the California Health and Safety Code as enacted by Chapter 14017 of the Statutes of 1972. Cannabis does not include the mature stalks of the plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of the plant which is incapable of germination. For the purpose of this Chapter, cannabis does not mean industrial hemp as that term is defined by Section 81000 of the California Food and Agricultural Code or Section 11018.5 of the California Health and Safety Code.
"Cannabis product" means cannabis that has undergone a process whereby the plant material has been transformed into a concentrate, or other cannabis derivative, including, but not limited to, concentrated cannabis, or an edible or topical product containing cannabis or concentrated cannabis and other ingredients. "Day care center" means any child day care facility other than a family day care home, and includes infant centers, preschools, extended day care facilities, and schoolage child care centers.
"Overlay Zone" means the commercial cannabis overlay zone, whose area and boundaries are attached to City Council Ordinance No. 673 as Exhibit "A" "MAUCRSA" means the Medicinal and Adult-Use Cannabis Regulation and Safety Act, as may hereinafter be amended.
"Youth center" means any public or private facility that is primarily used to host recreational or social activities for minors, including, but not limited to, private youth membership organizations or clubs, social service teenage club facilities, video arcades, or similar amusement park facilities.

Page4
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20.120.020 Prohibitions.

Adult-use commercial cannabis activities and medicinal commercial cannabis activities, as both are described in state law, including, but not limited to MAUCRSA, are hereby prohibited unless otherwise allowed in this Chapter.

20.120.030 Overlay zone.

Medicinal commercial cannabis activities, except retail dispensaries that are open to the public for point-of-sale purchases, shall be allowed within the Overlay Zone pursuant to a development agreement adopted in accordance with the Development Agreement Law (Gov. Code, § 65864 et seq.) and Cudahy Municipal Code Chapter

20.28 (Development Agreements). No such activities shall be permitted without a development agreement within or outside of the boundaries of the Overlay Zone.

The City may approve or deny such a development agreement in its sole and absolute discretion.

20.120.040 Particular restrictions for Atlantic Avenue.

Section 20.120.030 notwithstanding, no cannabis-related business shall be located within the Overlay Zone and on Atlantic Avenue with a storefront facing Atlantic Boulevard unless such business employs and effectuates a business model with a primary entertainment purpose.

20.120.050 Indoor Horticulture.

Indoor horticulture, excluding cannabis horticulture shall be permitted by-right within the Overlay Zone.

20.120.060 Prohibition on new schools, day cares, and youth centers in overlay zone.

The establishment of public or private schools providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center is prohibited within the Overlay Zone, or within 600 feet of the boundaries of the Overlay Zone, is hereby prohibited, unless otherwise mandated under state or federal law. An existing public or private school providing instruction in kindergarten or any grades 1 through 12, day care center, or youth center located within the Overlay Zone, or within 600 feet of the boundaries of the Overlay Zone shall be considered legal nonconforming, in accordance with Chapter 20.24 (Legal Nonconforming) of Title 20 (Zoning) of the Cudahy Municipal Code.

20.120.070 Temporary permits for local events - rights reserved.

The City reserves the right to issue temporary permits for onsite cannabis sales to, and consumption by, persons 21 years of age or older at a county fair, district agricultural association event, or other similar event authorized under state law, which is located within the Overlay Zone, pursuant to the provisions of Subdivision (e) of Business and Professions Code Section 26200.

SECTION 3. Subsection (3)(p) of Section 20.64.090 (Uses Permitted in Residential Zones by Conditional Use Permit) of Chapter 20.64 (Residential Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:

Administrative Record - Review Hearing for Genius Distribution, LLC Page 17 of 329 Page 1079 of 4584 (p) Schools, public and private, excluding schools providing instruction in kindergarten or any grades 1 through 12 located within 600 feet of a residential zone located within the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise mandated under state or federal law.

SECTION 4. Subsection (24) of Section 20.68.100 (Uses Permitted in Residential Zones by Conditional Use Permit) of Chapter 20.68 (Commercial and Professional Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:
(24) Day care centers, excluding those occupying any portion of the CC zone located within 600 feet of the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise mandated under state or federal law.

SECTION 5. Subsection (49) of Section 20.68.100 (Uses Permitted in Residential Zones by Conditional Use Permit) of Chapter 20.68 (Commercial and Professional Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:
(49) Schools, colleges, and universities, accredited, including appurtenant facilities that offer instruction required to be taught by the Education Code of the state of California and in which no pupil is physically restrained, excluding schools which provide instruction in kindergarten or any grades 1 through 12 that occupy any portion the CC zone located within 600 feet of the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise mandated under state or federal law.

SECTION 6. Subsection (50) of Section 20.68.100 (Uses Permitted in Residential Zones by Conditional Use Permit) of Chapter 20.68 (Commercial and Professional Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:
(50) Schools, business and professional, including art, barber, beauty, dance, drama, music, and swimming, excluding schools which provide instruction in kindergarten or any grades 1 through 12 that occupy any portion the CC zone located within 600 feet of the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise mandated under state or federal law.

SECTION 7. Subsection (46) of Section 20.68.150 (Uses by conditional use permit in C-M Zone) of Chapter 20.68 (Commercial and Professional Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:
(46) Schools, colleges, and universities, accredited, including appurtenant facilities which offer instruction required to be taught by the Education Code of the state and in which no pupil is physically restrained, excluding schools which provide instruction in kindergarten or any grades 1 through 12 that occupy any portion the C-M zone located within 600 feet of the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise

Administrative Record - Review Hearing for Genius Distribution, LLC Page 18 of 329 Page 1080 of 4584 mandated under state or federal law.

SECTION 8. Subsection (47) of Section 20.68.150 (Uses by conditional use permit in C-M Zone) of Chapter 20.68 (Commercial and Professional Districts) of Title 20 (Zoning) of the Cudahy Municipal Code is hereby amended to read as follows:
(47) Schools, business and professional, including art, barber, beauty, dance, drama, music, and swimming, excluding schools which provide instruction in kindergarten or any grades 1 through 12 that occupy any portion the C-M zone located within 600 feet of the Commercial Cannabis Overlay Zone illustrated in Exhibit "A" to City Council Ordinance No. 673, unless otherwise mandated under state or federal law.

SECTION 9. Title 5 (Business License and Regulations) of the Cudahy Municipal Code is hereby amended by the addition of a new Chapter 5.20 (Cannabis Permitting and Regulation), which shall read as follows:

Chapter 5.20 - Cannabis Permitting and Regulation.

5.20.010 Section Intent and Purposes.

The intent and purpose of this Chapter is to regulate Commercial Cannabis Activity (as defined below) in accordance with State Law (as defined below) to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law, including, but not limited to, MAUCRSA. The goals of this regulation for Commercial Cannabis Activity include:
(a) To comply with the goals and guidance set forth in the Cole Memo. (b) To minimize the size of the illegal market for Cannabis in the City and the surrounding regions.
(c) To create jobs, revenue, and economic growth for the City and its residents. (d) To enable law enforcement and regulators to have sufficient rights to inspect and audit Cannabis Permittees and take expeditious action against Cannabis Permittees who violate the requirements of this Chapter. (e) To minimize social harms which may arise from Cannabis including youth consumption or intoxicated driving.
(f) To regulate the manner of advertising and location of Cannabis Permittees such that public nuisance is minimized.

5.20.020 Definitions.

For purposes of this Chapter, the following definitions shall apply, unless the context clearly indicates otherwise:
(a) "Applicant" means an Owner seeking a Cannabis Permit pursuant to this Chapter.
(b) "Cannabis" means all parts of the Cannabis sativa Linnaeus, Cannabis indica, or Cannabis ruderalis, whether growing or not; the seeds thereof; the resin, whether crude or purified, extracted from any part of the plant; and every

Administrative Record - Review Hearing for Genius Distribution, LLC Page 19 of 329 Page 1081 of 4584 compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds, or resin. Cannabis also means the separated resin, whether crude or purified, obtained from cannabis. Cannabis also means marijuana as defined by Section 11018 of the California Health and Safety Code as enacted by Chapter 14017 of the Statutes of 1972. Cannabis does not include the mature stalks of the plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of the plant which is incapable of germination. For the purpose of this Chapter 5.18, Cannabis does not mean industrial hemp as that term is defined by Section 81000 of the California Food and Agricultural Code or Section 11018.5 of the California Health and Safety Code.
(c) "Cannabis Permit" means a permit issued by the City to conduct a Commercial Cannabis Activity, including, but not limited to a Cultivation Permit, Distribution Permit, Manufacturing Permit, Microbusiness Permit, Retail Delivery Permit, or Testing.
(d) "Cannabis Permittee" means a Person who holds a Cannabis Permit. (e) "Cannabis Product" means cannabis that has undergone a process whereby the plant material has been transformed into a concentrate, or other cannabis derivative, including, but not limited to, concentrated cannabis, or an edible or topical product containing cannabis or concentrated cannabis and other ingredients.
(f) "City" shall mean the City of Cudahy.
(g) "City Coden means the City of Cudahy Municipal Code. (h) "City Manager" means the City Manager of the City of Cudahy. (i) "Cole Memo" means the August 29, 2013 United States Department of Justice memorandum offering guidance on federal enforcement priorities regarding Cannabis.

U) "Commercial Cannabis Activity(ies)" means the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery or sale of Cannabis and/or Cannabis Products. (k) "Cultivation" means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of Cannabis.
(I) "Cultivation Permit" means a Cannabis Permit for the Indoor Cultivation of Cannabis in accordance with the terms and conditions of this Chapter and the Development Agreement for the applicable Cannabis Permit issued to the particular Cultivation Permittee.
(m) "Cultivation Permittee" means an applicant who has applied for and has been issued a Cultivation Permit by the City pursuant to the terms and conditions of this Chapter.

l
l
Administrative Record - Review Hearing for Genius Distribution, LLC Page 20 of 329 Page 1082 of 4584 (n) "Day Care Center" means any child day care facility other than a family day care home, and includes infant centers, preschools, extended day care facilities, and schoolage child care centers.
(o) "Development Agreement" means an agreement adopted pursuant to the Development Agreement Law (Gov. Code, § 65864 et seq.) and Cudahy Municipal Code Chapter 20.28 (Development Agreements), which provides agreed upon community benefits to the City.
(p) "Distribution" means the procurement, sale, and transport of cannabis and cannabis products between persons authorized to engage in permitted commercial cannabis activities pursuant to this Chapter. (q) "Distribution Permit" means, with respect to a Distribution Permittee, a Cannabis Permit for Distribution in accordance with the terms and conditions of this Chapter and the Development Agreement for the applicable Cannabis Permit issued to such Distribution Permittee.
(r) "Distribution Permittee" means a Person that has been issued a Distribution Permit by the City pursuant to the terms and conditions of this Chapter. (s) "Fully Enclosed and Secure Structure" means a space within a building or other structure which has a complete roof enclosure supported by connecting walls extending from the ground to the roof, which is reasonably secure against unauthorized entry, provides complete visual screening or is behind fencing or other features providing complete visual screening, and which is accessible only through one or more lockable doors and is inaccessible to minors. (t) "Good Cause" for purposes of refusing or denying a Cannabis Permit, for revoking a Cannabis Permit, or for refusing or denying a Cannabis Permit renewal or reinstatement means: (i) the Applicant has not obtained approval by the City Council of a Development Agreement setting forth the general terms for the operation of commercial cannabis activity or breaches a term or terms of a Development Agreement approved by the City Council pursuant to this Chapter; (ii) The Applicant or Cannabis Permittee has violated the terms, conditions, or provisions of this Chapter, of state law, of any regulations or rules promulgated pursuant to state law or this Chapter, any applicable local rules, regulations, or conditions placed upon its state license or Cannabis Permit; (iii) the licensed Premises have been operated in a manner that adversely affects the public health, safety, or welfare or the safety of the immediate neighborhood in which the Commercial Cannabis Activity is being conducted; (iv) the Applicant or Cannabis Permittee has knowingly made false statements, misrepresentations, or material omissions on an application form, renewal form, or other document submitted to the City; (v) the Applicant or Cannabis Permittee's criminal history does not indicate that the Applicant or Cannabis Permittee is of Good Moral Character or the Applicant or Cannabis Permittee has been convicted of an offense that is substantially related to the qualifications, functions, or duties of the Applicant or Cannabis Permittee. However, if the City has issued a Cannabis Permit to the Applicant or Cannabis Permittee, the City shall not consider any

Administrative Record - Review Hearing for Genius Distribution, LLC Page 21 of 329 Page 1083 of 4584 criminal history of the Applicant or Cannabis Permittee that was disclosed to or discovered by the City prior to issuance of the Cannabis Permit and is confirmed by the Applicant or Cannabis Permittee. For any criminal history that was not disclosed to or discovered by the City prior to issuance of a Cannabis Permit, or that arose after the issuance of the Cannabis Permit, the City shall conduct a thorough review of the nature of the crime, conviction, circumstances, and evidence of rehabilitation of the Applicant or Cannabis Permittee, and shall evaluate the suitability of the Applicant or Cannabis Permittee based upon such review. In determining which offenses are substantially related to the qualifications, functions, or duties of the Applicant or Cannabis Permittee, the City shall consider factors set forth in Business and Professions Code Section 26057; (vi) the Applicant or Cannabis Permittee is employing or allowing to volunteer any person whose criminal history indicates that such person is not of Good Moral Character; (vii) the Applicant or Cannabis Permittee fails to allow inspection by City officials of the security recordings, activity logs, business records, or other accessible records pertaining to the activities conducted on the applicable Premises; or (viii) the Applicant or Cannabis Permittee allows for Physician Services to be conducted on the applicable Premises. (u) "Good Moral Character" means having a personal history that demonstrates the propensity to serve the public in a manner that reflects openness, honest, fairness, and respect for the law and rights and well-being of others. In determining Good Moral Character, the following standards shall apply: (i) a judgment of guilt in a criminal prosecution or a judgment in a civil action shall not be used, in and of itself, as proof of an individual's lack of Good Moral Character.

Such judgment, however, may be used as evidence in the determination and when so used, the individual shall be notified and shall be permitted to rebut the evidence by showing that, at the current time, he or she has the ability to, and is likely to serve the public, in a fair, honest, and open matter, that he or she is rehabilitated, and/or that the substance of the former offense is not substantially related to the applicable Commercial Cannabis Activity; and (ii) a prior conviction where the sentence, including any term of probation incarceration, or supervised release is completed for the possession of, possession for sale, sale, manufacture, transportation, or cultivation of a controlled substance, is not considered substantially related, and shall not be the sole ground for denial of a Cannabis Permit, except that any of the convictions set forth in Business and Professions Code Section 26057(b)(4), as may be amended, shall be deemed substantially related to applicable Commercial Cannabis Activity. (v) "Health and Safety Code" means the California Health and Safety Code, as amended from time to time.
(w) "Indoor" means within a Fully Enclosed and Secure Structure. (x) "Manufacture" or "Manufacturing" means to compound, blend, extract, infuse, or otherwise make or prepare a Cannabis Product from such blends, extractions, or infusions.

)
Administrative Record - Review Hearing for Genius Distribution, LLC Page 22 of 329 Page 1084 of 4584 (y) uManufacturing Permit" means a Cannabis Permit to Manufacture in accordance with the terms and conditions of this Chapter and the conditions of approval for the applicable Cannabis Permit issued to the particular Manufacturing Permittee.
(z) "Manufacturing Permittee" means a Person that has been issued a Manufacturing Permit by the City pursuant to the terms and conditions of this Chapter.
(aa) "Medicinal Permittee" means a Person who is issued a Cannabis Permit to engage in Commercial Cannabis Activity with respect to medicinal Cannabis in accordance with applicable City law and State Law, including MAUCRSA. (bb) "Microbusiness" means a commercial medicinal cannabis business facility of cultivation of medicinal cannabis on areas less than 10,000 square feet and also acts as a licensed distributor, manufacturer, and Delivery-only retailer, pursuant to State Law, including MAUCRSA. Microbusinesses shall not be open to the public for point-of-sale retail Cannabis sales.
(cc) "Microbusiness Permit" means a Cannabis Permit to establish and conduct a Microbusiness in accordance with the terms and conditions of this Chapter and the conditions of the Development Agreement for the applicable Cannabis Permit issued to the particular Microbusiness Permittee. (dd) "Microbusiness Permittee" means a Person who has been issued a Microbusiness Permit by the City pursuant to the terms and conditions of this Chapter.
(ee) "Outdoors" means any location within the City that is not within a Fully Enclosed and Secure Structure.
(ff) "Owner" means any of the following: (i) a Person with an aggregate ownership interest of 20% or more in the Person applying for a Cannabis Permit, unless the interest is solely a security, lien, or encumbrance; (ii) the chief executive officer of a nonprofit or other entity; a member of the boards of directors of a nonprofit; (iv) an individual who will be participating in the direction, control, or management of the person applying for a Cannabis Permit. (gg) "Permit Zone" means, with respect to a Person holding a Cannabis Permit, the overlay zone described in Cudahy Municipal Code Chapter 20.120 where such Cannabis Permit type is permitted to operate pursuant to a Development Agreement with the City.
(hh) "Person" includes any individual, entity, firm, co-partnership, joint venture, association, corporation, limited liability company, estate, trust, business trust, receiver, syndicate, or any other group or combination acting as a unit, and the plural as well as the singular.
(ii) "Physician Services" means the consultation by a State-licensed physician of a patient with the possible recommendation by such physician of medicinal Cannabis for such patient.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 23 of 329 Page 1085 of 4584 OD "Premises" means the designated structure or structures and land specified in the application that is owned, leased, or otherwise held under the control of the Cannabis Permittee applicant or Cannabis Permittee where the Commercial Cannabis Activity will be or is conducted. The premises shall be a contiguous area and shall only be occupied by one Cannabis Permittee. (kk) "Retail Delivery" means the commercial transfer or delivery of Cannabis or Cannabis Products to a customer, patient, primary caregiver or Cannabis Permittee.
(II) "Retail Delivery Establishment" means a location where Cannabis or Cannabis Products are, either individually or in any combination, Delivered pursuant to State Law, including MAUCRSA. Retail Delivery Establishments shall not be open to the public for point-of-sale retail sales. (mm) "Retail Delivery Permit" means a Cannabis Permit to Deliver Cannabis and Cannabis Products to customers, patients, and primary caregivers in accordance with the terms and conditions of this Chapter and the conditions of the Development Agreement for the applicable Cannabis Permit issued to the particular Retail Delivery Permittee.
(nn) "Retail Delivery Permittee" means a Person that has been issued a Retail Delivery Permit by the City pursuant to the terms and conditions of this Chapter. (oo) "State" means the State of California.
(pp) "State Law" means all laws of the State of California, including, but not limited to, all rules and regulations adopted by State agencies and State regulatory entities, including subsequent amendments to such laws, rules, and regulations.
(qq) "State Medicinal license" means a State license for medicinal Commercial Cannabis Activities issued pursuant to State Law. (rr) "Testing" means the activities conducted by a Testing Laboratory. (ss) "Testing Laboratory" means an accredited laboratory, facility, or entity in the City that offers or performs tests of medicinal cannabis or medicinal cannabis products in accordance with State Law and City law:
(tt) "Testing Permit" means a Cannabis Permit for Testing the quality and makeup of Cannabis and Cannabis Products pursuant to the terms and conditions of this Chapter and the conditions of the Development Agreement for the applicable Cannabis Permit issued to the particular Testing Permittee. (uu) "Testing Permittee" means a Person who has been issued a Testing Permit by the City pursuant to the terms and conditions of this Chapter. (vv) "Volatile Solvent" means a Class I Flammable liquid as defined by the National Fire Protection Association, including butane and propane. (ww) "Youth Center" means any public or private facility that is primarily used to host recreational or social activities for minors, including, but not limited to,

Administrative Record - Review Hearing for Genius Distribution, LLC Page 24 of 329 Page 1086 of 4584 private youth membership organizations or clubs, social service teenage club facilities, video arcades, or similar amusement park facilities.

5.20.030 Commercial Cannabis Activity Prohibited.

All Commercial Cannabis Activity within the City is prohibited except as permitted by this Chapter.

5.20.040 Certain Commercial Cannabis Activity Permitted. Medicinal Commercial Cannabis Activities, except retail dispensaries that are open to the public for point-of-sale purchases, shall be allowed within the area set forth in the overlay zone/Permit Area illustrated in Exhibit "A" to City Council Ordinance No. 673 pursuant to a development agreement adopted in accordance with the Development Agreement Law (Gov. Code,§ 65864 et seq.) and Cudahy Municipal Code Chapter

20.28 (Development Agreements). No such activities shall be permitted without a Development Agreement within or outside of the boundaries of such overlay zone.

The City may approve or deny such a Development Agreement in its sole and absolute discretion. The City Manager is authorized to develop and promulgate policies and procedures consistent with the intent and spirit of this Chapter concerning the applications, application process, including, but not limited to, the information required of Applicants, and application review procedures, which shall inform the administration and protocols to be used and followed by the City in the application and hearing processes.

5.20.050 Business standards.

Commercial Cannabis Activity within the City shall be in conformance with the standards set forth in this Section, in addition to those additional standards that may be imposed through negotiated Development Agreement. The City Manager is hereby authorized to formulate and impose additional Business Requirements applicable to Cannabis Permittees in furtherance of the public health, safety, and/or welfare.
(a) Commercial Cannabis Activity shall only be allowed upon application and issuance of a Cannabis Permit and a Development Agreement by the City in accordance with the criteria and process set forth in this Chapter and City Code. (b) Zoning and Land Use.
(1) Operation Near Schools, Day Cares, and Youth Centers. Following the enactment of this Chapter, no new Premises shall be established, developed, or operated within 600 feet of a Day Care Center, Youth Center, or public or private school providing instruction in kindergarten or any grades 1 through 12 that is in existence at the time the Cannabis Permit is issued. All distances shall be measured in a straight line, without regard to intervening structures, from the nearest point of the building or structure in which the Premises are, or will be, located to the nearest property line of those uses describe in this Subsection. The restrictions set forth in this Subsection shall not apply to Premises which operate within 600 feet of any Day Care Center, Youth Center, or public or private school

Administrative Record - Review Hearing for Genius Distribution, LLC Page 25 of 329 Page 1087 of 4584 providing instruction in kindergarten or any grades 1 through 12, if such Premises existed prior to the establishment of the applicable Day Care Center, Youth Center, or school that is located within 600 feet of such Premises.
(2) Co-Location. All Commercial Cannabis Activity shall fully comply with all l mandates set forth in State Law. To the extent not prohibited under State Law, a Cannabis Permittee may be located within the same unit of the same Premises or building, facility or real property parcel as another Cannabis Permittee.
(3) Development Agreement.
a) Prior to commencing operations, all Cannabis Permittees shall enter into a Development Agreement with the City.
b) All Premises shall be operated in accordance with the terms of the applicable Development Agreement for the specified parcel of real property (or sub-portion thereof) upon which the Premises is located. c) Except as specified, Commercial Cannabis Activities shall not exceed the square footage authorized pursuant to the applicable Development Agreement.
d) All Premises shall be located in the Permit Zone pursuant to the applicable Development Agreement.
(c) Commercial Cannabis Activity is allowed only within Fully Enclosed and Secure Structures that are inaccessible to minors.
(d) Signage for any business must be applied for through the City's Planning Division, which shall require review and approval prior to installation. Business identification signage shall be limited to that needed for identification only, and shall not contain any logos or information that identifies, advertises, or lists the services or the products offered. No Cannabis Permittee shall advertise by having a person holding a sign and advertising the business to passersby, whether such person is on the Premises of the Cannabis Permittee or elsewhere including, but not limited to, the public right-of-way. (e) From any public right-of-way, there shall be no visible evidence of the consumption of any Cannabis Products. Commercial Cannabis Activity shall not adversely affect the health or safety of the nearby residents by creating dust, glare, heat, noise, smoke, traffic, vibration, odor or other impacts, and shall not be hazardous due to use or storage of materials, processes, products, or wastes. (f) Hours of operation limits, if any, shall be specified in terms mutually agreed upon in a Development Agreement.
(g) All Cannabis and Cannabis Products shall be kept in a secured manner during all business and nonbusiness hours.
(h) All Commercial Cannabis Activities shall operate within Premises that are compliant with all applicable State Laws and local laws.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 26 of 329 Page 1088 of 4584 (i) Cannabis Permittees must pay all applicable taxes pursuant to all federal, State, and local laws, including, but not limited to, fees relating to infrastructure improvements within the Permit Zone.

U) Cannabis Permittees shall provide sufficient odor absorbing ventilation and exhaust systems so that odors outside the applicable Premises are not a nuisance on any adjacent property of public right-of-way. Any violation of this Section shall be remedied within thirty (30) days of the Cannabis Permittee receiving notice of such violation.
(k) Cannabis Permittees shall utilize product and inventory tracking software and accounting software that is consistent with reasonable business practices within the industry and the seed-to-sale tracking software being developed by the State. (I) Except permitted in this Chapter, on-site smoking, ingestion, or consumption of Cannabis or Cannabis Products shall be prohibited on Premises. Except to the extent otherwise permitted pursuant to this Chapter, the entrance of the Premises shall be clearly and legibly posted with a notice indicating that smoking, ingesting, or consuming Cannabis, Cannabis Products or alcohol on such Premises is prohibited.
(m) Signage for all Premises shall be in compliance with the City's sign code and application for all signs must be submitted to the City's Planning Division and comply with its sign permitting protocol.
(n) Alcoholic beverages and tobacco shall not be sold, stored, distributed, or consumed on the Premises. Cannabis Permittees shall not hold or maintain a license from the State Department of Alcohol Beverage Control to sell alcoholic beverages, or operate a business that sells alcoholic beverages or tobacco with respect to the Premises. In addition, alcohol shall not be provided, stored, kept, located, sold, dispensed, or used on the Premises.
(o) Physician Services shall not be provided at any Premises. (p) The Premises shall fully comply with all applicable rules, regulations, and laws including, but not limited to, zoning and building City Codes, the City's business license ordinances, the Revenue and Taxation Code, the Americans with Disabilities Act, and MAUCRSA.
(q) Each Cannabis Permittee shall provide the City Manager, or the City Manager's designee, with the name, phone number, facsimile number, and email address of an on-site representative of such Cannabis Permittee to whom the City and the public can provide notice if there are any operational problems associated with such Cannabis Permittee's Premises. Each Cannabis Permittee shall make reasonable and good faith efforts to encourage residents and the public to call this representative to resolve any operational problems before any calls or complaints are made to the City or law enforcement. (r) All Cannabis Permittees must comply with the following security requirements:
(1) General Security Requirements.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 27 of 329 Page 1089 of 4584 a) Security cameras shall be installed and maintained in good working condition and used in a format approved by the City Manager. The cameras shall be in use 24 hours per day, 7 days per week. The areas to be covered by the security cameras include areas as determined by the City Manager, including, but not limited to, the area in which the primary Commercial Cannabis Activity occurs, e.g. the Cultivation area for a for a cultivator.
b) The Premises shall be alarmed with a reliable commercial alarm system that is operated and monitored by a security company or alarm business in a manner satisfactory to the City Manager.
c) Entrance to any storage areas shall be locked at all times and under the control of staff of the Cannabis Permittee.
d) The business entrance(s) and all window areas shall be illuminated during evening hours. The Applicant shall comply with the City's lighting standards regarding fixture type, wattage, illumination levels, shielding, etc., and secure the necessary approvals and permits, as necessary. e) All windows on the Premises shall be appropriately secured with all Cannabis and Cannabis Products securely stored.
f) Each Cannabis Permittee shall implement track and trace protocols, as noted above in this Section, in order to prevent diversion of Cannabis or Cannabis Products.
g) All waste and disposal containers shall be locked at all times and stored ins a secure area and, at all times, under the control of the Cannabis Permittee.
(2) Security Alarm Systems - Minimum Requirements.
a) Each Premises shall have a security alarm system installed by a licensed alarm company on all perimeter entry points and perimeter windows.
b) Each Premises must ensure that its location is continuously monitored. Premises may engage the services of outside vendors to fulfill this requirement, such as a private security firm.
c) Each Premises shall maintain up to date and current records and existing contracts on the Premises that describe the location and operation of each security alarm system, a schematic of security zones, the name of the licensed alarm company, and the name of any vendor monitoring the Premises.
(3) Lock Standards. At a minimum, all points of ingress and egress shall be secured with commercial-grade, non-residential door locks. (4) Video Surveillance Requirements.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 28 of 329 Page 1090 of 4584 a) Prior to exercising the privileges of a Cannabis Permit issued under this Chapter, an Applicant must install fully operational video surveillance and camera recording system. The recording system must record in digital format and meet the requirements outlined herein.
b) All video surveillance records and recording must be stored in a secure area that is only accessible to the management staff of the Cannabis Permittee.
c) Video surveillance records and recordings must be made available upon request to the City Manager or designee for a purpose authorized by this Chapter or for any other State or local law enforcement purpose. d) Video surveillance shall be held in confidence by all employees and representatives of the City Manager, except that the City Manager may provide such records and recordings to any State or local law enforcement agency for any purpose authorized under this Chapter for any State or local law enforcement purpose.
e) A sign shall be posted in a conspicuous place near each point of public access, which shall not be less than 12 inches wide and 12 inches long, composed of letters not less than one inch in height, stating that "All Activities Monitored by Video Camera" or "These Premises Are Being Digitally Recorded" or otherwise advising of all persons entering the Premises that a video surveillance and camera recording system is in operation and recording all activity as provided in this Section. f) The Premises shall utilize video surveillance equipment and a camera system that shall be remotely accessible by the City and Los Angeles County Sheriff's Department.
(5) Video Surveillance Equipment.
a) Video surveillance equipment shall, at a minimum, consist of digital or network video recorders, cameras capable of meeting the recording requirements described in this Section, video monitors, digital archiving devices, and a color printable capable of delivering still photos. b) All video surveillance systems must be equipped with a failure notification system that provides prompt notification to a Cannabis Permittee of any prolonged surveillance equipment interruption and/or the complete failure of the surveillance.
c) Cannabis Permittees are responsible for ensuring that all surveillance equipment is properly functioning and maintained so that the playback quality is suitable for viewing and the surveillance equipment is capturing the identity of all individuals and activities in the monitored Premises.
d) All video surveillance equipment shall have sufficient battery backup to support a minimum of four hours of recording in the event of a power outage.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 29 of 329 Page 1091 of 4584 (6) Placement of Cameras and Required Camera Coverage.
a) Camera placement shall be capable of identifying activity occurring within 20 feet of all points of ingress and egress and shall allow for the clear and certain identification of any individual and activities on the Premises.
b) All entrances and exits to the Premises shall be recorded from both indoor and outdoor vantage points.
c) The system shall be capable of recording all pre-determined surveillance areas in any lighting conditions. If the Premises has a medicinal cannabis cultivation area, a rotating schedule of lighted conditions and zero-illumination can occur as long as ingress and egress points to those areas remain constantly illuminated for recording purposes.
d) Areas where medicinal cannabis is grown, tested, cured, manufactured, or stored shall have a camera placed in the room facing the primary entry door at a height that will provide a clear unobstructed view of activity without sight blockage from lighting hoods, fixtures, or other equipment.
e) Cameras shall also be placed at each location where weighing, packaging, preparation, tagging activities occur, or other distribution preparation activities occur.
f) At least one camera must be dedicated to record the access points to the secured surveillance recording area.
(7) Location and Maintenance of Surveillance Equipment. a) Surveillance recording equipment must be housed in a designated, locked, and secured room or other enclosure with access limited to authorized employees, the City Manager or designee, Los Angeles County Sheriff's Department, as authorized by this Chapter, other State or local law enforcement purpose, and service personnel or contractors. b) Premises must keep a current list of all authorized employees and service personnel who have access to the surveillance system and/or surveillance system room on the Premises. Premises must keep a surveillance equipment activity log on the Premises to record all service activity, including the identity of all individuals performing services on system service, the service date and time, and the reason for such service to the surveillance system.
c) Off-site monitoring and video recording storage of the Premises by an independent third party may be authorized so long as standards exercised at the remote location meets or exceeds all of the standards applicable to onsite monitoring.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 30 of 329 Page 1092 of 4584 d) Each Premises located in a common or shred building must have a separate surveillance room/area that is dedicated to that specific Premises. The facility that does not house the central surveillance room is required to have a review station, printer, and map of camera placement on the Premises. All minimum requirements for equipment and security standards as set forth in this Section apply to such review station. (8) Video Recording Retention Requirements.
a) All camera views of all recorded areas must be continuously recorded 24 hours a day.
b) All surveillance recordings must be kept for a minimum of 30 days and be in a format that can be easily accessed for viewing. Video recordings must be archived in a format that ensures authentication of the recording as legitimately-capture video and guarantees that no alteration of the recorded image has taken place.
c) The surveillance system or equipment must have the capabilities to produce a color still photograph form any camera image, live, or recorded, of the Premises.
d) The date and time must be embedded on all surveillance recordings without significantly obscuring the picture. e) Time is to be measured in accordance with the official United States time established by the National Institute of Standards and Technology and the U.S. Naval Observatory at www.time.gov. f) After the 30-day surveillance retention schedule has lapsed, surveillance video recordings must be erased or destroyed prior to being discarded or disposed of for any other purpose. Surveillance video recordings shall not be destroyed if the Cannabis Permittee knows or should have known of a pending criminal, civil, or administrative investigation or any other proceeding sfor which the recording may contain relevant information.
(9) Other Records. All records applicable to the surveillance system and cannabis tracking system shall be maintained on the Premises. At a minimum, Premises shall maintain a map of the camera locations, directions of coverage, camera numbers, surveillance equipment maintenance activity log, user authorization list and operating instructions for the surveillance equipment.
(s) Audit. Each Cannabis Permittee shall maintain accurate books and records in an electronic format, which detail all revenues and expenses of the business, including, but not limited to, all assets and liabilities. On no less than an annual basis, or at any time upon reasonable request of the City, each Cannabis Permittee shall file a sworn statement detailing business activity during the previous 12-month period (or shorter period based upon the timing of the request). The statement shall include gross sales for each month and all

Administrative Record - Review Hearing for Genius Distribution, LLC Page 31 of 329 Page 1093 of 4584 applicable taxes and fees paid or due to be paid. On an annual basis, each owner and operator shall submit to the City a financial audit of the business's operations conducted by an independent certified public accountant. Each Cannabis Permittee shall be subject to a regulatory compliance review and financial audit as determined by the City Manager or designee. (t) Inspections. The City Manager, or designee, or Los Angeles County Sheriff's Department shall have the right to enter all Premises from time to time unannounced during a Cannabis Permittee's hours of operation for the purpose of making reasonable inspections to observe and enforce compliance with this Chapter, to inspect and copy records required to be maintained under this Chapter, or to inspect, view, and copy recordings made by security cameras, all without requirement for a search warrant, subpoena, or court order, and subject to appropriate fees, as specified in the Development Agreement, or adopted by the City.

5.20.060 Application and fee requirements.
(a) All applicants wishing to obtain a Cannabis Permit from the City shall file an application with the City upon a form approved by the City Manager and shall pay a permit application fee as established by the City. The fee may vary depending on the type of Cannabis Permit. The City Manager or designee may require and conduct background checks, as necessary, to process and evaluate Cannabis Permit applications.
(b) Prior to operating in the City, each Cannabis Permittee shall timely and fully pay all fees associated with the establishment of Commercial Cannabis Activity.

The fees shall be as set forth in the schedule and fees and charges established by the City Council, including, but not limited to, the following:
(1) Application fee for accepting a registration application, due and payable in full at the time an application is submitted;
(2) Processing fee for the cost to the City of processing an application and reviewing, investigating, and scoring each application in accordance with any evaluation system to determine eligibility for issuance of a Cannabis Permit, due and payable in full at the time a registration application is submitted;
(3) Permit issuance fee for the cost to the City of preparing a Development Agreement, Planning Commission and City Council review of the Development Agreement and the Cannabis Permit, and preparation and issuance of the Cannabis Permit, as authorized by the Cannabis Permit; (4) Amended registration fee for the cost to the City of reviewing amendments or changes to the registration form previously filed on behalf of an Applicant, due and payable in full at the time amendments or changes to any Cannabis Permit form is submitted to the City;

Administrative Record - Review Hearing for Genius Distribution, LLC Page 32 of 329 Page 1094 of 4584 (5) Permit renewal fee for the cost ot the City of processing an application to renew a Cannabis Permit, due and payable in full at the time application is made to renew a Cannabis Permit; and
(6) Any fees set forth in the applicable Development Agreement.

5.20.070 Permit conditions.
(a) A Cannabis Permit application may be denied and not awarded by the City if:
(1) The Applicant or the Applicant's agent(s) has made one or more false or misleading statements or omissions in the application or during the application process.
(2) The proposed Premises or Commercial Cannabis Activity at the Premises is not allowed by State Law or City law.
(3) The Applicant is not a legal representative of the proposed Cannabis Permittee.
(4) The Applicant or any of its officers, directors, owners, managers, or employees is under 21 years of age.
(5) The Applicant's facility or its location is in violation of any building, zoning, health, safety, or other provision of this Chapter or of any State or local law that substantially affects the public health, welfare, safety, or morals, or the facility or its location is not permitted in the proposed area, or the issuing or continuation of a Cannabis Permit would be contrary ro the public health, welfare, safety, or morals.
(6) The Applicant or any of its officers, directors, owners, managers, or employees has been sanctioned by the City, State, or any county for unauthorized cannabis activities or has had a registration revoked under this Chapter in the previous 3 years.
(7) The Applicant or the Applicant's agent(s) have engaged in unlawful, fraudulent, unfair, or deceptive business acts or practices. (8) The Applicant has not been or is not in good standing with the City related to other or previous business activities operated in the City. (9) The Applicant has not satisfied all requirement of this Chapter. (10) For Good Cause, as defined in this Chapter.
(b) A Cannabis Permit shall be awarded by the City to Applicants in accordance with the process established by the City Manager.
(c) Before a Cannabis Permit can be issued to an applicant, a Cannabis Permit fee must be paid to offset all related costs to the City, and the proposed Premises must pass all applicable inspections.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 33 of 329 Page 1095 of 4584 (d) Each Cannabis Permit is subject to the conditions of approval in the applicable Development Agreement for the parcel of real property upon which the Premises is located.
(e) Each Cannabis Permit is subject to any additional conditions that may be applied by the City at the time of issuance or renewal as necessary to properly regulate the applicable Commercial Cannabis Activities and to protect the public. (f) Each Cannabis Permittee shall execute a Development Agreement with the City to, among other things, fully reimburse the City for all fiscal impacts, costs, expenses, fees, and attorneys' fees incurred by the City related to the Cannabis Permit and the related Commercial Cannabis Activity of such Cannabis Permittee.
(g) Each Cannabis Permittee shall:
(1) Carry liability insurance in the amounts and types set by the City Manager or the City Manager's designee, and name the City as an additional insured on all such insurance policies.
(2) Execute an Indemnification Agreement prepared by the City that fully indemnifies the City for all liabilities associated with the Cannabis Permit, the Cannabis Permittee's Commercial Cannabis Activities, and any action taken by the Cannabis Permittee pursuant to this Chapter. Such indemnification may be set forth in the applicable Development Agreement.
(3) Defend the City, at the Cannabis Permittee's sole expense, in any action against the City or its agents, officers, officials, or employees associated with the Cannabis Permit, the Cannabis Permittee's Commercial Cannabis Activities, or any action taken by the Cannabis Permittee pursuant to this Chapter. The City may, at its sole discretion, participate in the defense of any such action, but such participation shall not relieve the Cannabis Permittee of its indemnification and reimbursement obligations. (4) Reimburse the City for all costs, expenses, fees, and attorney's fees incurred by the City related to any action against the City or its agents, officers, or employees associated with the Cannabis Permit, the Cannabis Permittee's Commercial Cannabis Activity, or any action taken by the Cannabis Permittee pursuant to this Chapter.
(h) A Cannabis Permittee shall keep the City and law enforcement updated with the names, addresses, and relevant criminal histories of the Applicant's Agents.

Relevant criminal histories shall include any drug-related or felony convictions, the nature of such offenses, and the sentences received for such convictions. (i) Transfer.
(1) Any Cannabis Permittee may not sell, transfer, pledge, assign, grant an option, or otherwise dispose of his or her ownership interest in the Commercial Cannabis Business authorized pursuant to the Cannabis Permit.

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Administrative Record - Review Hearing for Genius Distribution, LLC Page 34 of 329 Page 1096 of 4584 (2) In order for a Cannabis Permittee to transfer its Cannabis Permit to any Person, such Cannabis Permittee must submit a transfer application to the City Manager or City Manager's designee. The City Manager or designee may create a transfer application and reasonable transfer application process, including mandatory fee, that Cannabis Permittees and the City must follow and pay for Cannabis Permit transfer requests. Each transfer request of a Cannabis Permit and the related transfer application is subject to the prior approval of the City Manager or designee. (3) Applicants for Cannabis Permits must show proof of lawful possession of the applicable location. Evidence of lawful possession consists of properly executed deeds of trust, leases, and other written instruments, as may be accepted by the City.
(4) The location shall only be the geographical area that is specifically and accurately described in executed documents verifying lawful possession.

No Cannabis Permittee is authorized to relocate to other areas or units within a building structure without first filing a change of location application and obtaining approval form the City regardless of any possessory interest or right to possession to such additional space. No Cannabis Permittee shall add additional contiguous units or areas, thereby altering initially-approved Premises without filing an application to modify the location on forms prepared by the City Manager, including any applicable processing fee.
(5) No Cannabis Permittee is authorized to sublet any portion of any Premises for any purpose unless all necessary forms and applications to modify the existing location to accomplish any subletting have been approved by the City.
(6) The City Manager shall develop and promulgate a process for the renewal of Cannabis Permits and the establish related fees, in accordance with applicable laws.

U) To the fullest extent permitted by law, the City does not assume any liability, and expressly does not waive sovereign immunity, with respect to any Commercial Cannabis Activities, or for the other activities of any Cannabis Permittee or for any other activities taking place at Premises. (k) Changing, Altering, or Modifying Location.
(1) After issuance of a Cannabis Permit, the Cannabis Permittee shall not make any physical change, alteration, or modification to the Premises that materially or substantially alters the location, production estimates, and/or usage of the location form the plans originally approved under the applicable Development Agreement, without the prior written approval of the City Council or designee. The Cannabis Permittee whose Premises are to be materially or substantially changed is responsible for filing an application with the City in order to obtain requisite approval.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 35 of 329 Page 1097 of 4584 (2) Material or substantial changes, alterations, or modifications requiring approval include, but are not limited to, the following: (i) an increase or decrease in the total physical size or capacity of the location; (ii) the sealing off, creation of or relocation of a common entryway, doorway, passage, or other such means of public ingress and/or egress, when such common entryway, doorway, or passage alters or changes limited access areas; or (iii) the installation or replacement of electric fixtures or equipment, the lowering of a ceiling, or electrical modifications made for the purpose of increasing power usage ..
(3) The City Council or designee may grant approval for the types of changes, alterations, or modifications described herein upon the filing of an application by the Cannabis Permittee and payment of any applicable fee, subject to any requisite amendments to the applicable Development Agreement. The Cannabis Permittee must submit all information requested by the City Council or designee including, but not limited to, documents that verify the following: (i) the Cannabis Permittee will continue to have the exclusive possession of the Premises, as changed, by ownership, lease, rental agreement, or other means, and sole control over all activities; and (ii) the proposed change conforms to any and all City restrictions related to the time, manner, and place of regulation of the applicable Commercial Cannabis Activity.
(I) To the fullest extent permitted by law, the City does not assume any liability, and expressly does not waive sovereign immunity, with respect to any Commercial Cannabis Activities, or for the other activities of any Cannabis Permittee or for any other activities taking place at Premises.

5.20.080 Enforcement and Appeals.
(a) Any Commercial Cannabis Activity within the City in violation of this Chapter is hereby declared to be unlawful and a public nuisance. (b) Any Person who willfully or knowingly (i) engages in a violation of this Chapter or (ii) owns, possesses, controls, or has charge of any parcel of real property in the City upon which a violation of this Chapter is maintained and who has actual knowledge of such violation ( or would have actual knowledge of such violation after a reasonable inquiry), shall be subject to the penalties and remedies provided by this Chapter.
(c) Any violation of this Chapter shall constitute a separate offense for each and every day the violation occurs or persists.
(d) Any Person in violation of any provision of this Chapter or who causes another Person to be in violation of this Chapter shall have committed a misdemeanor. In addition which shall be punishable by a fine of up to one thousand dollars ($1,000) for each violation and for each day the applicable violation continues to persist.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 36 of 329 Page 1098 of 4584 (e) Any person in violation of any provision of this Chapter shall be punishable by an administrative fine of up to a $1,000 per offense.
(f) Any material violation of this Chapter or any other relevant City law or State Law by a Cannabis Permittee, or a Cannabis Permittee's agent, is grounds for suspending or revoking the relevant Cannabis Permit. In addition, the City Manager or the City Manager's designee may suspend or revoke a Cannabis Permit, disqualify an Applicant from the application process, or elect not to renew a Cannabis Permit if any of the following occur:
(1) The City Manager or the City Manager's designee determines that the Cannabis Permittee has failed to comply with this Chapter, any condition of approval, or any agreement or covenant as required pursuant to this Chapter.
(2) The Cannabis Permittee's Commercial Cannabis Activities cease for more than ninety (90) calendar days.
(3) Ownership of the Cannabis Permittee is changed without approval from the City.
(4) The licensed Commercial Cannabis Activity moves from the licensed Premises to a different, unauthorized location.
(5) The Cannabis Permittee fails to provide remote access to the security cameras to the City Manager, the City Manager's designee, or Los Angeles County Sheriff's Department, or fails to allow inspection of the security recordings, the activity logs, or of the Premises by authorized City officials.
(g) Any decision regarding the suspension or revocation of a Cannabis Permit, disqualification of an Applicant from the application process, or election not to renew a Cannabis Permit may be appealed to an independent neutral third-party administrative hearing officer appointed by the City Manager or the City Manager's designee (the "Hearing Officer"). Said appeal shall be made by a notice of appeal from the Person appealing within thirty (30) days from the date of the City's decision. The appeal shall be accompanied by a written verified declaration setting forth the basis for the claim that the City's decision was improper. The Hearing Officer's decision shall be final and binding upon the City and the appellant Cannabis Permittee or Applicant. Alternatively, the City Manager may provide for the appeal to be made to the City Council, in lieu of a hearing officer. In such case, the City Council's decision shall be final and binding upon the City and the appellant.
(h) These penalties and remedies are cumulative, and in addition to any other penalties and remedies available to the City.

5.20.090 State Medicinal License Requirement.
(a) Cannabis Permittees must obtain a State Medicinal License in accordance with State Law, including, but not limited, to the temporary and permanent State Medicinal Licenses provided for in MAUCRSA.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 37 of 329 Page 1099 of 4584 (b) Each Cannabis Permittee must expeditiously provide proof of receipt of the applicable State Medicinal License by such Cannabis Permittee to the City Manager or designee.

5.20.100 Medicinal Cannabis Cultivation.
(a) Purpose. The purpose and intent of this Section is to permit and regulate the medicinal Cannabis Cultivation in order to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law. (b) Scope; Medicinal Cannabis. This Section permits and regulates the medicinal Cannabis Cultivation pursuant to State Law, including MAUCRSA.

Subject to the terms of this Chapter, Cultivation Permits may be issued by the City for medicinal Cannabis Cultivation pursuant to and in accordance with State Law, including MAUCRSA.
(c) Outdoor Cultivation is prohibited within the City.
(d) Indoor Cultivation is permitted only on properties within the applicable Permit Zone with a valid Cultivation Permit and other requisite permits and entitlements. (e) Indoor Cultivation may include growing Cannabis plants, harvesting Cannabis plants, and drying Cannabis flowers but shall not include the Manufacturing or of Cannabis Products, unless otherwise authorized pursuant to this Chapter. (f) Entrance to the Cultivation area, and all storage areas, of the applicable Premises shall be locked at all times and under the control of the staff of such Premises.

5.20.110 Medicinal Cannabis Products Manufacturing.
(a) Purpose. The purpose and intent of this Section is to permit and regulate the medicinal Cannabis Products Manufacturing to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law. (b) Scope; Medicinal Cannabis. This Section permits and regulates medicinal Cannabis Products Manufacturing pursuant to State Law, including MAUCRSA.

Subject to the terms of this Chapter, Manufacturing Permits may be issued by the City for medicinal Cannabis Products Manufacturing, pursuant to and in accordance with State Law, including MAUCRSA.
(c) Medicinal Cannabis Products Manufacturing is a permitted use only on properties within the applicable Permit Zone with a valid Cultivation Permit and other requisite permits and entitlements.
(d) A Manufacturing Permittee must employ at least one (1) member of its personnel dedicated full time to quality control.
(e) The Manufacturing Permittee must establish standard operating procedures and batch records that comply with current good manufacturing practices and applicable State Law, including MAUCRSA.

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Administrative Record - Review Hearing for Genius Distribution, LLC Page 38 of 329 Page 1100 of 4584 (f) All Cannabis Products produced by a Manufacturing Permittee must be labeled in compliance with applicable State Law, including MAUCRSA. (g) All Cannabis Products produced by a Manufacturing Permittee must be packaged in child resistant containers prior to leaving the Premises fOf such Manufacturing Permittee in accordance with applicable State Law, including MAUCRSA.
(h) Manufacturing Permittees may conduct Manufacturing using any type of solvents, including Volatile Solvents, or Manufacturing processes if such Manufacturing complies with the requirements of this Chapter and State or local law, including but not limited to Health and Safety Code Section 11362.775 (or any successive State Law) all applicable fire and building codes in the City and any other laws of the City designed to ensure the safety of such operation. (i) Manufacturing Permittees using Volatile Solvents for Manufacturing Cannabis Products must operate in a manner to reduce the risk of explosion or danger to public health, including through the use of a close-loop · or solvent dispersion system consistent with the requirements of Health and Safety Code Section 11362.775 (or any successive State Law).

U) If hazardous materials, flammable gas, flammable liquefied gas, flammable and combustible liquids, or other flammable material, as those terms are defined in California Fire Code Section 202, are to be used in the processing of medicinal Cannabis, then the provisions of California Fire Code Section 407 shall be applicable where hazardous materials are subject to permits under California Fire Code Section 50 (Hazardous Materials) are located on the Premises or where required by the applicable building or fire official.
(k) Storage, use, and handling of compressed gases in compressed gas containers, cylinders, tanks, and systems shall comply with California Fire Code Chapter 53. Partially full compressed gas containers, cylinders, or tanks containing residual gases shall be considered as full for the purposes of the controls required. Compressed gases classified as hazardous materials shall also comply with California Fire Code Chapter 50 for general requirements and California Fire Code Chapter 53 addressing specific hazards, including California Fire Code Chapter 58 (Flammable Gases), California Fire Code Chapter 60 (Highly Toxic and Toxic Materials), California Fire Code Chapter 63 (Oxidizers, Oxidizing Gases and Oxidizing Cryogenic Fluids, and California Fire Code Chapter 64 (Pyrophoric Materials). Prevention, control, and mitigation of dangerous conditions related to storage, use, dispensing, mixing, and handling of flammable and combustible liquids shall be in accordance with California Fire Code Chapters 50 and 57.
(I) Labeling Requirements - Edibles.
(1) Before a Manufacturing Permittee prepares any edible Cannabis or edible Cannabis Product for retail sale, it shall be labeled and placed in tamperevident packaging which at least meets the requirements of State Law, including, but not limited to, MAUCRSA.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 39 of 329 Page 1101 of 4584 (2) All items to be sold or distributed shall be individually wrapped at the original point of preparation by the Cannabis Permittee. (3) Labeling must include a warning if nuts or other known allergens are used, and must include the total weight (in ounces or grams) of Cannabis in the package, not to exceed ten (10) milligrams of tetrahydrocannabinol (THC) per serving.
(4) A warning that the item is a medication and not a food must be clearly legible on the front of the package and/or must comply with state packing requirements.
(5) The package must have a label warning that the product is to be kept away from children.
(6) The label must also state that the product contains Cannabis and must specify the date of Manufacture and the Manufacture Permittee's information, including, but not limited to, address, and phone number. (7) Distributions must be in a properly labeled opaque package when distributed.
(8) The City Manager, or designee, may impose additional packaging and labeling requirements on Cannabis or Cannabis Products.

5.20.120 Medicinal Cannabis and Cannabis Products Retail Delivery (Retail Delivery Only, Dispensaries Prohibited).
(a) Purpose. The purpose and intent of this Section is to regulate the Retail Delivery of medicinal Cannabis and Cannabis Products in order to promote the health, safety, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to the State Law. (b) Scope; Medicinal Cannabis Only. This Section permits and regulates the Retail Delivery of medicinal Cannabis and Cannabis Products pursuant to State Law, including MAUCRSA. Subject to the terms of this Chapter, Retail Delivery Permits may be issued by the City for the Retail Delivery of medicinal Cannabis and Cannabis Products pursuant to and in accordance with State Law, including MAUCRSA. The point-of-sale sale of Cannabis or Cannabis Products is strictly prohibited.
(c) Retail Delivery of Cannabis and Cannabis Products is a permitted use only on properties within the applicable Permit Zone with a valid Retail Delivery Permit and other requisite permits and entitlements.
(d) The Retail Delivery of medicinal Cannabis and Cannabis Products may only include the Retail Delivery of Cannabis and Cannabis Products by a Retail Delivery Permittee to a customer, patient or primary caregiver, in accordance with State Law, including MAUCRSA.
(e) Retail Delivery Permittees shall implement sufficient security measures to both deter and prevent unauthorized entrance into areas containing Cannabis

Administrative Record - Review Hearing for Genius Distribution, LLC Page 40 of 329 Page 1102 of 4584 and Cannabis Products and theft of Cannabis and Cannabis Products from the Retail Delivery Establishment or employees participating in Retail Delivery. (f) All Cannabis and Cannabis Products shall be stored in a secured and locked room, safe, or vault, and in a manner as to prevent diversion, theft, or loss. (g) Individuals shall not be allowed to remain on the Premises comprising of the Retail Delivery Establishment unless they are engaging in activity expressly related to the operations of the Retail Delivery Establishment or are a customer. (h) A Retail Delivery Permittee shall notify the City Manager or the City Manager's designee within 24 hours of discovering any of the following:
(1) Significant discrepancies identified during inventory. The level of significance shall be determined by the City Manager or the City Manager's designee.
(2) Diversion, theft, loss, or any criminal activity involving the Retail Delivery Establishment or any agent or employee of the Retail Delivery Establishment.
(3) The loss or unauthorized alteration of records related to Cannabis, Cannabis Products, registered qualifying patients, primary caregivers, or Retail Delivery Establishment agents or employees.
(4) Any other material breach of security.
(i) The Retail Delivery of medicinal Cannabis and Cannabis Products shall comply with all State and local Law, including all laws requiring presentment of government-issued identification card, physician's recommendation, or medicinal Cannabis identification card at the time of initial purchase.

U) With respect to medicinal Cannabis, physicians' recommendations for medicinal cannabis use shall be verified by a Retail Delivery Permittee prior to the Retail Delivery any medicinal Cannabis to a qualified patient or primary caregiver and at least every six months thereafter.
(k) A Retail Delivery Establishment may not employ or enter into any agreements with any physicians who recommend medicinal Cannabis; Physician Services are prohibited from any and all Retail Delivery Establishments. (I) A Retail Delivery Permittee shall inspect all Cannabis and Cannabis Products received for quality assurance prior to the Retail Delivery to any Person. (m) The Retail Delivery of Cannabis and Cannabis Products shall occur only after such Cannabis and Cannabis Products have been inspected and quality tested in accordance with applicable State Law, including MAUCRSA. (n) Each Retail Delivery Establishment shall do regular monthly inventories and record the total quantity of Cannabis and Cannabis on the Premises. These records shall be maintained for three years from the date created and shall be open to inspection by the City Manager, the City Manager's Designee, and law enforcement.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 41 of 329 Page 1103 of 4584 (o) A Retail Delivery Permittee shall register with the City each location where Cannabis or Cannabis Products are stored for purposes of Retail Delivery by such Retail Delivery Permittee within the City.
(p) A Retail Delivery Establishment shall maintain customer and patient and other business records in a secure location (including electronically or cloud-based) j. that is compliant with, as applicable, HIPAA and other federal and state privacy laws.
(q) During the Retail Delivery of Cannabis or Cannabis Products, each vehicle driver shall carry a copy of the Retail Delivery Permit, a copy of the Retail Delivery request, a form of government-issued identification, and all other information required by State and local Law. The driver shall present these documents upon the request of law enforcement, the City Manager, or the City Manager's designee.
(r) Prior to Retail Delivery of Cannabis and Cannabis Products, such Cannabis and Cannabis Products shall be labeled and placed in a tamper-evident package.

Labels and packages of Cannabis and Cannabis Products shall, at minimum, meet the requirements specified under State Law, including MAUCRSA. (s) All Retail Delivery vehicles shall:
(1) Be equipped with, and utilize, a vehicle alarm system. (2) Have and utilize a direct communication system with the related Retail Delivery Establishment.
(3) Keep all Cannabis and Cannabis Products in a secure and locked container.
(4) Have an internal partition between the driver and all passengers from the Cannabis and Cannabis Products storage containers that prevents access by the driver and passengers to all cannabis products from inside the vehicle.
(5) Not carry more Cannabis and Cannabis Products than allowed by State and local Law and required to fulfill all immediate Retail Delivery requests (6) Not display any logo, signage, or other information that identifies, advertises, or lists the services or the products offered.

5.20.130 Medicinal Cannabis and Cannabis Products Distribution. (a) Purpose. The purpose and intent of this Section is to permit and regulate the Distribution of Cannabis and Cannabis Products between Cannabis Permittees in order to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law.
(b) Scope; Medicinal Cannabis Only. This Section permits and regulates the Commercial Cannabis Activity of Distribution of medicinal Cannabis and Cannabis Products pursuant to State Law, including MAUCRSA. Subject to the terms of this Chapter, Distribution Permits may be issued by the City for the

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Administrative Record - Review Hearing for Genius Distribution, LLC Page 42 of 329 Page 1104 of 4584 )
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Distribution of medicinal Cannabis and Cannabis Products pursuant to and in accordance with State Law, including MAUCRSA. Distribution of Cannabis and Cannabis Products requires a Development Agreement with the City and must be located within the applicable Permit Zone. -,
(c) Distribution activities includes the receiving and releasing of Cannabis and Cannabis Products for inspection, Testing, and quality assurance, as required under applicable State Law and such other activities as are permitted pursuant to State Law.
(d) A Distribution Permittee shall only Distribute Cannabis and Cannabis Products between Cannabis Permittees or to facilities or portions of facilities wholly controlled by such Distribution Permittee to the extent permitted by State Law.
(e) A Distribution Permittee shall inspect all Cannabis and Cannabis Products received by it for quality assurance prior to Distributing to any Cannabis Permittee, as required under applicable State Law.
(f) In addition to the application requirements in Section 0, a Distribution Permittee shall register with the City each location within the City where Cannabis and Cannabis Products are stored for purposes of Distribution activities within the City.
(g) A Distribution Permittee shall Distribute Cannabis and Cannabis Products to Cannabis Permittees only after such Cannabis and Cannabis Products have been inspected and quality tested in accordance with applicable State Law, including MAUCRSA.
(h) A Distribution Permittee may also hold any other Permit type to the extent permitted by State Law. To the extent permitted by State law, a Distribution Permittee that also holds another Permit type may self-distribute its Cannabis Products.

5.20.140 Medicinal Cannabis and Cannabis Products Microbusiness. (a) Purpose. The purpose and intent of this Section is to permit and regulate the medicinal Cannabis and Cannabis Products Microbusiness in order to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law, including MAUCRSA.
(b) Scope; Medicinal Cannabis Only. This Section permits and regulates Microbusinesses, pursuant to State Law, including MAUCRSA. Subject to the terms of this Chapter, Microbusiness Permits may be issued by the City pursuant to and in accordance with State Law, including MAUCRSA. (c) All Microrobusinesses shall require a Development Agreement with the City and must be located within the applicable Permit Zone.
(d) All components of a Microbusiness (i.e., Cultivation, Manufacturing, etc.) must be in compliance with the provisions of this Chapter and State Law, including MAUCRSA.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 43 of 329 Page 1105 of 4584 (e) The City may authorize the smoking, vaporizing, and ingestion of Cannabis or Cannabis Products on the Premises of a Microbusiness if all of the following are met:
(1) Access to the area where Cannabis consumption is allowed is restricted to persons 21 years of age and older.
(2) Cannabis consumption is not visible from any public place or nonagerestricted area. (3) Sale or consumption of alcohol or tobacco is not allowed on the Premises.

5.20.140 Medicinal Cannabis and Cannabis Products Testing. (a) Purpose. The purpose and intent of this Section is to permit and regulate the Testing of medicinal Cannabis and Cannabis Products in order to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City intends to be on the forefront of medicinal Cannabis research and Testing. The City is authorized to regulate this activity pursuant to State Law.
(b) Scope; Medicinal Cannabis Only. This Section permits and regulates Cannabis and Cannabis Products Testing, pursuant to State Law, including MAUCRSA. Subject to the terms of this Chapter, Testing Permits may be issued by the City for the Testing of medicinal Cannabis and Cannabis Products pursuant to and in accordance with State Law, including MAUCRSA. (c) Testing of Cannabis and Cannabis Products requires a Development Agreement with the City and must be located within the applicable Permit Zone. (d) Each Testing Permittee must employ at least one (1) full time quality control personnel employee.
(e) Testing Permittees must operate, and all Cannabis and Cannabis Products must be properly tested by Testing Permittees, in accordance with applicable State Law.
(f) All Testing devices used by a Testing Permittee must be "UL listed," and/or otherwise approved for the intended use by the City's Building Official, the Fire Department or other person designated by the City Manager or designee. (g) Each Testing Permittee must notify the State Department of Public Health and the City Manager, or the City Manager's designee, within one business day after the receipt of notice of any kind that its accreditation has been denied, suspended, or revoked.

SECTION 10. Recognizing that there is a potential conflict between federal and State law, it is the City Council's intention that this Ordinance shall be deemed to comply with applicable State Law and shall defer to such applicable State Law through preemption.

SECTION 11. The City Council determines that it is in the best interest of the residents of the City to allow Commercial Cannabis Activities in compliance with applicable State Law, including MAUCRSA, to be established and operated as permitted uses within certain areas of the City subject to the regulations and restrictions provided in this

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Administrative Record - Review Hearing for Genius Distribution, LLC Page 44 of 329 Page 1106 of 4584 Ordinance. It is the City Council's intention that nothing in this Ordinance shall be construed to:

1. Allow a Person to engage in conduct that endangers others or causes a public nuisance.

2. Allow any activity relating to Cannabis that is otherwise not permitted under State law.

SECTION 12. The City Council finds that the actions contemplated by this Ordinance are exempt from the California Environmental Quality Act pursuant to Section 15061 (b )(3) and 15305 of the Guidelines, in that the Ordinance alone does not have the potential for causing a significant effect on the environment. Further permits and approvals will be required before any activity that will affect the environment will be permitted. In addition, Business and Professions Code Section 26055 exempts local ordinances from CEQA that authorizes commercial cannabis activity through discretionary review and approval.

SECTION 13. If any section or provision of this Ordinance is for any reason held to be invalid, unconstitutional, illegal, or unenforceable by any court of competent jurisdiction, or contravened by reason of any preemptive legislation, then such section or provision shall be severed and shall be inoperative, and the remainder of this Ordinance shall remain in full force and effect.

SECTION 14. By regulating Commercial Cannabis Activity, the City is only undertaking to preserve the general welfare through implementing the MAUCRSA. The City Council is not assuming, nor is it imposing on its officers and employees, an obligation for which a breach thereof would expose the City to liability in money damages to any Person who claims that such breach proximately caused injury. To the fullest extent permitted by law, the City shall assume no liability whatsoever, and expressly does not waive sovereign immunity, with respect to any provision of this Ordinance or for the activities of any Cannabis Permittee. To the fullest extent permitted by law, any actions taken by a public officer or employee under the provisions of this Ordinance shall not become a personal liability of any public officer or employee of the City. Nothing in this Ordinance shall be deemed or considered in any respects to constitute authorization to violate any law.

SECTION 15. Inconsistent Provisions. Any provision of the Cudahy Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to the extent necessary to implement the provisions of this Ordinance.

SECTION 16. Severability. If any section, subsection, subdivision, paragraph, sentence, clause or phrase of this Ordinance, or any part thereof is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance or any part thereof. The City Council hereby declares that it would have passed each section, subs,ection, subdivision, paragraph, sentence, clause or phrase thereof,

Administrative Record - Review Hearing for Genius Distribution, LLC Page 45 of 329 Page 1107 of 4584 irrespective of the fact that any one or more section, subsection, subdivision, paragraph, sentence, clause or phrase would be subsequently declared invalid or unconstitutional.

SECTION 17. Publication and Effective Date. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The City Clerk shall cause the same to be published once in a newspaper of general circulation within fifteen (15) days after its adoption. This Ordinance shall become effective thirty (30) days after adoption.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Cudahy at the / ." ,_, regular meeting of this 11th day of September, 2017. ,.,_,,,_ /4. ~VY

STATE OF CALIFORNIA

COUNTY OF LOS ANGELES

CITY OF CUDAHY
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Chris Garcia
Mayor
I, Richard Iglesias, Deputy City Clerk of the City of Cudahy, hereby certify that the foregoing Ordinance No. 673 was introduced for a first reading on the 14th day of August 2017 and approved for a second reading and adopted by said Council at its regular meeting held on the 11th day of September, 2017 by the following vote, to-wit:

AYES: Markovich, Hernandez, Garcia
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NOES: Guerrero
ABSTAIN: None
ABSENT: Sanchez
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Richard lgles~a~ / 7 · · · ·-:---___ __
Deputy City B r:I<
Administrative Record - Review Hearing for Genius Distribution, LLC Page 46 of 329 Page 1108 of 4584 EXHIBIT "A": OVERLAY ZONE
IIABI! NA~ l'!ATIJRl!B
,-.... I._.J Cuclohy Boundary
-Railroad, EXISTING ZONING - Boundaries of Overlay Zone .,r Portion of High Density Residential Zone which shall be available for Medicinal Commercial Cannabis Activity upon rezoning by the City Council by General Plan Amendment, Zoning Map Amendment, or other means.

CUDAHY GENERAL PLAN
Administrative Record - Review Hearing for Genius Distribution, LLC Page 47 of 329 Page 1109 of 4584 ATTACHMENT B.

City Council Resolution No. 18-17
Administrative Record - Review Hearing for Genius Distribution, LLC Page 48 of 329 Page 1110 of 4584 RESOLUTION NO.18-17

A RESOLUTION OF THE CITY COUNCIL OF THE

CITY OF CUDAHY, CALIFORNIA, APPROVING THE
ISSUANCE OF COMMERCIAL CANNABIS PERMIT NO. CCPlS0019 (LOCATION: 4916 CECILIA STREET, APPLICANTS:

CUPER DEVELOPMENT, THE 420 CLUB, GENIUS DISTRIUTION,

GO CUDAHY, DANIEL AND GOLIATH, DAVINA, HERBAL
DRAGON).

WHEREAS, to strengthen the public planning process, encourage private participation in comprehensive planning and reduce the economic risk of development, the Legislature of the State of California adopted Section 65864 et seq. of the California Government Code (the Development Agreement Statute"); and
WHEREAS, the Development Agreement Statute authorizes the City to enter into a property development agreement with any person having legal or equitable interest in real property for the development of such property in order to establish certain development rights; and WHEREAS, in accordance with California law, the City of Cudahy has adopted Municipal Code Chapter 20.28 (Development Agreements) establishing the procedures and requirements for the consideration of development agreement with the City; and WHEREAS, on September 11, 201 7, the City Council for the City of Cudahy passed Ordinance No. 673 establishing regulations and a discretionary review process for the allowance of medicinal-only commercial cannabis activities ( cultivation, distribution, manufacturing, deliveries, micro-business and laboratory testing) in a specified Overlay Zone through a development agreement; and
WHEREAS, all procedures of the California Environmental Quality Act ("CEQA"), California Public Resources Code §21000 et seq., and the CEQA guidelines, title 14 of the California Code of Regulations, chapter 3, §15000 et seq. have been satisfied. The City has found that the proposed Project is Categorically Exempt from California Environmental Quality Act (CEQA) requirements under provisions of CEQA Guidelines Section 15301 -Existing Facilities.

This exemption applies to projects characterized as alterations to existing facilities meeting the conditions described in Section 15301;
WHEREAS, the City of Cudahy Planning Commission ("Planning Commission") conducted a properly noticed public hearing to consider approval of a Commercial Cannabis Permit and a Development Agreement, at which testimony and evidence, both written and oral, were presented to and considered by the Planning Commission; and WHEREAS, the City Council shall approve a development agreement by ordinance; and WHEREAS, subsequent to receipt of the recommendation of the Planning Commission, the City Council conducted a properly noticed public hearing to consider the approval of a Commercial Cannabis Permit No. CCP18-0019 and Development Agreement(s) Nos. DA18-019C, DA18-012C, DA18-016C, DA18-018C, DA18-020C, DA18-021C and DA18-022C, at which testimony and Administrative Record - Review Hearing for Genius Distribution, LLC Page 49 of 329 Page 1111 of 4584 Resolution No. 18-17

evidence, both written and oral, were presented to and considered by the City Council.

NOW THEREFORFE, THE CITY COUNCIL OF THE CITY OF CUDAHY
DOES HEREBY RESOLVE, DECLARE AND DETERMINE AS FOLLOWS:

SECTION 1. RECITALS
That the above Recitals are true and correct and are incorporated as though fully set forth herein.

SECTION 2. APPROVAL OF COMMERCIAL CANNABIS PERMIT
That the City Council hereby approves Commercial Cannabis Permit No. CCP18-0019, subject to the terms and conditions stated therein, to allow a Commercial Cannabis Facility for the Site located at: 4916 Cecilia Street. A copy of the permit is attached hereto and incorporated herein by this reference as Exhibit "A." The Commercial Cannabis Permit shall be issued upon execution by the City of a Development Agreement for the Site.

SECTON3. SEVERABILITY
That the City Council declares that, should any provision, section, paragraph, sentence or word of this Resolution be rendered or declared invalid by any final court action in a court of competent jurisdiction or by reason of any preemptive legislation, the remaining provisions, sections, paragraphs, sentences or words of this Resolution as hereby adopted shall remain in full force and effect.

PASSED, APPROVED, AND ADOPTED by the City Counc~f the City regular meeting on this 15th day of May, 2018. / /
ATTEST:

Richard
Deputy City
Iglesias
Clerk
~
u.

Chris Garcia
Mayor
udahy at its
l
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STATE OF CALIFORNIA )

CERTIFICATION
COUNTY OF LOS ANGELES ) SS:

CITY OF CUDAHY )
I, Richard Iglesias, Deputy City Clerk of the City of Cudahy, do hereby certify that the above and foregoing Resolution No.18-17, signed by the Mayor and attested by the Deputy City Clerk at a meeting of said City Council of the City of Cudahy held on this 15th day of May 2018, and that said Resolution was adopted by the following votes to wit:

A YES: Markovich, Hernandez, and Garcia
NOES: None
ABSTAIN: None
ABSENT: Guerrero and Sanchez
Richard Iglesias
Deputy City Cl k
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EXHIBIT "A"

COMMERCIAL CANNABIS PERMIT

SEEATTACHMENT
[The Permit will be based upon the Staff Report with
Conditions of Approval and Issued in a Letter to Follow] Administrative Record - Review Hearing for Genius Distribution, LLC Page 52 of 329 Page 1114 of 4584 ATTACHMENT C.

CCP18-0019 Conditions of Approval
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CCP18-0019

CONDITIONS OF APPROVAL
COMMERCIAL CANNABIS PERMIT NO, CCP18-0019
DEVELOPMENT AGREEMENT NOS. DA18-012C, DA18-016C,
DA DA18-018C-DA18-022C
4916 CECLILA STREET - CUPER DEVELOPMENT, ET. AL.

GENERAL CONDITIONS OF APPROVAL
Condition of Approval No. 1 - Financial Responsibility for Compliance Monitoring and Enforcement
a. Cost Responsibilities: The Permittee shall bear the full costs of all City staff time, materials, and City-retained consultants associated with condition compliance review and monitoring, CEQA mitigation monitoring, other permit monitoring programs, and enforcement activities, actions, and processes conducted pursuant to the City of Cudahy Municipal Code (§ 5.20.060) related to this Commercial Cannabis Permit (CCP) and Development Agreement (DA). Such condition compliance review, monitoring and enforcement activities may include (but are not limited to): periodic site inspections; preparation, review, and approval of studies and reports; review of permit conditions and related records; enforcement hearings and processes; drafting and implementing compliance agreements; and attending to the modification, suspension, or revocation of permits. Costs will be billed at the rates set forth in the Planning Division or other applicable City Fee Schedule, and at the contract rates of City-retained consultants, in effect at the time the costs are incurred.

Establishment of Compliance Account: Within 10 calendar days of the effective date of the final decision approving this CCP, the Permittee shall submit a new, updated, and completed reimbursement agreement for Condition Compliance Case No. CCP18-0019 in a form provided by the City, obligating the Permittee to pay all condition compliance review, monitoring, and enforcement costs, and any civil administrative penalties, subject to the Permittee’s right to challenge all such charges and penalties prior to payment.
b. Billing Process: The Permittee shall pay all City invoices within 30 days of receipt thereof. Failure to timely pay an invoice shall subject the Permittee to late fees and charges set forth in the City Fee Schedule, and shall be grounds for suspension, modification, or revocation of this CCP. The Permittee shall have the right to challenge any charge or penalty prior to payment.

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Condition of Approval No. 2 - Defense and Indemnification a. The Permittee shall defend, at the Permittee's sole expense with legal counsel acceptable to the City, against any and all claims, actions, or proceedings against the City, any other public agency with a governing body consisting of the members of the City Board of Supervisors, or any of their respective board members, officials, employees and agents (collectively, “Indemnified Parties”) arising out of or in any way related to the City’s issuance, administration, or enforcement of this CUP. The City shall promptly notify the Permittee of any such claim, action or proceeding and shall cooperate fully in the defense.
b. The Permittee shall also indemnify and hold harmless the Indemnified Parties from and against any and all losses, damages, awards, fines, expenses, penalties, judgments, settlements, or liabilities of whatever nature, including but not limited to court costs and attorney fees (collectively, “Liabilities”), arising out of or in any way related to any claim, action or proceeding subject to subpart (a) above, regardless of how a court apportions any such Liabilities as between the Permittee, the City, and/or third parties.
c. Except with respect to claims, actions, proceedings, and Liabilities resulting from an Indemnified Party’s sole active negligence or intentional misconduct, the Permittee shall also indemnify, defend (at Permittee’s sole expense with legal counsel acceptable to City), and hold harmless the Indemnified Parties from and against any and all claims, actions, proceedings, and Liabilities arising out of, or in any way related to, the construction, maintenance, land use, or operations conducted pursuant to this CCP, regardless of how a court apportions any such Liabilities as between the Permittee, the City, and/or third parties. The City shall promptly notify the Permittee of any such claim, action, or proceeding and shall cooperate fully in the defense.
d. Neither the issuance of this CCP, nor compliance with the conditions hereof, shall relieve the Permittee from any responsibility otherwise imposed by law for damage to persons or property; nor shall the issuance of this CCP serve to impose any liability upon the Indemnified Parties for injury or damage to persons or property.

Condition of Approval No. 3 Relationship of CCP Conditions, Laws, and Other Entitlements
The Permittee shall implement the Project in compliance with all applicable requirements and enactments of federal, state, and local authorities. In the event of conflict between various requirements, the more restrictive requirements shall apply. In the event the City Manager determines that any CCP condition contained herein is in conflict with any other CPP condition contained herein, when principles of law do not provide to the contrary, the CCP condition most protective of public health and safety and environmental resources shall prevail to the extent feasible.

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No condition of this CCP for uses allowed by the City Municipal Code shall be interpreted as permitting or requiring any violation of law, lawful rules, or regulations, or orders of an authorized governmental agency. Neither the approval of this CPP, nor compliance with the conditions of this CPP, shall relieve the Permittee from any responsibility otherwise imposed by law for damage to persons or property.

The Permittee shall obtain a business tax certificate and regulatory licenses for the operation of Commercial Cannabis operations.

Condition of Approval No. 4 - Contact Person
PURPOSE: To establish a contact person responsible for responding to City and/or community complaints.

The Permittee shall designate a contact person(s) to respond to complaints from citizens and the City which are related to the permitted uses of this CUP.

The Permittee shall provide the City with the contact information (e.g., name and/or position title, address, business and cell phone numbers, and email addresses) of the Permittee’s Community Agent who receives all orders, notices, and communications regarding matters of condition and code compliance at the Project site.

Timing: Prior to the issuance of a Zoning Clearance for use inauguration, the Permittee shall provide the Planning Division the contact information of the Permittee’s field agent(s) for the Project file. If the address or phone number of the Permittee’s field agent(s) should change, or the responsibility is assigned to another person, the Permittee shall provide Planning Division staff with the new information in writing within three calendar days of the change in the Permittee’s field agent.

The Planning Division maintains the contact information provided by the Permittee in the Project file. The Planning Division has the authority to periodically confirm the contact information consistent with the requirements of this permit.

Condition of Approval No. 5 - Resolution of Complaints
PURPOSE: To establish a process to resolve complaints.

The following process shall be used to resolve complaints related to the Project:
a. The Permittee shall post the telephone number for the designated Contact Person as identified pursuant to Condition No. 4 in a visible location on the site. The Contact Person shall be available via telephone on a 24-hour basis. Persons with concerns about an activity as it is occurring may directly contact the Contact Person;

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b. If City staff receives a written complaint about the Project, the City Manager, or his designee, may contact the Permittee’s Contact Person or the Permittee to request information regarding the alleged violation; and
c. If, following a complaint investigation by City staff, a violation of the City Municipal Code or a condition of this CCP is confirmed, City staff may initiate enforcement actions, in accordance with City Municipal Code.

Condition of Approval No. 6 - Reporting of Major Incidents PURPOSE: To ensure that the Planning Director is notified of major incidents associated with, or resulting from, the Project, he Permittee shall immediately notify the Planning Director by telephone, email, FAX, and/or voicemail of any incidents (e.g., fires, explosions, spills, landslides, or slope failures) that could pose a hazard to life or property inside or outside the Project Site.

Upon request of any City, County or State regulatory agency, the Permittee shall provide a written report of any incident that shall include, but not limited to: a description of the facts of the incident; the corrective measures used, if any; and the steps taken to prevent a recurrence of the incident.

Timing: The Permittee shall provide the written report to the requesting agency and Planning Division within seven days of receiving the request.

The Planning Division maintains any documentation provided by the Permittee related to major incidents in the Project file.

Condition of Approval No. 7 - Change of Permittee
To ensure that the Planning Division is properly and promptly notified of any change of Permittee, the Permittee shall file, as an initial notice with the Planning Director, the new name(s), address(es), telephone/FAX number(s), and email addresses of the new owner(s), lessee(s), operator(s) of the permitted uses, and the company officer(s). The Permittee shall provide the Planning Director with a final notice once the transfer of ownership and/or operational control has occurred.

The initial notice must be submitted with the new Permittee’s contact information. The final notice of transfer must include the effective date and time of the transfer and a letter signed by the new Property Owner(s), lessee(s), and/or operator(s) of the permitted uses acknowledging and agreeing to comply with all conditions of this CCP.

Timing: The Permittee shall provide written notice to the Planning Director 10 calendar days prior to the change of ownership or change of Permittee. The Permittee shall provide the final notice to the Planning Director within 15 calendar days of the effective date of the transfer.

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The Planning Division maintains notices submitted by the Permittee in the Project file and has the authority to periodically confirm the information consistent with the requirements of this permit.

COMMERCIAL CANNABIS CULTIVATION (ORD. 673, SEC 5.20.100) PURPOSE: The purpose and intent of this section is to permit and regulate the commercial Cannabis Cultivation in order to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law.

Condition of Approval No. 8 - Cultivation Operating Fees.

Operator/Permittee must pay all operating fees as stipulated within Development Agreement No. DA18-018C and DA18-019C.

Condition of Approval No. 9 – Outdoor Cultivation.

Outdoor Cultivation is prohibited within the City.

Condition of Approval No. 10 – Indoor Cultivation.

Indoor Cultivation is permitted only on properties within the applicable Permit Zone with a valid Cultivation Permit and other requisite permits and entitlements. Indoor Cultivation may include growing Cannabis plants, harvesting Cannabis plants, and drying Cannabis flowers but shall not include the Manufacturing or of Cannabis Products, unless otherwise authorized pursuant to this Chapter.

Condition of Approval No. 11 – Cultivation Security Control.

Entrance to the Cultivation area, and all storage areas, of the applicable Premises shall be locked at all times and under the control of the staff of such Premises.

Prior to the issuance of a Zoning Clearance for Use Inauguration, the Permittee shall prepare and submit a security plan compliant with and applicable State Law, including MAUCRSA, to the City Manager, or his designee and obtain approval of said plan.

Condition of Approval No. 12 – Zoning and Land Use.

No new premises shall be established, developed, or operated within 600 feet of a Day Care Center, Youth Center, or public or private school providing ng K-12 instruction.

COMMERCIAL CANNABIS PRODUCTS MANUFACTURING (ORD. 673, SEC

5.20.110)
PURPOSE: The purpose and intent of this Section is to permit and regulate the commercial Cannabis Products Manufacturing to promote the health, safety, morals, and

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general welfare of the resident and businesses within the City. The City is authorized to regulate this activity pursuant to State Law.

Condition of Approval No. 13 - Manufacturing Operating Fees.

Operator/Permittee must pay all operating fees as stipulated within Development Agreement Nos. DA18-019C, DA18-021C and DA18-022C.s
Condition of Approval No. 14 – Manufacturing Properties.

Commercial Cannabis Products Manufacturing is a permitted use only on properties within the applicable Permit Zone with a valid Cultivation Permit and other requisite permits and entitlements.

Condition of Approval No. 15 – Quality Control Employee.

The Permittee must employ at least one (1) member of its personnel dedicated full time to quality control.

Condition of Approval No. 16 – Standard Operating Procedures and Batch Record.

The Manufacturing Permittee must establish standard operating procedures and batch record that comply with current good manufacturing practices and applicable State Law, including MAUCRSA.

Condition of Approval No. 17 – Labeling and Packaging.
a) All Cannabis Products produced by a Manufacturing Permittee must be packaged in child resistant containers prior to leaving the Premises for such Manufacturing Permittee in accordance with applicable State Law, including MAUCRSA. b) All Cannabis Products produced by a Manufacturing Permittee must be labeled in compliance with applicable State Law, including MAUCRSA. c) Labeling Requirements – Edibles
i. Before a Manufacturing Permittee prepares any edible Cannabis or edible Cannabis Product for retail sale, it shall be labeled and placed in tamperevident packaging which at least meets the requirements of State Law, including, but not limited to, MAUCRSA.
ii. All items to be sold or distributed shall be individually wrapped at the original point of preparation by the Cannabis Permittee.
iii. Labeling must include a warning if nuts or other known allergens are used and must include the total weight (in ounces or grams) of Cannabis in the package, not to exceed ten (10) milligrams of tetrahydrocannabinol (THC) per serving.
iv. A warning that the item is a medication and not a food must be clearly legible on the front of the package and/or must comply with state packing requirements.
v. The package must have a label warning that the product is to be kept away from children.

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vi. The label must also state that the product contains Cannabis and must specify the date of Manufacture and the Manufacture Permittee’s information, including, but not limited to, address, and phone number. vii. Distribution must be in a properly labeled opaque package when distributed. viii.The City Manager, or designee, may impose additional packaging and labeling requirements on Cannabis or Cannabis Products.

Condition of Approval No. 18 – Use of Solvents.
a) Manufacturing Permittees may conduct Manufacturing using any type of solvents, including Volatile Solvents, or Manufacturing processes if such Manufacturing complies with the requirements of this Chapter and State or local law, including but not limited to Health and Safety Code Section 11362.775 (or any successive State Law) all applicable fire and building codes in the City and any other laws of the City designed to ensure the safety of such operation.
b) Manufacturing Permittees using Volatile Solvents for Manufacturing Cannabis Products must operate in a manner to reduce the risk of explosion or danger to public health, including through the use of a close-loop or solvent dispersion system consistent with the requirements of Health and Safety Code Section 11362.775 (or any successive State Law).

Condition of Approval No. 19 – Use of Hazardous and Flammable Materials.

If hazardous materials, flammable gas, flammable liquefied gas, flammable and combustible liquids, or other flammable material, as those terms are defined in California Fire Code Section 202, are to be used in the processing of commercial Cannabis, then the provisions of California Fire Code Section 407 shall be applicable where hazardous materials are subject to permits under California Fire Code Section 50 (Hazardous Materials) are located on the Premises or where required by the applicable building or fire official.

Timing: Prior to the issuance of a Temporary/Certificate of Occupancy, the Permittee must obtain LA County Fire Approval for site design, water and access, and hazardous materials.

Condition of Approval No. 20 – Compressed Gases.

Storage, use, and handling of compressed gases in compressed gas containers, cylinders, tanks, and systems shall comply with California Fire Code Chapter 53. Partially full compressed gas containers, cylinders, or tanks containing residual gases shall be considered as full for the purposes of the controls required. Compressed gases classified as hazardous materials shall also comply with California Fire Code Chapter 50 for general requirements and California Fire Code Chapter 53 addressing specific hazards, including California Fire Code Chapter 58 (Flammable Gases), California Fire Code Chapter 60 (Highly Toxic and Toxic Materials), California Fire Code Chapter 63 (Oxidizers, Oxidizing Gases and Oxidizing Cryogenic Fluids, and California Fire Code Chapter 64 (Pyrophoric

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Materials). Prevention, control, and mitigation of dangerous conditions related to storage, use, dispensing, mixing, and handling of flammable and combustible liquids shall be in accordance with California Fire Code Chapters 50 and 57.

Timing: Prior to the issuance of a Temporary/Certificate of Occupancy, the Permittee must obtain LA County Fire Approval for site design, water and access, and hazardous materials.

COMMERCIAL CANNABIS AND CANNABIS PRODUCTS RETAIL DELIVERY (ORD. 673, SEC 5.20.120)
PURPOSE: The purpose and intent of this Section is to regulate the Retail Delivery of commercial Cannabis and Cannabis Products in order to promote the health, safety, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to the State Law.

Condition of Approval No. 21 – Retail Delivery Operating Fees.

Operator/Permittee must pay all operating fees as stipulated within Development Agreement Nos DA18-012C and DA18-020C.

Condition of Approval No. 22 – Retail Delivery Permitted Use Locations.

Retail Delivery of Cannabis and Cannabis Products is a permitted use only on properties within the applicable Permit Zone with a valid Retail Delivery Permit and other requisite permits and entitlements.

Condition of Approval No. 23 – Retail Delivery Customers.

The Retail Delivery of commercial Cannabis and Cannabis Products may only include the Retail Delivery of Cannabis and Cannabis Products by a Retail Delivery Permittee to a customer, patient or primary caregiver, in accordance with State Law, including MAUCRSA.

Condition of Approval No. 24 – Retail Delivery Security. a) Retail Delivery Permittees shall implement sufficient security measures to both deter and prevent unauthorized entrance into areas containing Cannabis and Cannabis Products and theft of Cannabis and Cannabis Products from the Retail Delivery Establishment or employees participating in Retail Delivery. b) All Cannabis and Cannabis Products shall be stored in a secured and locked room, safe, or vault, and in a manner as to prevent diversion, theft, or loss.

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Condition of Approval No. 25 – Retail Delivery Premises.

Individuals shall not be allowed to remain on the Premises comprising of the Retail Delivery Establishment unless they are engaging in activity expressly related to the operations of the Retail Delivery Establishment or are a customer.

Condition of Approval No. 26 – Retail Delivery 24 Hour Notifications.

A Retail Delivery Permittee shall notify the City Manager or the City Manager’s designee within 24 hours of discovering any of the following:
a) Significant discrepancies identified during inventory. The level of significance shall be determined by the City Manager or the City Manager’s designee. b) Diversion, theft, loss, or any criminal activity involving the Retail Delivery Establishment or any agent or employee of the Retail Delivery Establishment. c) The loss or unauthorized alteration of records related to Cannabis, Cannabis Products, registered qualifying patients, primary caregivers, or Retail Delivery Establishment agents or employees.
d) Any other material breach of security.

Condition of Approval No. 27 – Retail Delivery Compliance.

The Retail Delivery of commercial Cannabis and Cannabis Products shall comply with all State and local Law, including all laws requiring presentment of government-issued identification card, physician's recommendation, or commercial Cannabis identification card at the time of initial purchase.

Condition of Approval No. 28 – Retail Delivery Physician Recommendation Verification.

With respect to commercial Cannabis, physicians' recommendations for commercial cannabis use shall be verified by a Retail Delivery Permittee prior to the Retail Delivery any commercial Cannabis to a qualified patient or primary caregiver and at least every six months thereafter.

Condition of Approval No. 29 – Retail Delivery Physician Employment.

A Retail Delivery Establishment may not employ or enter into any agreements with any physicians who recommend commercial Cannabis; Physician Services are prohibited from any and all Retail Delivery Establishments.

Condition of Approval No. 30 – Retail Delivery Inspection, Quality Testing and Quality Assurance.
a) A Retail Delivery Permittee shall inspect all Cannabis and Cannabis Products received for quality assurance prior to the Retail Delivery to any Person. b) The Retail Delivery of Cannabis and Cannabis Products shall occur only after such Cannabis and Cannabis Products have been inspected and quality tested in accordance with applicable State Law, including MAUCRSA.

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Condition of Approval No. 31 – Retail Delivery Monthly Inventories.

Each Retail Delivery Establishment shall do regular monthly inventories and record the total quantity of Cannabis and Cannabis on the Premises. These records shall be maintained for three years from the date created and shall be open to inspection by the City Manager, the City Manager's Designee, and law enforcement.

Condition of Approval No. 32 – Retail Delivery Registration.

A Retail Delivery Permittee shall register with the City each location where Cannabis or Cannabis Products are stored for purposes of Retail Delivery by such Retail Delivery Permittee within the City.

Condition of Approval No. 33– Retail Delivery Business Records.

A Retail Delivery Establishment shall maintain customer and patient and other business records in a secure location (including electronically or cloud-based) that is compliant with, as applicable, HIPAA and other federal and state privacy laws.

Condition of Approval No. 34 – Retail Delivery Vehicle Driver Documents.

During the Retail Delivery of Cannabis or Cannabis Products, each vehicle driver shall carry a copy of the Retail Delivery Permit, a copy of the Retail Delivery request, a form of government-issued identification, and all other information required by State and local Law. The driver shall present these documents upon the request of law enforcement, the City Manager, or the City Manager's designee.

Condition of Approval No.35 – Retail Delivery Labeling and Packaging.

Prior to Retail Delivery of Cannabis and Cannabis Products, such Cannabis and Cannabis Products shall be labeled and placed in a tamper-evident package. Labels and packages of Cannabis and Cannabis Products shall, at minimum, meet the requirements specified under State Law, including MAUCRSA.

Condition of Approval No. 36 – Retail Delivery Requirements.

All Retail Delivery vehicles shall:
a) Be equipped with, and utilize, a vehicle alarm system. b) Have and utilize a direct communication system with the related Retail Delivery Establishment.
c) Keep all Cannabis and Cannabis Products in a secure and locked container. d) Have an internal partition between the driver and all passengers from the Cannabis and Cannabis Products storage containers that prevents access by the driver and passengers to all cannabis products from inside the vehicle. e) Not carry more Cannabis and Cannabis Products than allowed by State and local Law and required to fulfill all immediate Retail Delivery requests f) Not display any logo, signage, or other information that identifies, advertises, or lists the services or the products offered.

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COMMERCIAL CANNABIS AND CANNABIS PRODUCTS DISTRIBUTION (ORD. 673, SEC 5.20.130)
PURPOSE: The purpose and intent of this Section is to permit and regulate the Distribution of Cannabis and Cannabis Products between Cannabis Permittees in order to promote the health, safety, morals, and general welfare of the residents and businesses within the City. The City is authorized to regulate this activity pursuant to State Law.

Condition of Approval No. 37 - Distribution Operating Fees.

Operator/Permittee must pay all operating fees as stipulated within Development Agreement No. DA18-016C and DA18-019C.

Condition of Approval No. 38 – Distribution Development Agreement and Location.

Distribution of Cannabis and Cannabis Products requires a Development Agreement with the City and must be located within the applicable Permit Zone.

Condition of Approval No. 39 - Distribution Activities.

Distribution activities includes the receiving and releasing of Cannabis and Cannabis Products for inspection, Testing, and quality assurance, as required under applicable State Law and such other activities as are permitted pursuant to State Law.

Condition of Approval No. 40 – Distribution Customers.

A Distribution Permittee shall only Distribute Cannabis and Cannabis Products between Cannabis Permittees or to facilities or portions of facilities wholly controlled by such Distribution Permittee to the extent permitted by State Law.

Condition of Approval No. 41 – Distribution Quality Assurance. a) A Distribution Permittee shall inspect all Cannabis and Cannabis Products received by it for quality assurance prior to Distributing to any Cannabis Permittee, as required under applicable State Law.
b) A Distribution Permittee shall Distribute Cannabis and Cannabis Products to Cannabis Permittees only after such Cannabis and Cannabis Products have been inspected and quality tested in accordance with applicable State Law, including MAUCRSA.

Condition of Approval No. 42 – Distribution Registration.

A Distribution Permittee shall register with the City each location within the City where Cannabis and Cannabis Products are stored for purposes of Distribution activities within the City.

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Condition of Approval No. 43 – Multiple Permit Types.

A Distribution Permittee may also hold any other Permit type to the extent permitted by State Law. To the extent permitted by State law, a Distribution Permittee that also holds another Permit type may self-distribute its Cannabis Products.

OTHER OPERTIONAL CONDITIONS
PURPOSE: To ensure compliance with all applicable City, State and other regulatory agency requirements.

Condition of Approval No. 44 – Final Floor Plan Approval PURPOSE: To ensure Operators perform all proposed Tenant Improvements timely and applicable City fees are assessed accurately pursuant to the proposed project request.

Permittee must submit to and obtain approval from the City Manager, or his designee, on all proposed Final Floor Plans. Final Floor Plan must address odor control, waste management, waste water filtration and all other operational information requested by the City.

All Final Floor Plans shall be stamped and dated by the Planning Department upon approval. Changes to the floor plan design or other elements (including, but not limited to security, fire or hazmat details) require administrative approval by the Planning Department, prior to any construction activity or Building Permit Issuance.

Timing: Prior to Zoning Clearance for Use Inauguration, Permittee shall prepare and submit a Final Floor Plan which demonstrates compliance with all City and State Commercial Cannabis regulations.

Condition of Approval No. 45 – Payment of Development Agreement Fees Operator(s) must pay all required DA fees in accordance with DA terms. Failure to pay fees, as assessed by the City Manager, will constitute a breach of the DA and may result in suspension or immediate revocation of the DA.

Condition of Approval No. 46 – Additional Plans and Approvals Purpose: To ensure all Commercial Cannabis facilities meet the development standards of the zoning code, policies, goals and programs of the general plan and City economic development activities—including City beautification and future public improvement projects.

A. Landscape Plan – The Operator must submit a landscaping plan, designed by a licensed landscape architect or arborist. The plan must include a fivefoot landscaped dedication measured from the property line, as illustrated on the approved Site Plan. The plan must include drought tolerant desert plants, approved by the City.

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B. Fencing Plan – Fencing must be provided along the front perimeter of all Commercial Cannabis facilities. Fencing may be constructed between 8 feet and 10 feet in the front and up to 15 feet in the back.

Materials: Corrugated metal, wrought iron, concrete and block wall are all allowed materials. Alternative materials may be allowed with City approval. Chain-link and razor wire are strictly prohibited.

Fences may be required to be constructed 5 feet from the property line to allow for future City improvements. All fencing plans must be submitted to and approved by the City prior to construction.

C. Façade Improvement Plan - All new Commercial Cannabis facilities must submit a Façade Improvement Plan for City approval. The plan must include new paint, siding or other building improvement materials, in a color scheme approved by the City. Plans must also include new paving, as needed, parking striping, and other site improvements, as determined by the City.

D. LA County Public Health Permit – The Operator must submit obtain a Cannabis Public Health Permit from the Los Angeles County Public Health.

E. City Business License – All operators must file for a City business license to conduct business within the City, pay all required business license fees and obtain a City Business License prior to conducting sales transactions in the City.

Timing: Prior to Building Permit, all plans and agency permits must be secured by the Operator(s).

Condition of Approval No. 47 – Site Maintenance
PURPOSE: To ensure that the Project site is maintained in a neat and orderly manner so as not to create any hazardous conditions or unsightly conditions which are visible from outside of the Project site.

The Permittee shall maintain the Project site in a neat and orderly manner, and in compliance with the Project description. Only equipment and/or materials which the City Manager, or his designee, determines to substantially comply with the Project description shall be stored within the Project site during the life of the Project.

The Permittee shall maintain the Project site in compliance with Condition No. 1 and the approved plans for the Project.

Monitoring and Reporting: The City Building Inspector, City Cannabis Enforcement staff, or Planning Department staff have the authority to conduct periodic site inspections to ensure the Permittee’s ongoing compliance with this condition.

Planning Commission Hearing – April 30, 2018
CCP18-0019
Condition of Approval No. 48 – Commercial Cannabis Permit (CCP) Modification Prior to undertaking any operational or construction-related activity which is not expressly described in these conditions, the Permittee shall first contact the City Manager, or his designee, to determine if the proposed activity requires a modification of this CCP. The City Manager may, at his sole discretion, require the Permittee to file a written and/or mapped description of the proposed activity in order to determine if a permit modification is required.

Condition of Approval No. 49 - Construction Activities
Prior to any construction, the Permittee shall obtain a Zoning Clearance for construction from the Planning Division and a Building Permit from the Building and Safety Division.

Condition of Approval No. 50 - Acceptance of Conditions and Schedule of Enforcement Responses
The Permittee’s acceptance of this CCP and/or commencement of construction and/or operations under this CCP shall constitute the Permittee’s formal agreement to comply with all conditions of this CCP. Failure to abide by and comply with any condition of this CCP shall constitute grounds for enforcement action provided in the City Municipal Code which shall include, but is not limited to, the following:
a. Public reporting of violations to the Planning Commission and/or City Council; b. Suspension of the permitted land uses;
c. Modification of the CCP conditions listed herein;
d. Recordation of a “Notice of Noncompliance” on the deed to the subject property; e. The imposition of civil administrative penalties; and/or f. Revocation of this CUP.

The Permittee is responsible for being aware of and complying with the CCP conditions and all applicable federal, state, and local laws and regulations. In the event of any actual and direct conflict between these Conditions of Approval and the terms of the approved Development Agreement, the terms of the Development Agreement shall control and take precedence.

Condition of Approval No. 51. - Time Limits
A. Use inauguration: The approval decision for this CCP becomes effective upon the expiration of the 15-day appeal period following the approval decision, or when any appeals of the decision are finally resolved. Once the approval decision becomes effective, the Permittee must obtain a Zoning Clearance for Use Inauguration to initiate the land uses set forth herein. i. This CCP shall expire and become null and void if the Permittee fails to obtain a Zoning Clearance for use inauguration within 90 days –from the date the approval decision of this CCP becomes effective. The City

Planning Commission Hearing – April 30, 2018
CCP18-0019
Manager may grant an extension of time to the Permittee in order to obtain the Zoning Clearance for use inauguration if the Permittee can demonstrate to the satisfaction of the City Manager that the Permittee has made a diligent effort to implement the Project, and the Permittee has requested the time extension in writing at least 30 days prior to 90- day expiration date.
ii. Within 90 days of the permit effective date, the Permittee must complete construction of Phase I, as indicated on the approved Final Floor plan and obtain a Temporary Certificate of Occupancy from the City Building Department. The City Manager may grant an extension of time to the Permittee to obtain the Zoning Clearance for use inauguration if the Permittee can demonstrate to the satisfaction of the City Manager that the Permittee has made a diligent effort to implement the Project iii. Within 180 of the permit effective date, the Permittee must complete all Tenant Improvements and construction as indicated on the approved Final Floor Plan and obtain a Certificate of Occupancy from the City Building Department. The City Manager may grant an extension of time to the Permittee to obtain the Zoning Clearance for construction if the Permittee can demonstrate to the satisfaction of the City Manager that the Permittee has made a diligent effort to implement the Project. iv. Prior to the issuance of the Zoning Clearance for construction or use inauguration, all fees and charges billed to that date by the City, as well as any fines, penalties, and sureties, must be paid in full. After issuance of the Zoning Clearance for Use Inauguration, any final billed processing fees must be paid within 30 days of the billing date or the City may revoke this CCP.

B Permit Life or Operations Period: This CCP will expire on April 30, 2028.

However, the Development Agreement contains terms and conditions for extending operations for an additional 10 years. The lack of additional notification of the expiration date provided by the City to the Permittee shall not constitute grounds to continue the uses that are authorized by this CCP after the CCP expiration date. The uses authorized by this CCP may continue after the CCP expiration date if:
(1) The Permittee has filed a permit modification application 90 days prior to April 30, 2018; and
(2) The City decision-maker grants the requested modification.

Planning Commission Hearing – April 30, 2018
CCP18-0019
The uses authorized by this CCP may continue during processing of a timely-filed modification application, at the City Managers sole discretion.

In the event of any actual and direct conflict between these Conditions of Approval and the terms of the approved Development Agreement, the terms of the Development Agreement shall control and take precedence. [end of conditions]

ATTACHMENT D.

Ordinance No. 678
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ORDINANCE NO. 678

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF

CUDAHY, CALIFORNIA, APPROVING THE DEVELOPMENT

AGREEMENT BY AND BETWEEN THE CITY OF CUDAHY AND
GENIUS DISTRIBUTION, [AN INDIVIDUAL, LIMITED LIABILITY
COMPANY, CORPORATION]
WHEREAS, to strengthen the public planning process, encourage private part1c1pation in comprehensive planning and reduce the economic risk of development, the Legislature of the State of California adopted Section 65864 et seq. of the California Government Code (the Development Agreement Statute"); and
WHEREAS, the Development Agreement Statute authorizes the City to enter into a property development agreement with any person having legal or equitable interest in real property for the development of such property in order to establish certain development rights; and WHEREAS, in accordance with California law, the City of Cudahy has adopted Municipal Code Chapter 20.28 (Development Agreements) establishing the procedures and requirements for the consideration of development agreement with the City; and WHEREAS, on September 11, 2017, the City Council for the City of Cudahy passed Ordinance No. 673 establishing regulations and a discretionary review process for the allowance of medicinal-only commercial cannabis activities ( cultivation, distribution, manufacturing, deliveries, micro-business and laboratory testing) in a specified Overlay Zone through a development agreement; and
WHEREAS, all procedures of the California Environmental Quality Act ("CEQA"), California Public Resources Code §21000 et seq., and the CEQA guidelines, title 14 of the California Code of Regulations, chapter 3, §15000 et seq. have been satisfied. The City has found that the proposed Project is Categorically Exempt from California Environmental Quality Act (CEQA) requirements under provisions of CEQA Guidelines Section 15301 - Existing Facilities.

This exemption applies to projects characterized as alterations to existing facilities meeting the conditions described in Section 15301;
WHEREAS, the City of Cudahy Planning Commission ("Planning Commission") conducted a properly noticed public hearing to consider the Development Agreement (as defined below), at which testimony and evidence, both written and oral, were presented to and considered by the Planning Commission; and
WHEREAS, the City Council shall approve a development agreement by ordinance; and WHEREAS, subsequent to receipt of the recommendation of the Planning Commission, the City Council conducted a properly noticed public hearing to consider the Development Agreement, at which testimony and evidence, both written and oral, were presented to and considered by the City Council.

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NOW THEREFORFE, THE CITY COUNCIL OF THE CITY OF CUDAHY
DOES ORDAIN AS FOLLOWS:

SECTION 1. RECITALS
That the above Recitals are true and correct and are incorporated as though fully set forth herein.

SECTION 2. APPROVAL OF DEVELOPMENT AGREEMENT
That the City Council hereby approves the Development Agreement By and Between the City of Cudahy and Genius Distribution, [an individual, limited liability company, corporation] ("Development Agreement"), a copy of which is attached hereto and incorporated herein by this reference as Exhibit "A," subject to the terms and conditions stated therein.

SECTION 3. SEVERABILITY
That the City Council declares that, should any provision, section, paragraph, sentence or word of this Ordinance be rendered or declared invalid by any final court action in a court of competent jurisdiction or by reason of any preemptive legislation, the remaining provisions, sections, paragraphs, sentences or words of this Ordinance as hereby adopted shall remain in full force and effect.

SECTION 4. EFFECTIVE DATE OF ORDINANCE
That this Ordinance shall take effect thirty (30) days after its second reading by the City Council.

SECTION 5. EFFECTIVE DATE OF DEVELOPMENT AGREEMENT
The Development Agreement shall not be executed by the City until on or after the effective date of the Ordinance.

SECTION 6. RECORDATION OF DEVELOPMENT AGREEEMENT
That the City Clerk is hereby directed to record the fully executed Development Agreement with the County Recorder for the County of Los Angeles no later than ten (10) days after its execution.

SECTION 7. CERTIFICATION
That the City Clerk shall certify to the passage of this Ordinance and shall cause the same to be published according to law.
2 l
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Ordinance No. 678
~Page 3 of 5
PASSED, APPROVED AND ADOPTED by the City Council of the City of Cudahy at its regular meeting of this 5th day of June, 2018.

ATTEST:
~ ~ -- Richard
Deputy City
Iglesias
Cler
~
3 Chris Garcia
Mayor
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l?age 4 -o:f 5

STATE OF CALIFORNIA

COUNTY OF LOS ANGELES

CITY OF CUDAHY
)
)
)

CERTIFICATION
SS:

I, Richard Iglesias, Deputy City Clerk of the City of Cudahy, hereby certify that the foregoing Ordinance No. 678 was introduced for a first reading on the 15th day of May, 2018 and approved for a second reading and adopted by said Council at its regular meeting held on the 5th day of June, 2018 by the following vote, to-wit:

A YES: Markovich, Hernandez, and Garcia
NOES: None
ABSTAIN: Sanchez
ABSENT: None
4 Richard Iglesias
Deputy City Cle
-
l
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EXHIBIT "A"

DEVELOPMENT AGREEMENT

BY AND BETWEEN

THE CITY OF CUDAHY

AND GENIUS DISTRIBUTION,
[AN INDIVIDUAL, LIMITED LIABILITY COMPANY, CORPORATION]

SEE ATTACHMENT
5 Administrative Record - Review Hearing for Genius Distribution, LLC Page 75 of 329 Page 1137 of 4584 ATTACHMENT E.

Development Agreement No. 18-016C
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ATTACHMENT F.

Exhibit A-F of Development Agreement
No. 18-016C
Administrative Record - Review Hearing for Genius Distribution, LLC Page 120 of 329 Page 1182 of 4584 EXHIBIT “A”

LEGAL DESCRIPTION

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PARCEL MAP

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LANDLORD CONSENT

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LEGAL DESCRIPTION

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PARCEL MAP

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LEASE

Administrative Record - Review Hearing for Genius Distribution, LLC Page 138 of 329 Page 1200 of 4584 STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE – NET

1. Basic Provisions (“Basic Provisions”)

1.1.Parties: This Lease (“Lease”), dated for reference purposes only April 11 2018 (“Effective Date”), is made by and between Cudahy Cecilia, LLC, a California limited liability company (“Lessor”) and Genius Grover Beach, LLC, a California limited liability company (“Lessee”), (collectively the “Parties”, or individually a “Party”).

1.2 Premises: That certain portion of the Building (as defined below), including all improvements existing therein or to be provided by Lessor under the terms of this Lease, if any, commonly known by the street address of 4916 Cecilia Street, Suite __, Cudahy, California 90201 (“Premises”) and comprising approximately 809 rentable square feet.

In addition to Lessee’s rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to the Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified, of the building containing the Premises (“Building”), which Building is comprised of approximately 69,800 rentable square feet. The Premises, the Building, the Common Areas, the land upon which they are located, are herein collectively referred to as the “Project.” (See also Paragraph 2)

1.3 Term: Approximately ten (10) years (“Original Term”), commencing upon the date that is two hundred ten (210) days following the Permit Date (“Commencement Date”) and ending on the last day of the full calendar month which is one hundred twenty (120) months thereafter (“Expiration Date”). (See also Paragraph 3)

1.4 Early Possession: April 15, 2018 (“Early Possession Date”). (See also Paragraphs 3.2 and 3.3)

1.5 Base Rent: Commencing upon the Commencement Date, Lessee shall pay monthly installments of Base Rent as follows: (See also Paragraph 4)
Period Base Rent Per Month
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1.6 Intentionally Omitted.

1.7 Base Rent and Other Monies Paid Upon Execution:
(a) Base Rent: for the first (1st) month of the Original Term. (b) Additional Rent: for the first (1st) month of the Original Term. (c) Initial Deposit: Initial Deposit”). (See also Paragraph 5) Total Due Upon Execution of this Lease:

1.8 Agreed Use: Agricultural and horticultural indoor cultivation and manufacturing facility, including extraction, conversion, assembly and packaging of cannabis, as permitted by and in compliance with any current and future State, city and local laws, rules, ordinances and regulations, as promulgated from time to time (the “Agreed Use”). Lessee shall be responsible for acquiring and maintaining all use and building permits, including all local and State of California industry-specific licenses, permits and/or any other requirements to operate the Agreed Use at the Premises. In the event it is determined by any court or legislature that the California statutes permitting marijuana cultivation or any other aspect of the Agreed Use are invalid, either party hereto shall have the right to terminate this Lease effective upon written notice delivered to the other party. Lessee agrees to cease any and all marijuana cultivation activities at the Premises upon receipt of notice from Lessor that the California laws permitting marijuana cultivation have been determined to have been preempted by Federal law. To the fullest extent permitted by law, Lessee shall indemnify Lessor for any and damages, claims, losses and liabilities arising due to, and absolve Lessor of any wrongdoing in the event of, the determination by such court or legislature that Federal law preempts such California statues. (See also Paragraph 6)

1.9 Real Estate Brokers: (See also Paragraph 15) The following real estate brokers (the “Brokers”) and brokerage relationships exist in this transaction (check applicable boxes): None.

1.10 Guarantor: Cuper Management LLC, a California limited liability company

2. Premises.

2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of size set forth in this Lease, or that may have been used in calculating Rent, is an approximation which the Parties agree is reasonable and any payments based thereon are not subject to revision whether or not the actual size is more or less.

2.2 Condition. Subject to Paragraph 3.3, Lessor will deliver the Premises to Lessee in their “as-is” “where-is” condition, without any representations or warranties whatsoever, on the Commencement Date or the Early Possession Date, whichever first occurs (“Start Date”).

2.3 Zoning. Lessor makes no representation with respect to the Agreed Use of the Premises or the fitness of the Premises for such Agreed Use. Lessee is responsible for determining whether or not all applicable laws, covenants and restrictions of record, regulations, and ordinances in effect on the Start Date (collectively, the “Applicable Requirements”), and especially the zoning, are appropriate for Lessee’s intended use, and acknowledges that past uses of the Premises may no longer be allowed.

2.4 Acknowledgements. Lessee acknowledges that: (a) it has been advised by Lessor and/or Brokers to satisfy itself with respect to the condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements and the Americans with Disabilities Act), and their suitability for Lessee’s Administrative Record - Review Hearing for Genius Distribution, LLC Page 140 of 329 Page 1202 of 4584 intended use, (b) Lessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, and (c) neither Lessor, Lessor’s agents, nor Brokers have made any oral or written representations or warranties with respect to said matters other than expressly as set forth in this Lease.

2.5 Civil Code Section 1938 Disclosure. Pursuant to California Civil Code Section 1938, Lessor hereby discloses that the Premises have not undergone an inspection by a Certified Access Specialist to determine whether the Premises meet all applicable construction-related accessibility standards. A Certified Access Specialist (“CASp”) can inspect the Premises and determine whether the Premises comply with all of the applicable construction-related accessibility standards under California law.

Although California law does not require a CASp inspection of the Premises, Lessor may not prohibit the Lessee from obtaining a CASp inspection of the Premises for the occupancy or potential occupancy of Lessee, if requested by Lessee. Lessor and Lessee shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the Premises.

2.6 Vehicle Parking. Lessee shall be entitled to use the parking area serving the Building on a nonexclusive basis. Said parking area shall be used for parking by vehicles used by or in connection with the businesses operating in the building (“Permitted Vehicles”). Lessor may regulate the loading and unloading of vehicles by adopting Rules and Regulations as provided in Paragraph 2.9. No vehicles other than Permitted Vehicles may be parked in the Common Area without the prior written permission of Lessor.
(a) Lessee shall not service or store any vehicles in the Common Areas. (b) If Lessee permits or allows any of the prohibited activities described in this Paragraph 2.6, then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

2.7 Common Areas—Definition. The term “Common Areas” is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Project and interior utility raceways and installations within the Premises that are provided and designated by the Lessor from time to time for the general non-exclusive use of Lessor, Lessee and other tenants of the Project and their respective employees, suppliers, shippers, customers, contractors and invitees, including parking areas, loading and unloading areas, trash areas, roadways, walkways, driveways and landscaped areas.

2.8 Common Areas—Lessee’s Rights. Lessor grants to Lessee, for the benefit of Lessee and its employees, suppliers, shippers, contractors, customers and invitees, during the term of this Lease, the non-exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Project. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to conduct business or store any property, temporarily or permanently, in the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor’s designated agent, which consent may be revoked at any time. In the event that any unauthorized storage shall occur then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove the property and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

2.9 Common Areas—Rules and Regulations. Lessee shall have the exclusive control and management of the Common Areas subject to the right of Lessor, from time to time, to establish, modify, Administrative Record - Review Hearing for Genius Distribution, LLC Page 141 of 329 Page 1203 of 4584 amend and enforce reasonable rules and regulations (“Rules and Regulations”) for the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the convenience of other occupants or tenants of the Building and the Project and their invitees, if any. Lessee agrees to abide by and conform to all such Rules and Regulations, and to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform.

Lessor shall not be responsible to Lessee for the non-compliance with said Rules and Regulations by other tenants of the Project.

2.10 Common Areas—Changes. As and when necessary, from time to time to maintain the Common Areas in good and clean condition, and in compliance with applicable law, Lessee shall have the right, at Lessee’s cost, to:
(a) Make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways and utility raceways; (b) Close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available;
(c) With Landlord’s prior written approval, designate other land outside the boundaries of the Project to be a part of the Common Areas;
(d) With Landlord’s prior written approval, add additional buildings and improvements to the Common Areas;
(e) Use the Common Areas while engaged in making additional improvements, repairs or alterations to the Project, or any portion thereof; and (f) Prior to exercising any of its rights under this Paragraph 2.10 that may impact other tenants’ use or occupancy of the Project, Lessee shall give Lessor reasonable notice of the action to be taken, and shall use reasonable efforts to cooperate with Lessee to minimize the impact of such actions upon such other tenants’ use and occupancy of the Project.

3. Term.

3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3.

3.2 Early Possession. If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent and Additional Rent shall be abated for the period of such early possession. All other terms of this Lease shall, however, be in effect during such period.

Any such early possession shall not affect the Expiration Date, provided that Lessee shall in no event commence business operations from the Premises prior to obtaining the Permits.

3.3 Delay In Possession. Lessor agrees to use its best commercially reasonable efforts to deliver possession of the Premises to Lessee by the Early Possession Date. If, despite said efforts, Lessor is unable to tender possession as agreed for any reason other than events of force majeure, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease. Lessee shall not, however, be obligated to pay Rent until it receives possession of the Premises.

3.4 Lessee Compliance. Lessor shall not be required to tender possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease from and after the Start Date (except that the payment of Base Rent shall commence upon the Commencement Administrative Record - Review Hearing for Genius Distribution, LLC Page 142 of 329 Page 1204 of 4584 Date), notwithstanding Lessor’s election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied.

3.5 Contingency to Effectiveness. As of the Effective Date, Lessee shall use best efforts to diligently, professionally and in good faith prosecute such actions which are reasonably necessary to obtain the Permits (as defined in Paragraph 6.6 below) in accordance with Paragraph 6.6 below, and Lessor shall use commercially reasonable efforts, at no cost to Lessor, to cooperate with Lessee’s efforts.

The date Lessee has actually obtained all Permits shall be referred to herein as the “Permit Date”.

Lessee shall have sixty (60) days following the Effective Date (“Contingency Period”) to obtain the Permits. In the event that, despite Lessee’s best efforts, Lessee is unable to obtain the Permits, or any of them during the Contingency Period, then, as of the day immediately following the expiration of the Contingency Period, either party hereto shall have the right to terminate this Lease by delivering written notice (“Termination Notice”) to the other party at any time prior to the issuance of the Permits. In the event this Lease is terminated in accordance with the provisions of this Paragraph 3.5, then Lessor and Lessee shall be released from all obligations under this Lease as of the date of delivery of the Termination Notice, except for such express obligations that survive the termination of this Lease, and Lessor shall promptly return to Lessee any pre-paid Rent and the Initial Deposit to Lessee.

4. Rent.

4.1 Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease are deemed to be rent (“Rent”).

4.2 Additional Rent. Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent, the following charges, during each calendar year of the term of this Lease, in accordance with the following provisions (collectively referred to in this Lease as “Additional Rent”):
(a) Real Property Taxes (as defined in Paragraph 10).
(b) The cost of the premiums for the insurance maintained by Lessor pursuant to Paragraph 8 (“Lessor’s Insurance Premiums”).
(c) An administrative fee equal to ten percent (10%) of Real Property Taxes and Lessor’s Insurance Premiums.

4.3 Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. Rent for any period during the term hereof which is for less than one full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor’s rights to the balance of such Rent, regardless of Lessor’s endorsement of any check so stating. In the event that any check, draft, or other instrument of payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the sum of $100 in addition to any late charges which may be due.

5. Security Deposit.

5.1 Initial Deposit; Additional Deposit. Lessee shall deposit with Lessor upon execution hereof the Initial Deposit as security for Lessee’s faithful performance of its obligations under this Lease.

If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or Administrative Record - Review Hearing for Genius Distribution, LLC Page 143 of 329 Page 1205 of 4584 compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, subject to Paragraph 5.2 below, Lessee shall within 10 days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. Within 30 days after the Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit not used, burned down, or applied by Lessor. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease.

Lessee hereby waives the provisions of Section 1950.7 of the California Civil Code, and all other laws, statutes, ordinances or other governmental rules, regulations or requirements now in force or which may hereafter be enacted or promulgated, which (i) establish the time frame by which Lessor must refund a security deposit under a lease, and/or (ii) provide that Lessor may claim from the Security Deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Lessee or to clean the Premises, it being agreed that Lessor may, in addition, claim those sums specified in Paragraph 13 below, and/or those sums reasonably necessary to compensate Lessor for any loss or damage caused by Lessee’s breach of this Lease or the acts or omission of Lessee or any Lessee Party. As used in this Lease a “Lessee Party” shall mean Lessee, any employee of Lessee, or any agent, authorized representative, design consultant or construction manager engaged by or under the control of Lessee.

5.2 Reduction of Security Deposit. Intentionally Deleted.

5.3 Breach. Notwithstanding Paragraph 5.2 above, in the event Lessee commits a material breach under this Lease prior to the scheduled reduction of the Security Deposit, then, regardless of whether such material breach is cured following the applicable notice and cure periods set forth in this Lease, and without the necessity of any further notice to Lessee, the Security Deposit shall not be reduced and shall hereafter remain on deposit with Lessor in the full amount then held and no reduction in the Security Deposit shall occur thereafter. The remedies granted to Lessor under this Paragraph 5.3 shall be in addition to and not in lieu of any and all remedies of Lessor under this Lease and applicable law.

6. Use.

6.1 Use. Lessee shall use and occupy the Premises only for the Agreed Use, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful under California law, creates damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties.

6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term “Hazardous Substance” as used in this Lease shall mean any product, substance, or waste, whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory.

Hazardous Substances shall include, but not be limited to, fertilizers, herbicides, pesticides, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee’s expense) with all Applicable Requirements. “Reportable Use” shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or Administrative Record - Review Hearing for Genius Distribution, LLC Page 144 of 329 Page 1206 of 4584 business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, so long as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance.
(c) Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee’s expense, take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party.

(d) Lessee Indemnification. Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys’ and consultants’ fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from areas outside of the Project). Lessee’s obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease.

No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement.
(e) Investigations and Remediations. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to the Start Date, unless such remediation measure is required as a result of Lessee’s use (including “Alterations”, as defined in Paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor’s agents to have reasonable access to the Premises at reasonable times in order to carry out Lessor’s investigative and remedial responsibilities.
(f) Lessor Termination Option. If a Hazardous Substance Condition (see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements at Lessee’s Administrative Record - Review Hearing for Genius Distribution, LLC Page 145 of 329 Page 1207 of 4584 cost and this Lease shall continue in full force and effect, but subject to Lessor’s rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor’s option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds the proceeds of Lessor’s insurance policies, give written notice to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of Lessor’s desire to terminate this Lease as of the date 60 days following the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee’s commitment to pay the amount by which the cost of the remediation of such Hazardous Substance Condition exceeds the proceeds of Lessor’s insurance policies. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days following such commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor’s notice of termination.

6.3 Lessee’s Compliance with Applicable Requirements. Except as otherwise provided in this Lease, Lessee shall, at Lessee’s sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor’s engineers and/or consultants which relate in any manner to the Premises, without regard to whether said requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor’s written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee’s compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements. For the purpose of this Paragraph 6.3, “Applicable Requirements” shall include any laws, codes, statutes, ordinances, assessments, licensing requirements or orders governing the use of the Premises promulgated at any time by any governmental or quasi-governmental body having jurisdiction over the Premises.

6.4 Inspection; Compliance. Subject to all Applicable Requirements (including those specifically applicable to the Agreed Use), Lessor and Lessor’s “Lender” (as defined in Paragraph 30) and consultants shall have the right to enter into Premises at any time, in the case of an emergency, and otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a contamination is found to exist or be imminent, or the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination. Lessor agrees to provide 48 hour notice (unless an emergency) to Lessee for inspection and/or to make repairs. Lessee agrees to be accompanied by Lessee and to comply with the safety regulations.

6.5 Additional Indemnity for Violation of Law or Use Provisions of Lease. To the fullest extent permitted by law, Lessee shall defend, indemnify and hold harmless Lessor from any and all damages to Lessor arising out of any violation of paragraphs 6.1, 6.2, and 6.3, including all attorney’s fees and costs, investigative costs. Lessee acknowledges that Lessor shall be entitled to take any action, within its sole discretion, to protect itself in the event of a violation of any of these Paragraphs by Lessee. The indemnity obligations contained in this paragraph shall be in addition to Lessee’s other such obligations in the Lease, and shall be regardless of any fault or negligence of Lessee.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 146 of 329 Page 1208 of 4584

6.6 Cannabis Use; Permits. Lessor and Lessee understand, acknowledge and agree that the parties are entering into this Lease based on the current medical cannabis laws in California, namely Proposition 215, the Medical Marijuana Program Act, the Medical Cannabis Regulatory and Safety Act, and related laws, as well as Proposition 64, which legalized recreational use of cannabis in California, and the cultivation, processing, manufacturing and extracting of cannabis/marijuana plants and products therefor, subject to significant implementing criteria. Lessee intends to, subject to compliance with all Applicable Requirements, and Lessee shall be permitted to utilize the Premises for the Agreed Use. Lessee understands, acknowledges, and agrees that the right to utilize the Premises for the Agreed Use is subject to Applicable Requirements, as same may change from time to time, and that Lessee bears the entire risk of any changes to Applicable Requirements. As of the date Lessee obtains the Permits (as defined below) nothing herein shall relieve Lessee from its obligations hereunder in the event that any change in Applicable Requirements impedes or interferes with Lessee’s intended use of the Premises.

Lessee shall, at its sole expense, apply to the City of Cudahy for a Development Agreement allowing for the operation of a cannabis-related business on the Premises and such licenses directly related thereto as are required by the State of California to commence business operations in the Premises for the Agreed Use (collectively, “Permits”). Under no circumstances shall Lessee have any right to utilize the Premises for any purposes in violation of Applicable Requirements. Without limiting the foregoing, in no event shall Lessee have the right to operate the Agreed Use prior to obtaining the Permits, and Lessee’s commencement of business operations within the Premises shall constitute Lessee’s representation and warranty to Lessor that all Permits have been obtained in accordance with all Applicable Requirements. Lessee agrees to promptly and expeditiously apply to the City of Cudahy and the State of California, as applicable, for the Permits as soon as the State of California and the City of Cudahy allow, and to promptly commence and continue to prepare improvement plans as necessary or appropriate for Lessee’s application for applicable building permits. Lessor shall reasonably cooperate with Lessee, at no cost to Lessor, in connection with Lessee's efforts to obtain the Permits. Any Permits issued with respect to the Premises shall be deemed to run with and benefit the Premises, and Lessee shall have no right to assign, sell or otherwise transfer the Permits, or any of them. Prior to submitting any applications to the City of Cudahy for any Permits, Lessee shall submit same to Lessor for Lessor's review and approval, which approval shall not be unreasonably withheld, conditioned or delayed and which approval shall be given (or withheld) within ten (10) days after receipt of application from Lessee.

Lessor’s approval of any such application shall be construed as permission to submit same to the applicable governmental authority, and not a representation or warranty with respect to the contents thereof, the fitness of the Premises for the Agreed Use, or any information contained therein.

Under no circumstance shall Lessee attempt to move the License and/or applicable operating Permits from the Premises and building. If Lessee wishes to move such licenses, it must obtain written approval by Lessor, which shall be granted or denied in its sole and absolute discretion.

6.7. Cannabis Requirements.
(a) Lessee shall use best efforts to ensure compliance with all local and state law, including ensuring that:
(i) No medical cannabis cultivated on the Premises is distributed to persons under the age of eighteen (18);
(ii) There is no involvement of any criminal enterprise, gang or cartel on or off the Premises (and Lessee agrees to timely submit to, and provide to Lessor copies of the results of, all background checks performed or to be performed on any persons affiliated with Lessee in connection with the proposed use of the Premises);
Administrative Record - Review Hearing for Genius Distribution, LLC Page 147 of 329 Page 1209 of 4584 (iii) Cannabis cultivated on the Premises is only distributed within the State of California;
(iv) No use or trafficking of illegal narcotics or other illegal activity occurs on the Premises;
(vi) No firearms shall be maintained anywhere on the Premises with the exception with an insured and state licensed security guard who is permitted to be armed; (vii) Lessee shall inform Lessor of any and all notices it receives from municipal, state or federal government entities involving a cannabis business on the Premises; (viii) Lessee obtains and maintains a Seller’s Permit from the State Board of Equalization and remits all required sales tax payments; (ix) Lessee maintains security personnel sufficient to ensure that the Premises and surrounding areas are not negatively impacted; and
(x) Lessee keeps accurate records and assure that generally accepted cash handling practices are followed, and regular bank drops are made. (b) Landlord shall have the unilateral right to cancel this Lease upon forty-eight (48) hours prior written notice to Tenant if any governmental authority, local or federal, threatens forfeiture of the Property due to the Permitted Use during the Lease Term. (c) For so long as Tenant is engaged in the Permitted Use, Tenant shall not employ at the Premises any natural persons who have any record of criminal misconduct, and Tenant shall perform commercially reasonable background checks on all employees. Tenant shall, at all times, furnish Landlord with a list of persons employed by Tenant at the Premises, and such list shall be updated and delivered to Landlord upon any change in employee personnel. The foregoing shall also apply to security personnel.

6.8 Breach. In the event that Lessee violates or fails to ensure enforcement of any of the provisions of Paragraph 6, then Lessee shall be deemed to have materially breached this Lease. If such material breach occurs, then Lessor shall have the right, but not the obligation, to terminate this Lease upon three (3) days’ written notice to Lessee specifying Lessee’s breach, and indicating that the Lease shall terminate upon the end of the third (3rd) day following delivery of such notice by Lessor. Alternatively, Lessor may choose in its sole discretion to continue the Lease upon Lessee curing the breach. Any waiver by Lessor of any such breach by Lessee shall not excuse future breaches or lack of performance by Lessee.

The remedies set forth herein shall be in addition to, not in lieu of, the remedies set forth in Paragraph 13 below.

7. Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.

7.1 Lessee’s Obligations.
(a) In General. Subject to the provisions of 2.3 (Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole expense, keep the Premises, Building, Utility Installations, and Alterations in good order, condition and repair (whether or not the portion of the Premises, Building or Project requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee’s use, any prior use, the elements or the age of such portion of the Premises), including, but not limited to, all equipment or facilities, such as fire detection and/or sprinkler Administrative Record - Review Hearing for Genius Distribution, LLC Page 148 of 329 Page 1210 of 4584 system, fume hoods, plumbing, HVAC equipment, electrical, lighting facilities, boilers, pressure vessels, fixtures, interior and exterior walls, interior and exterior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, roofs, and skylights. Lessee, in keeping the Premises, Building and Project in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1(b) below.

Lessee’s obligations shall include restorations, replacements or renewals when necessary to keep the Premises, Building and Project and all improvements thereon or a part thereof in good order, condition and state of repair.

Lessee shall also maintain in good condition, repair and replace all aspects of the Building and Project, including, without limitation, the foundations, exterior walls, structural condition of interior bearing walls, structural roof, building systems including fire sprinkler system, Common Area fire alarm and/or smoke detection systems, fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences, signs, tenant directories, and utility systems serving the Common Areas and all parts thereof. Lessee expressly waives the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease. Lessee shall be responsible for trash disposal, pest control services, property management, landscaping, security services, and the costs of any environmental inspections.
(b) Service Contracts. Lessee shall, at Lessee’s sole expense, procure and maintain contracts, and obtain proposals for equipment repair for Lessor’s routine budgetary and monitoring of its fixed assets with copies to Lessor, in customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements, if any, if and when installed in or on the Premises, Building or Project: (i) HVAC equipment, (ii) boiler and pressure vessels, (iii) clarifiers, and (iv) any other equipment located within the Premises, Building or Project, if reasonably required by Lessor or if required by Applicable Requirements. (c) Failure to Perform. If Lessee fails to perform Lessee’s obligations under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days’ prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee’s behalf, and put the Premises, Building and/or Project in good order, condition and repair, and Lessee shall promptly reimburse Lessor for the cost thereof.

7.2 Intentionally Omitted.

7.3 Utility Installations; Trade Fixtures; Alterations. (a) Definitions. The term “Utility Installations” refers to all floor and window coverings, air lines, power panels, electrical distribution, security and fire protection systems, communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises, Building or Project.

The term “Trade Fixtures” shall mean Lessee’s machinery and equipment in or on the Premises that can be removed without doing material damage to the Premises. The term “Alterations” shall mean any modification of the improvements within the Premises, other than Utility Installations or Trade Fixtures, whether by addition or deletion. “Lessee Owned Alterations and/or Utility Installations” are defined as Alterations and/or Utility Installations installed, constructed or made by or on behalf of Lessee. (b) Consent. Lessee shall not make any Alterations or Utility Installations, structural or nonstructural, to the Premises without Lessor’s prior written consent. Notwithstanding the foregoing, Lessee shall not make or permit any roof penetrations and/or install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Tenant shall have the right to make certain electrical upgrades so long as Landlord Administrative Record - Review Hearing for Genius Distribution, LLC Page 149 of 329 Page 1211 of 4584 reasonably approves the scope of work and the contractor selected by Tenant to perform such work (“Electrical Upgrades”); if Tenant elects to perform the same, Tenant shall provide Landlord with invoices and reasonable proof of payment of such costs, and Landlord shall, within thirty (30) days following receipt of such invoices and proof of payment, at Landlord’s election, either reimburse Tenant for the reasonable, out-of-pocket costs incurred by Tenant in performing the Electrical Upgrades or credit such amount against the installment of Base Rent then coming due. Consent shall be deemed conditioned upon Lessee’s: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount in excess of one month’s Base Rent. Lessor shall have a period of ten (10) days from receipt of the plans within which to approve or disapprove the proposed Alteration(s). Any Alteration made by Lessee after consent has been given, and any fixture (including trade fixtures) shall throughout the Lease, or any extension thereof, remain the property of Lessee and shall be removed by Lessee at Lessee’s cost at the expiration or earlier termination of this Lease, unless otherwise expressly agreed to in writing by Lessor. (c) Indemnification. Subject to reimbursement and/or credit to Base Rent for the cost of the Electrical Upgrades, as set forth in Section 7.3(b) above, Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic’s or materialman’s lien against the Premises or any interest therein. Lessee shall give Lessor not less than 10 days’ notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor’s attorneys’ fees and costs.

7.4 Ownership; Removal; Surrender; and Restoration.
(a) Ownership. Subject to Lessor’s right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee. (b) Removal. All Lessee Owned Alterations or Utility Installations shall be removed by the expiration or termination of this Lease, by Lessee at Lessee’s sole cost and expense, unless otherwise approved by Lessor in writing.
(c) Surrender; Restoration; Removal of Special Substances. Lessee shall surrender the Premises by the Expiration Date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. “Ordinary wear and tear” shall not include any damage or deterioration that would have been prevented by good maintenance practice. Lessee shall repair any damage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee Owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee. Lessee shall also completely remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third party (except Hazardous Substances which were deposited via underground migration from areas outside of the Project) even if such removal would require Lessee to perform or pay for work that exceeds statutory requirements. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a Administrative Record - Review Hearing for Genius Distribution, LLC Page 150 of 329 Page 1212 of 4584 holdover under the provisions of Paragraph 26 below. Upon termination or expiration of this Lease, Lessee shall remove any substances including cannabis, drugs, pharmaceuticals, or hazardous, illegal, controlled or specially permitted substances (hereinafter, “Special Substances”). In the event that Lessee fails to do so within three (3) days of written notice to do so from Lessor, Lessor shall have the right to cause such Special Substances to be removed and destroyed by the State of California, City or County of Los Angeles, or other governmental agency responsible therefore, and Lessee shall be responsible for two hundred percent (200%) of the cost of such removal; moreover, any period during which any Special Substances persist on the Premises shall be deemed to be a holdover period, subject to Paragraph 26 of this Lease, regardless of the length of such period.

8. Insurance; Indemnity.

8.1 Payment of Premiums. The cost of the premiums for the insurance policies required to be carried by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), shall be a charge passed through to Lessee as Additional Rent. Premiums for policy periods commencing prior to, or extending beyond, the term of this Lease shall be prorated to coincide with the corresponding Start Date or Expiration Date.

8.2 Liability Insurance. Lessee shall obtain and keep in force a Commercial General Liability policy of insurance protecting Lessee and Lessor as an additional insured against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than per occurrence with an annual aggregate of not less than an “Additional Insured-Managers or Lessors of Premises Endorsement” and contain the “Amendment of the Pollution Exclusion Endorsement” for damage caused by heat, smoke or fumes from a hostile fire. The policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an “insured contract” for the performance of Lessee’s indemnity obligations under this Lease.

The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only.

8.3 Property Insurance—Building and Improvements.
(a) Building and Improvements. Lessor shall obtain and keep in force a policy or policies of insurance in the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender insuring loss or damage to the Premises. The amount of such insurance shall be at least eighty percent (80%) the full replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lender, but in no event more than the commercially reasonable and available insurable value thereof. Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee’s personal property shall be insured by Lessee under Paragraph 8.4. If the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (flood and/or earthquake), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $1,000 per occurrence.
(b) Adjacent Premises. Lessee shall pay for any increase in the premiums for the property insurance of the Building and for the Common Areas or other buildings in the Project if said increase is caused by Lessee’s acts, omissions, use or occupancy of the Premises.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 151 of 329 Page 1213 of 4584 (c) Lessee’s Improvements. Lessor shall not be required to insure Lessee Owned Alterations and Utility Installations.

8.4 Lessee’s Property; Business Interruption Insurance. (a) Property Damage. Lessee shall obtain and maintain insurance coverage on all of Lessee’s personal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with written evidence that such insurance is in force.
(b) Business Interruption. Lessee shall obtain and maintain loss of income and extra expense insurance in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils.
(c) No Representation of Adequate Coverage. Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee’s property, business operations or obligations under this Lease.

8.5 Insurance Policies. Insurance required herein shall be by companies duly licensed or admitted to transact business in the state where the Premises are located, and maintaining during the policy term a “General Policyholders Rating” of at least A-, V, as set forth in the most current issue of “Best’s Insurance Guide”, or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after 30 days prior written notice to Lessor. Lessee shall, at least 30 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or “insurance binders” evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same.

8.6 Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be insured against herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby.

8.7 Indemnity. Except to the extent of the gross negligence or willful misconduct of Lessor, its employees, agents, or contractors, Lessee shall indemnify, protect, defend and hold harmless Lessor and its agents, and Lessor’s master lessor or ground lessor, partners, members, shareholders, managers, agents, representatives, contractors, and lenders, and the Premises, from and against any and all claims and/or damages, liens, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or liabilities, whether arising in or about the Premises, Building or Project, based upon personal injury, death and/or property damage arising out of, involving, or in connection with this Lease and/or the use and/or occupancy of the Premises. If any action or proceeding is brought against Lessor by reason of the foregoing matters, Lessee shall upon notice defend Lessor at Lessee’s expense by counsel reasonably Administrative Record - Review Hearing for Genius Distribution, LLC Page 152 of 329 Page 1214 of 4584 satisfactory to Lesssor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified.

8.8 Exemption of Lessor from Liability. Lessor shall not be liable, unless caused by Lessor’s gross negligence or willful misconduct, for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee’s employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building, or from other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor nor from the failure of Lessor to enforce the provisions of any other lease in the Project.

9. Damage or Destruction.

9.1 Definitions.
(a) “Premises Partial Damage” shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably be repaired in 3 months or less from the date of the damage or destruction, and the cost thereof does not exceed a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total. (b) “Premises Total Destruction” shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in 3 months or less from the date of the damage or destruction and/or the cost thereof exceeds a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total. (c) “Insured Loss” shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits involved.
(d) “Replacement Cost” shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation.
(e) “Hazardous Substance Condition” shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.

9.2 Partial Damage—Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor’s election, make the repair of any damage or destruction the total cost to repair of which is $5,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose.

Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, Lessee shall promptly contribute the shortage in proceeds as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason Administrative Record - Review Hearing for Genius Distribution, LLC Page 153 of 329 Page 1215 of 4584 of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said 10 day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party.

9.3 Partial Damage—Uninsured Loss. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee’s expense), Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10 days after receipt of the termination notice to give written notice to Lessor of Lessee’s commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, then, at Lessor’s election, this Lease shall terminate as of the date specified in the termination notice.

9.4 Total Destruction. Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, then at the election of Lessor by written notice to Lessee, this Lease shall terminate 60 days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor’s damages from Lessee, except as provided in Paragraph 8.6.

9.5 Damage Near End of Term. If at any time during the last 6 months of this Lease there is damage for which the cost to repair exceeds one month’s Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective 60 days following the date of occurrence of such damage by giving a written termination notice to Lessee within 30 days after the date of occurrence of such damage.

Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is 10 days after Lessee’s receipt of Lessor’s written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor’s commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee’s option shall be extinguished.

9.6 Abatement of Rent; Lessee’s Remedies.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 154 of 329 Page 1216 of 4584 (a) Abatement. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which Lessee cannot reasonably use the Premises for the Agreed Use and does not use the Premises for the Agreed Use. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein.
(b) Remedies. If Lessor shall be obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within 120 days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee’s election to terminate this Lease on a date not less than 60 days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within 30 days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within such 30 days, this Lease shall continue in full force and effect. “Commence” shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs.

9.7 Termination; Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee’s Security Deposit as has not been, or is not then required to be, used by Lessor.

9.8 Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent inconsistent herewith.

10. Real Property Taxes; Additional Taxes.

10.1 Definition. As used herein, the term “ Real Property Taxes” shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal income or estate taxes); improvement bond; and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the Project, Lessor’s right to other income therefrom, and/or Lessor’s business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Project address and where the proceeds so generated are to be applied by the city, county or other local taxing authority of a jurisdiction within which the Project is located. The term “Real Property Taxes” shall also include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Project or any portion thereof or a change in the improvements thereon. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shall be included in the calculation of Real Property Taxes for such calendar year based upon the number of days which such calendar year and tax year have in common.

10.2 Payment of Taxes. Lessor shall pay the Real Property Taxes applicable to the Project, and any such amounts shall be included in the calculation of Additional Rent in accordance with the provisions of Paragraph 4.2.

10.3 Personal Property Taxes; Additional Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises. When possible, Lessee shall cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, Administrative Record - Review Hearing for Genius Distribution, LLC Page 155 of 329 Page 1217 of 4584 equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee’s said property shall be assessed with Lessor’s real property, Lessee shall pay Lessor the taxes attributable to Lessee’s property within 10 days after receipt of a written statement setting forth the taxes applicable to Lessee’s property. Lessee shall be entirely responsible for any sales taxes, use taxes, assessments or any other tax liabilities imposed as a result of the Agreed Use, or any product or substance sold or dispensed by Lessee, including all excise taxes charged on cultivation in or on the Premises and/or on sales made in or from the Premises. In the event, the city of Cudahy requires Lessor to collect, or pay certain fees or taxes based on Lessee’s use of the property, Lessor shall have the right to inspect Lessee’s monthly gross receipts. Reasonable evidence of Lessee’s gross receipts shall be provided to Lessor no later than the third (3rd) day of each month. Lessee shall defend, indemnify, and hold Lessor harmless in the event that Lessee fails to provide Lessor with accurate information, and Lessee shall be responsible for paying all fees, penalties, interest and other associated costs, including, but not limited to, Lessor’s attorney fees and the cost of collection incurred as a result of such noncompliance by Lessee. All amounts due under this Paragraph shall be deemed Rent subject to the provisions of this Lease.

11. Utilities. Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon. Notwithstanding the provisions of Paragraph 4.2, if at any time in Lessor’s sole judgment, Lessor determines that Lessee is using a disproportionate amount of water, electricity or other commonly metered utilities, or that Lessee is generating such a large volume of trash as to require an increase in the size of the dumpster and/or an increase in the number of times per month that the dumpster is emptied, then Lessor may (i) increase Lessee’s Base Rent by an amount equal to such increased costs, or (ii) to cause the utilities serving the Premises to be separately metered, at Lessee’s cost.

12. Assignment and Subletting.

12.1 Lessor’s Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, “assign or assignment”) or sublet all or any part of Lessee’s interest in this Lease or in the Premises without Lessor’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. In addition to all other documentation and reasonably applied criteria which similarly-situated Lessors may use in determining whether to permit assignments or subleases, Lessee acknowledges that Lessor may also require Lessee to provide a character and/or background check of any potential assigns of this Lease, and may refuse to consent to such assignment or sublease in the event that any potential assign does not display requisite character and honesty to operate the Agreed Use. By way of example, and not of limitation, any of the following shall be deemed reasonable grounds for denying an assignment or sublease: a) conviction for any felony; b) any judgment, whether civil or criminal, involving any form of fraud, deceit, larceny, theft or intentional malfeasance; c) any citation or other action for negligent failure to observe licensing requirements, permits, or the like, or practicing any profession requiring a license without having such license; d) any conviction for illegal drug use, possession, or sale; any e) conviction for operating a motor vehicle while intoxicated or impaired. (b) Without limiting the foregoing, any change in the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of any of the voting control of Lessee shall constitute a change in control for this purpose.
(c) Without limiting the foregoing, any involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee’s assets occurs, which results or will result in a reduction of the Net Worth of Lessee as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or Administrative Record - Review Hearing for Genius Distribution, LLC Page 156 of 329 Page 1218 of 4584 as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. “Net Worth of Lessee” shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles. (d) An assignment or subletting without consent shall, at Lessor’s option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable Breach, Lessor may either: (i) terminate this Lease, or (ii) upon 30 days written notice, increase the monthly Base Rent to 150% of the Base Rent then in effect.
(e) Lessee’s remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.

12.2 Terms and Conditions Applicable to Assignment and Subletting. (a) Regardless of Lessor’s consent, no assignment or subletting shall: (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee. (b) Lessor may accept Rent or performance of Lessee’s obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor’s right to exercise its remedies for Lessee’s Default or Breach. (c) Lessor’s consent to any assignment or subletting shall not constitute consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee’s obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor’s remedies against any other person or entity responsible therefore to Lessor, or any security held by Lessor. (e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor’s determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with a fee of $1,500, as consideration for Lessor’s considering and processing said request. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested. Any such deposit paid in accordance with this provision will be applied against any fees due pursuant to Paragraph 36, below. (f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing.
(g) Lessor’s consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2) Administrative Record - Review Hearing for Genius Distribution, LLC Page 157 of 329 Page 1219 of 4584

12.3 Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee’s obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee’s obligations, Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee’s obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee’s obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor.
(c) Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part of the Premises without Lessor’s prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee.

13. Default; Breach; Remedies.

13.1 Default; Breach. A “Default” is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or Rules and Regulations under this Lease. A “Breach” is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee to cure such Default within any applicable grace period:
(a) The abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security, or where the coverage of the property insurance described in Paragraph 8.3 is jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism. In the event that Lessee abandons the Premises, Lessee agrees and acknowledges that any cannabis plant material remaining on the Premises cannot be legally sold without a license, and, for purposes of California Civil Code section 1993 et seq. has a value of zero. (b) The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to provide reasonable evidence of insurance or surety bond required under this Lease, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of 5 days following written notice to Lessee.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 158 of 329 Page 1220 of 4584 (c) The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) an Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 41 (Reservations), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of 10 days following written notice to Lessee. (d) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof, other than those described in subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of 30 days after written notice; provided, however, that if the nature of Lessee’s Default is such that more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day period and thereafter diligently prosecutes such cure to completion. (e) The occurrence of any of the following events: (i) the making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a “debtor” as defined in 11 U.S.C. § 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where such seizure is not discharged within 30 days; provided, however, in the event that any provision of this subparagraph (e) is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions.
(f) The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false.
(g) If the performance of Lessee’s obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor’s liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) a Guarantor’s breach of its guaranty obligation on an anticipatory basis, and Lessee’s failure, within 60 days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease.

13.2 Remedies. If Lessee fails to perform any of its affirmative duties or obligations, within 10 days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee’s behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option, may require all future payments to be made by Lessee to be by cashier’s check. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach:
(a) Terminate Lessee’s right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by Administrative Record - Review Hearing for Genius Distribution, LLC Page 159 of 329 Page 1221 of 4584 which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys’ fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent. Efforts by Lessor to mitigate damages caused by Lessee’s Breach of this Lease shall not waive Lessor’s right to recover damages under Paragraph 12. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee’s right to possession and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor’s interests, shall not constitute a termination of the Lessee’s right to possession. (c) Pursue any other remedy now or hereafter available under the laws or judicial decisions of the state wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee’s right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee’s occupancy of the Premises.

13.3 Inducement Recapture. Any agreement for free or abated rent or other charges, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee’s entering into this Lease, all of which concessions are hereinafter referred to as “Inducement Provisions”, shall be deemed conditioned upon Lessee’s full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this Paragraph shall not be deemed a waiver by Lessor of the provisions of this Paragraph unless specifically so stated in writing by Lessor at the time of such acceptance.

13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor within 5 days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal to ten percent (5%) of the overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will Administrative Record - Review Hearing for Genius Distribution, LLC Page 160 of 329 Page 1222 of 4584 incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee’s Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for 3 consecutive installments of Base Rent, then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor’s option, become due and payable quarterly in advance.

13.5 Interest. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor by its due date, shall bear interest from the date when due. The interest (“Interest”) charged shall be equal to the prime rate reported in the Wall Street Journal as published closest prior to the date when due plus 2%, but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4.

13.6 Breach by Lessor. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor’s obligation is such that more than 30 days are reasonably required for its performance, then Lessor shall not be in breach if performance is commenced within such 30 day period and thereafter diligently pursued to completion.

14. Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively “Condemnation”), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the Premises is taken by Condemnation, Lessee may, at Lessee’s option, to be exercised in writing within 10 days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within 10 days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation.

Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation for Lessee’s relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation.

15. Brokerage Fees. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one other than said named Brokers is entitled to any commission or finder’s fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, attorneys’ fees reasonably incurred with respect thereto.

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16. Estoppel Certificates.
(a) Lessee shall within 10 days after written notice from Lessor or Lessor’s lender (the “Requesting Party”) execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current “Estoppel Certificate” form published by the AIR Commercial Real Estate Association, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party.
(b) If Lessee shall fail to execute or deliver the Estoppel Certificate within such 10 day period, the Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting Party’s performance, and (iii) if Lessor is the Requesting Party, not more than one month’s rent has been paid in advance. Prospective purchasers and encumbrancers may rely upon the Requesting Party’s Estoppel Certificate, and Lessee shall be estopped from denying the truth of the facts contained in said Certificate.
(c) If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee’s financial statements for the past 3 years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth.

17. Definition of Lessor. The term “Lessor” as used herein shall mean the owner or owners at the time in question of the fee title to the Premises. Lessor shall have the right to transfer Lessor’s title or interest in the Premises or this Lease, in which event the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined.

18. Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.

19. Days. Unless otherwise specifically indicated to the contrary, the word “days” as used in this Lease shall mean and refer to calendar days. As used herein, the term “business days” shall be and mean Mondays through Fridays excluding any federal, state or local holiday.

20. Limitation on Liability. Subject to the provisions of Paragraph 17 above, the obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, the individual partners of Lessor or its or their individual partners, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against the individual partners of Lessor, or its or their individual partners, directors, officers or shareholders, or any of their personal assets for such satisfaction.

21. Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease.

22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the use, nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. The liability (including court costs and attorneys’ fees), of any Broker with respect to negotiation, execution, delivery or performance by either Lessor or Lessee under this Lease or any Administrative Record - Review Hearing for Genius Distribution, LLC Page 162 of 329 Page 1224 of 4584 amendment or modification hereto shall be limited to an amount up to the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker’s liability shall not be applicable to any gross negligence or willful misconduct of such Broker.

23. Notices.

23.1 Notice Requirements. All notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23.

The addresses noted adjacent to a Party’s signature on this Lease shall be that Party’s address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee’s taking possession of the Premises, the Premises shall constitute Lessee’s address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in writing.

23.2 Date of Notice. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 48 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantee next day delivery shall be deemed given 24 hours after delivery of the same to the Postal Service or courier. Notices transmitted by facsimile transmission or similar means shall be deemed delivered upon telephone confirmation of receipt (confirmation report from fax machine is sufficient), provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.

24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by the other party, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by such party of the same or of any other term, covenant or condition hereof. A party’s consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of consent to, or approval of, any subsequent or similar act by the other party or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment.

25. Intentionally Omitted.

26. No Right To Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the Base Rent shall be increased to 200% of the Base Rent applicable immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee.

27. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.

28. Covenants and Conditions; Construction of Agreement. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the Parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall include the plural and vice versa. This Lease Administrative Record - Review Hearing for Genius Distribution, LLC Page 163 of 329 Page 1225 of 4584 shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it.

29. Binding Effect; Choice of Law. This Lease shall be binding upon the parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located.

30. Subordination; Attornment; Non-Disturbance.

30.1 Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, “Security Device”), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together referred to as “Lender”) shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof.

30.2 Attornment. In the event that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Device to which this Lease is subordinated (i) Lessee shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and upon request, enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or, at the election of such new owner, this Lease shall automatically become a new lease between Lessee and such new owner, upon all of the terms and conditions hereof, for the remainder of the term hereof, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor’s obligations, except that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound by prepayment of more than one month’s rent, or (d) be liable for the return of any security deposit paid to any prior lessor.

30.3 Non-Disturbance. This Lease, including any options to extend the term hereof, will not be disturbed by the holder of any Security Devices entered into by Lessor after the execution of this Lease so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises.

30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attornment and/or non-disturbance Agreement provided for herein.

31. Governing Law; Venue and Jurisdiction; Attorney Fees. This Agreement and any claim, controversy or dispute arising under or related to this Agreement, the relationship of the parties and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of California without regard to any conflicts of law principles. The prevailing party in any litigation or arbitration to the enforce or interpret this Agreement will be entitled to recover from the other party(ies) all costs, expenses, and actual attorney’s fees (including expert witness and other consultants’ fees and costs) relating to or arising out of such litigation. Subject to the following arbitration provision, all actions and proceedings arising in connection with this Agreement must be tried and litigated exclusively in the State courts located in the County of Los Angeles, State of California, which shall be the sole and exclusive venue for adjudicating all matters arising out of or related to this Agreement. Any Administrative Record - Review Hearing for Genius Distribution, LLC Page 164 of 329 Page 1226 of 4584 dispute concerning this Agreement will be resolved exclusively by binding arbitration conducted by JAMS in accordance with JAMS Comprehensive Arbitration Rules and Procedures (the “Rules”). The arbitration will be heard by one arbitrator to be selected in accordance with the Rules and take place in Los Angeles County, California. Judgment upon any award rendered may be entered in any court having jurisdiction thereof. The parties waive the right, if any, to obtain any award for exemplary or punitive damages or any other amount for the purpose of imposing a penalty from the other in any arbitration or judicial proceeding or other adjudication arising out of or with respect to this Agreement or any breach hereof, including any claim that said Agreement, or any part hereof, is invalid, illegal or otherwise voidable or void. In addition to all other relief, the arbitrator will award reasonable attorneys’ fees and costs to the prevailing party. The decision of the arbitrator will be final, conclusive and binding upon all parties

32. Lessor’s Access; Showing Premises; Repairs. Lessor and Lessor’s agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times for the purpose of showing the same to prospective purchasers, lenders, or tenants, and making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary. All such activities shall be without abatement of rent or liability to Lessee. Lessor may at any time place on the Premises any ordinary “For Sale” signs and Lessor may during the last 8 months of the term hereof place on the Premise any ordinary “For Lease” signs. Lessee may at any time place on the Premises any ordinary “For Sublease” sign.

33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor’s prior written consent. Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction.

34. Signs. Except for ordinary “For Sublease” signs which may be placed only on the Premises, Lessee shall not place any sign upon the Project without Lessor’s prior written consent. All signs must comply with all Applicable Requirements. Without limiting the foregoing, Lessee shall be absolutely prohibited from using any of the following words in any signage, or anywhere on its entryways, windows, storefront, or any visible place, external or internal: Leaf, Dispensary, Marijuana, or any word or expression which is understood to refer to Marijuana or any other illegal or illicit drug or substance.

35. Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies.

Lessor’s failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor’s election to have such event constitute the termination of such interest.

36. Consents. Lessor’s actual reasonable costs and expenses (including but not limited to architects’, attorneys’, engineers’ and other consultants’ fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefore. Lessor’s consent to any act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor’s consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given.

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37. Guarantor.

37.1 Execution. Concurrently with Lessee’s execution hereof, and as a condition to Lessor’s obligations hereunder, Guarantors, if any, shall each execute a guaranty in the form attached hereto as Exhibit A, and each such Guarantor shall have the same obligations as Lessee under this Lease.

37.2 Default. It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence of the execution of the guaranty, including the authority of the party signing on Guarantor’s behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect.

38. Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions on Lessee’s part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof.

39. Intentionally Omitted.

40. Security Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties. Lessee, at its sole cost and expense, shall maintain 24 hour surveillance cameras at the Premises and a security guard at the Premises, Such security personnel shall accept any direction from Lessor which Lessor may provide, including, without limitation, restrictions on the number of persons who may be present within the Premises at any particular time; restrictions on persons loitering in the Project; restriction of other activities in the vicinity of the Premises; restriction of particular individuals from the Project; and removal of vehicles.

Notwithstanding any direction by Lessor, Lessee shall defend, indemnify, and hold harmless Lessor from and against any claims made against Lessor as a result of any activities of any such security personnel.

The defense, indemnification, and hold harmless provisions hereof shall survive the termination or expiration of this Lease.

41. Reservations. Lessor reserves the right: (i) to grant, without the consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, (ii) to cause the recordation of parcel maps and restrictions, and (iii) to create and/or install new utility raceways, so long as such easements, rights, dedications, maps, restrictions, and utility raceways do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate such rights.

42. Intentionally Omitted.

43. Authority. If either Party hereto is a corporation, trust, limited liability company, partnership, or similar entity, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each Party shall, within 30 days after request, deliver to the other Party satisfactory evidence of such authority.

44. Intentionally Omitted.

45. Offer. Preparation of this Lease by either party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto.

46. Amendments. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. As long as they do not materially change Lessee’s obligations hereunder, Lessee Administrative Record - Review Hearing for Genius Distribution, LLC Page 166 of 329 Page 1228 of 4584 agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises.

47. Multiple Parties. If more than one person or entity is named herein as either Lessor or Lessee, such multiple Parties shall have joint and several responsibility to comply with the terms of this Lease.

48. Waiver of Jury Trial. To the fullest extent permitted by applicable law, the Parties hereby waive their respective rights to trial by jury in any action or proceeding involving the Property or arising out of this Agreement.

49. Mediation and Arbitration of Disputes. The parties hereto shall use good faith efforts to use mediation and/or the arbitration of all disputes arising out of this Lease prior to commencing litigation procedures. The parties hereto acknowledge and agree that in any dispute arising out of this Lease, regardless of the manner of resolution selected by the parties, Federal illegality of cannabis shall not be a valid defense to any claim, and the parties hereto waive the right to present any such defense related to the status of cannabis under Federal law.

50. Option to Extend Lease. Lessee shall have the option (“Option”) to extend the term of this Lease on all provisions contained in this Lease, for a period of ten (10) years (the “Extended Term”) following the expiration of the initial term of this Lease, by giving written notice of the exercise of the Option (“Option Notice”) to Lessor at least six (6) months, but not more than twelve (12) months prior to the expiration of the initial term of this Lease (“Option Notice Period”). Base Rent during the Extended Term shall be as set forth in Paragraph 1.5 above. Once Lessee delivers the Option Notice, Lessee cannot revoke it and any attempt to revoke the exercise shall be void. Any Option Notice given at any time other than the Option Notice Period shall be void and of no effect. Notwithstanding the above, (i) if lessee is in Default of the Lease on the date of giving the Option Notice, has been late in making payments of any amounts owed pursuant to this Lease more than two (2) times, then Lessor may deem the Option Notice void and of no effect, and (ii) if Lessee is in Default of the Lease on the date the Extended Term is to begin, then Lessor may deem the Option void and terminate the Lease as of the end of the Original Term. Lessee may only exercise the Option on all but not less than all of the Premises. Any Option Notice that purports to exercise the Option for less than all of the Premises, shall be deemed to exercise the Option for all of the Premises.

The Option granted to Lessee in this Lease is personal to the original Lessee named in this Lease, and cannot be voluntarily or involuntarily assigned or exercised by any person or entity other than said original Lessee while the original Lessee is in full and actual possession of the Premises and without the intention of thereafter assigning or subletting. The Option herein granted to Lessee is not assignable, either as a part of an assignment of this Lease or separately or apart therefrom, and the Option cannot be separated from this Lease in any manner, by reservation or otherwise.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND

EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES

HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS

LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY EITHER

PARTY HERETO AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:

Administrative Record - Review Hearing for Genius Distribution, LLC Page 167 of 329 Page 1229 of 4584  &.
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Administrative Record - Review Hearing for Genius Distribution, LLC Page 168 of 329 Page 1230 of 4584 Administrative Record - Review Hearing for Genius Distribution, LLC Page 169 of 329 Page 1231 of 4584

EXHIBIT A

GUARANTY OF LEASE
THIS GUARANTY OF LEASE (“Guaranty”) is made by Cuper Management LLC, a California limited liability company (“Guarantor”), in favor of Cudahy Cecilia, LLC, a California limited liability company (“Landlord”), in connection with that certain Office Lease dated March __ 2018 (the “Lease”) pursuant to which Landlord leases to Genius Grover Beach, LLC, a California limited liability company (“Tenant”) those premises generally located at 4916 Cecilia Street, Suite __, Cudahy, California 90201 (the “Premises”) and more particularly described in the Lease. As a material inducement to and in consideration of Landlord entering into the Lease, Landlord having indicated that it would not enter into the Lease without the execution of this Guaranty, Guarantor does hereby agree with Landlord as follows:

1. Guarantor does hereby unconditionally and irrevocably guarantee and promise to perform and be liable for any and all obligations and liabilities of Tenant under the terms of the Lease.

2. Guarantor does hereby agree that, without the consent of or notice to Guarantor and without affecting any of the obligations of Guarantor hereunder: (a) any term, covenant or condition of the Lease may be amended, compromised, released or otherwise altered by Landlord and Tenant, and Guarantor does guarantee and promise to perform all the obligations of Tenant under the Lease as so amended, compromised, released or altered; (b) any guarantor of or party to the Lease may be released, substituted or added; (c) any right or remedy under the Lease may be exercised, not exercised, impaired, modified, limited, destroyed or suspended; (d) Landlord or any other person acting on Landlord’s behalf may deal in any manner with Tenant, any guarantor, any party to the Lease or any other person; and (e) all or any part of the Premises or of Tenant’s rights or liabilities under the Lease may be sublet, assigned or assumed.

3. The obligations of Guarantor hereunder are in addition to and independent of the obligations of Tenant. A separate action or actions may be brought and prosecuted against Guarantor whether action is brought against Tenant or whether Tenant is joined in any such action or actions. Guarantor hereby waives and agrees not to assert or take advantage of: (a) any right to require Landlord to proceed against or exhaust any security held from Tenant or any other person; (b) any right to require Landlord to proceed against Tenant or any other person or to pursue any other remedy before proceeding against Guarantor; (c) the defense of any statute of limitations in any action under or related to this Guaranty or the Lease; (d) any right or defense that may arise by reason of the incapacity, lack of authority, death or disability of Tenant or any other person; and (e) any right or defense arising by reason of the absence, impairment, modification, limitation, destruction or cessation (in bankruptcy, by an election of remedies, or otherwise) of the liability of Tenant, of the subrogation rights of Guarantor or of the right of Guarantor to proceed against Tenant for reimbursement. Without in any manner limiting the generality of the foregoing, Guarantor hereby waives the benefits of the provisions of Sections 2809, 2810, 2819, 2845, 2847, 2848, 2849, 2850, 2899 and 3433, the second sentence of Section 2822(a) and all rights that are waivable pursuant to Section 2856, all of the California Civil Code, and any similar or analogous statutes of California or any other jurisdiction.

4. Guarantor hereby waives and agrees not to assert or take advantage of any right or defense based on the absence of any or all presentments, demands (including demands for performance), notices (including notices of adverse change in the financial status of Tenant or other facts which increase the risk to Guarantor, notices of non-performance and notices of acceptance of this Guaranty) and protests of each and every kind.

5. Until all Tenant’s obligations under the Lease are fully performed, Guarantor: (a) shall have no right of subrogation against the Tenant by reason of any payments or acts of performance by Guarantor under this Guaranty; and (b) subordinates any liability or indebtedness of Tenant now or hereafter held by Guarantor to the obligations of Tenant under, arising out of or related to the Lease or Tenant’s use or occupancy of the Premises.

Administrative Record - Review Hearing for Genius Distribution, LLC Page 170 of 329 Page 1232 of 4584

6. The liability of Guarantor and all rights, powers and remedies of Landlord hereunder and under any other agreement now or at any time hereafter in force between Landlord and Guarantor relating to the Lease shall be cumulative and not alternative and such rights, powers and remedies shall be in addition to all rights, powers and remedies given to Landlord by law.

7. This Guaranty applies to, inures to the benefit of and binds all parties hereto, their heirs, devisees, legatees, executors, administrators, representatives, successors and assigns (including any purchaser at a judicial foreclosure or trustee’s sale or a holder of a deed in lieu thereof). This Guaranty may be assigned by Landlord voluntarily or by operation of law.

8. Guarantor agrees from time to time upon Landlord’s request, but not more than once in any twelve (12) month period, to deliver to Landlord Guarantor’s financial statement. All financial statements heretofore delivered to Landlord by Guarantor are, and all financial statements hereafter delivered to Landlord by Guarantor will be, true and correct in all material respects and fair presentations of the financial condition of Guarantor as of the date thereof, prepared in accordance with generally accepted accounting practices. No material adverse change has occurred in the financial condition of Guarantor since the date of the financial statements heretofore delivered to Landlord.

9. Guarantor shall not, without the prior written consent of Landlord, commence, or join with any other person in commencing, any bankruptcy, reorganization or insolvency proceeding against Tenant. The obligations of Guarantor under this Guaranty shall not be altered, limited or affected by any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Tenant, or by any defense which Tenant may have by reason of any order, decree or decision of any court or administrative body resulting from any such proceeding. Guarantor shall file in any bankruptcy or other proceeding in which the filing of claims is required or permitted by law all claims which Guarantor may have against Tenant relating to any indebtedness of Tenant to Guarantor and will assign to Landlord all rights of Guarantor thereunder. Landlord shall have the sole right to accept or reject any plan proposed in such proceeding and to take any other action to which a party filing a claim is entitled.

In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Landlord the amount payable on such claim and, to the full extent necessary for that purpose, Guarantor hereby assigns to Landlord all of Guarantor’s rights to any such payments or distributions to which Guarantor would otherwise be entitled; provided, however, that Guarantor’s obligations hereunder shall not be satisfied except to the extent that Landlord receives cash by reason of any such payment or distribution. If Landlord receives anything hereunder other than cash, the same shall be held as collateral for amounts due under this Guaranty.

10. This Guaranty shall constitute the entire agreement between Guarantor and the Landlord with respect to the subject matter hereof. No provision of this Guaranty or right of Landlord hereunder may be waived nor may any Guarantor be released from any obligation hereunder except by a writing duly executed by an authorized officer or director of Landlord.

11. If more than one person signs this Guaranty, each such person shall be deemed a Guarantor and the obligation of all such Guarantors shall be joint and several. When the context and construction so requires, all words used in the singular herein shall be deemed to have been used in the plural. The word “person” as used herein shall include an individual, company, firm, association, partnership, corporation, trust or other legal entity of any kind whatsoever.

12. Should any one or more provisions of this Guaranty be determined to be illegal or unenforceable, all other provisions shall nevertheless be effective.

13. The waiver or failure to enforce any provision of this Guaranty shall not operate as a waiver of any other breach of such provision or any other provisions hereof.

14. If either party hereto participates in an action against the other party arising out of or in connection with this Guaranty, the prevailing party shall be entitled to have and recover from the other party actual Administrative Record - Review Hearing for Genius Distribution, LLC Page 171 of 329 Page 1233 of 4584 attorneys’ fees, collection costs and other costs incurred in and in preparation for the action. In addition to the foregoing award of attorneys’ fees, the ultimately successful party shall be entitled to its actual attorneys’ fees incurred in any post-judgment proceedings to collect or enforce the judgment. This provision is separate and several and shall survive the merger of this Guaranty into any judgment on this Guaranty. In any action or proceeding arising under this Guaranty, Guarantor consents to trial without a jury.

15. Time is strictly of the essence under this Guaranty and any amendment, modification or revision hereof.

16. If Guarantor is a corporation, each individual executing this Guaranty on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Guaranty on behalf of said corporation, in accordance with a duly adopted resolution of the board of directors of said corporation or in accordance with the bylaws of said corporation, and that this Guaranty is binding upon said corporation in accordance with its terms. If Guarantor is a corporation, Landlord, at its option, may require Guarantor to concurrently, with the execution of this Guaranty, deliver to Landlord a certified copy of a resolution of the board of directors of said corporation authorizing or ratifying the execution of this Guaranty.

17. The term “Landlord” whenever hereinabove used refers to and means the Landlord in the foregoing Lease specifically named and also any assignee of said Landlord, whether by outright assignment or by assignment for security, and also any successor to the interest of said Landlord or of any assignee of such Lease or any part thereof, whether by assignment or otherwise. The term “Tenant” whenever hereinabove used refers to and means the Tenant in the foregoing Lease specifically named and also any assignee or subtenant of said Lease and also any successor to the interests of said Tenant, assignee or sublessee of such Lease or any part thereof, whether by assignment, sublease or otherwise.

18. Any notice, request, demand, or other communication hereunder shall be in writing and shall be considered duly given or furnished when:
a. delivered personally or by messenger or overnight delivery service, with signature evidencing such delivery;
b. upon the date of delivery, after being mailed in a postpaid envelope, sent certified mail, return receipt requested, when addressed to Landlord as set forth below and to Guarantor as set forth below; or to such other address or addressee as either party may designate by a written notice given pursuant hereto; or c. upon confirmation of good transmission if sent via facsimile machine to such phone number as shall have been provided in writing by Landlord or Guarantor, one to the other:

GUARANTOR: LANDLORD:

At the Premises 201 Wilshire Boulevard
2nd Floor
Santa Monica, California 90401

19. As a further material part of the consideration to Landlord to enter into the Lease with Tenant, Guarantor agrees:
a. The law of the State of California shall govern all questions with respect to the Guaranty; b. Any suit, action or proceeding arising directly or indirectly from the Guaranty, the Lease or the subject matter thereof shall be litigated only in courts located within the County of Los Angeles and the State of California;
c. The Parties hereby irrevocably consent to the jurisdiction of any local, state or federal court located within the County of Los Angeles and the State of California; Administrative Record - Review Hearing for Genius Distribution, LLC Page 172 of 329 Page 1234 of 4584 d. Guarantor hereby waives personal service of any and all process upon it and consents to all such service of process in the manner and at the address set forth in Paragraph 18 above; and e. Without limiting the generality of the foregoing, Guarantor hereby waives and agrees not to assert by way of motion, defense or otherwise in any suit, action or proceeding any claim that Guarantor is not personally subject to the jurisdiction of the above-named courts, that such suits, action or proceeding is brought in an inconvenient forum or that the venue of such action, suit or proceeding is improper.

GUARANTOR:

Cuper Management LLC, a California limited liability
company
___________________________________
Dated: _____________________________
Administrative Record - Review Hearing for Genius Distribution, LLC Page 173 of 329 Page 1235 of 4584 EXHIBIT “D”

SITE AND FLOOR PLANS

Administrative Record - Review Hearing for Genius Distribution, LLC Page 174 of 329 Page 1236 of 4584 280' - 1"
167' - 1"
163' - 0"

DOSIFIER
82' - 5"
13' - 0" 13' - 0" 13' - 0" 13' - 9"
20' - 8" 20' - 5" 7' - 0"
7' - 0"
(N) SEC. DOOR
(N) SEC. DOOR
(E) ROLL-UP DOOR

EXTRACTION
UNIT
1 A3.1
1 A3.1
794 SF
VEG 6
788 SF
VEG 5
778 SF
VEG 2
765 SF
VEG 1
774 SF
VEG 4
1729 SF
FLOWER 6
784 SF
VEG 3
1731 SF
VEG 7
2370 SF
FLOWER 9
2134 SF
FLOWER 8
2143 SF
FLOWER 7
1222 SF
VEG 8
2156 SF
FLOWER 5
2143 SF
FLOWER 4
2143 SF
FLOWER 3
2152 SF
FLOWER 2
2156 SF
FLOWER 1
1928 SF
FLOWER 1
2210 SF
FLOWER 2
2167 SF
FLOWER 3
2170 SF
FLOWER 5
2213 SF
FLOWER 4
1877 SF
VEG 1
561 SF

MOTHER ROOM
642 SF

TISSUE CULTURE
416 SF

MAUNFACTURING
463 SF
OFFICE
449 SF

DRY ROOM
449 SF

DRY ROOM
449 SF

DRY ROOM
809 SF

DISTRIBUTION
1270 SF

MANUFACTURING
2530 SF

MANUFACTURING
383 SF

WATER RESERVOIR
474 SF

DRY ROOM
1475 SF

SHIPPING/ LOADING
130 SF
F EMP. LOCKERS
127 SF
M EMP. LOCKERS
913 SF
LOBBY
93 SF
EMP. CHECK IN
96 SF

BREAKROOM
275 SF

OFFICES/ CONFERENCE
83 SF

UTILITY
85 SF

LAUNDRY
80 SF
STORE
188 SF
OFFICE
181 SF
OFFICE 51 SF
SEC. VAULT
303 SF

TRIMMING
298 SF

PACKAGING
76 SF

BATHROOM
73 SF

BATHROOM
71 SF

BATHROOM
45 SF

BATHROOM
12' x 4' TRANSFORMAR PAD
6" BOLLARDS PROTECTION
22' - 8" 31' - 2" 40' - 7" 7' - 3" 40' - 8"
23' - 0"
25' - 3" 24' - 1" 24' - 10"
22' - 0" 22' - 5" 26' - 3" 4' - 0" 22' - 6" 23' - 1" 37' - 5" 6' - 0"

EXIT EXIT EXIT
EXIT
EXIT

EXIT EXIT
(E) ELECTRIC PANEL
(N) ELETRIC ROOM
547 SF
DRYING
520 SF
DRYING
549 SF
DRYING
475 SF

TRIMMING
484 SF

DISTRIBUTION
228 SF
M EMP. LOCKER
229 SF
F EMP. LOCKER
486 SF

CHECK-IN
499 SF

DELIVERY
814 SF

DELIVERY
38' - 0" 38' - 7" 38' - 11" 42' - 1" 42' - 2"
15' - 0" 14' - 4" 7' - 11" 10' - 7" 11' - 9" 40' - 3" 40' - 1" 44' - 6" 8' - 0" 10' - 3" 17' - 0" 20' - 2" 18' - 3" 21' - 4" 13' - 3"
39' - 3" 40' - 3" 40' - 2" 40' - 0" 40' - 0" 40' - 3" 35' - 0" 54' - 10"
27' - 6" 27' - 0" 7' - 6"
11' - 4" 11' - 4" 7' - 9"
47' - 4" 55' - 8" 54' - 8"
54' - 10" 7' - 4" 25' - 6"
42' - 1"
213' - 0"
136' - 7"
13' - 5" 21' - 3" 13' - 10" 10' - 3" 10' - 6" 5' - 5" 10' - 9" 26' - 2" 21' - 5" 33' - 5" 280' - 1"
163' - 8"
143' - 0"
443' - 9"
23' - 10" 7' - 8" 23' - 0"
54' - 6"
18' - 7"
42' - 4"
4' - 2" 30' - 11"
UNIT C : DIVINA LLC
UNIT D : GENIUS
UNIT F : DANIEL AND GOLIATH LLC UNIT G : 420 CLUB LLC
UNIT E : HERBAL DRAGON
UNIT B : GO CUDAHY UNIT B

UNIT B BTINU BTINU

UNIT B UNIT B UNIT B

UNIT B UNIT B UNIT B

ATINU ATINU ATINU ATINU ATINU

ATINU ATINU

ATINU ATINU

ATINU ATINU
UNIT A
UNIT A

ATINU ATINU ATINU UNIT A
UNIT A
UNIT A

UNIT A UNIT A
UNIT A
UNIT A
UNIT A
UNIT A
UNIT A
UNIT A
UNIT A
UNIT A
Scale
Drawn By
Date
Project Number
Woodland Hills, CA 91365P.O. Box 6004 406610
Global Construction Inc
EST. 2017
1/16" = 1'-0"
4/10/2018 3:50:15 PMA1.2

PROPOSED
PLAN

PHILLIPE KFOURY

DJ JE WC
04/10/2018
2018.003
No. Description Date
1/16" = 1'-0" 1 LEVEL 1 PROPOSED

4. Contractor shall provide, erect, and maintain all temporary barr

3. Do not scale from drawings.

2. All dimensions are too face of structure unless otherwise noted.

1. Any inconsistencies or unforeseen conditions to be reviewed by the Architect prior to proceeding with construction.NOTES:
iers and guards, and all temporary shoring and bracing as required by city and state regulations.

6. Contractor shall pro

5. Contractor shall provide adequate weather protection for the building and its contents during the course of the work. vide temporary sanitary facilities as to least impact neighbors and as directed by city regulations.

8. All casework dimensions to face of finish.

7. All door and window dimensions to be centerline of clear opening.

N Administrative Record - Review Hearing for Genius Distribution, LLC Page 175 of 329 Page 1237 of 4584 
 

 
 

  







SITE
LOT DEPTH 484'-0"
LOT WIDTH 210'-0"
6'-0"

SIDEWALK
5'-0"

PLANTER
167'-1"
162'-2"
25'-5"
N

 


 
DRIVEWAY WIDTH 26'-5"
SIDE SETBACK 41'-0"



 

 
25'-0"

PL TO STREET CL
Exist fire department connection

WAREHOUSE BUILDING
EXISTING 70,079.2 sq ft
FRONT SETBACK 37'-8" 277'-6"
SIDE SETBACK 63'-5"
12 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 TYP. 9'-0'
18'-0" TYP.

TYP.
9'-0'
18'-0"
TYP.
21'0"

PROPERTY LINE

PROPERTY LINE

PROPERTY LINE

PROPERTY LINE
DRIVEWAY WIDTH 20'-6"
CECILIA ST. CL
Entrance Entrance Entrance

BUILDING

ENTRANCE

BUILDING

ENTRANCE

BUILDING

ENTRANCE

BUILDING

ENTRANCE

 

 
 
 

 



  

C D E B
A
F
G
H I


PATH OF TRAVEL 2%

CROSS SLOPE MAX

CROSS SLOPE MAX
PATH OF TRAVEL 2%

CROSS SLOPE MAX
PATH OF TRAVEL 2%
PATH OF TRAVEL 2%

CROSS SLOPE MAX


Scale
Proposed Site plan 1
16" = 1'-0"




New sliding Fence.

New Fence.

New Fence. New sliding Fence. New Fence.

New Fence.










 








CUPER DEVELOPMENT
Administrative Record - Review Hearing for Genius Distribution, LLC Page 176 of 329 Page 1238 of 4584 EXHIBIT “E”

ADDITIONAL BUSINESS STANDARDS
(IF APPLICABLE)
Administrative Record - Review Hearing for Genius Distribution, LLC Page 177 of 329 Page 1239 of 4584 EXHIBIT “F”

STANDARDS AND CONDITIONS FOR CONSTRUCTION
(IF APPLICABLE)
Administrative Record - Review Hearing for Genius Distribution, LLC Page 178 of 329 Page 1240 of 4584 ATTACHMENT G.

Correspondence Letter- Notice of
Delinquency dated October 2, 2019
Administrative Record - Review Hearing for Genius Distribution, LLC Page 179 of 329 Page 1241 of 4584 Administrative Record - Review Hearing for Genius Distribution, LLC Page 180 of 329