Hollister City Council
September 3, 2024

City of hollister ▎ 10
Combined Miscellaneous
& Safety Groups *
Valuation as of
June 30, 2021
Valuation as of
June 30, 2022 Change
Actuarial Liability $153.0 M $164.1 M 7.3%↑
Assets $128.0 M $118.7 M 7.3%↓
Unfunded Liability $25.0 M $45.4 M 81.8%↑
Funded Ratio 83.7%72.3%13.6%↓
Employer Contribution Amount $5.4 M $5.5 M 2.1%↑(FY 22-23)(FY 23-24) Employer Contribution Amount – Projected *---$8.1 M 45.7%↑(FY 29-30) Pension Funding Status
As of June 30, 2022, City of Hollister’s CalPERS pension plan is funded as follows:
* Data through 2029-30 from Agency’s latest CalPERS actuarial valuation.

City of hollister ▎ 11
Why Prefund Pension Obligations?
Complete Local Control over Assets
Agency has complete control over assets, including contributions, disbursements and the timing, amount, and risk tolerance level of investments

1. Pension Rate Stabilization
Assets can be transferred to the retirement system at the Agency’s direction, potentially reducing/eliminating large fluctuations in employer contribution amounts

2. Rainy Day Fund
Emergency source of funds when employer revenues are strained in difficult budgetary or economic times

3. Diversification
Allows for investment flexibility and offers the potential for assets to earn greater returns than the general fund; spread the risk vs. sending additional money to CalPERS

4.

City of hollister ▎ 12

1. Input Phase
–Target discount rate
–Risk tolerance
–Investment philosophy
–Asset allocation
–Timing on use of funds

2. Model Portfolios 3. Dedicated Portfolio Manager/
Investment Specialist
–Makes recommendation
–Fiduciary responsibility
–Investment policy statement
–Periodic reviews
–Cell phone access
Strategy Equity 10-YR Returns*
Capital Appreciation 65-85%7.22%
Balanced 50-70%6.53%
Moderate 40-60%5.71%
Moderately Conservative 20-40% 4.06%
Conservative 5-20%2.81%
vs. LAIF 0%1.47%**
Simple Investment Approach
*10-Year Active Portfolio annualized returns as of June 30, 2021, 2024 (Gross of Investment Management Fees, but Net of Embedded Fund Fees). Please see complete Investment Strategy Sheets (enclosed) for more information. **Avg. LAIF apportionment rate (released quarterly) over the 10-Year period ending June 30, 2024 The advisor to the PARS portfolios is U.S. Bank, and PFM Asset Management serves as sub-advisor to U.S. Bank to manage these portfolios. Prior to January 1st, 2024 HighMark Capital Management, Inc. (“HighMark”) acted as sub-advisor to the PARS portfolios. HighMark, including clients and investment personnel, was consolidated into its affiliate, PFM Asset Management LLC (PFMAM) on January 1st, 2024.

Please see important additional disclosures to the PARS portfolios included in the individual strategy fact sheets at the end of this presentation.

City of hollister ▎ 13
Plan Set-Up Fee:Ongoing Fees Paid to U.S. Bank:

None 0.35%for assets under $5 million

0.25%for assets $5-10 million

0.20%for assets $10-15 million

0.15%for assets $15-50 million

0.10%for assets over $50 million
Program Fees
Plan Set-Up Fee:Ongoing Fees:

None 0.25%for assets $0-10 million

0.20%for assets $10-15 million

0.15%for assets $15-50 million

0.10%for assets over $50 million
* PARS does not receive any compensation from the investments or any commissions, back-end loads, or any other forms of compensation. ** Subject to change due to rebalancing. Additional information on PFMAM and a description of its fees are described in its ADV which is also available on the SEC’s website at www.adviserinfo.sec.gov . Fees charged by U.S. Bank National Association (“U.S. Bank”) , as Discretionary Tru stee/Investment Management fees are based on individual agency assets. U.S Bank has retained its affiliate, PFM Asset Management LLC (“PFMAM”), an SEC Regis tered Investment Advisor, as its sub-advisor to provide investment management services. U.S. Bank compensates PFMAM for these services from its own fees, as deta iled above. Additional information about PFMAM is described in its ADV, available at https://adviserinfo.sec.gov Trust Administration/Consulting Fees *
Discretionary Trustee/Investment Management Fees **
As subadvisor to U.S. Bank

City of hollister ▎ 14
Why take this step?

1.Smooths out pension rate volatility

2.Offers hedge against Inflation

3.Provides a fiscal tool in your financial toolbox

4.Prepares today for tomorrow’s OPEB and Pension realities Questions?

Disclaimer
Investment advisory services are provided by PFM Asset Management LLC (“PFMAM”), an investment adviser registered with the U.S. Securities and Exchange Commission and a subsidiary of U.S. Bancorp Asset Management, Inc. (“USBAM”).USBAM is a subsidiary of U.S. Bank National Association (“U.S.

Bank”).U.S. Bank is a separate entity and subsidiary of U.S. Bancorp. U.S. Bank is not responsible for and does not guarantee the products, services or performance of PFMAM.The information contained is not an offer to purchase or sell any securities. Additional applicable regulatory information is available upon request.

Public Agency Retirement Services (“PARS”) serves as the trust administrator to the Public Agencies Post-Employment Benefits Trust, Public Agencies Post-Retirement Health Care Plan Trust, and the Public Agency Retirement System Trust (the “Trusts”). U.S. Bank National Association (“U.S. Bank”) serves as the discretionary trustee to the Trusts. In its capacity as discretionary trustee, U.S. Bank delegates the investment management of the Trusts to PFM Asset Management LLC (“PFMAM”) through a sub- advisory agreement. PFMAM is an investment adviser registered with the U.S.

Securities and Exchange Commission (“SEC”) and an indirect subsidiary of U.S. Bank.

For more information regarding PFMAM’s services please visit www.pfmam.com .

NOT FDIC INSURED : NO BANK GUARANTEE : MAY LOSE VALUE
DisclaimerDisclaimer

STAFF REPORT

HOLLISTER CITY COUNCIL
MEETING DATE: September 3, 2024
REPORT # Public Works-2024-32

AGENDA ITEM: SEWER SYSTEM UPDATE

DEPARTMENT: Public Works
DEPARTMENT HEAD: William Via, Public Works Director
STAFF CONTACT: William Via, Public Works Director

RECOMMENDED ACTION: Receive informational report.

DISCUSSION: City Council has requested periodic updates on the status of the sanitary sewer system including upgrades, projects, operations, and issues.

This presentation will inform Council on the status of the Industrial Wastewater Treatment Plant (IWTP), Sewer System Upgrade projects, Vacuum Truck Dump Station project, Membrane Bio-Reactor Upgrades, and Sewer Camera Van Purchase.

FISCAL IMPACT: None for this informational report.

PREVIOUS COUNCIL OR COMMISSION ACTION: None

CEQA: This activity is not a project pursuant to California Environmental Quality Act Statute Section 21065 and Guidelines Section 15378(b)(5), as it is an informational item that will not result in direct or a reasonably foreseeable indirect physical change in the environment.

ATTACHMENTS:

1. Presentation

SEWER SYSTEM UPDATE

UPGRADES, PROJECTS, OPERTIONS, AND ISSUES
CITY COUNCIL MEETING SEPTEMBER 3, 2024

UPGRADES
•MBR-The MBR upgrade project has been delayed due to the need to manufacture specific, custom-made parts. The original mounting brackets and mounting bolts did not meet the required seismic specifications for Hollister. The brackets were custom designed and manufactured and the bolts, which could not be designed and manufactured until the final design of the brackets was known, are now being manufactured. Installation is now scheduled to begin in early October and completed by October 31st .

SEWER CAMERA
VAN
The Camera Van was delivered, and
training has been provided to staff. The van
includes a sink, restroom, operators'
station, generator, awning, and a lift for
removing manhole covers.

CAMERA VAN

CAMERA VAN

PROJECTS
•Sewer System-The sewer system project, which includes manhole, line, and vault replacements on Bridge Road is at the 30% design phase. Once staff provides comments on the 30% plans to the consultant that is designing the project, we will receive 60% plans and the process will continue to 90% and 100% plans. The current outlook is to put out to bid in early Spring 2025.
•Vacuum Truck Dump Station-This project is also at the 30% plans stage but, since it is a relatively simple design, should be ready to go out for bids by the end of the calendar year.

IWTP
San Benito Foods (SBF) has been working to eliminate the odors created by their operation of the IWTP during the tomato canning season. The steps taken so far are:
•Addition of Bioxide at the processing plant to reduce Hydrogen Sulfide (H2S) levels in the line leading to the IWTP.
•Bioaugmentation-Designed to enhance the treatment process to reduce organic solids accumulation and reduce odors.
•Recirculating water in Pond 1 to prevent another extreme algae bloom •Altered the flow from the processing plant into the IWTP

PREVIOUS TREATMENT FLOW

CURRENT FLOW

QUESTIONS/COMMENTS

STAFF REPORT

HOLLISTER CITY COUNCIL
MEETING DATE: September 3, 2024
REPORT # Parks & Recreation-2024-08

AGENDA ITEM: UPDATE ON THE DEVELOPMENT OF CESAR CHAVEZ
COMMUNITY PARK FUNDED THROUGH PROPOSITION 68 GRANT

DEPARTMENT: Parks & Recreation
DEPARTMENT HEAD: Charles Wall, Parks & Recreation Director STAFF CONTACT: Tina Garza, Recreation Manager

RECOMMENDED ACTION: Accept the report and provide possible direction to staff.

DISCUSSION: This report provides an update on the development of Cesar Chavez Community Park, funded through the Proposition 68 grant. It also outlines the progress, challenges, and upcoming milestones associated with the project.

Project Overview
Cesar Chavez Community Park, located adjacent to Fire Station 2, is being developed with a grant amount of $1,826,125.00 from Proposition 68. This grant, part of the California Drought, Water, Parks, Climate, Coastal Protection, and Outdoor Access for All Act of 2018, enhances public access to outdoor spaces. The new park aims to offer a range of features, including the following:
 Exercise stations
 Inclusive Playground
 Pickleball court
 Cemented Walking Path
 Open grass area
 Pavilion
 Small and Large Dog Park
 Picnic areas
 Art installations
 Storm Water Garden
 Natural habitat restoration
 Fire Safe demonstration garden
 Parking lot
 Restroom
 Basketball court

These amenities are designed to enrich the quality of life for residents in the City of Hollister.

Progress to Date
The project's planning and current draft design were completed in June 2024, incorporating key elements such as playgrounds, sports courts, walking trails, and a dog park. Community engagement efforts included a community outreach public meeting at Dunne Park Clubhouse on June 27, 2024. On July 8, 2024, at a Special Meeting, the

Parks and Recreation Commission approved the design concept by a 3-0 vote with a minor adjustment to include a mister near the playground to help prevent overheating during warmer days. Construction will begin in April 2025, and the park is anticipated to be completed in December 2025.

Challenges and Solutions
During the site review, one challenge was discovering an area not included in the grant application. If left undeveloped, this area could negatively affect the park's design and flow. The staff asked the architect to integrate this area into the overall park design to address this. Another issue was that the property, created through a Lot Line Adjustment, lacked defined property corners. By law, a Record of Survey must be filed to establish property lines if needed by the city. To resolve this, the staff requested a Record of Survey, which will cost $6,000.00.

Community Impact
The park is designed to offer various benefits to the community, such as promoting physical health through recreational activities, enhancing mental well-being with green spaces, and providing a range of facilities for all age groups. It also includes educational opportunities through environmental programs. The park is anticipated to contribute to local economic growth by raising property values and attracting businesses.

Additionally, it features safe play areas for children and strengthens community pride by fostering a sense of ownership among residents. Positive feedback from pre-grant engagement meetings has influenced the project, with additional meetings scheduled to maintain ongoing community involvement.

Next Steps
The upcoming milestones for the park project involve several key phases. First, the focus will be on finalizing the design phase. Follo wing that, the project will move into the bid and award phase. Once this is complete, attention will turn to the construction phase, which involves site preparation, infrastructure development, and building work.

Additionally, a maintenance plan will be developed to ensure ongoing upkeep. Quarterly updates will be provided, with the next report expected in December 2024.

The development of Cesar Chavez Community Park is progressing smoothly, with significant milestones already achieved. We remain on track for project completion by December 2025 and are dedicated to delivering a high-quality facility that will effectively serve the community’s needs.

FISCAL IMPACT: The total budget for the project is $1,826,125.00, funded by the Proposition 68 grant. Expenditures total $2,715,057.00, resulting in a shortfall of $888,932.00. Staff requests that the Park Dedication Fund cover this remaining balance.

The increased costs are attributed to rising expenses since the city accepted the grant in December 2021, shade structures over the playground areas, mister at the request of the Parks and Recreation Commission and included an area not originally covered in the grant application, which accounts for about a quarter of an acre of land staff is seeking to develop. After a comprehensive review, the staff has asked the architect to incorporate and develop this extra area within the budget.

PREVIOUS COUNCIL OR COMMISSION ACTION: In March 2021, with approval from

the City Council via Resolution 2021-158, staff applied for the Proposition 68 Statewide Park Development and Community Revitalization Program. The goal was to establish a new park north of the City of Hollister Fire Station 2, featuring amenities such as a dog park, art installations, a playground, pickleball courts, a basketball court, a pavilion, and exercise stations.

On December 20, 2021, the City Council, through Resolution 2021-241, accepted a $1,826,125.00 grant from Proposition 68, managed by the California Department of Parks and Recreation.

On November 22, 2022, the City Council adopted Resolution 2022 -210, accepting an amendment to the grant agreement. This amendment, communicated via email regarding Contract No. C5054084 extended the project’s performance period to June 30, 2028, and referenced Executive Order N-6-22, issued by Governor Gavin Newsom on March 4, 2022.

On January 17, 2023, the City Council approved Reso lution 2023-6, which authorized a professional services agreement with Vanir Construction Management, Inc. This agreement involved appointing a Construction Manager to support staff in managing the detailed scope of work for property acquisition, design, and construction of the new park project funded by the Proposition 68 grant awarded to the city.

On February 5, 2024, through Resolution 2024 -7, the City Council approved a contractual agreement with Melton Design Group for architectural and engineering services related to the Proposition 68 construction of the new park at Fire Station #2.

CEQA: Included with the grant application.

ATTACHMENTS:

1. Draft park design and representative photos

STAFF REPORT

HOLLISTER CITY COUNCIL
MEETING DATE: September 3, 2024
REPORT # City Attorney-2024-11

AGENDA ITEM: OROSCO GROUP CANNABIS LICENSE FEE REFUND

DEPARTMENT: City Attorney
DEPARTMENT HEAD: Mary Lerner, City Attorney
STAFF CONTACT: Jennifer Thompson, Assistant City Attorney, Rod Powell, Assistant City Manager, and Maria Mendez, Cannabis Affairs Manager

RECOMMENDED ACTION: Deny Orosco Group’s request to grant a $119,872.00 refund for cannabis license fees.

DISCUSSION: At the August 6, 2024, City of Hollister (“City”) Council meeting, Orosco Group requested, during public comment regarding items not on the agenda, that the City refund Orosco Group cannabis license fees in the amount of $119,872.00, because Orosco Group’s three cannabis facilities never opened for business.

Background
On approximately April 13, 2017, Orosco Group submitted three Orosco Group applications, one for Briggs Seventeen, one for Felipe Nine, and one for Wright Thirteen. Following receipt of the applications and fees, the City Cannabis Affairs Manager (“Cannabis Manager”) reviewed the applications for completeness, drafted required development agreements, and performed all of the ordinary work associated with processing a cannabis license application.

On December 16, 2019, after several revisions and numerous meetings, staff presented the development agreements (“DA”) associated with these applications to the City Council, which was a crucial step in processing their cannabis applications. At t hat time, all contracts needed to be signed before the council meeting, so the Cannabis Manager asked the Orosco Group owner, Patrick Orosco, to submit wet signatures for the three DAs. During the City Council meeting, the City Council approved some requested changes, so revised DAs were produced. (Attachments 1-4.) Following the completion of the revisions, the Cannabis Manager contacted Mr. Orosco to request signatures, but he asked that the signature pages from the original documents be used.

The Cannabis Manager informed Mr. Orosco that the previous signatures could not be used, and he must sign the new agreements. In addition, after review by Orosco Group’s legal team, Orosco Group wished to incorporate additional changes to the DAs.

Discussions continued between the City and Orosco Group but eventually stalled. After some time, the Cannabis Manager followed up with Mr. Orosco who informed the Cannabis Manager that he was currently focused on other priorities, and the City DAs were no longer a priority to Orosco Group.

On October 31, 2023, the Orosco Group emailed the Cannabis Manager requesting a refund of $119,872.00, stating, “due to numerous factors outside of our control, we are no longer pursuing cannabis use projects.” (Attachment 5.) On November 8, 2023, the Cannabis Manager replied explaining that cannabis license fees are not refundable, but

if the Orosco Group would like to appeal that determination, they must do so within ten (10) days in accordance with Hollister Municipal Code section 5.42.270. (Attachment

6.)
The City never received an appeal.

Legal Considerations

City Authority to Charge Fees for Services
California cities are permitted to charge fees for the reasonable regulatory cost to a local government of issuing licenses and permits. (Cal. Const. Art. XIII C, § 1, subd. (e).) The cannabis license fee charged by the City is intended to recoup the cost to the City of processing the license fee application. The City’s Medical Cannabis Facility Application Acknowledge Form requires cannabis license applicants to acknowledge that “the application fee is non-refundable.” (Attachment 7.)

Whether there are State laws prohibiting the refund of cannabis license fees During the August 6, 2024, City Council meeting, the Mayor stated that she believes there is a State law that would preclude the City from refunding cannabis fees. The Mayor asked the City Attorney to research this issue. The City Attorney did so and did not find, and is not aware of, any law that would preclude a City from refunding cannabis license fees.

Gift of Public Funds
The services that are intended to be paid for by the cannabis license fee have already been rendered, so refunding the cannabis license fee may be viewed as a gift of public funds. Whether the City may “gift” public funds depends on whether the gift serves a public purpose. The prohibition against the gift of public funds is rooted in Article XVI, section 6 of the California Constitution. When determining whether an expenditure constitutes a gift of public funds, the primary question is whether the funds are to be used for a public or private purpose. (City and County of San Francisco v. Patterson (1988) 202 Cal.App. 3d 95.) Funds spent for a “direct and substantial public purpose” will not be considered a gift. (California Housing Finance Agency v. Elliott (1976) 17 Cal.3d 575.) The City Council has the discretion to determine what constitutes a “public purpose”. (County of Alameda v. Janssen (1940) 16 Cal.2d 276.) Courts will uphold the governing body’s “public purpose” determination unless it is “unreasonable” or “arbitrary.” (Janssen, 16 Cal.2d at 281; Elliott, 17 Cal.3d, at 583.)

Reason for Recommendation
As discussed, the purpose of the City’s cannabis license fee is to cover the cost to process the cannabis application and associated activities. The Orosco Group’s three applications were reviewed and even approved by the City Council. The licenses were not finally issued only because the Orosco Group wanted to make further amendments to the DAs after approval, and then the Orosco Group withdrew from conversations with the City.

In addition, the Orosco Group acknowledged that the cannabis license application fee is not refundable.

Last, the Orosco Group, when its initial request for a refund was denied, was informed

that they had ten (10) days to appeal the decision. They never appealed.

FISCAL IMPACT: If the City Council grants the cannabis fee refund, the City will be required to pay Orosco Group $119,872.00. As discussed above, the City staff time required to process the cannabis license application has already been incurred by City staff.

CEQA: N/A

ATTACHMENTS:

1. Unsigned Briggs Seventeen DA

2. Unsigned Felipe Nine DA

3. Unsigned Wright Thirteen DA

4. Resolutions approving DAs

5. Email from Matt Nohr requesting cannabis license fee refund

6. Cannabis Manager letter explaining appeal process

7. City Medical Cannabis Facility Application Acknowledgement Form

Record at the request and for the
benefit of the City of Hollister
Pursuant to Government Code §§ 6301 and 27383

DEVELOPMENT AGREEMENT

BY AND BETWEEN

THE CITY OF HOLLISTER, A CALIFORNIA MUNICIPAL CORPORATION, AND

BRIGGS SEVENTEEN, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY

OROS\56228\2198899.3
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RECORDING REQUESTED BY:

CITY OF HOLLISTER
When Recorded Mail To:

City Clerk
City of Hollister
375 Fifth Street
Hollister, CA 95023
Space above this line for Recorder’s use

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DEVELOPMENT AGREEMENT BY AND BETWEEN

THE CITY OF HOLLISTER AND BRIGGS SEVENTEEN, LLC
(Briggs Seventeen)
This Development Agreement (“Agreement”) is entered into on , 2019, by and between the City of Hollister, a California municipal corporation (“City”), and Briggs Seventeen, LLC, a California limited liability company (“Developer”). City and Developer are individually referred to herein as a “Party” and collectively as the “Parties.”

RECITALS

A. To strengthen the public planning process, encourage private participation and comprehensive planning, and reduce the economic risk of development, the California Legislature adopted sections 65864 et seq. of the Government Code (“Development Agreement Statute”), which authorize a city to enter into an agreement with any person having a legal or equitable interest in real property, providing for the development of such property and establishing certain development rights therein.

B. Developer has a legal or equitable interest in certain real property located at 773 San Felipe Road, anticipated to be annexed within City’s incorporated municipal boundaries, consisting of approximately 17.67 gross acres (APN: 019-090-026 ) (“Subject Property”), as more particularly described in attached Exhibit A and shown in attached Exhibit B. The Subject Property has a General Plan land use designation of North Gateway Commercial (NG) and is zoned North Gateway Commercial (NG).

C. Developer seeks approval of a project on the Subject Property on which it desires to construct approximately five hundred fifty thousand (550,000) square feet of buildings for a cannabis facility (as defined below) (with cultivation, manufacturing, research, delivery and office uses), including on-site parking and all utility connections, drainage and landscape improvements, as further described in the Current Approvals (as defined below) (“Project”).

D. City is a general law city and municipal corporation of the State of California and is duly organized, existing, and authorized to exercise powers under the laws of California and the Hollister Municipal Code (“Municipal Code”).

E. In accordance with the Development Agreement Statute, City has enacted a development agreement ordinance pursuant to the provisions thereof (Section 17.24.280 of the Municipal Code; “Development Agreement Ordinance”). The provisions of the Development Agreement Statute and the Development Agreement Ordinance are collectively referred to herein as the “Development Agreement Law.”

F. City has adopted Chapter 5.42 of the Municipal Code (“Local Cannabis Regulations”), which sets forth a regulatory framework to allow for cannabis facilities. The purpose of Chapter 5.42 is to provide for “reasonable regulations pertaining to cannabis dispensary, cultivation, and manufacturing facilities to ensure that qualified patients and their primary caregivers are afforded safe and convenient access to cannabis, while at the same time ensuring that such uses do not conflict with the general plan, are not inconsistent with surrounding uses, and are not detrimental to the public health, safety and welfare” of the citizens of Hollister, and to ensure that operation of such facilities is in compliance with

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applicable state laws and regulations.

G. The Parties intend for this Agreement to be a statutory development agreement, pursuant to the Development Agreement Law, and include conditions and requirements for the development of the Subject Property, as well as vest Developer’s rights to develop the Project as provided for in this Agreement. In addition, the Parties intend this Agreement to satisfy the requirements of the Local Cannabis Regulations, which require those operating a cannabis facility to enter into a “development agreement and operating plan” setting forth “the terms and conditions under which the cannabis facility will operate that are in addition to the requirements of this chapter, including, but not limited to, public outreach and education, community service, payment of fees and other charges as mutually agreed, and such other terms and conditions that will protect and promote the public health, safety, and welfare.”

H. Pursuant to the Local Cannabis Regulations, those who desire to operate a cannabis facility are required to obtain a regulatory permit pursuant to Section 5.42.050 of the Municipal Code (“Regulatory Permit”).

I. Developer anticipates entering into a lease with an entity(ies) (“Tenant”) to hold the Regulatory Permit and to operate the Project on the Subject Property, once constructed, in accordance with the Project Approvals (as defined below), including, among others, the Project’s Regulatory Permit and the City Rules (as defined below).

J. Developer proposes to develop and use the Subject Property as a cannabis facility pursuant to this Agreement, the requirements set forth in the Municipal Code, and as described more fully in the Project Approvals (as defined below). “Cannabis facility” shall have the meaning set forth as in Chapter 5.42.020 of the Municipal Code, and shall include, without limitation, a facility where cannabis or cannabis products are cultivated, possessed, manufactured, processed, stored, tested, labeled, transported, delivered, distributed, or sold, and for any other lawful use not prohibited under state and local laws and regulations, and/or any additional uses that may be approved of by City in the future at Developer’s request.

K. Pursuant to Chapter 5.42 and the Zoning Ordinance in the Municipal Code, the cannabis facilities uses and related improvements as contemplated by the Project constitute a permitted use in the North Gateway Commercial (NG) zoning district, subject to approval of a Regulatory Permit. The Project complies with all applicable commercial development standards for the North Gateway Commercial (NG) zoning district set forth in the Municipal Code.

L. The Project requires the issuance by City of several discretionary entitlements, as set forth in Recital R below; accordingly, the Project is required to comply with the California Environmental Quality Act (Public Resources Code § 21000 et seq. and CEQA Guidelines § 15000 et seq. (collectively, “CEQA”). Pursuant to CEQA, City, as the lead agency, has caused to be prepared an Initial Study/Mitigated Negative Declaration (“IS/MND”) for the Project, which circulated for public review and comment for a thirty (30) day period of time, from July 26, 2019 to August 26, 2019.

M. On September 26, 2019, the City’s Planning Commission (“Planning Commission”) held a duly noticed public hearing and considered Developer’s application for the Project’s Prezone Application (2018-6), along with the IS/MND that was prepared in

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connection therewith. After taking testimony and closing the public hearing, the Planning Commission deliberated and considered the matter, adopted the IS/MND and approved the Project’s Prezone Application, Resolution No. 2019-2019-248, and Prezone Ordinance No.1186 respectively.

N. As noted further herein, City has given the required notice of its intention to consider adoption of this Agreement and has conducted public hearings thereon pursuant to Government Code Section 65867. In addition, City has reviewed and evaluated this Agreement in accordance with the Development Agreement Law, the Local Cannabis Regulations and other relevant provisions of the Municipal Code and found that the provisions of this Agreement and its purposes are consistent therewith and the applicable goals, policies, standards and requirements specified in the General Plan and the Municipal Code.

O. On December 16, 2019, the Hollister City Council (“City Council”) held a duly noticed public hearing and considered this Agreement. After taking testimony and closing the public hearing, the City Council deliberated and considered the matter, confirmed that the IS/MND remained adequate for purposes of considering this Agreement, adopted a Mitigation Monitoring and Reporting Program and made the required findings of fact related thereto (as set forth in Resolution No. ); and introduced Ordinance No. approving this Agreement (“DA Ordinance”). On , 2020, the City Council subsequently adopted the DA Ordinance, which became effective on , 2020.

P. The Site and Architectural Review, the Tentative Parcel Map and this Development Agreement shall be referred to herein as the “Current Approvals.”

Q. City anticipates that during the Term (as defined below) of this Agreement and subsequent to the Effective Date (as defined below), Developer will seek from City (as well as any other public agencies having jurisdiction over aspect(s) of the Project) certain other implementing approvals, entitlements and permits that are necessary or desirable for the Project, which may include, without limitation, the Regulatory Permit, final subdivision and parcel maps, lot line adjustments, encroachment permits, grading permits, building permits, and/or certificates of occupancy (each, a “Subsequent Approval” and collectively, the “Subsequent Approvals”).

R. City and Developer desire the timely, efficient, and orderly development of the Project as contemplated herein and in accordance with the Current Approvals and the Subsequent Approvals, as and when obtained (collectively, “Project Approvals”).

S. The terms and conditions of this Agreement have undergone review by City staff, its Planning Department, and the City Attorney, as well as the City Council at duly noticed public meetings and hearings and have been found to be fair, just and reasonable. City further finds that this Agreement is consistent with the City’s General Plan and any applicable specific plan; is in conformity with the public convenience, general welfare, and good land use practices; is not inconsistent with surrounding land uses; will not be detrimental to the health, safety, and general welfare of persons residing in the immediate area nor be detrimental or injurious to property or persons in the general neighborhood or to the general welfare of the residents of the City of Hollister as a whole; will not adversely affect the orderly development of property or the preservation of property values; and is consistent with the Development Agreement Law and applicable state law and regulations regarding cannabis facilities. The Project will

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facilitate economic generation for the City of Hollister in a number of ways, including, without limitation, job creation (both construction- and operation-oriented); property tax generation; and payment of Impact Fees and the Cannabis Business Fees (as those terms are defined below).

T. City and Developer have reached mutual agreement and desire to voluntarily enter into this Agreement to facilitate development of the Project in conformance with the Development Agreement Law and the Local Cannabis Regulations, to vest Developer’s right to develop the Project on the Subject Property, and to establish Developer’s obligations related thereto, as more particularly set forth herein.

NOW, THEREFORE, in consideration of the mutual promises, covenants and provisions set forth herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows.

AGREEMENT

ARTICLE I: DESCRIPTION OF SUBJECT PROPERTY, PROPOSED DEVELOPMENT, EFFECTIVE DATE AND TERM.

Section 1.1. Description of Subject Property.

This Agreement vests the laws applicable to development of the Project on the Subject Property as of the Effective Date, as set forth more fully herein.

Section 1.2. Proposed Development.

Subject to the terms and conditions of this Agreement, Developer shall have the vested right to construct and operate (and/or lease the Project to Tenant(s) for purposes of operation consistent with the Regulatory Permit) the Project in accordance with the Current Approvals, as well as the Subsequent Approvals once granted and effective. Developer shall have the right to have Subsequent Approvals, as well as any amendment(s) to the Current Approval(s) proposed by Developer, considered by City for approval or denial based upon the terms, standards, criteria and requirements set forth in the Current Approvals and in accordance with Developer’s vested rights hereunder. In exercising its discretion when acting upon Subsequent Approval(s) to the extent the same are discretionary in nature, City shall apply the Current Approvals as the controlling body of law within which City’s discretion shall be exercised. Furthermore, City shall process applications for any amendment(s) to the Current Approval(s) proposed by Developer as well as all applications for Subsequent Approval(s) expeditiously and in accordance with this Section 1.2.

Section 1.3. Effective Date and Term.

(a) Effective Date. The effective date of this Agreement shall be thirty (30) days after the date that the City Council adopts the DA Ordinance (“Effective Date”) and shall be inserted above where indicated. The Parties acknowledge that section 65868.5 of the Development Agreement Statute requires City to record this Agreement with the San Benito County Recorder no later than ten (10) days after the Parties enter into this Agreement and that the burdens of this Agreement shall be binding upon and the benefits shall inure to all successors in interest to the Parties, subject to the assignment provisions in Section 6.12 below.

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(b) Term. Subject to extension(s) granted pursuant to subsection (c) below, the term of this Agreement shall commence on the Effective Date and extend twenty (20) years thereafter (“Term”). Unless earlier terminated (pursuant to the terms of this Agreement), following the expiration of the Term, this Agreement shall be deemed terminated and of no further force and effect, except for the provisions of this Agreement that expressly survive termination, if any.

(c) Extension(s) of Term. Developer may, in its sole and absolute discretion, request up to, and upon receipt of a written request from Developer, City shall grant a total of three (3) ten (10) year extensions; assuming all extensions are requested by Developer, the Term of this Agreement shall be a total of fifty (50) years, at which point this Agreement shall automatically terminate.

ARTICLE II: STANDARDS, LAWS, AND PROCEDURES GOVERNING THE PROPOSED DEVELOPMENT.

Section 2.1. Vested Right to Develop.

In recognition of the extraordinary, long-term investment in planning, engineering, design, technical review and legal resources necessary to develop the Subject Property with the Project, Developer shall have the vested right to develop and operate the Project on the Subject Property in accordance with all valid applicable adopted ordinances, resolutions, statutes, codes, laws, rules, regulations, initiatives, referenda, and/or official policies of City, including, without limitation, City’s General Plan; the Municipal Code; and City’s environmental laws, entitlements, approvals, licenses, and permits issued to Developer by City (including, without limitation, the Current Approvals), in effect on the Effective Date of this Agreement (collectively, “City Rules”). The Subsequent Approval(s) shall be considered for approval or denial based upon the terms, provisions, standards, criteria and requirements set forth in the City Rules.

Section 2.2. Permitted Uses.

The permitted uses of the Subject Property; the density and intensity of uses; the maximum height, bulk, and size of proposed buildings; provisions for reservation or dedication of land for public purposes and location and maintenance of on-site and off-site improvements and the location of public utilities operated by City (water and wastewater); and other terms and conditions of development applicable to the Project, shall be those set forth in this Agreement, the other Current Approvals, any amendment(s) to the Current Approval(s) proposed by Developer and approved by City, and the Subsequent Approval(s) once granted and effective.

Section 2.3. Application of Subsequently Enacted Rules, Regulations and Official Policies.

This Agreement is a legally binding contract that shall supersede any initiative, measure, moratorium, statute, ordinance, or other limitation enacted after the Effective Date (collectively, “New Rules”) except as expressly provided herein and as otherwise provided for in accordance with applicable laws and regulations. Notwithstanding the foregoing, the Parties acknowledge and agree that New Rules shall be applicable to the Project if and only to the extent that such application will not conflict with any of the vested rights granted to Developer hereunder. Any New Rules shall be deemed to conflict with Developer’s vested rights hereunder if the New Rule(s) seek to limit or reduce the density or intensity of development of the Project; impose in an ad hoc manner on the Project additional material financial obligations; or seek to modify the timing of the development of the Project as contemplated in the Project Approvals.

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Notwithstanding anything to the contrary in this Section 2.3 and in accordance with Sections 2.5 and 2.7 below, City shall not be precluded from applying any New Rules to the Project under the following circumstances, where the New Rules are: (a) specifically mandated by changes in state or federal laws or regulations adopted after the Effective Date as provided in Government Code Section 65869.5, subject to the terms of Section 2.7(a) below; (b) specifically mandated by a court of competent jurisdiction; or (c) changes to the Uniform Building Code or similar uniform construction codes, or to City’s local construction standards for public improvements so long as such code or standard has been formally adopted by City and is in effect on a city-wide basis.

Section 2.4. Vested Against Moratoria, Quotas, Restrictions or Other Cannabis Facilities Development Limitations.

City agrees that, except as otherwise expressly provided in or expressly limited by the provisions of this Agreement, this Agreement vests the Project against New Rules that would directly or indirectly limit the rate, timing, or sequencing of development of the Project on the Subject Property, or that would prevent or conflict with the permitted uses, or the density or intensity of uses, or the terms, provisions, criteria, standards or requirements of development, as set forth in the Current Approvals and the Subsequent Approval(s) once granted and effective. The foregoing shall include, without limitation, any New Rules that seek to restrict the number, type or nature of cannabis facilities in City.

Section 2.5. Vested Rights Exclude Building and Fire Codes.

City shall apply to the Project the applicable provisions of the California Building Code, Plumbing Code, Electrical Code, Mechanical Code, Fire Code, Water Conservation laws, Energy Code, and Green Building Standards, as may be amended from time to time, as adopted by City, as well as the applicable provisions of the Federal Americans with Disabilities Act (ADA) (collectively, “Applicable Uniform Codes”) in effect at the time the applicable building, grading, encroachment or other construction permit is submitted for review for the Project. If no construction permit is required for infrastructure improvement(s), such improvement(s) shall be constructed in accordance with the Applicable Uniform Codes in effect at the time of approval by City of the improvement plans for such infrastructure. Provided, however, that the Parties acknowledge and agree that for purposes of applying the Applicable Uniform Codes to the Project, the occupancy classification for agricultural buildings and greenhouses shall be designated as Group “U” pursuant to Section 312 of the 2016 California Building Code.

Section 2.6. Vested Rights Exclude Regulatory Processing Fees, Annual Operating Fees, and Cannabis Facilities Registration and Renewal Fees.

Developer shall pay City’s actual expenses to process applications for the Subsequent Approval(s) and to conduct plan check and inspections (collectively, “Regulatory Processing Fees”) in accordance with City’s adopted Regulatory Processing Fee schedule in effect at the time that each Subsequent Approval application is formally submitted. In addition, Developer shall pay all applicable annual renewal fees, as well as any fees for inspection or investigation that are required by Municipal Code Section 5.42.080 for the Project except as otherwise expressly set forth in Section 2.8 below and so long as each said fee has been lawfully adopted and applied on a city-wide basis and is applied to the Project only on a prospective basis. The various fees expressly referenced in this Section 2.6 are distinct from and shall be treated differently than the Cannabis Business Fees (as defined below), for which Developer has vested

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rights pursuant to section 2.8 below. Notwithstanding anything to the contrary in the foregoing, nothing in this Section 2.6 is intended to limit non-City public agencies’ legal authority, to the extent such otherwise exists, to impose fees on the Project.

Section 2.7. Vested Rights Exclude Changes in State or Federal Laws.

(a) Changes in State or Federal Laws. This Agreement shall not preclude the application to the Project of changes in City Rules, the terms of which are specifically mandated and required by changes in state or federal law(s) and/or regulation(s). In the event state and/or federal law(s) and/or regulation(s) enacted after the Effective Date prevent or preclude compliance with one or more provisions of this Agreement, the Party identifying the conflict shall provide the other Party, as soon as practicable after the conflict becomes known to the notifying Party, written notice of the conflict, a copy of the law(s) or regulation(s) that give rise to the conflict, and a statement explaining the nature of the conflict. Within thirty (30) days after that notice is given, the Parties shall meet and confer in good faith in a reasonable attempt to modify this Agreement so as to comply with the state and/or federal law(s) or regulation(s) giving rise to the conflict, pursuant to Government Code section 65869.5. If Developer does not consent to an amendment that is required to make this Agreement consistent with state and/or federal law(s) or regulation(s) in accordance with Government Code section 65869.5, City shall provide Developer written notice of the immediate suspension of this Agreement, and this Agreement shall remain suspended until the date this Agreement is so amended to eliminate the conflict.

Notwithstanding this Section 2.7(a), the parties acknowledge that all commercial cannabis activity is prohibited under federal law, and any new federal law or regulation pertaining to commercial cannabis activity shall have no impact on this Agreement, unless and to the extent such new federal law or regulation imposes or increases City’s legal or financial liability under such new law.

(b) No Vesting into State Laws. The operation of cannabis facilities is a highly regulated business activity, and it is subject to various state and local laws and regulations. This Agreement does not, and City cannot and does not intend to, give Developer the vested right to continue Project operations without complying with applicable state and local laws and regulations governing the operations of cannabis facilities. This Agreement only “vests” those regulations expressly referenced in the Development Agreement Statute, which include rules, regulations, and official policies governing permitted uses of the land, density, and design, improvement, and construction standards and specifications, applicable to development of the Project, and as described more fully herein.

(c) Conflict with Cannabis Regulation and Safety Act. If there is any conflict between any provision of this Agreement and any provision of the Cannabis Regulation and Safety Act, formerly known as the Marijuana Regulation and Safety Act, which is comprised of Assembly Bill 243, Assembly Bill 266, and Senate Bill 643 (Bus. & Prof. Code Section 19300 et seq.; H&S Code Section 11362.769-11362.777; and Water Code Section 13276), the provisions of the Cannabis Regulation and Safety Act shall control. Nothing in this Agreement is intended to nor shall it be construed or interpreted to allow or require Developer to do anything or take any action related to the performance of this Agreement that is contrary to, prohibited by, or not allowed under the Cannabis Regulation and Safety Act and any regulations issued by the State pursuant thereto. Nor shall this Agreement be construed or interpreted to allow or authorize Developer to not do anything or not take any action related to the performance of this Agreement that is required by said Act and related regulations.

(d) In addition to the above provisions of this Section 2.7, in the event state or

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federal laws or regulations negate, legally or financially, any lease agreement between Developer and a Tenant of the Subject Property, whether wholly or in part, Developer agrees and acknowledges that City shall have no liability to Developer for any loss, financial or otherwise, which Developer consequently incurs.

Section 2.8. Vested Rights Regarding Development Impact Fees and Cannabis Business Fee.

(a) Development Impact Fees. Developer shall vest into the Impact Fee(s) (as defined below) that are in place on the Effective Date and are set forth in attached Exhibit B, and therefore City shall have no right to impose on the Project any increase in existing Impact Fee(s) (except for a standard inflationary increase as reflected in the Consumer Price Index) or any new type(s) of Impact Fees; provided, however, that if City adopts Impact Fee(s) that are less in amount (or eliminates a type of Impact Fee) after the Effective Date, Developer shall have the vested right to pay that lower amount (or avoid payment of the eliminated fee altogether), so long as said lower amount remains subject to standard inflationary increases as reflected in the Consumer Price Index. Notwithstanding the above, however, if Developer seeks a certificate of occupancy for the Project more than ten (10) years following the Effective Date of this Agreement, then Developer shall pay the greater of the Impact Fees as of the Effective Date of this Agreement or the Impact Fees as of the date Developer seeks a certificate of occupancy. Developer shall have the vested right to pay all applicable Impact Fees at time of issuance of the relevant certificate of occupancy rather than building permit. “Impact Fee(s)” means any monetary amount charged by City or other governmental or quasi-governmental agency in connection with a Project Approval in order to lessen, offset, mitigate or compensate for the impacts of development of the Project on the environment; facilities, services, improvements, and/or infrastructure or other public interests, including, without limitation, any “fee” as that term is defined by Government Code section 66000(b) as well as any fee imposed “in lieu of” an Exaction. “Exaction” means an exaction that may be imposed by City as a condition of developing the Project, including, without limitation, requirements for acquisition, dedication or reservation of land; and obligations to construct on-site or off-site public and private infrastructure improvements such as roadways, utilities or other improvements; this is the case whether such exactions constitute subdivision improvements, mitigation measures in connection with environmental review of the Project, or impositions made under the City Rules. A requirement imposed by City or other governmental or quasi-governmental authority on the Project that meets both the definitions of an Impact Fee and an Exaction shall be considered to be an Impact Fee. Notwithstanding anything to the contrary in the foregoing, the parties acknowledge and agree that this subsection (a) does not apply or otherwise affect the treatment of the Cannabis Business Fee (as defined below).

(b) Cannabis Business Fee. Subject to the time frames and limitations set forth in this subsection (b), Developer shall include a provision in any and all lease(s) with Tenant(s) who will operate the Project that the Tenant(s) pay to City the annual cannabis business fees (collectively, “Cannabis Business Fees”):

(i) A per square foot (“psf”) fee in the amount defined by the table below as applied to the Active Cultivation Area (as defined below) within the Project, unless City later adopts a modified cultivation tax or fee that is lower, in which event the lower amount shall apply to the Project on a going-forward basis.

Total Facility (SF)
City Fee Rate ($) per SF of
Active Cultivation Area
Cumulative City
Annual Tax ($)

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100,001 150,000 $3.00 450,000
150,001 1,000,000 $1.00 1,300,000

“Active Cultivation Area” shall mean the floor area of canopy, as that term is defined in CDFA regulations, for fully licensed and operational businesses at the Project whose gross receipts are at least five (5) times greater than the Cannabis Business Fee owed in any particular quarter. For avoidance of doubt, Active Cultivation Area shall exclude areas such as those which are used for: hallways, unoccupied perimeters, entryways or lobbies, offices or administration, security or video surveillance monitoring, personnel or human resources, break rooms, kitchens, locker rooms, and restrooms; storage, curing, drying, trimming, processing, packaging or labeling, sorting, transporting, loading or unloading, shipping or distributing raw materials, packaging, equipment, cannabis products or plants; all nurseries, clone, ‘mother’ or propagation rooms, all mechanical, electrical, fire suppression, plumbing or irrigation equipment rooms; and waste disposal areas, among others.

(ii) A per square foot (“psf”) fee in the amount defined by the table below as applied to the Active Manufacturing Area (as defined below) within the Project, unless City later adopts a modified manufacturing or extraction tax or fee that is lower, in which event the lower amount shall apply to the Project on a going-forward basis.

ty
$)

“Active Manufacturing Area” shall mean the floor area where commercial cannabis manufacturing activity is conducted, including extraction; refinement, infusion, cooking, mixing, making, batch sampling or other active manufacturing operations directly related to the production of consumer and pre-consumer commercial cannabis products such as cannabis oils, shake, shatter, wax, edibles, drinks, vape pens and other devices, salves, creams, or tinctures, for fully licensed and operational businesses whose gross receipts are at least five (5) times greater than the Cannabis Business Fees due in any particular quarter. For avoidance of doubt, Active Manufacturing Area shall exclude areas such as those which are used for:
hallways, unoccupied perimeters, entryways or lobbies, offices or administration, security or video surveillance monitoring, personnel or human resources, break rooms, kitchens, locker rooms, and restrooms; storage, curing, drying, trimming, processing, packaging or labeling, sorting, transporting, loading or unloading, shipping or distributing raw materials, packaging, equipment, cannabis products or plants; all nurseries, clone, ‘mother’ or propagation rooms, all mechanical, electrical, fire suppression, plumbing or irrigation equipment rooms; and waste disposal areas, among others.

“Total Facility” shall mean the gross area of all buildings on the Subject Property, within the Felipe Nine project, and the Wright Thirteen project.

If, in any particular quarter, gross receipts are not five (5) times greater than the Cannabis Business Fees due for any particular Tenant, then that Tenant shall pay a fee equal to one percent (1%) of gross receipts for that particular quarter in lieu of the psf fee described above.

City Fee Rate ($) per SF of Cumulative C
Total Facility (SF) Active Manufacturing Area Annual Tax (

100,001 150,000 $3 .00 450,000
150,001 1,000,000 $1 .00 1,300,000

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(iii) So long as the Tenant is engaged in either manufacturing or cultivation of commercial cannabis, there shall be no Cannabis Business Fee due in connection Tenant’s distribution of commercial cannabis products from the same Project in which such cultivation or manufacturing activity is conducted.

The payment of the first (1st) quarterly installment of the Cannabis Business Fees shall not be deemed delinquent until such time as the second (2nd) quarterly payment is due. The first (1st) quarter shall commence on or about the date when the Subject Property is fully operational, which is further defined as when the Subject Property is engaged in full capacity cultivation and manufacturing activities. Notwithstanding the foregoing, if operation of cultivation, manufacturing and/or distribution activities are phased in accordance with phased certificates of occupancy or temporary certificates of occupancy issued by City, the first (1st) quarter for each phase of cultivation, manufacturing and/or distribution shall be deemed as commencing on or about the date the certificate of occupancy or temporary certificate of occupancy is issued by the City for each phase of operation.

Notwithstanding anything to the contrary in the foregoing, Developer shall, under no circumstances, have the obligation to pay the Cannabis Business Fees. Payment of this obligation shall be attached as a condition to the Regulatory Permit, for which the Tenant, as the holder of the Regulatory Permit, shall have the sole responsibility to pay.

Section 2.9. Priority of Enactments.

In the event of any conflict or inconsistency between this Agreement and any of the other Current Approval(s) (including, without limitation, any conditions attached thereto), or between this Agreement and any Subsequent Approval(s), to the fullest extent legally possible, this Agreement shall prevail and control. Furthermore, any conflict or inconsistency between this Agreement and the Municipal Code, to the fullest extent legally possible, this Agreement shall prevail and control.

Section 2.10. Life of Vesting Tentative Map and Other Approval(s).

The term of the Current Approvals including, without limitation, the Tentative Parcel Map (pursuant to Government Code section 66452.6(a)) as well as the term of any and all Subsequent Approval(s) once granted and effective, including, without limitation, the Regulatory Permit. shall be deemed extended for the longer of the Term of this Agreement or the term otherwise applicable to such Approval(s). The Tentative Parcel Map complies with the provisions of California Government Code Section 66473.7, as applicable. Notwithstanding this Section 2.10, City shall have the right to schedule and conduct a periodic review per Section 6.2, below.

ARTICLE III: OTHER DEVELOPER OBLIGATIONS.

Section 3.1. First Source Hiring.

Subject to applicable laws and regulations governing such arrangements, Developer shall use good faith and diligent efforts to implement a “Local First Source Hiring” program to support local employment opportunities for residents of the City of Hollister in connection with the Project.

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Section 3.2. Compliance with Operating Conditions.

Pursuant to Section 5.42.090 of the Municipal Code, Developer shall include in any lease(s) with Tenant(s) the requirement that the Tenant (as the holder of the Regulatory Permit) shall adhere to all conditions of the Regulatory Permit, including, without limitation, those that set forth the terms and conditions under which the Project shall operate, which shall be in substantially the same form as attached Exhibit C. In the event there is any conflict between said conditions and the operational requirements in the Local Cannabis Regulations, the conditions in the Regulatory Permit shall govern. If Tenant(s) fail, in a material way, to comply with any such conditions, then the City Planning Director (“Planning Director”) shall notify Tenant (with a copy to Developer) in writing of its non-compliance and in said notice, shall provide with reasonable specificity the basis for City’s finding of non-compliance, and shall identify the reasonable means by which Tenant may come into compliance (“Condition Non- Compliance Notice”). Tenant shall cure any such non-compliance within ninety (90) days of receipt of the Condition Non-Compliance Notice unless the non-compliance is such that it cannot be remedied within said 90-day period, in which case Tenant’s commencement of said cure within this 90-day period and its diligent prosecution of said cure thereafter to completion shall constitute a cure for purposes of this Section 3.2. If Tenant fails to cure any such non- compliance during this 90-day period (or fails to commence the cure as provided in this Section

3.2, then City shall have the right, but not the obligation, to commence revocation proceedings pursuant to Section 4.1(c) below. Notwithstanding anything to the contrary in the foregoing, Tenant and/or Developer shall have the right to appeal any Condition Non-Compliance Notice issued by the Planning Director to the City Council, as well as appeal any decision by the Planning Director to revoke or revise the Regulatory Permit (pursuant to Section 4.1(c) below) to the City Council. Any decisions made by City pursuant to this Section 3.2 shall be made in writing and supported by substantial evidence.

Notwithstanding anything to the contrary in the foregoing, the Parties acknowledge and agree that the Tenant (as the holder of the Regulatory Permit) shall have the sole responsibility to adhere to the conditions attached to the Regulatory Permit, and that Developer shall have no such obligations under any circumstances. Provided, however, Developer shall have the right, but not the obligation, to step into Tenant’s place to cure any non-compliance pursuant to this Section 3.2. If Developer elects, in its sole and absolute discretion, to do so and the method of cure would involve replacement of the Tenant, then Developer shall have the right to replace the Tenant who violated the Regulatory Permit with another Tenant and City shall accept this substitution so long as the new Tenant meets the objective criteria set out in the Local Cannabis Regulations for purposes of operating a cannabis facility.

Section 3.3. Compliance with Other Project Approval Conditions.

Subject to the limitations set forth in Section 3.2 above, Developer (or its successor(s) and assign(s), as applicable) shall comply with the conditions imposed on other Project Approvals, including, without limitation, all mitigation measures and requirements to construct public improvements, as set forth therein.

Section 3.4. No Obligation to Construct. By entering this Agreement, Developer shall not be obligated to develop all or any portion of the Subject Property, and, unless Developer elects to develop all or any portion(s) of the Subject Property with the Project, Developer shall not be required to perform any obligations under this Agreement. Notwithstanding this Section 3.4, the parties agree that if Developer has not demonstrated a good faith effort to commence construction of the Project on the tenth (10th) anniversary of the Effective Date, then City shall

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have the right, but not the obligation, to terminate this Agreement. For purposes of this Section

3.4, a “good faith effort to commence construction” shall mean Developer has obtained a building permit for any Project component including, without limitation, on- or off-site improvements. Provided, however, that if Developer has not demonstrated a good faith effort to commence construction within ten (10) years and City elects to terminate this Agreement, this shall not be construed as a default of Developer.

ARTICLE IV: PROCESS TO OBTAIN SUBSEQUENT APPROVALS; RENEWAL AND REVOCATION PROCESS FOR REGULATORY PERMIT.

Section 4.1. Subsequent Approvals.

(a) State Subsequent Approvals; City Cooperation. Developer shall be responsible for obtaining or causing to obtain all applicable state licenses, permits, approvals, and consents, even if the applicable state laws and regulations are amended following the Effective Date. The Cannabis Regulation and Safety Act and any regulations issued by the State pursuant thereto may require the issuance of multiple State-issued licenses for full operation of the Project. At Developer’s request, the Parties shall meet and confer and cooperate with each other in good faith and with diligence to facilitate the creation of a business model and organizational structure that enables Developer to develop and operate the Project pursuant to this Agreement. If Developer is for any reason not able to obtain the number or type of State-issued licenses required for full operation of the Project, or the State limits the number of licenses issued to Developer, then Developer may request City issue additional Regulatory Permit(s) as necessary to another party or parties for purposes of operating the Project. Except for good cause, City shall issue Regulatory Permits to each such applicant so long as same satisfies any applicable requirements set for in the Local Cannabis Regulations and agrees to assume the obligations hereunder pursuant to Section 6.12 below.

(b) Renewal of Regulatory Permit. The procedural and substantive requirements in this Section 4.1(b), rather than those in Section 5.42.120 of the Municipal Code, shall solely govern the development and operation of the Project and the renewal of its Regulatory Permit.

Subject to the payment of all applicable annual renewal fees in accordance with this Agreement and in accordance with Developer’s vested rights to construct and operate the Project hereunder, City shall be required to renew the Regulatory Permit on an annual basis so long as Tenant is in compliance with the conditions attached thereto. The Planning Director shall have the authority to issue each said renewal without any requirement for public notice or hearing, which shall occur no later than twelve (12) months following the Effective Date and annually thereafter. Each said renewal shall be memorialized in writing by the Planning Director, with a copy given to Tenant and Developer. Provided, however, that if the Planning Director fails to issue said renewal in writing pursuant to the time frames set forth in this subsection (b), then the Regulatory Permit shall be deemed renewed for purposes of the following year. If the Planning Director denies renewal of the Regulatory Permit, the basis for doing so shall be set forth in writing with reasonable specificity and based on substantial evidence in the record, and Developer shall have the right to appeal this decision to the City Council.

(c) Revocation of Regulatory Permit. The procedural and substantive requirements in this Section 4.1(c), rather than those in Section 5.42.120 of the Municipal Code, shall solely govern the development and operation of the Project and any attempt to revoke its Regulatory Permit. Subject to payment of all applicable annual fees in accordance with this Agreement and in accordance with Developer’s vested rights to construct and operate the Project hereunder, City shall be required to renew the Regulatory Permit on an annual basis so long as Tenant is in

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compliance with the conditions attached thereto. Pursuant to this Section 4.1(c) and Section 3.2 above, City shall not have any right to revoke the Project’s Regulatory Permit unless Tenant has materially violated one (1) or more conditions attached to its Regulatory Permit after receiving notice of same from City, and failed to cure said violation(s) pursuant to Section 3.2 above. The City Council shall be the decision maker with respect to any revocation proceedings, and consideration of same shall take place at a public hearing. Any revocation of the Project’s Regulatory Permit shall: (i) be based on substantial evidence in the record; (ii) require the City Council to make written findings that specify (A) the material violation(s) and Tenant’s failure to cure same and (B) the substantial adverse impact to the public health and safety if revocation does not occur. City shall have the burden to demonstrate the basis for revocation pursuant to Section 3.2 and this Section 4.1 of this Agreement and shall be subject to Developer’s vested rights hereunder.

ARTICLE V: DEFAULT, REMEDIES, TERMINATION.

Section 5.1. General Provisions.

Subject to extensions of time by the Parties’ mutual consent in writing, failure or unreasonable delay by either Party to perform any material term or provision of this Agreement shall constitute a default by that Party, but only if the defaulting Party does not cure the alleged default within ninety (90) days after receipt of the written notice required in this Section 5.1, or does not commence to cure such failure or delay within this 90-day period and thereafter diligently prosecute said cure to completion, if the default is such that it cannot reasonably be cured within 90 days. In the event of alleged default of any term or provision of this Agreement, the Party alleging default shall give the defaulting Party not less than ninety (90) days’ notice in writing reasonably specifying the nature of the alleged default and the manner in which said default may be satisfactorily cured. During any such ninety (90) day period, the defaulting Party shall not be considered in default for purposes of termination or institution of legal proceedings.

After notice and expiration of the 90-day period without the defaulting Party having cured or having commenced to cure the default (if a cure cannot be completed during the 90-day period), then the non-defaulting Party at its option may institute legal proceedings pursuant to this Agreement or give notice of intent to terminate this Agreement as it relates to the defaulting Party’s rights hereunder pursuant to California Government Code Section 65868. Following notice of intent to so terminate, the matter shall be scheduled for consideration and review by the City Council within thirty (30) calendar days in the manner set forth in California Government Code Sections 65865, 65867 and 65868.

Following consideration of the evidence presented in said review before the City Council, the Party alleging the default by the other Party may give written notice of termination of this Agreement as it relates to the defaulting Party’s rights hereunder to the other parties.

Evidence of default may also arise in the course of a regularly scheduled periodic review of this Agreement pursuant to Government Code Section 65865.1 and Section 6.2 below. If a Party determines that the other Party is in default following the completion of the normally scheduled periodic review, the non-defaulting Party may give written notice of default of this Agreement as set forth in this Section 5.1. If: (a) the alleged default is not cured within ninety (90) days; or (b) the defaulting Party does not commence to cure, correct or remedy such alleged default within ninety (90) days and thereafter diligently prosecute said cure to completion; or (c) the defaulting Party does not cure (or commence to cure, if appropriate) within such longer period as may be specified in the notice; or (d) if the defaulting Party waives its right to cure such alleged default,

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the other Party may terminate this Agreement.

Notwithstanding anything to the contrary in the foregoing, Developer shall have the right to object to and/or otherwise challenge any claim(s) of default and City’s authority to terminate the Agreement as a result thereof.

Furthermore, the Parties acknowledge and agree that any failure on the part of Tenant to adhere to the operating conditions of the Regulatory Permit shall not constitute a default of Developer hereunder.

The Parties further acknowledge and agree that City shall have no obligation to issue a Regulatory Permit to any proposed Tenant of Developer’s that does not satisfy all applicable express requirements set forth in the Local Cannabis Regulations as well as those conditions set forth in attached Exhibit C, including without limitation, background checks, and that under such circumstances City shall have no liability to Developer for refusal to issue such Regulatory Permit.

Section 5.2. Excused Delay, Extension of Times of Performance.

Performance by either Party hereunder shall not be deemed to be in default where delays or default are due to war, insurrection, strikes, walkouts, riots, floods, drought, earthquakes, fires, casualties, acts of God, terrorist acts, new or supplementary environmental or other laws or regulations affecting development, litigation, severe economic circumstances beyond Developer’s reasonable control, or similar bases for excused performance (“Excused Delay”).

If written notice of such delay is given by Developer to City within thirty (30) days of the commencement of such delay, an extension of time for such cause shall be granted in writing for the period of such delay, or longer as may be mutually agreed upon.

Section 5.3. Permitted Extensions by City.

In addition to any extensions to the time for performance of any obligation due to an excused delay under Section 5.2 above, City, in its sole discretion, may extend the time for performance by Developer of any obligation hereunder. Any such extension shall not require an amendment to this Agreement, so long as such extension only involves the time for performance thereof and does not change the obligations to be performed by Developer as a condition of such extension.

The Parties shall document in writing any such extension(s).

Section 5.4. Legal Action; No Obligation to Develop; Specific Enforcement.

In addition to any other rights or remedies that may be available to the Parties, either Party may institute legal action to cure, correct or remedy any default, to enforce any covenant or agreement herein, or to enjoin any threatened or attempted violation. All legal actions shall be initiated in the Superior Court of the County of San Benito, State of California. Developer acknowledges that under the Development Agreement Law, land use approvals (including development agreements) must be approved by the City Council and that under applicable law, the City Council’s discretion to vote in any particular way may not be constrained by contract, except as permitted in the Development Agreement Law. Developer therefore waives all claims for monetary damages against City in the event that this Agreement or any other Subsequent Approval is: (1) not approved by the City Council; or (2) is approved by the City Council, but with new changes, amendments, conditions or deletions to which Developer is opposed. Developer further acknowledges that as an instrument that must be approved by ordinance, a development

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agreement is subject to referendum, and that under applicable laws, the City Council’s discretion to avoid a referendum by rescinding its approval of the underlying ordinance may not be constrained by contract, and Developer waives all claims for monetary damages against City in this regard. Notwithstanding anything to the contrary in the foregoing, nothing in this Section

5.4 is intended to nor does it limit Developer’s rights to equitable remedies as permitted by law.

ARTICLE VI: GENERAL PROVISIONS.

Section 6.1. Amendments.

(a) Amendment by Mutual Consent. This Agreement may be amended in writing from time to time by the Parties’ mutual consent in accordance with the Development Agreement Law.

(b) Substantive Changes Shall Require Amendment. Substantive changes to this Agreement shall necessitate an amendment to this Agreement to incorporate the applicable changes to the terms and conditions at issue and any related documents and agreements (if and to the extent necessary to ensure consistency with this Agreement). A “substantive change” to this Agreement is one that changes the Term or for which an application is made to modify any of the following with respect to the Subject Property: the permitted uses; an increase in the density or intensity of use; an increase in height or size of buildings; provisions for reservation and dedication of land; conditions, terms, restrictions and requirements relating to Subsequent Approvals that are discretionary in nature; the amount of monetary contributions by Developer; or any other material term or condition of this Agreement. If a Party notifies the other Party that an amendment is needed or desirable due to the proposed substantive change(s) to this Agreement, the Parties shall meet and confer in good faith on the terms of any such amendment. The scope of good faith negotiation shall be limited to such good faith amendment(s) necessary to effectuate the substantive changes to this Agreement contemplated in this Section 6.1(b), and shall not reopen other provisions of this Agreement not affected by the proposed amendment(s). Amendments for substantive changes shall be made in accordance with the provisions of the Development Agreement Law. Notwithstanding anything to the contrary in the foregoing, any approved amendment(s) to the Current Approvals or approval of any Subsequent Approvals shall not trigger a requirement to amend this Agreement to reflect said same.

(c) Minor Changes Do Not Require Amendment. This Agreement need not be amended to allow for changes to this Agreement that are not substantive, as described in Section 6.1(b) above, but rather are minor in nature. The Parties acknowledge that refinement and further implementation of the Project via Subsequent Approval(s) may demonstrate that certain minor changes may be appropriate with respect to the Project details and related performance of the Parties under this Agreement, and the Parties desire to retain a certain degree of flexibility with respect to such details and performances. If and when the Parties find and mutually agree that clarifications, minor changes, or minor adjustments are necessary or appropriate, they shall effectuate such clarifications, changes or adjustments through an operating written memorandum approved by the Parties, with the City Manager acting on behalf of City. After execution, the operating memorandum shall be attached to this Agreement. Further minor changes as necessary from time to time may be agreed upon by the Parties by their subsequent approval. Unless required by the Development Agreement Law, no operating memorandum shall require prior notice or public hearing, nor shall it constitute an amendment to or termination for convenience in whole or in part of this Agreement.

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(d) Recordation Upon Amendment or Termination. Except when this Agreement is automatically terminated due to the expiration of the Term, City shall cause any amendment(s) hereto and any termination hereof to be recorded with the San Benito County Recorder within ten (10) days after full execution of any such amendment or the effective date of any such termination.

(e) Cancellation by Mutual Consent. Except as otherwise permitted herein, this Agreement may be canceled in whole or in part only by the Parties’ mutual consent in accordance with applicable provisions of the Development Agreement Law.

Section 6.2. Periodic Review .

City shall, at least every twelve (12) months during the Term of this Agreement (commencing from the Effective Date), review the extent of good faith substantial compliance by Developer with the terms and provisions of this Agreement. Such periodic review shall be limited in scope to compliance with the terms and provisions of this Agreement pursuant to California Government Code Section 65865.1, Section 17.280(F) of the Municipal Code, and the monitoring of mitigation in accordance with California Public Resources Code Section 21081.6.

A finding by City of good faith compliance by Developer with the terms and provisions of this Agreement shall be conclusive with respect to Developer’s performance during the period preceding the review. Developer shall be responsible for the cost reasonably and directly incurred by City to conduct such periodic review, the payment of which shall be due within thirty (30) days after conclusion of the review and receipt from City of the bill for such costs (and reasonable documentation in support thereof). Upon Developer’s written request, City shall provide to Developer a copy of all staff reports and related exhibits concerning performance under this Agreement at least ten (10) calendar days prior to any such periodic review. If City has not performed a periodic review within ninety (90) days following the relevant 12-month period, Developer shall be deemed to be in substantial compliance with the terms and provisions of this Agreement.

Section 6.3. Applicable Law .

This Agreement shall be construed and enforced in accordance with the laws of the State of California.

Section 6.4. Hold Harmless.

(a) Indemnification Obligations Relating to Project Construction and Operation.

Developer agrees to, and shall defend, indemnify and hold City, its elective and appointive councils, boards, commissions, officers, agents, and employees harmless from its proportionate fair share of any costs, expenses, damages, liability for damages or claims of damage for personal injury, or bodily injury including death, as well as from claims for property damage (collectively, “Claims”) that may arise from Developer’s construction and/or operation of the Project on the Subject Property, or of Developer’s contractors, subcontractors, agents, or employees under this Agreement, whether such activities be by Developer, or by any of its contractors or subcontractors or operators or Tenant(s), or by any one or more persons directly or indirectly employed by, or acting as agent for, Developer or its contractors or subcontractors or operators or Tenant(s); provided, however, that said indemnification obligations shall not cover any Claim(s) if and to the extent said Claim(s) arise from City’s negligence or willful misconduct. Furthermore, notwithstanding anything to the contrary in the foregoing, the indemnity obligation in this Section 6.4(a) shall not apply to any liability for Claim(s) with respect

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to or use of any public improvements that were constructed as part of the Project after the completion and acceptance thereof by City. This Section 6.4(a) shall constitute compliance with the indemnification obligations set forth in Section 5.42.130 of the Municipal Code.

(b) Indemnification Obligations Relating to Project Approval. In addition to the indemnity obligation in Section 6.4(a) above, Developer agrees to and shall defend, indemnify and hold City, its elective and appointive councils, boards, commissions, officers, agents and employees harmless from any and all third-party lawsuits, claims, challenges, damages, expenses, costs, including attorneys' fees (each, “Third-Party Lawsuit”) that may be awarded by a court in any action at law or in equity as a result of a successful legal challenge to City’s approval of this Agreement and/or any other Project Approval(s). City shall retain the right to appear in and defend any such action or lawsuit on its own behalf regardless of any tender under this provision. Notwithstanding anything to the contrary in the foregoing, this indemnity obligation shall not apply to any liability for damage or claims for damage that are related to City’s negligence or willful misconduct. This Section 6.4(b) shall constitute compliance with the indemnification obligations set forth in Section 5.42.130 of the Municipal Code.

(c) Cooperation and Defense in the Event of Legal Challenge. In the event of any Third Party Lawsuit challenging City’s approval of this Agreement and/or any other Project Approval(s), the Parties shall cooperate in defending said action. Developer shall bear their own costs of defense as a real party in interest in any such action pursuant to subsection (b) above, and Developer shall pay City for all reasonable court costs and attorneys’ fees expended by City in defense of any such action or other proceeding, provided that City reasonably cooperates with Developer in the defense of such action. City, in its sole discretion, may retain separate counsel and may defend same; provided, however, that City shall obtain Developer’s prior written consent prior to settling the Third-Party Lawsuit.

Section 6.5. Enforceability.

City agrees that unless this Agreement is amended or canceled pursuant to the provisions hereof, this Agreement shall be enforceable according to its terms by Developer notwithstanding any change hereafter to the General Plan, Specific Plan, Zoning, subdivision ordinance or building regulations adopted by City, or by initiative, which changes, alters or amends the City Rules, as provided by California Government Code Section 65866.

Section 6.6. No Third Party Beneficiaries.

This Agreement is made and entered into for the sole protection and benefit of Developer and City and their respective successors and assigns. No other person shall have any right of action based upon any provision in this Agreement.

Section 6.7. Project as a Private Undertaking.

It is specifically understood and agreed by and between the Parties that the Project is a private development. No partnership, joint venture or other association of any kind is formed by this Agreement.

Section 6.8. Mortgagee Protection.

The Parties agree that this Agreement shall not prevent or limit Developer, in any manner, at the Developer’s sole discretion, from encumbering the Subject Property or any portion thereof or

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any improvement thereon by any mortgage, deed of trust, security agreement, sale or leaseback financing, or other like security instrument encumbering all or any portion(s) of the Subject Property (each, a “Mortgage”), except as limited by the provisions of this Section 6.8.

City acknowledges that the Mortgagee(s) providing such financing may require certain Agreement interpretations and modifications and agrees upon request, from time to time, to meet with Developer and representatives of such Mortgagee(s) to negotiate in good faith any such request for interpretation or modification. City shall not unreasonably withhold its consent to any such requested interpretation or modification provided such interpretation or modification is consistent with the intent and purposes of this Agreement. Any Mortgagee shall be entitled to the following rights and privileges:

(a) Neither entering into this Agreement nor a default hereunder shall defeat, render invalid, diminish or impair the lien of any Mortgage on the Subject Property (or any portion(s) thereof) made in good faith and for value, unless otherwise required by law.

(b) The Mortgagee of any Mortgage encumbering the Subject Property, or any portion(s) thereof, which Mortgagee has submitted a request in writing to City in the manner specified herein for giving notices, may request to receive written notification from City of any default by Developer in the performance of Developer’s obligations under this Agreement.

(c) If City receives a timely request from a Mortgagee requesting a copy of any notice of default given to Developer under the terms of this Agreement, City shall provide a copy of that notice to the Mortgagee within ten (10) days of sending the notice of default to said Developer. The Mortgagee shall have the right, but not the obligation, to cure the default during the remaining cure period allowed to Developer under this Agreement.

(d) Any Mortgagee who comes into possession of the Subject Property, or any portion(s) thereof, by any means, whether pursuant to foreclosure of the Mortgage, or deed in lieu of such foreclosure or otherwise, shall take the Subject Property, or portion thereof, subject to the terms of this Agreement. Provided, however, notwithstanding anything to the contrary above, any Mortgagee, or the successors or assigns of such Mortgagee, who becomes an owner of the Subject Property, or any portion(s) thereof, through foreclosure or deed in lieu thereof shall not be obligated to pay any fees or construct or complete the construction of any improvements, unless such owner desires to continue development of the Subject Property consistent with this Agreement and the Project Approvals, in which case the owner by foreclosure shall assume all the past and future, including delinquent obligations of Developer hereunder in a form reasonably acceptable to City.

Section 6.9. Estoppel Certificate.

(a) Either Party may, at any time, and from time to time, request written notice from the other Party requesting such Party to certify in writing that: (i) this Agreement is in full force and effect and a binding obligation of the Parties, (ii) this Agreement has not been amended or modified either orally or in writing, or if so amended, identifying the amendments, and (iii) to the knowledge of the certifying Party the requesting Party is not in default in the performance of its obligations under this Agreement, or if in default, to describe therein the nature and amount of any such defaults. A Party receiving a request hereunder shall execute and return such certificate within thirty (30) days following the receipt thereof, or the Parties may reasonably agree to such longer period as mutually agreed to in writing by the Parties. The City Manager shall be authorized to execute any certificate requested by Developer. Should the Party receiving the request not execute and return such certificate within the applicable period, this

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shall not be deemed to be a default, provided that such Party shall be deemed to have certified that the statements in clauses (a)(i) through (a)(iii) of this section are true, and any Party may rely on such deemed certification.

Section 6.10. Severability.

The unenforceability, invalidity or illegality of any provisions, covenant, condition or term of this Agreement shall not render the other provisions, covenants, conditions or terms unenforceable, invalid or illegal.

Section 6.11. Attorneys’ Fees and Costs.

If City or Developer initiates any action at law or in equity to enforce or interpret the terms and conditions of this Agreement, the prevailing Party shall be entitled to recover reasonable attorneys’ fees and costs in addition to any other relief to which it may otherwise be entitled.

Section 6.12. Transfers and Assignments.

The procedural and substantive requirements in this Section 6.12, rather than those in Section

5.42.050 of the Municipal Code, shall solely govern the transfer and assignability of this Agreement, the Regulatory Permit, and the other Project Approvals. From and after the Effective Date, Developer shall have the right, in its sole and absolute discretion, to transfer, convey, delegate and/or assign (collectively, “Assign”) its rights and obligations hereunder as well as the other Project Approvals in connection with the sale or lease of all or a portion of the Subject Property and/or the Project. Provided, however, that Developer shall notify City of any such Assignment by providing City with an executed assignment and assumption agreement; upon City’s receipt of the assignment and assumption agreement at issue, Developer shall be released from any further liability or obligation hereunder so conveyed and the Assignee shall be deemed to be Developer, with all rights and obligations related thereto, with respect to such conveyed property. Notwithstanding anything to the contrary in the foregoing, the Parties acknowledge and agree that any such Assignee shall be obligated to adhere to all conditions and requirements of this Agreement and the other Project Approvals.

Section 6.13. Other Necessary Acts.

Each Party shall execute and deliver to the other all such other further instruments and documents as may be reasonably necessary to carry out this Agreement in order to provide and secure to the other Party the full and complete enjoyment of its rights and privileges hereunder.

Section 6.14. Incorporation of Recitals.

The preamble, the recitals and all defined terms in this Agreement are hereby incorporated into this Agreement as if set forth herein in full.

Section 6.15. Agreement Runs with the Land.

All provisions, rights, terms, covenants and obligations contained in this Agreement shall be binding upon the Parties and their respective Assignees, and all other persons acquiring the Subject Property, or any portion thereof, or any interest therein, whether by operation of law or in any manner whatsoever. All provisions of this Agreement shall be enforceable as equitable servitude and shall constitute covenants running with the land pursuant to applicable laws,

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including, but not limited to, Section 1468 of the Civil Code of the State of California. Each covenant to do, or refrain from doing, some act on the Subject Property hereunder, or with respect to any owned property, (a) is for the benefit of such properties and is a burden upon such properties, (b) runs with such properties, and (c) is binding upon each Party and each successive owner during its ownership of such properties or any portion thereof, and shall be a benefit to and a burden upon each Party and its property hereunder and each other person succeeding to an interest in such properties.

Section 6.16. Notices.

All notices required or provided for under this Agreement shall be in writing. Notices required to be given to City shall be addressed as follows:

Attn: City Manager
City of Hollister
375 Fifth Street
Hollister, CA 95023
Notices required to be given to Developer shall be addressed as follows:

Attn: Patrick Orosco
Briggs Seventeen, LLC
10 Harris Court, Suite B-1
Monterey, CA 93940
With a copy to Developer’s legal counsel:

Attn: Nadia Costa
Miller Starr Regalia
1331 N. California Blvd., Fifth Floor
Walnut Creek, CA 94596

A Party may change address by giving notice in writing to the other Party and thereafter all notices shall be addressed and transmitted to the new address. Notices shall be deemed given and received upon personal delivery, or if mailed, upon the expiration of forty eight (48) hours after being deposited in the United States Mail. Notices may also be given by overnight courier, which shall be deemed given the following day, or by email transmission, which shall be deemed given upon verification of receipt.

Section 6.17. Agreement is Entire Understanding.

This Agreement constitutes the entire understanding and agreement of the Parties.

Section 6.18. Counterparts.

This Agreement is executed in two (2) duplicate originals, each of which is deemed to be an original. This Agreement, inclusive of its recitals and exhibits, constitutes the entire understanding and agreement of the parties. This Agreement may be signed in identical counterparts and the signature pages, together with appropriate acknowledgments, may be removed from the counterparts and attached to a single counterpart, which shall all be considered a fully-executed original for all persons and for purposes of recordation hereof.

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Section 6.19. Recordation.

City shall record a copy of this Agreement within ten (10) days following execution by both Parties.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date and year first above written.

CITY DEVELOPER

City of Hollister Briggs Seventeen, LLC

By: By:

William Avera Patrick W. Orosco, Managing Member
City Manager

By:

Thomas A. Graves, MMC Christopher R. Orosco, Managing Member City Clerk

Approved as to form:

City Attorney [NOTARIZATION
ATTACHED]

EXHIBIT A

Legal Description of Subject Property

Real property in the County of San Benito, State of California, described as follows:

PARCEL ONE:

THE PART OF HOMESTEAD LOT 11 OF SAN JUSTO RANCHO, AS SUBDIVIDED BY THE SAN JUSTO HOMESTEAD ASSOCIATION AND DESCRIBED AS FOLLOWS:

BEGINNING AT A STATION ON THE EASTERLY SIDE OF SAID HOMESTEAD LOT 11 AND FROM WHICH STATION THE SOUTHEAST CORNER OF SAID LOT BEARS SOUTH 2° 51' WEST 11.194 CHAINS; AND RUNNING THENCE NORTH 37° O' WEST AT 0.464 CHAINS TO 3" X 3" REDWOOD STAKE NUMBERED "1 AND 4", IN FENCE 19.076 CHAINS TO A 3" X 3" REDWOOD STAKE NUMBERED "1, 2, 3 AND 4", THENCE NORTH 2° 55' WEST 10.746 CHAINS TO A 3" X 3" REDWOOD STAKE NUMBERED "3, 4, 5 AND 6", THENCE SOUTH 87° EAST 19.062 CHAINS TO A STATION ON THE EASTERLY SIDE OF LOT 11 IN THE CENTER OF THE HOLLISTER AND SAN FELIPE ROAD, AND FROM WHICH STATION A 3" X 3" REDWOOD STAKE NUMBERED "4 AND 5" BEARS NORTH 87° WEST 0.454 CHAINS, AND THENCE SOUTH 2° 51' WEST 10.7 16 CHAINS ALONG THE EASTERLY LINE OF SAID LOT 11 TO THE PLACE OF BEGINNING.

EXCEPTING THEREFROM THAT CERTAIN PORTIONS AS CONVEYED BY GEORGE W.

JEAN AND ALICE JEAN, HUSBAND AND WIFE, TO THE STATE OF CALIFORNIA BY DEED DATED APRIL 20, 1955, AND RECORDED OCTOBER 26, 1955 IN VOL. 218, AT PAGE 59,

OF OFFICIAL RECORDS OF SAN BENITO

COUNTY, CALIFORNIA.

PARCEL TWO:

INTEREST IN WELLS AND PUMPING PLANTS WITH NECESSARY RIGHTS OF WAY FOR

DITCHES AND OTHER CONDUIT FOR TAKING WATER FROM SAID WELLS AND PUMPING PLANTS TO THE LAND ABOVE DESCRIBED AS GRANTED TO GEORGE W. JEAN BY:

A: DEED FROM LAURENCE FLYNN ET AL., DATED DECEMBER 4, 1912, AND RECORDED IN VOL.51 OF DEEDS, AT PAGE 188, SAN BENITO COUNTY RECORDS. AS GRANTED TO STEPHEN KAELEN BY:

B. DEED FROM LAURENCE FLYNN ET AL., DATED OCTOBER 30, 1913, AND RECORDED IN VOL.52 OF DEEDS, AT PAGE 84, SAN BENITO COUNTY RECORDS, AS GRANTED TO ANTONE G. DE ROZA BY:

C. DEED FROM LAURENCE FLYNN ET AL., DATED NOVEMBER 1, 1917, AND RECORDED IN VOL. 59 OF DEEDS, AT PAGE 20, SAN BENITO COUNTY RECORDS.

EXHIBIT B

MEMORANDUM

DATE: July 20, 2019

TO: DEVELOPMENT SERVICES DIRECTOR

FROM: ENGINEERING DIVISION

SUBJECT: ADJUSTED FEES AND CHARGES AS ADOPTED AND ESTABLISHED BY RESOLUTIONS 2019-113, 2011-82, 2017-234, 2017-296, 89-134, 88-80, 94-70, 95-59, 89-46, 89-47

This memo supersedes our memo dated July 1, 2019 on the same subject. As of July 20, 2019, fees and charges shown in the table below shall be in effect based on 1,000 square feet of building area.

COMMERCIAL/INDUSTRIAL IMPACT FEES

Public Facility Impact Fees
Local
Commercial
*

Commercial Commercial
Office
Local
Industrial *

Industrial
Water (2) $286.00 $286.00 $286.00 $143.00 $143.00 Traffic (3 ) $1,705.62 $2, 168.88 $4,464 .09 $505.37 $590.65 Sewer - Collection (S) $656.10 $656.10 $656.10 $0.00 $0.00 Storm Drainaqe(6J $285.00 $285.00 $285.00 $589.00 $589.00 Police (BJ $283.70 $283.70 $283 .70 $283.70 $283 .70
Fire (9) $378 .30 $378.30 $378.30 $378 .30 $378 .30 Detention (Jail/Juvenile Hall) (10 ) $0.50 $0.50 $0.38 $0.23 $0.23 City Hall/City Yard (11 ) $356 .00 $356.00 $465.00 $172.00 $172 .00 Total July 2019 Fees $3,951.22 $4,414.48 $6,818.57 $2,071.60 $2,156.88

Definition: Local Serving (Local Commercial and Local Industrial) applies ONLY to the traffic impact fee.

It is defined as a business which primarily serves local residents and local retail through vehicle trips considered to be generated from Zone 2 of the Traffic Impact Fees approval in Resolution 2016-46 and not considered to be peak traffic flows contributors on State Route 25 and State Route 156 as determined by

ADDITIONAL FEES:

There is an additional sewer treatment impact fee(4) and a water meter setting fee( 1) as shown on the following page.

) WATER METER FEE (1

Meter Size ** Min-Max GPM
Flow****
Connection
Fee
518" x %" 0 .5 - 20 $301.00
1" 1 - 50 $443.00
2" 2.5 - 160 $848 .00
2" Compound 0.5 - 200 $1,948.00
4" 10 - 1200 $2,630.00
4" Compound 1 - 1000 $4,433.00
6" 20 - 2500 $4,781.00
6" Compound 1.5 - 2000 $7,462 .00
8" 35 - 4000 $7,590 .00
8" Compound n/a $13,362 .00
10" 50 - 6500 $11,351 .00
1O" Compound n/a $18,987.00

** Compound meter shall be used when identified by City of Hollister Utility Department when varying flows are expected. Call (831- 636-4370.

*** Normal operating Range from Neptune Technology Group Water Meter Selector

Sewer Treatment Impact Fee (4)
Non-Residential : $27.44 gallons per day
School : $135.64 per student

SAMPLE:

Sewer Treatment Impact Fee

Unit

Flow GPO

Fee
Auto Repair 1000 sq . ft. 100 $2,744.41
Bar 1000 sq . ft. 350 $9,605.45
Barber/Beauty Shop 1000 sq. ft. 40 $1,097.77
Car Wash no recycling 1000 sq. ft. 3700 $101,543.31
Church 1000 sq. ft. 60 $1,646.65
Commercial Office 1000 sq. ft. 60 $1,646.65
Hospitals Bed 200 $5,488 .83
Laundromat Machine 500 $13,722.07
Mortuaries 1000 sq. ft. 100 $2,744.41
Market 1000 sq. ft. 60 $1,646.65
Motel Sleeping Room 125 $3,430 .52
Pharmacy 1000 sq. ft. 100 $2,744.41
Restaurants 1000 sq . ft. 150 $4, 116.62
Restaurants - Fast Food 1000 sq . ft. 570 $15,643.16
Retail Store 1000 sq . ft. 100 $2,744.41
Schools Student 4 .94 $135.64
Service Stations 1000 sq. ft. 100 $2,744.41
Theaters 1000 sq. ft. 90 $2,469 .97
Light Industrial 1000 sq. ft. 25 $686 .10
Warehouse 1000 sq . ft. 25 $686.10

Notes

1. Resolution No. 2011-82. (Water Meter Fee)
Resolution No. 2011-82 amends Table 7 of Resolution No. 2004-125.

Reference Resolutions : 2011-82, 2004-125, 87-90, 85-95

2. Resolution No. 2019-113 . (Water Impact Fee)
Resolution No. 2019-113 approved May 20, 2019 supersedes Resolution No. 85-95 .

1.00000

* Adjustments per "Employee Cost Index for State and Local Government Employees, Total compensation" published by Bureau of Labor statistics. Council may, by resolution, apply changes to Master Fee Schedule.

Reference Resolutions: 2013-113, 87-90, 85-95

3. Resolution No. 2017-234. (Traffic Impact Fee)
Resolution No. 2017-234 amends Resolution No. 2016-46

1.05285

Reference Resolutions : 2017-234, 2016-46, 2011-142, 2008-87, 2001-170, 98-73, 95-149, 95-131, 95-59, 93-66, 92-178, 88-100, 85-123, 85-99, 85-36

4. Resolution No. 2017-296 . (Sewer Impact Fee - Treatment) Resolution No. 2017-296 supersedes Resolution No. 2009-146 .

1.05150

Reference Resolutions : 2017-296, 2009-146, 2006-151, 89-134, 85-145, 85-93

5. Resolution No. 89-134. (Sewer Impact Fee - Collection) Resolution No. 89-134 amends Resolution No. 85-145 .

2.68217

Reference Resolutions: 89-134, 85-145, 85-93

6. Resolution No. 2019-113: (Storm Drainage Fee)
Resolution No. 2019-113 approved on May 20, 2019 supersedes Resolution No. 89-133.

1.00000

Reference Resolutions: 2019-113, 89-133, 85-144, 85-96 ENR Construction Cost Index April-19 11228.07
April-19 11228.07

ENR Construction Cost Index June-19 11268.48
June-17 10702.81

ENR Construction Cost Index Apr-19 11228 .07
Apr-17 10678.15

ENR Construction Cost Index June-19 11268.48
June 1985 4201 .26

ENR Construction Cost Index Apr-19 11228.07
Apr-19 11228.07

7. Resolution No. 88-80: (East Area Storm Drainage Fee) Resolution No. 88-80 amends Section 2 of Resolution No. 85-146. * please note, Resolution No. 88-80 is to be repealed.

2.68217

Reference Resolutions: 88-80, 87-92, 85-146

8. Resolution No. 89-46 : (Police Impact Fee)

2.36457

Reference Resolutions : 95-59, 89-46, 85-97

9. Resolution No. 89-47: (Fire Impact Fee)

2.36457

Reference Resolutions: 95-59, 89-47, 85-98

10. Resolution No. 2019-113 : (Jail and Juvenile Hall Facilities Impact Fee) Resolution No.2019-113 approved on May 20, 2019 supersedes Resolution No. 2000-64 .

1.00000

Reference Resolutions: 2019-113, 2000-64

11. Resolution No. 2019-113 : (City Hall/City Yard Impact Fee) Resolution 2019-113 approved on May 20, 2019 with a ENR Construction Cost Index.

1.00000

Reference Resolutions: 2019-113
ENR Construction Cost Index June-19 11268.48
June 1985 4201 .26

Consumer Price Index Dec-2018 289.896
Dec-1988 122.600

Consumer Price Index Dec-2018 289.896
Dec-1988 122.600

ENR Construction Cost Index Apr-19 11228.07
Apr-19 11228.07

ENR Construction Cost Index Apr-19 11228.07
Apr-19 11228.07

EXHIBIT C

OROS\56228\2186746.2

Cannabis Facility Regulatory Permit Applicant Release Agreement, Conditions of Approval and Affidavit of Acknowledgement

As an applicant for the Cannabis Facility, commonly known as “Briggs 17,” located on San Felipe Road, to be located within City’s incorporated municipal boundaries once annexation is approved and currently located in unincorporated San Benito County, consisting of approximately 17.67 gross acres (APN: 019-090-026) (“Subject Property”),

I, as the applicant and operator for the Cannabis Facility, hereby acknowledge and agree to the following conditions being imposed on the approval of the Regulatory Permit for the Briggs 17 Cannabis Facility.

CANNABIS FACILITIES AND DELIVERY REGULATIONS.

Cannabis Facility Infrastructure and Security Regulations

In addition to the infrastructure and security requirements expressly contained in the Hollister Municipal Code, Chapter 5.42, the Briggs 17 Cannabis Facility shall comply with the following infrastructure and security regulations:

The operator shall substantially comply with the Security Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Security Plan, the requirements in the Security Plan shall govern and control.

Alarms and closed circuit television. A Police Department-licensed, 24-hour centrally monitored alarm system is required. The system shall automatically notify the Police Department dispatch and allow camera system access for dispatch to relay vital information to responding officers on alarm activations.

Closed circuit television (“CCTV”) video monitoring shall be installed that meets the following criteria:

Continuous 24-hour operation and recording with minimum archival period of six months cloud-based storage for motion-activated movement.

Sufficient cameras shall be installed and maintained on-site, with angles of observation and lighting to allow facial feature identification of persons in interior and exterior areas where cannabis or cannabis products are present at any time.

Sufficient cameras shall be installed and maintained on-site, with angles of observation and lighting to allow facial feature identification of persons in the immediate exterior areas of doors, windows, or other avenues of potential access , with 20 feet on either side and out from every door.

All CCTV recordings shall be accessible to law or code enforcement officers at all times during operating hours and otherwise upon reasonable request. All CCTV recording systems shall have the capability of producing tapes, DVDs or other removable media of recordings made by the CCTV system, including still photograph images.

To prevent tampering, the CCTV recorder shall be kept in a secure, locked location and all recordings shall be date and time stamped.

Windows and glass panes shall have vandal-resistant glazing, shatter-resistant film, glass block, or bars installed and equipped with latches that may be released quickly from the inside to allow exit in the event of emergency.

Windows vulnerable to intrusion by a vehicle must be protected by bollards or a landscaping grade separation that is reasonably sufficient to prevent such intrusion.

Roofs, roof hatches, sky lights, and ceilings: All reasonable means of gaining unauthorized access to the roof shall be eliminated. Exterior roof ladders shall be secured with locked ladder covers.

Roof hatches and skylights shall be reasonably secured so as to prevent intrusion.

Visibility: Cannabis or cannabis products or graphics depicting cannabis or cannabis products within the cannabis facility shall not be visible with the naked eye from the perspective of a pedestrian immediately exterior to the property line of the cannabis facility.

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Exterior landscaping within 10 feet of a cannabis facility shall be free of locations which could reasonably be considered places where a person could conceal themselves considering natural or artificial illumination.

Exterior building lighting and parking area lighting must be of sufficient foot-candles and color rendition, so as to allow the ready identification of any individual committing a crime on site at a distance of no less than forty feet.

Fire suppression system: An approved automatic fire sprinkler system, designed in compliance with International Fire Code is required, unless otherwise determined not to be necessary pursuant to applicable Fire Code provisions given the nature of the structure being constructed.

Entrances, exits, and doors: A cannabis facility shall have a single plainly identified primary entrance/exit site that is visible from public or common areas.

Any exit or entrance that is not visible from a public or common area shall be plainly marked as an emergency exit only. Such emergency exits shall be self-closing, self-locking, with commercial grade locks equipped with an alarm and not used except in an emergency.

Any aluminum door shall be fitted with steel inserts at the lock receptacles.

Any outward opening doors shall be fitted with hinge stud kits, welded hinges or set-screw hinge pins.

Panic exit hardware shall be “push-bar” design.

Double doors shall be fitted with three-point locking hardware and push-bars consistent with fire agency regulations or requirements.

All emergency exits shall be solid core doors featuring hinge-pin removable deterrence. Emergency exit doors shall have latch guards at least 12 inches in length protecting the locking bolt area. Latch guards shall be of minimum 0.125-inch thick steel, affixed to the exterior of the door with non-removable bolts, and attached so as to cover the gap between the door and the doorjamb for a minimum of six inches both above and below the area of the latch.

All glass doors or doors with glass panes shall have shatter-resistant film affixed to prevent glass breakage.

Identification and access badges: Managers and employees of a cannabis facility may wear identification badges with photo identification on breakaway style lanyards, at chest height.

The identification badges shall the means to access areas of the cannabis facility not designed for public access.

The identification badge access system shall have a duress feature.

The identification badge access system shall have a readily available recorded log for entry/exit time of areas of the cannabis facility not designed for public access. The electronic logs must be retained for 90 days.

Biometric access system: Entrances to areas of a cannabis facility where cannabis or cannabis products are cultivated, manufactured, processed, stored, tested, or labeled must have biometric scanners for individual unmistakable identifying access.

The biometric access system shall have a readily available recorded log for entry/exit time for to the secured areas. The electronic logs must be retained for 90 days.

Security personnel: A cannabis facility shall utilize adequate security personnel and patrols to ensure the safety of persons and to protect the facility from theft at all times.

All security personnel utilized by the cannabis facility shall be licensed and possess a valid Department of Consumer Affairs “Security Guard Card” at all times.

Security liaison: A cannabis facility shall provide the City Manager or designee with the name, telephone number, and email address of a security liaison to whom the City can provide notice if there are security

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problems associated with the cannabis facility or refer members of the public who may have any concerns or complaints regarding the security of the cannabis facility. Each cannabis facility shall also provide the above information to all businesses and residences located within 100-foot radius of the cannabis facility.

The security liaison shall be reasonably available to meet with the City Manager, the City’s Police Chief, or their designees, regarding any security related measures or and operational issues.

All Cannabis Facility General Operating Requirements

In addition to the operating requirements applicable to cannabis facilities expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis facilities shall comply with the following general operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

A cannabis facility shall post, in a prominent location within the facility, a copy of its cannabis facility Regulatory Permit and a document that provides (a) the name, telephone number, and address of a person(s) authorized to accept service of process on behalf of the cannabis facility, (b) the name, telephone number, and address of the facility’s community relations liaison required pursuant to Section 5.42.240 of the Municipal Code, and (c) the name, telephone number, and address of the facility’s security liaison required pursuant to this condition.

There shall be at least one responsible person at the cannabis facility to act as manager and supervise employees at all times during business hours. Such responsible person shall undergo a Fingerprint- Based Criminal History Records Check conducted by the City Police Department pursuant to Section 5.42.060 of the Municipal Code and shall not have been convicted of an offense listed in Section 5.42.070.7.A of the Municipal Code.

All finished cannabis and cannabis products (except for limited amounts of cannabis used for display purposes, samples, or immediate sale) shall be secured and locked in a room, safe, or vault in a manner as to prevent diversion, theft, and loss. No outdoor storage of cannabis or cannabis products is permitted at any time.

A cannabis facility shall utilize an inventory and point-of-sale tracking system to track and report on all aspects of the facility’s business including, but not limited to, such matters as cannabis tracking, inventory data, and gross sales (by weight and by sale). The cannabis facility shall ensure that such information is compatible with the City’s record-keeping systems. The system must have the capability to produce historical transactional data for review by the City Manager or designee.

A cannabis facility shall use weighing or measuring devices that meet standards equivalent to Division 5 of the Business and Professions Code.

All cannabis or cannabis products sold, distributed, tested, or manufactured by cannabis facility shall be cultivated, manufactured, and transported by licensed facilities that maintain operations in full conformance with the State and local regulations.

Signage and notices: In addition to the requirements otherwise set forth in this section, business identification signage for a cannabis facility shall conform to the applicable requirements of the Municipal Code, including, but not limited to, seeking the issuance of a City sign permit.

No signs placed on the premises of a cannabis facility shall obstruct any entrance or exit to the building or any window.

Each entrance to a cannabis facility shall be visibly posted with a clear and legible notice indicating that smoking, ingesting, or otherwise consuming cannabis on the premises or in the areas adjacent to the cannabis facility is prohibited.

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 facility shall advertise by having an individual holding a sign and advertising the business to passersby, whether such person is on the premises of the cannabis facility or elsewhere including, but

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not limited to, the public right-of-way. No “A Frame” style signs allowed in front of business or on curbside.

Signage shall not be directly illuminated, internally or externally, except that the name and address of the business may be illuminated at night.

Odor control: Odor control devices and techniques shall be incorporated in all cannabis facilities to ensure that odors from cannabis are mitigated to the maximum extent reasonably practicable so as to minimize off-site detection. All cannabis facilities shall provide a sufficient odor absorbing ventilation and exhaust system so that odor generated inside the cannabis facility that is distinctive to its operation is mitigated to the maximum extent reasonably practicable so as to minimize off-site detection, anywhere on adjacent property or adjacent public rights-of-way, on or about the exterior or interior common area walkways, hallways, breezeways, foyers, lobby areas, or any other areas available for use by common tenants or the visiting public, or within any other non-cannabis unit located inside the same building as the cannabis facility. As such, cannabis facilities must install and maintain the following equipment or any other equipment which the City Manager or designee determines is a more effective method or technology: exhaust air filtration system with odor control that prevents internal odors, to the maximum extent reasonably practicable, from being emitted externally.

An air system that creates negative air pressure between the cannabis facility’s interior and exterior, so that the odors generated inside the cannabis business are not detectable, to the maximum extent reasonably practicable, on the outside of the cannabis business.

A cannabis facility shall (i) prohibit loitering by individuals outside the cannabis facility, whether the loitering is occurring immediately outside the cannabis facility or anywhere else on the project site; (ii) on-site consumption of cannabis or alcohol; and (iii) loud car stereos or activities disruptive to the neighboring businesses or residences outside the cannabis facility, whether the disruption is occurring immediately outside the cannabis facility or anywhere else on the project site.

A cannabis facility shall notify the City Manager or designee IMMEDIATELY after discovering any of the following:

(i) Discrepancies identified during inventory.

(ii) Diversion, theft, loss, or any criminal activity involving the cannabis business or any agent or employee of the cannabis business.

(iii) The loss or unauthorized alteration of records related to cannabis, , or employees or agents of the cannabis facility.

(iv) Any other material breach of security.

Agents or employees of the City requesting access to a cannabis facility or the records required to be maintained by a cannabis facility to document compliance with these conditions shall be given reasonable access to same.

A cannabis facility shall implement and monitor procedures for cash management, security, and storage.

A cannabis facility shall secure worker’s compensation insurance covering employees of the medical facility.

A cannabis facility shall secure general liability insurance with an aggregate limit not less than $1,000,000.00.

Cannabis Cultivation Facility Operating Requirements

In addition to the operating requirements applicable to cannabis cultivation facilities contained in the Hollister Municipal Code, Chapter 5.42, cannabis cultivation facilities shall comply with the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

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A cannabis cultivation facility shall not use pesticides or insecticides prohibited by applicable federal, State, or local law for fertilization or production of edible produce.

A cannabis cultivation facility shall comply with all applicable federal, State, and local laws regarding use and disposal of pesticides and fertilizers.

Until regulatory implementation of the Medicinal and Adult-Use Cannabis Regulation and Safety Act ( MAURA), a cannabis cultivation facility shall send (or make arrangements for a cannabis distribution facility to send) cannabis cultivated by the facility for batch testing to a cannabis testing center that maintains operations in full conformance with the applicable State and local regulations prior to distribution to a cannabis dispensary.

Prior to transportation, a cannabis cultivation facility shall package and seal all cannabis in tamper- evident packaging and use a unique identifier, such as a batch and lot number or bar code, to identify and track the cannabis.

Cannabis Manufacturing Facility Operating Requirements

In addition to the operating requirements applicable to cannabis manufacturing facilities expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis manufacturing facilities shall comply with the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

All cannabis manufacturing facilities must adhere to applicable City of Hollister Building Department Codes as required by the Building Official.

All manufacturers, whether Type 7 or Type S, must adhere to all applicable regulations and requirements set by the California Department of Public Health ( California Code of Regulations, Title 17; Division 1, Chapter 13. Manufactured Cannabis Safety.

A cannabis manufacturing facility shall only produce, distribute, provide, donate, or sell non-potentially hazardous food, as established by the State Department of Public Health pursuant to Section 114365.35 of the Health and Safety Code.

Prior to transportation, a cannabis manufacturing facility shall package and seal all cannabis products in tamper-evident packaging and use a unique identifier, such as a batch and lot number or bar code, to identify and track the cannabis products.

Cannabis Distribution Facility Operating Requirements

In addition to the operating requirements applicable to cannabis distribution facilities expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis distribution facilities shall comply with the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

A cannabis distribution facility shall only procure, sell, or transport cannabis or cannabis products that are packaged and sealed in tamper-evident packaging that uses a unique identifier, such as a batch and lot number or bar code, to identify and track the cannabis or cannabis products.

A cannabis distribution facility shall maintain a database and provide a list of the individuals and vehicles authorized to conduct transportation on behalf of the cannabis distribution facility to the City Manager or designee.

Individuals authorized to conduct transportation on behalf of the cannabis distribution facility shall have a valid California Driver’s License.

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Individuals authorized to conduct transportation on behalf of the cannabis distribution facility shall undergo a Fingerprint-Based Criminal History Records Check conducted by the City Police Department pursuant to Section 5.42.060 of the Municipal Code and shall not have been convicted of an offense listed in Section 5.42.070.7.A of the Municipal Code.

Individuals transporting cannabis or cannabis products on behalf of the cannabis distribution facility shall maintain a physical copy of the transportation request (and/or invoice) and shall make it available upon request of agents or employees of the City requesting documentation.

During transportation, the individual conducting transportation on behalf of the cannabis distribution facility shall maintain a copy of the cannabis distribution facility’s regulatory permit and shall make it available upon request of agents or employees of the City requesting documentation.

A cannabis distribution facility shall only transport cannabis or cannabis products in a vehicle that is (a) insured at or above the legal requirement in California, (b) capable of securing (locking) the cannabis or cannabis products during transportation, and (c) capable of being temperature controlled if perishable cannabis or cannabis products are being transported.

Operating Requirements for the Transportation of Cannabis or Cannabis Products

In addition to any applicable operating requirements expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis cultivation facilities and cannabis manufacturing facilities may transport cannabis or cannabis products produced at the particular facility subject to the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

The facility shall maintain a database and provide a list of the individuals and vehicles authorized to conduct transportation on behalf of the facility to the City Manager or designee.

Individuals authorized to conduct transportation on behalf of the facility shall have a valid California Driver’s License.

Individuals authorized to conduct transportation on behalf of the facility shall undergo a Fingerprint- Based Criminal History Records Check conducted by the City Police Department pursuant to Section 5.42.060 of the Municipal Code and shall not have been convicted of an offense listed in Section 5.42.070.7.A of the Municipal Code.

Individuals transporting cannabis or cannabis products on behalf of the facility shall maintain a physical copy of the transportation request (and/or invoice) and shall make it available upon request of agents or employees of the City requesting documentation.

During transportation, the individual conducting transportation on behalf of the facility shall maintain a copy of the facility’s cannabis facility regulatory permit and shall make it available upon request of agents or employees of the City requesting documentation.

A facility shall only transport cannabis or cannabis products in a vehicle that is (a) insured at or above the legal requirement in California, (b) capable of securing (locking) the cannabis or medical cannabis products during transportation, and (c) capable of being temperature controlled if perishable cannabis or cannabis products are being transported.

Cannabis Testing Center Operating Requirements

In addition to the operating requirements applicable to cannabis testing centers expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis testing centers shall comply with the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

A cannabis testing center shall adopt a standard operating procedure using methods consistent with general requirements established by the International Organization for Standardization, specifically ISO/IEC 17025, to test cannabis and cannabis products.

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A cannabis testing center shall be accredited by a body that is a signatory to the International Laboratory Accreditation Cooperation Mutual Recognition Arrangement.

A cannabis testing center shall establish standard operating procedures that provide for adequate chain of custody controls for samples transferred to the testing laboratory for testing.

A cannabis testing center shall destroy the remains of samples of cannabis or medical Cannabis product upon completion of analyses.

Cannabis Delivery Operating Requirements

In addition to the operating requirements applicable to delivery (as defined Section 5.42.180 of the Hollister Municipal Code) expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis facilities involving delivery uses shall comply with the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

A cannabis facility shall ensure that all cannabis and medical cannabis products sold, given away, or donated by the facility were batch tested by a cannabis testing center that maintains operations in full conformance with the applicable State and local regulations prior to delivery.

Prior to delivery, a cannabis facility shall ensure that all cannabis and cannabis products are packaged and sealed in tamper-evident packaging that includes a unique identifier, such as a batch and lot number or bar code, to identify and track the cannabis or cannabis products.

“CALIFORNIA PROP. 65 WARNING: Smoking of cannabis and cannabis-derived products will expose you and those in your immediate vicinity to cannabis smoke. Cannabis smoke is known by the State of California to cause cancer.”

A cannabis facility shall facilitate the delivery of cannabis or cannabis products with a technology platform owned by or licensed to the facility that uses point-of-sale technology to track and database technology to record and store the following information for each transaction involving the exchange of cannabis or cannabis products between the facility and the customer.

(i) The identity of the individual delivering cannabis or cannabis products on behalf of the facility.

(ii)(i) The identity of the customer receiving cannabis or cannabis products from the facility.

(iii) The type and quantity of cannabis or cannabis products delivered and received.

(iv) The dollar amount charged by the facility and received by the individual delivering cannabis or cannabis products on behalf of the facility for the cannabis or cannabis products delivered and received.

A cannabis facility shall maintain a database and provide a list of the individuals and vehicles authorized to conduct delivery on behalf of the facility to the City Manager or designee and the City Police Department.

Individuals authorized to conduct delivery on behalf of the facility shall have a valid California Driver’s License.

Individuals authorized to conduct delivery on behalf of the facility shall undergo a Fingerprint-Based Criminal History Records Check conducted by the City Police Department pursuant to Section 5.42.060 of the Municipal Code and shall not have been convicted of an offense listed in Section 5.42.070.7.A of the Municipal Code.

Individuals delivering cannabis or cannabis products on behalf of the facility shall maintain a physical copy of the delivery request (and/or invoice) and shall make it available upon request of agents or employees of the City requesting documentation.

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During delivery, the individual conducting delivery on behalf of the facility shall maintain a copy of the dispensary’s cannabis facility regulatory permit, and shall make it available upon request of agents or employees of the City requesting documentation.

A facility shall only delivery cannabis or cannabis products in a vehicle that is (a) insured at or above the legal requirement in California, (b) capable of securing (locking) the cannabis or cannabis products during transportation, (c) capable of being temperature controlled if perishable cannabis or cannabis products are being transported, and (d) does not display advertising or symbols visible from the exterior of the vehicle that suggest the vehicle is used for delivery or affiliated with a cannabis facility.

A facility shall facilitate delivery with a technology platform owned by or licensed to the permittee that uses Global Positioning System technology to track and database technology to record and store the following information:

(i) The time that the individual delivering cannabis or cannabis products on behalf of the facility.

(ii) The time that the individual delivering cannabis or cannabis products on behalf of the facility completed delivery to the customer.

(iii) The time that the individual delivering cannabis or cannabis products on behalf of the facility.

(iv) The route the individual delivering cannabis or cannabis products on behalf of the facility.

(v) For each individual delivery transaction, the identity of the individual delivering cannabis or cannabis products on behalf of the facility.

(vi) For each individual delivery transaction, the vehicle used to deliver cannabis or cannabis products on behalf of the facility.

(vii) For each individual delivery transaction, the identity of the customer receiving cannabis or cannabis products from the facility.

(viii) For each individual delivery transaction, the type and quantity of cannabis or cannabis products delivered and received.

(ix) For each individual delivery transaction, the dollar amount charged by the facility and received by the individual delivering cannabis or cannabis products on behalf of the facility for the cannabis or cannabis products delivered and received.

(x) The individual delivering cannabis or cannabis products on behalf of the facility shall personally verify for each individual delivery transaction of the identity of the customer receiving cannabis or cannabis products from the facility.

No delivery transactions shall occur in the City of Hollister between the hours of 09:00 p.m. and 7:00 a.m.

I understand the applicant and the employees of the cannabis facility may be subject to prosecution under federal laws.

I understand the City of Hollister accepts no legal liability in connection with the approval and subsequent operation of the cannabis facility.

For the cost to the City of administering the cannabis facilities and operations, fees are due and payable to the City in the manner set forth in that certain Development Agreement for the Briggs 17 Cannabis Facility, entered into on .

Record at the request and for the
benefit of the City of Hollister
Pursuant to Government Code §§ 6301 and 27383

DEVELOPMENT AGREEMENT

BY AND BETWEEN

THE CITY OF HOLLISTER, A CALIFORNIA MUNICIPAL CORPORATION, AND

FELIPE NINE, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY

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RECORDING REQUESTED BY:

CITY OF HOLLISTER
When Recorded Mail To:

City Clerk
City of Hollister
375 Fifth Street
Hollister, CA 95023
Space above this line for Recorder’s use

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DEVELOPMENT AGREEMENT BY AND BETWEEN

THE CITY OF HOLLISTER AND FELIPE NINE, LLC
(Felipe Nine)
This Development Agreement (“Agreement”) is entered into on , 2019, by and between the City of Hollister, a California municipal corporation (“City”), and Felipe Nine, LLC, a California limited liability company (“Developer”). City and Developer are individually referred to herein as a “Party” and collectively as the “Parties.”

RECITALS

A. To strengthen the public planning process, encourage private participation and comprehensive planning, and reduce the economic risk of development, the California Legislature adopted sections 65864 et seq. of the Government Code (“Development Agreement Statute”), which authorize a city to enter into an agreement with any person having a legal or equitable interest in real property, providing for the development of such property and establishing certain development rights therein.

B. Developer has a legal or equitable interest in certain real property located at 773 San Felipe Road, within City’s incorporated municipal boundaries, consisting of approximately 9.17 gross acres (APNs: 051-100-031 and 051-100-032) (“Subject Property”), as more particularly described in attached Exhibit A and shown in attached Exhibit B. The Subject Property has a General Plan land use designation of North Gateway Commercial (NG) and is zoned North Gateway Commercial (NG).

C. Developer seeks approval of a project on the Subject Property on which it desires to construct approximately two hundred twenty thousand (220,000) square feet of buildings for a cannabis facility (as defined below) (with cultivation, manufacturing, research, delivery and office uses), including on-site parking and all utility connections, drainage and landscape improvements, as further described in the Current Approvals (as defined below) (“Project”).

D. City is a general law city and municipal corporation of the State of California and is duly organized, existing, and authorized to exercise powers under the laws of California and the Hollister Municipal Code (“Municipal Code”).

E. In accordance with the Development Agreement Statute, City has enacted a development agreement ordinance pursuant to the provisions thereof (Section 17.24.280 of the Municipal Code; “Development Agreement Ordinance”). The provisions of the Development Agreement Statute and the Development Agreement Ordinance are collectively referred to herein as the “Development Agreement Law.”

F. City has adopted Chapter 5.42 of the Municipal Code (“Local Cannabis Regulations”), which sets forth a regulatory framework to allow for cannabis facilities. The purpose of Chapter 5.42 is to provide for “reasonable regulations pertaining to cannabis dispensary, cultivation, and manufacturing facilities to ensure that qualified patients and their primary caregivers are afforded safe and convenient access to cannabis, while at the same time ensuring that such uses do not conflict with the general plan, are not inconsistent with surrounding uses, and are not detrimental to the public health, safety and welfare” of the citizens of Hollister, and to ensure that operation of such facilities is in compliance with

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applicable state laws and regulations.

G. The Parties intend for this Agreement to be a statutory development agreement, pursuant to the Development Agreement Law, and include conditions and requirements for the development of the Subject Property, as well as vest Developer’s rights to develop the Project as provided for in this Agreement. In addition, the Parties intend this Agreement to satisfy the requirements of the Local Cannabis Regulations, which require those operating a cannabis facility to enter into a “development agreement and operating plan” setting forth “the terms and conditions under which the cannabis facility will operate that are in addition to the requirements of this chapter, including, but not limited to, public outreach and education, community service, payment of fees and other charges as mutually agreed, and such other terms and conditions that will protect and promote the public health, safety, and welfare.”

H. Pursuant to the Local Cannabis Regulations, those who desire to operate a cannabis facility are required to obtain a regulatory permit pursuant to Section 5.42.050 of the Municipal Code (“Regulatory Permit”).

I. Developer anticipates entering into a lease with an entity(ies) (“Tenant”) to hold the Regulatory Permit and to operate the Project on the Subject Property, once constructed, in accordance with the Project Approvals (as defined below), including, among others, the Project’s Regulatory Permit and the City Rules (as defined below).

J. Developer proposes to develop and use the Subject Property as a cannabis facility pursuant to this Agreement, the requirements set forth in the Municipal Code, and as described more fully in the Project Approvals (as defined below). “Cannabis facility” shall have the meaning set forth as in Chapter 5.42.020 of the Municipal Code, and shall include, without limitation, a facility where cannabis or cannabis products are cultivated, possessed, manufactured, processed, stored, tested, labeled, transported, delivered, distributed, or sold, and for any other lawful use not prohibited under state and local laws and regulations, and/or any additional uses that may be approved of by City in the future at Developer’s request.

K. Pursuant to Chapter 5.42 and the Zoning Ordinance in the Municipal Code, the cannabis facilities uses and related improvements as contemplated by the Project constitute a permitted use in the North Gateway Commercial (NG) zoning district, subject to approval of a Regulatory Permit. The Project complies with all applicable commercial development standards for the North Gateway Commercial (NG) zoning district set forth in the Municipal Code.

L. The Project requires the issuance by City of several discretionary entitlements, as set forth in Recital R below; accordingly, the Project is required to comply with the California Environmental Quality Act (Public Resources Code § 21000 et seq. and CEQA Guidelines § 15000 et seq. (collectively, “CEQA”). Pursuant to CEQA, City, as the lead agency, has caused to be prepared an Initial Study/Mitigated Negative Declaration (“IS/MND”) for the Project, which circulated for public review and comment for a thirty (30) day period of time, from April 12, 2019 to May 13, 2019.

M. On September 26, 2019, the City’s Planning Commission (“Planning Commission”) held a duly noticed public hearing and considered Developer’s application for the Project’s Site and Architectural Review (“Site Plan and Architectural Review”) as well

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as the proposed Minor Subdivision (2018-1) (“Tentative Parcel Map”), along with the IS/MND that was prepared in connection therewith. After taking testimony and closing the public hearing, the Planning Commission deliberated and considered the matter, adopted the IS/MND and approved the Project’s Site and Architectural Review as well as the Tentative Parcel Map, as reflected in Resolution No. 2019-41, Resolution No. 2019- 43, and Resolution No. 2019-42, respectively.

N. As noted further herein, City has given the required notice of its intention to consider adoption of this Agreement and has conducted public hearings thereon pursuant to Government Code Section 65867. In addition, City has reviewed and evaluated this Agreement in accordance with the Development Agreement Law, the Local Cannabis Regulations and other relevant provisions of the Municipal Code and found that the provisions of this Agreement and its purposes are consistent therewith and the applicable goals, policies, standards and requirements specified in the General Plan and the Municipal Code.

O. On December 16, 2019, the Hollister City Council (“City Council”) held a duly noticed public hearing and considered this Agreement. After taking testimony and closing the public hearing, the City Council deliberated and considered the matter, confirmed that the IS/MND remained adequate for purposes of considering this Agreement, adopted a Mitigation Monitoring and Reporting Program and made the required findings of fact related thereto (as set forth in Resolution No. ); and introduced Ordinance No. approving this Agreement (“DA Ordinance”). On , 2020, the City Council subsequently adopted the DA Ordinance, which became effective on , 2020.

P. The Site and Architectural Review, the Tentative Parcel Map and this Development Agreement shall be referred to herein as the “Current Approvals.”

Q. City anticipates that during the Term (as defined below) of this Agreement and subsequent to the Effective Date (as defined below), Developer will seek from City (as well as any other public agencies having jurisdiction over aspect(s) of the Project) certain other implementing approvals, entitlements and permits that are necessary or desirable for the Project, which may include, without limitation, the Regulatory Permit, final subdivision and parcel maps, lot line adjustments, encroachment permits, grading permits, building permits, and/or certificates of occupancy (each, a “Subsequent Approval” and collectively, the “Subsequent Approvals”).

R. City and Developer desire the timely, efficient, and orderly development of the Project as contemplated herein and in accordance with the Current Approvals and the Subsequent Approvals, as and when obtained (collectively, “Project Approvals”).

S. The terms and conditions of this Agreement have undergone review by City staff, its Planning Department, and the City Attorney, as well as the City Council at duly noticed public meetings and hearings and have been found to be fair, just and reasonable. City further finds that this Agreement is consistent with the City’s General Plan and any applicable specific plan; is in conformity with the public convenience, general welfare, and good land use practices; is not inconsistent with surrounding land uses; will not be detrimental to the health, safety, and general welfare of persons residing in the immediate area nor be detrimental or injurious to property or persons in the general neighborhood or to the general welfare of the residents of the City of Hollister as a whole; will not adversely affect the orderly development of property or the preservation

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of property values; and is consistent with the Development Agreement Law and applicable state law and regulations regarding cannabis facilities. The Project will facilitate economic generation for the City of Hollister in a number of ways, including, without limitation, job creation (both construction- and operation-oriented); property tax generation; and payment of Impact Fees and the Cannabis Business Fees (as those terms are defined below).

T. City and Developer have reached mutual agreement and desire to voluntarily enter into this Agreement to facilitate development of the Project in conformance with the Development Agreement Law and the Local Cannabis Regulations, to vest Developer’s right to develop the Project on the Subject Property, and to establish Developer’s obligations related thereto, as more particularly set forth herein.

NOW, THEREFORE, in consideration of the mutual promises, covenants and provisions set forth herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows.

AGREEMENT

ARTICLE I: DESCRIPTION OF SUBJECT PROPERTY, PROPOSED DEVELOPMENT, EFFECTIVE DATE AND TERM.

Section 1.1. Description of Subject Property.

This Agreement vests the laws applicable to development of the Project on the Subject Property as of the Effective Date, as set forth more fully herein.

Section 1.2. Proposed Development.

Subject to the terms and conditions of this Agreement, Developer shall have the vested right to construct and operate (and/or lease the Project to Tenant(s) for purposes of operation consistent with the Regulatory Permit) the Project in accordance with the Current Approvals, as well as the Subsequent Approvals once granted and effective. Developer shall have the right to have Subsequent Approvals, as well as any amendment(s) to the Current Approval(s) proposed by Developer, considered by City for approval or denial based upon the terms, standards, criteria and requirements set forth in the Current Approvals and in accordance with Developer’s vested rights hereunder. In exercising its discretion when acting upon Subsequent Approval(s) to the extent the same are discretionary in nature, City shall apply the Current Approvals as the controlling body of law within which City’s discretion shall be exercised. Furthermore, City shall process applications for any amendment(s) to the Current Approval(s) proposed by Developer as well as all applications for Subsequent Approval(s) expeditiously and in accordance with this Section 1.2.

Section 1.3. Effective Date and Term.

(a) Effective Date. The effective date of this Agreement shall be thirty (30) days after the date that the City Council adopts the DA Ordinance (“Effective Date”) and shall be inserted above where indicated. The Parties acknowledge that section 65868.5 of the Development Agreement Statute requires City to record this Agreement with the San Benito County Recorder no later than ten (10) days after the Parties enter into this Agreement and that the burdens of this Agreement shall be binding upon and the benefits shall inure to all successors in interest to

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the Parties, subject to the assignment provisions in Section 6.12 below.

(b) Term. Subject to extension(s) granted pursuant to subsection (c) below, the term of this Agreement shall commence on the Effective Date and extend twenty (20) years thereafter (“Term”). Unless earlier terminated (pursuant to the terms of this Agreement), following the expiration of the Term, this Agreement shall be deemed terminated and of no further force and effect, except for the provisions of this Agreement that expressly survive termination, if any.

(c) Extension(s) of Term. Developer may, in its sole and absolute discretion, request up to, and upon receipt of a written request from Developer, City shall grant a total of three (3) ten (10) year extensions; assuming all extensions are requested by Developer, the Term of this Agreement shall be a total of fifty (50) years, at which point this Agreement shall automatically terminate.

ARTICLE II: STANDARDS, LAWS, AND PROCEDURES GOVERNING THE PROPOSED DEVELOPMENT.

Section 2.1. Vested Right to Develop.

In recognition of the extraordinary, long-term investment in planning, engineering, design, technical review and legal resources necessary to develop the Subject Property with the Project, Developer shall have the vested right to develop and operate the Project on the Subject Property in accordance with all valid applicable adopted ordinances, resolutions, statutes, codes, laws, rules, regulations, initiatives, referenda, and/or official policies of City, including, without limitation, City’s General Plan; the Municipal Code; and City’s environmental laws, entitlements, approvals, licenses, and permits issued to Developer by City (including, without limitation, the Current Approvals), in effect on the Effective Date of this Agreement (collectively, “City Rules”). The Subsequent Approval(s) shall be considered for approval or denial based upon the terms, provisions, standards, criteria and requirements set forth in the City Rules.

Section 2.2. Permitted Uses.

The permitted uses of the Subject Property; the density and intensity of uses; the maximum height, bulk, and size of proposed buildings; provisions for reservation or dedication of land for public purposes and location and maintenance of on-site and off-site improvements and the location of public utilities operated by City (water and wastewater); and other terms and conditions of development applicable to the Project, shall be those set forth in this Agreement, the other Current Approvals, any amendment(s) to the Current Approval(s) proposed by Developer and approved by City, and the Subsequent Approval(s) once granted and effective.

Section 2.3. Application of Subsequently Enacted Rules, Regulations and Official Policies.

This Agreement is a legally binding contract that shall supersede any initiative, measure, moratorium, statute, ordinance, or other limitation enacted after the Effective Date (collectively, “New Rules”) except as expressly provided herein and as otherwise provided for in accordance with applicable laws and regulations. Notwithstanding the foregoing, the Parties acknowledge and agree that New Rules shall be applicable to the Project if and only to the extent that such application will not conflict with any of the vested rights granted to Developer hereunder. Any New Rules shall be deemed to conflict with Developer’s vested rights hereunder if the New Rule(s) seek to limit or reduce the density or intensity of development of the Project; impose in

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an ad hoc manner on the Project additional material financial obligations; or seek to modify the timing of the development of the Project as contemplated in the Project Approvals.

Notwithstanding anything to the contrary in this Section 2.3 and in accordance with Sections 2.5 and 2.7 below, City shall not be precluded from applying any New Rules to the Project under the following circumstances, where the New Rules are: (a) specifically mandated by changes in state or federal laws or regulations adopted after the Effective Date as provided in Government Code Section 65869.5, subject to the terms of Section 2.7(a) below; (b) specifically mandated by a court of competent jurisdiction; or (c) changes to the Uniform Building Code or similar uniform construction codes, or to City’s local construction standards for public improvements so long as such code or standard has been formally adopted by City and is in effect on a city-wide basis.

Section 2.4. Vested Against Moratoria, Quotas, Restrictions or Other Cannabis Facilities Development Limitations.

City agrees that, except as otherwise expressly provided in or expressly limited by the provisions of this Agreement, this Agreement vests the Project against New Rules that would directly or indirectly limit the rate, timing, or sequencing of development of the Project on the Subject Property, or that would prevent or conflict with the permitted uses, or the density or intensity of uses, or the terms, provisions, criteria, standards or requirements of development, as set forth in the Current Approvals and the Subsequent Approval(s) once granted and effective. The foregoing shall include, without limitation, any New Rules that seek to restrict the number, type or nature of cannabis facilities in City.

Section 2.5. Vested Rights Exclude Building and Fire Codes.

City shall apply to the Project the applicable provisions of the California Building Code, Plumbing Code, Electrical Code, Mechanical Code, Fire Code, Water Conservation laws, Energy Code, and Green Building Standards, as may be amended from time to time, as adopted by City, as well as the applicable provisions of the Federal Americans with Disabilities Act (ADA) (collectively, “Applicable Uniform Codes”) in effect at the time the applicable building, grading, encroachment or other construction permit is submitted for review for the Project. If no construction permit is required for infrastructure improvement(s), such improvement(s) shall be constructed in accordance with the Applicable Uniform Codes in effect at the time of approval by City of the improvement plans for such infrastructure. Provided, however, that the Parties acknowledge and agree that for purposes of applying the Applicable Uniform Codes to the Project, the occupancy classification for agricultural buildings and greenhouses shall be designated as Group “U” pursuant to Section 312 of the 2016 California Building Code.

Section 2.6. Vested Rights Exclude Regulatory Processing Fees, Annual Operating Fees, and Cannabis Facilities Registration and Renewal Fees.

Developer shall pay City’s actual expenses to process applications for the Subsequent Approval(s) and to conduct plan check and inspections (collectively, “Regulatory Processing Fees”) in accordance with City’s adopted Regulatory Processing Fee schedule in effect at the time that each Subsequent Approval application is formally submitted. In addition, Developer shall pay all applicable annual renewal fees, as well as any fees for inspection or investigation that are required by Municipal Code Section 5.42.080 for the Project except as otherwise expressly set forth in Section 2.8 below and so long as each said fee has been lawfully adopted and applied on a city-wide basis and is applied to the Project only on a prospective basis. The

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various fees expressly referenced in this Section 2.6 are distinct from and shall be treated differently than the Cannabis Business Fees (as defined below), for which Developer has vested rights pursuant to section 2.8 below. Notwithstanding anything to the contrary in the foregoing, nothing in this Section 2.6 is intended to limit non-City public agencies’ legal authority, to the extent such otherwise exists, to impose fees on the Project.

Section 2.7. Vested Rights Exclude Changes in State or Federal Laws.

(a) Changes in State or Federal Laws. This Agreement shall not preclude the application to the Project of changes in City Rules, the terms of which are specifically mandated and required by changes in state or federal law(s) and/or regulation(s). In the event state and/or federal law(s) and/or regulation(s) enacted after the Effective Date prevent or preclude compliance with one or more provisions of this Agreement, the Party identifying the conflict shall provide the other Party, as soon as practicable after the conflict becomes known to the notifying Party, written notice of the conflict, a copy of the law(s) or regulation(s) that give rise to the conflict, and a statement explaining the nature of the conflict. Within thirty (30) days after that notice is given, the Parties shall meet and confer in good faith in a reasonable attempt to modify this Agreement so as to comply with the state and/or federal law(s) or regulation(s) giving rise to the conflict, pursuant to Government Code section 65869.5. If Developer does not consent to an amendment that is required to make this Agreement consistent with state and/or federal law(s) or regulation(s) in accordance with Government Code section 65869.5, City shall provide Developer written notice of the immediate suspension of this Agreement, and this Agreement shall remain suspended until the date this Agreement is so amended to eliminate the conflict.

Notwithstanding this Section 2.7(a), the parties acknowledge that all commercial cannabis activity is prohibited under federal law, and any new federal law or regulation pertaining to commercial cannabis activity shall have no impact on this Agreement, unless and to the extent such new federal law or regulation imposes or increases City’s legal or financial liability under such new law.

(b) No Vesting into State Laws. The operation of cannabis facilities is a highly regulated business activity, and it is subject to various state and local laws and regulations. This Agreement does not, and City cannot and does not intend to, give Developer the vested right to continue Project operations without complying with applicable state and local laws and regulations governing the operations of cannabis facilities. This Agreement only “vests” those regulations expressly referenced in the Development Agreement Statute, which include rules, regulations, and official policies governing permitted uses of the land, density, and design, improvement, and construction standards and specifications, applicable to development of the Project, and as described more fully herein.

(c) Conflict with Cannabis Regulation and Safety Act. If there is any conflict between any provision of this Agreement and any provision of the Cannabis Regulation and Safety Act, formerly known as the Marijuana Regulation and Safety Act, which is comprised of Assembly Bill 243, Assembly Bill 266, and Senate Bill 643 (Bus. & Prof. Code Section 19300 et seq.; H&S Code Section 11362.769-11362.777; and Water Code Section 13276), the provisions of the Cannabis Regulation and Safety Act shall control. Nothing in this Agreement is intended to nor shall it be construed or interpreted to allow or require Developer to do anything or take any action related to the performance of this Agreement that is contrary to, prohibited by, or not allowed under the Cannabis Regulation and Safety Act and any regulations issued by the State pursuant thereto. Nor shall this Agreement be construed or interpreted to allow or authorize Developer to not do anything or not take any action related to the performance of this Agreement that is required by said Act and related regulations.

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(d) In addition to the above provisions of this Section 2.7, in the event state or federal laws or regulations negate, legally or financially, any lease agreement between Developer and a Tenant of the Subject Property, whether wholly or in part, Developer agrees and acknowledges that City shall have no liability to Developer for any loss, financial or otherwise, which Developer consequently incurs.

Section 2.8. Vested Rights Regarding Development Impact Fees and Cannabis Business Fee.

(a) Development Impact Fees. Developer shall vest into the Impact Fee(s) (as defined below) that are in place on the Effective Date and are set forth in attached Exhibit B, and therefore City shall have no right to impose on the Project any increase in existing Impact Fee(s) (except for a standard inflationary increase as reflected in the Consumer Price Index) or any new type(s) of Impact Fees; provided, however, that if City adopts Impact Fee(s) that are less in amount (or eliminates a type of Impact Fee) after the Effective Date, Developer shall have the vested right to pay that lower amount (or avoid payment of the eliminated fee altogether), so long as said lower amount remains subject to standard inflationary increases as reflected in the Consumer Price Index. Notwithstanding the above, if Developer seeks a certificate of occupancy for the Project more than ten (10) years following the Effective Date of this Agreement, then Developer shall pay the greater of the Impact Fees as of the Effective Date of this Agreement or the Impact Fees as of the date Developer seeks a certificate of occupancy.

Developer shall have the vested right to pay all applicable Impact Fees at time of issuance of the relevant certificate of occupancy rather than building permit. “Impact Fee(s)” means any monetary amount charged by City or other governmental or quasi-governmental agency in connection with a Project Approval in order to lessen, offset, mitigate or compensate for the impacts of development of the Project on the environment; facilities, services, improvements, and/or infrastructure or other public interests, including, without limitation, any “fee” as that term is defined by Government Code section 66000(b) as well as any fee imposed “in lieu of” an Exaction. “Exaction” means an exaction that may be imposed by City as a condition of developing the Project, including, without limitation, requirements for acquisition, dedication or reservation of land; and obligations to construct on-site or off-site public and private infrastructure improvements such as roadways, utilities or other improvements; this is the case whether such exactions constitute subdivision improvements, mitigation measures in connection with environmental review of the Project, or impositions made under the City Rules.

A requirement imposed by City or other governmental or quasi-governmental authority on the Project that meets both the definitions of an Impact Fee and an Exaction shall be considered to be an Impact Fee. Notwithstanding anything to the contrary in the foregoing, the parties acknowledge and agree that this subsection (a) does not apply or otherwise affect the treatment of the Cannabis Business Fee (as defined below).

(b) Cannabis Business Fee. Subject to the time frames and limitations set forth in this subsection (b), Developer shall include a provision in any and all lease(s) with Tenant(s) who will operate the Project that the Tenant(s) pay to City the annual cannabis business fees (collectively, “Cannabis Business Fees”):

(i) A per square foot (“psf”) fee in the amount defined by the table below as applied to the Active Cultivation Area (as defined below) within the Project, unless City later adopts a modified cultivation tax or fee that is lower, in which event the lower amount shall apply to the Project on a going -forward basis.

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Total Facility (SF)
City Fee Rate ($) per SF
of Active Cultivation Area
Cumulative City
Annual Tax ($)
100,001 150,000 $3.00 450,000
150,001 1,000,000 $1.00 1,300,000

“Active Cultivation Area” shall mean the floor area of canopy, as that term is defined in CDFA regulations, for fully licensed and operational businesses at the Project whose gross receipts are at least five (5) times greater than the Cannabis Business Fee owed in any particular quarter. For avoidance of doubt, Active Cultivation Area shall exclude areas such as those which are used for: hallways, unoccupied perimeters, entryways or lobbies, offices or administration, security or video surveillance monitoring, personnel or human resources, break rooms, kitchens, locker rooms, and restrooms; storage, curing, drying, trimming, processing, packaging or labeling, sorting, transporting, loading or unloading, shipping or distributing raw materials, packaging, equipment, cannabis products or plants; all nurseries, clone, ‘mother’ or propagation rooms, all mechanical, electrical, fire suppression, plumbing or irrigation equipment rooms; and waste disposal areas, among others.

(ii) A per square foot (“psf”) fee in the amount defined by the table below as applied to the Active Manufacturing Area (as defined below) within the Project, unless City later adopts a modified manufacturing or extraction tax or fee that is lower, in which event the lower amount shall apply to the Project on a going-forward basis.

Total Facility (SF)
City Fee Rate ($) per SF
of Active Manufacturing
Area

Cumulative City
Annual Tax ($)
100,001 150,000 $3.00 450,000
150,001 1,000,000 $1.00 1,300,000

“Active Manufacturing Area” shall mean the floor area where commercial cannabis manufacturing activity is conducted, including extraction; refinement, infusion, cooking, mixing, making, batch sampling or other active manufacturing operations directly related to the production of consumer and pre-consumer commercial cannabis products such as cannabis oils, shake, shatter, wax, edibles, drinks, vape pens and other devices, salves, creams, or tinctures, for fully licensed and operational businesses whose gross receipts are at least five (5) times greater than the Cannabis Business Fees due in any particular quarter. For avoidance of doubt, Active Manufacturing Area shall exclude areas such as those which are used for:
hallways, unoccupied perimeters, entryways or lobbies, offices or administration, security or video surveillance monitoring, personnel or human resources, break rooms, kitchens, locker rooms, and restrooms; storage, curing, drying, trimming, processing, packaging or labeling, sorting, transporting, loading or unloading, shipping or distributing raw materials, packaging, equipment, cannabis products or plants; all nurseries, clone, ‘mother’ or propagation rooms, all mechanical, electrical, fire suppression, plumbing or irrigation equipment rooms; and waste disposal areas, among others.

“Total Facility” shall mean the gross area of all buildings on the Subject Property, within the Wright Thirteen project, and the Briggs Seventeen project.

If, in any particular quarter, gross receipts are not five (5) times greater than the Cannabis

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Business Fees due for any particular Tenant, then that Tenant shall pay a fee equal to one percent (1%) of gross receipts for that particular quarter in lieu of the psf fee described above.

(iii) So long as the Tenant is engaged in either manufacturing or cultivation of commercial cannabis, there shall be no Cannabis Business Fee due in connection Tenant’s distribution of commercial cannabis products from the same Project in which such cultivation or manufacturing activity is conducted.

The payment of the first (1st) quarterly installment of the Cannabis Business Fees shall not be deemed delinquent until such time as the second (2nd) quarterly payment is due. The first (1st) quarter shall commence on or about the date when the Subject Property is fully operational, which is further defined as when the Subject Property is engaged in full capacity cultivation and manufacturing activities. Notwithstanding the foregoing, if operation of cultivation, manufacturing and/or distribution activities are phased in accordance with phased certificates of occupancy or temporary certificates of occupancy issued by City, the first (1st) quarter for each phase of cultivation, manufacturing and/or distribution shall be deemed as commencing on or about the date the certificate of occupancy or temporary certificate of occupancy is issued by the City for each phase of operation.

Notwithstanding anything to the contrary in the foregoing, Developer shall, under no circumstances, have the obligation to pay the Cannabis Business Fees. Payment of this obligation shall be attached as a condition to the Regulatory Permit, for which the Tenant, as the holder of the Regulatory Permit, shall have the sole responsibility to pay.

Section 2.9. Priority of Enactments.

In the event of any conflict or inconsistency between this Agreement and any of the other Current Approval(s) (including, without limitation, any conditions attached thereto), or between this Agreement and any Subsequent Approval(s), to the fullest extent legally possible, this Agreement shall prevail and control. Furthermore, any conflict or inconsistency between this Agreement and the Municipal Code, to the fullest extent legally possible, this Agreement shall prevail and control.

Section 2.10. Life of Vesting Tentative Map and Other Approval(s).

The term of the Current Approvals including, without limitation, the Tentative Parcel Map (pursuant to Government Code section 66452.6(a)), as well as the term of any and all Subsequent Approval(s) once granted and effective, including, without limitation, the Regulatory Permit, shall be deemed extended for the longer of the Term of this Agreement or the term otherwise applicable to such Approval(s). The Tentative Parcel Map complies with the provisions of California Government Code Section 66473.7, as applicable. Notwithstanding this Section 2.10, City shall have the right to schedule and conduct a periodic review per Section 6.2, below.

ARTICLE III: OTHER DEVELOPER OBLIGATIONS.

Section 3.1. First Source Hiring.

Subject to applicable laws and regulations governing such arrangements, Developer shall use good faith and diligent efforts to implement a “Local First Source Hiring” program to support local employment opportunities for residents of the City of Hollister in connection with the

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Project.

Section 3.2. Compliance with Operating Conditions.

Pursuant to Section 5.42.090 of the Municipal Code, Developer shall include in any lease(s) with Tenant(s) the requirement that the Tenant (as the holder of the Regulatory Permit) shall adhere to all conditions of the Regulatory Permit, including, without limitation, those that set forth the terms and conditions under which the Project shall operate, which shall be in substantially the same form as attached Exhibit C. In the event there is any conflict between said conditions and the operational requirements in the Local Cannabis Regulations, the conditions in the Regulatory Permit shall govern. If Tenant(s) fail, in a material way, to comply with any such conditions, then the City Planning Director (“Planning Director”) shall notify Tenant (with a copy to Developer) in writing of its non-compliance and in said notice, shall provide with reasonable specificity the basis for City’s finding of non-compliance, and shall identify the reasonable means by which Tenant may come into compliance (“Condition Non- Compliance Notice”). Tenant shall cure any such non-compliance within ninety (90) days of receipt of the Condition Non-Compliance Notice unless the non-compliance is such that it cannot be remedied within said 90-day period, in which case Tenant’s commencement of said cure within this 90-day period and its diligent prosecution of said cure thereafter to completion shall constitute a cure for purposes of this Section 3.2. If Tenant fails to cure any such non- compliance during this 90-day period (or fails to commence the cure as provided in this Section

3.2, then City shall have the right, but not the obligation, to commence revocation proceedings pursuant to Section 4.1(c) below. Notwithstanding anything to the contrary in the foregoing, Tenant and/or Developer shall have the right to appeal any Condition Non-Compliance Notice issued by the Planning Director to the City Council, as well as appeal any decision by the Planning Director to revoke or revise the Regulatory Permit (pursuant to Section 4.1(c) below) to the City Council. Any decisions made by City pursuant to this Section 3.2 shall be made in writing and supported by substantial evidence.

Notwithstanding anything to the contrary in the foregoing, the Parties acknowledge and agree that the Tenant (as the holder of the Regulatory Permit) shall have the sole responsibility to adhere to the conditions attached to the Regulatory Permit, and that Developer shall have no such obligations under any circumstances. Provided, however, Developer shall have the right, but not the obligation, to step into Tenant’s place to cure any non-compliance pursuant to this Section 3.2. If Developer elects, in its sole and absolute discretion, to do so and the method of cure would involve replacement of the Tenant, then Developer shall have the right to replace the Tenant who violated the Regulatory Permit with another Tenant and City shall accept this substitution so long as the new Tenant meets the objective criteria set out in the Local Cannabis Regulations for purposes of operating a cannabis facility.

Section 3.3. Compliance with Other Project Approval Conditions.

Subject to the limitations set forth in Section 3.2 above, Developer (or its successor(s) and assign(s), as applicable) shall comply with the conditions imposed on other Project Approvals, including, without limitation, all mitigation measures and requirements to construct public improvements, as set forth therein.

Section 3.4. No Obligation to Construct. By entering this Agreement, Developer shall not be obligated to develop all or any portion of the Subject Property, and, unless Developer elects to develop all or any portion(s) of the Subject Property with the Project, Developer shall not be required to perform any obligations under this Agreement. Notwithstanding this Section 3.4, the

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parties agree that if Developer has not demonstrated a good faith effort to commence construction of the Project on the tenth (10th) anniversary of the Effective Date, then City shall have the right, but not the obligation, to terminate this Agreement. For purposes of this Section

3.4, a “good faith effort to commence construction” shall mean Developer has obtained a building permit for any Project component including, without limitation, on- or off-site improvements. Provided, however, that if Developer has not demonstrated a good faith effort to commence construction within ten (10) years and City elects to terminate this Agreement, this shall not be construed as a default of Developer.

ARTICLE IV: PROCESS TO OBTAIN SUBSEQUENT APPROVALS; RENEWAL AND REVOCATION PROCESS FOR REGULATORY PERMIT.

Section 4.1. Subsequent Approvals.

(a) State Subsequent Approvals; City Cooperation. Developer shall be responsible for obtaining or causing to obtain all applicable state licenses, permits, approvals, and consents, even if the applicable state laws and regulations are amended following the Effective Date. The Cannabis Regulation and Safety Act and any regulations issued by the State pursuant thereto may require the issuance of multiple State-issued licenses for full operation of the Project. At Developer’s request, the Parties shall meet and confer and cooperate with each other in good faith and with diligence to facilitate the creation of a business model and organizational structure that enables Developer to develop and operate the Project pursuant to this Agreement. If Developer is for any reason not able to obtain the number or type of State-issued licenses required for full operation of the Project, or the State limits the number of licenses issued to Developer, then Developer may request City issue additional Regulatory Permit(s) as necessary to another party or parties for purposes of operating the Project. Except for good cause, City shall issue Regulatory Permits to each such applicant so long as same satisfies any applicable requirements set for in the Local Cannabis Regulations and agrees to assume the obligations hereunder pursuant to Section 6.12 below.

(b) Renewal of Regulatory Permit. The procedural and substantive requirements in this Section 4.1(b), rather than those in Section 5.42.120 of the Municipal Code, shall solely govern the development and operation of the Project and the renewal of its Regulatory Permit.

Subject to the payment of all applicable annual renewal fees in accordance with this Agreement and in accordance with Developer’s vested rights to construct and operate the Project hereunder, City shall be required to renew the Regulatory Permit on an annual basis so long as Tenant is in compliance with the conditions attached thereto. The Planning Director shall have the authority to issue each said renewal without any requirement for public notice or hearing, which shall occur no later than twelve (12) months following the Effective Date and annually thereafter. Each said renewal shall be memorialized in writing by the Planning Director, with a copy given to Tenant and Developer. Provided, however, that if the Planning Director fails to issue said renewal in writing pursuant to the time frames set forth in this subsection (b), then the Regulatory Permit shall be deemed renewed for purposes of the following year. If the Planning Director denies renewal of the Regulatory Permit, the basis for doing so shall be set forth in writing with reasonable specificity and based on substantial evidence in the record, and Developer shall have the right to appeal this decision to the City Council.

(c) Revocation of Regulatory Permit. The procedural and substantive requirements in this Section 4.1(c), rather than those in Section 5.42.120 of the Municipal Code, shall solely govern the development and operation of the Project and any attempt to revoke its Regulatory Permit. Subject to payment of all applicable annual fees in accordance with this Agreement and

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in accordance with Developer’s vested rights to construct and operate the Project hereunder, City shall be required to renew the Regulatory Permit on an annual basis so long as Tenant is in compliance with the conditions attached thereto. Pursuant to this Section 4.1(c) and Section 3.2 above, City shall not have any right to revoke the Project’s Regulatory Permit unless Tenant has materially violated one (1) or more conditions attached to its Regulatory Permit after receiving notice of same from City, and failed to cure said violation(s) pursuant to Section 3.2 above. The City Council shall be the decision maker with respect to any revocation proceedings, and consideration of same shall take place at a public hearing. Any revocation of the Project’s Regulatory Permit shall: (i) be based on substantial evidence in the record; (ii) require the City Council to make written findings that specify (A) the material violation(s) and Tenant’s failure to cure same and (B) the substantial adverse impact to the public health and safety if revocation does not occur. City shall have the burden to demonstrate the basis for revocation pursuant to Section 3.2 and this Section 4.1 of this Agreement and shall be subject to Developer’s vested rights hereunder.

ARTICLE V: DEFAULT, REMEDIES, TERMINATION.

Section 5.1. General Provisions.

Subject to extensions of time by the Parties’ mutual consent in writing, failure or unreasonable delay by either Party to perform any material term or provision of this Agreement shall constitute a default by that Party, but only if the defaulting Party does not cure the alleged default within ninety (90) days after receipt of the written notice required in this Section 5.1, or does not commence to cure such failure or delay within this 90-day period and thereafter diligently prosecute said cure to completion, if the default is such that it cannot reasonably be cured within 90 days. In the event of alleged default of any term or provision of this Agreement, the Party alleging default shall give the defaulting Party not less than ninety (90) days’ notice in writing reasonably specifying the nature of the alleged default and the manner in which said default may be satisfactorily cured. During any such ninety (90) day period, the defaulting Party shall not be considered in default for purposes of termination or institution of legal proceedings.

After notice and expiration of the 90-day period without the defaulting Party having cured or having commenced to cure the default (if a cure cannot be completed during the 90-day period), then the non-defaulting Party at its option may institute legal proceedings pursuant to this Agreement or give notice of intent to terminate this Agreement as it relates to the defaulting Party’s rights hereunder pursuant to California Government Code Section 65868. Following notice of intent to so terminate, the matter shall be scheduled for consideration and review by the City Council within thirty (30) calendar days in the manner set forth in California Government Code Sections 65865, 65867 and 65868.

Following consideration of the evidence presented in said review before the City Council, the Party alleging the default by the other Party may give written notice of termination of this Agreement as it relates to the defaulting Party’s rights hereunder to the other parties.

Evidence of default may also arise in the course of a regularly scheduled periodic review of this Agreement pursuant to Government Code Section 65865.1 and Section 6.2 below. If a Party determines that the other Party is in default following the completion of the normally scheduled periodic review, the non-defaulting Party may give written notice of default of this Agreement as set forth in this Section 5.1. If: (a) the alleged default is not cured within ninety (90) days; or (b) the defaulting Party does not commence to cure, correct or remedy such alleged default within ninety (90) days and thereafter diligently prosecute said cure to completion; or (c) the defaulting

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Party does not cure (or commence to cure, if appropriate) within such longer period as may be specified in the notice; or (d) if the defaulting Party waives its right to cure such alleged default, the other Party may terminate this Agreement.

Notwithstanding anything to the contrary in the foregoing, Developer shall have the right to object to and/or otherwise challenge any claim(s) of default and City’s authority to terminate the Agreement as a result thereof.

Furthermore, the Parties acknowledge and agree that any failure on the part of Tenant to adhere to the operating conditions of the Regulatory Permit shall not constitute a default of Developer hereunder.

The Parties further acknowledge and agree that City shall have no obligation to issue a Regulatory Permit to any proposed Tenant of Developer’s that does not satisfy all applicable express requirements set forth in the Local Cannabis Regulations as well as those conditions set forth in attached Exhibit C, including without limitation, background checks, and that under such circumstances City shall have no liability to Developer for refusal to issue such Regulatory Permit.

Section 5.2. Excused Delay, Extension of Times of Performance.

Performance by either Party hereunder shall not be deemed to be in default where delays or default are due to war, insurrection, strikes, walkouts, riots, floods, drought, earthquakes, fires, casualties, acts of God, terrorist acts, new or supplementary environmental or other laws or regulations affecting development, litigation, severe economic circumstances beyond Developer’s reasonable control, or similar bases for excused performance (“Excused Delay”).

If written notice of such delay is given by Developer to City within thirty (30) days of the commencement of such delay, an extension of time for such cause shall be granted in writing for the period of such delay, or longer as may be mutually agreed upon.

Section 5.3. Permitted Extensions by City.

In addition to any extensions to the time for performance of any obligation due to an excused delay under Section 5.2 above, City, in its sole discretion, may extend the time for performance by Developer of any obligation hereunder. Any such extension shall not require an amendment to this Agreement, so long as such extension only involves the time for performance thereof and does not change the obligations to be performed by Developer as a condition of such extension.

The Parties shall document in writing any such extension(s).

Section 5.4. Legal Action; No Obligation to Develop; Specific Enforcement.

In addition to any other rights or remedies that may be available to the Parties, either Party may institute legal action to cure, correct or remedy any default, to enforce any covenant or agreement herein, or to enjoin any threatened or attempted violation. All legal actions shall be initiated in the Superior Court of the County of San Benito, State of California. Developer acknowledges that under the Development Agreement Law, land use approvals (including development agreements) must be approved by the City Council and that under applicable law, the City Council’s discretion to vote in any particular way may not be constrained by contract, except as permitted in the Development Agreement Law. Developer therefore waives all claims for monetary damages against City in the event that this Agreement or any other Subsequent Approval is: (1) not approved by the City Council; or (2) is approved by the City Council, but with

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new changes, amendments, conditions or deletions to which Developer is opposed. Developer further acknowledges that as an instrument that must be approved by ordinance, a development agreement is subject to referendum, and that under applicable laws, the City Council’s discretion to avoid a referendum by rescinding its approval of the underlying ordinance may not be constrained by contract, and Developer waives all claims for monetary damages against City in this regard. Notwithstanding anything to the contrary in the foregoing, nothing in this Section

5.4 is intended to nor does it limit Developer’s rights to equitable remedies as permitted by law.

ARTICLE VI: GENERAL PROVISIONS.

Section 6.1. Amendments.

(a) Amendment by Mutual Consent. This Agreement may be amended in writing from time to time by the Parties’ mutual consent in accordance with the Development Agreement Law.

(b) Substantive Changes Shall Require Amendment. Substantive changes to this Agreement shall necessitate an amendment to this Agreement to incorporate the applicable changes to the terms and conditions at issue and any related documents and agreements (if and to the extent necessary to ensure consistency with this Agreement). A “substantive change” to this Agreement is one that changes the Term or for which an application is made to modify any of the following with respect to the Subject Property: the permitted uses; an increase in the density or intensity of use; an increase in height or size of buildings; provisions for reservation and dedication of land; conditions, terms, restrictions and requirements relating to Subsequent Approvals that are discretionary in nature; the amount of monetary contributions by Developer; or any other material term or condition of this Agreement. If a Party notifies the other Party that an amendment is needed or desirable due to the proposed substantive change(s) to this Agreement, the Parties shall meet and confer in good faith on the terms of any such amendment. The scope of good faith negotiation shall be limited to such good faith amendment(s) necessary to effectuate the substantive changes to this Agreement contemplated in this Section 6.1(b), and shall not reopen other provisions of this Agreement not affected by the proposed amendment(s). Amendments for substantive changes shall be made in accordance with the provisions of the Development Agreement Law. Notwithstanding anything to the contrary in the foregoing, any approved amendment(s) to the Current Approvals or approval of any Subsequent Approvals shall not trigger a requirement to amend this Agreement to reflect said same.

(c) Minor Changes Do Not Require Amendment. This Agreement need not be amended to allow for changes to this Agreement that are not substantive, as described in Section 6.1(b) above, but rather are minor in nature. The Parties acknowledge that refinement and further implementation of the Project via Subsequent Approval(s) may demonstrate that certain minor changes may be appropriate with respect to the Project details and related performance of the Parties under this Agreement, and the Parties desire to retain a certain degree of flexibility with respect to such details and performances. If and when the Parties find and mutually agree that clarifications, minor changes, or minor adjustments are necessary or appropriate, they shall effectuate such clarifications, changes or adjustments through an operating written memorandum approved by the Parties, with the City Manager acting on behalf of City. After execution, the operating memorandum shall be attached to this Agreement. Further minor changes as necessary from time to time may be agreed upon by the Parties by their subsequent approval. Unless required by the Development Agreement Law, no operating memorandum shall require prior notice or public hearing, nor shall it constitute an amendment to

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or termination for convenience in whole or in part of this Agreement.

(d) Recordation Upon Amendment or Termination. Except when this Agreement is automatically terminated due to the expiration of the Term, City shall cause any amendment(s) hereto and any termination hereof to be recorded with the San Benito County Recorder within ten (10) days after full execution of any such amendment or the effective date of any such termination.

(e) Cancellation by Mutual Consent. Except as otherwise permitted herein, this Agreement may be canceled in whole or in part only by the Parties’ mutual consent in accordance with applicable provisions of the Development Agreement Law.

Section 6.2. Periodic Review.

City shall, at least every twelve (12) months during the Term of this Agreement (commencing from the Effective Date), review the extent of good faith substantial compliance by Developer with the terms and provisions of this Agreement. Such periodic review shall be limited in scope to compliance with the terms and provisions of this Agreement pursuant to California Government Code Section 65865.1, Section 17.280(F) of the Municipal Code, and the monitoring of mitigation in accordance with California Public Resources Code Section 21081.6.

A finding by City of good faith compliance by Developer with the terms and provisions of this Agreement shall be conclusive with respect to Developer’s performance during the period preceding the review. Developer shall be responsible for the cost reasonably and directly incurred by City to conduct such periodic review, the payment of which shall be due within thirty (30) days after conclusion of the review and receipt from City of the bill for such costs (and reasonable documentation in support thereof). Upon Developer’s written request, City shall provide to Developer a copy of all staff reports and related exhibits concerning performance under this Agreement at least ten (10) calendar days prior to any such periodic review. If City has not performed a periodic review within ninety (90) days following the relevant 12-month period, Developer shall be deemed to be in substantial compliance with the terms and provisions of this Agreement.

Section 6.3. Applicable Law.

This Agreement shall be construed and enforced in accordance with the laws of the State of California.

Section 6.4. Hold Harmless.

(a) Indemnification Obligations Relating to Project Construction and Operation.

Developer agrees to, and shall defend, indemnify and hold City, its elective and appointive councils, boards, commissions, officers, agents, and employees harmless from its proportionate fair share of any costs, expenses, damages, liability for damages or claims of damage for personal injury, or bodily injury including death, as well as from claims for property damage (collectively, “Claims”) that may arise from Developer’s construction and/or operation of the Project on the Subject Property, or of Developer’s contractors, subcontractors, agents, or employees under this Agreement, whether such activities be by Developer, or by any of its contractors or subcontractors or operators or Tenant(s), or by any one or more persons directly or indirectly employed by, or acting as agent for, Developer or its contractors or subcontractors or operators or Tenant(s); provided, however, that said indemnification obligations shall not cover any Claim(s) if and to the extent said Claim(s) arise from City’s negligence or willful

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misconduct. Furthermore, notwithstanding anything to the contrary in the foregoing, the indemnity obligation in this Section 6.4(a) shall not apply to any liability for Claim(s) with respect to or use of any public improvements that were constructed as part of the Project after the completion and acceptance thereof by City. This Section 6.4(a) shall constitute compliance with the indemnification obligations set forth in Section 5.42.130 of the Municipal Code.

(b) Indemnification Obligations Relating to Project Approval. In addition to the indemnity obligation in Section 6.4(a) above, Developer agrees to and shall defend, indemnify and hold City, its elective and appointive councils, boards, commissions, officers, agents and employees harmless from any and all third-party lawsuits, claims, challenges, damages, expenses, costs, including attorneys' fees (each, “Third-Party Lawsuit”) that may be awarded by a court in any action at law or in equity as a result of a successful legal challenge to City’s approval of this Agreement and/or any other Project Approval(s). City shall retain the right to appear in and defend any such action or lawsuit on its own behalf regardless of any tender under this provision. Notwithstanding anything to the contrary in the foregoing, this indemnity obligation shall not apply to any liability for damage or claims for damage that are related to City’s negligence or willful misconduct. This Section 6.4(b) shall constitute compliance with the indemnification obligations set forth in Section 5.42.130 of the Municipal Code.

(c) Cooperation and Defense in the Event of Legal Challenge. In the event of any Third Party Lawsuit challenging City’s approval of this Agreement and/or any other Project Approval(s), the Parties shall cooperate in defending said action. Developer shall bear their own costs of defense as a real party in interest in any such action pursuant to subsection (b) above, and Developer shall pay City for all reasonable court costs and attorneys’ fees expended by City in defense of any such action or other proceeding, provided that City reasonably cooperates with Developer in the defense of such action. City, in its sole discretion, may retain separate counsel and may defend same; provided, however, that City shall obtain Developer’s prior written consent prior to settling the Third-Party Lawsuit.

Section 6.5. Enforceability.

City agrees that unless this Agreement is amended or canceled pursuant to the provisions hereof, this Agreement shall be enforceable according to its terms by Developer notwithstanding any change hereafter to the General Plan, Specific Plan, Zoning, subdivision ordinance or building regulations adopted by City, or by initiative, which changes, alters or amends the City Rules, as provided by California Government Code Section 65866.

Section 6.6. No Third Party Beneficiaries.

This Agreement is made and entered into for the sole protection and benefit of Developer and City and their respective successors and assigns. No other person shall have any right of action based upon any provision in this Agreement.

Section 6.7. Project as a Private Undertaking.

It is specifically understood and agreed by and between the Parties that the Project is a private development. No partnership, joint venture or other association of any kind is formed by this Agreement.

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Section 6.8. Mortgagee Protection.

The Parties agree that this Agreement shall not prevent or limit Developer, in any manner, at the Developer’s sole discretion, from encumbering the Subject Property or any portion thereof or any improvement thereon by any mortgage, deed of trust, security agreement, sale or leaseback financing, or other like security instrument encumbering all or any portion(s) of the Subject Property (each, a “Mortgage”), except as limited by the provisions of this Section 6.8.

City acknowledges that the Mortgagee(s) providing such financing may require certain Agreement interpretations and modifications and agrees upon request, from time to time, to meet with Developer and representatives of such Mortgagee(s) to negotiate in good faith any such request for interpretation or modification. City shall not unreasonably withhold its consent to any such requested interpretation or modification provided such interpretation or modification is consistent with the intent and purposes of this Agreement. Any Mortgagee shall be entitled to the following rights and privileges:

(a) Neither entering into this Agreement nor a default hereunder shall defeat, render invalid, diminish or impair the lien of any Mortgage on the Subject Property (or any portion(s) thereof) made in good faith and for value, unless otherwise required by law.

(b) The Mortgagee of any Mortgage encumbering the Subject Property, or any portion(s) thereof, which Mortgagee has submitted a request in writing to City in the manner specified herein for giving notices, may request to receive written notification from City of any default by Developer in the performance of Developer’s obligations under this Agreement.

(c) If City receives a timely request from a Mortgagee requesting a copy of any notice of default given to Developer under the terms of this Agreement, City shall provide a copy of that notice to the Mortgagee within ten (10) days of sending the notice of default to said Developer. The Mortgagee shall have the right, but not the obligation, to cure the default during the remaining cure period allowed to Developer under this Agreement.

(d) Any Mortgagee who comes into possession of the Subject Property, or any portion(s) thereof, by any means, whether pursuant to foreclosure of the Mortgage, or deed in lieu of such foreclosure or otherwise, shall take the Subject Property, or portion thereof, subject to the terms of this Agreement. Provided, however, notwithstanding anything to the contrary above, any Mortgagee, or the successors or assigns of such Mortgagee, who becomes an owner of the Subject Property, or any portion(s) thereof, through foreclosure or deed in lieu thereof shall not be obligated to pay any fees or construct or complete the construction of any improvements, unless such owner desires to continue development of the Subject Property consistent with this Agreement and the Project Approvals, in which case the owner by foreclosure shall assume all the past and future, including delinquent obligations of Developer hereunder in a form reasonably acceptable to City.

Section 6.9. Estoppel Certificate.

(a) Either Party may, at any time, and from time to time, request written notice from the other Party requesting such Party to certify in writing that: (i) this Agreement is in full force and effect and a binding obligation of the Parties, (ii) this Agreement has not been amended or modified either orally or in writing, or if so amended, identifying the amendments, and (iii) to the knowledge of the certifying Party the requesting Party is not in default in the performance of its obligations under this Agreement, or if in default, to describe therein the nature and amount of any such defaults. A Party receiving a request hereunder shall execute and return such

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certificate within thirty (30) days following the receipt thereof, or the Parties may reasonably agree to such longer period as mutually agreed to in writing by the Parties. The City Manager shall be authorized to execute any certificate requested by Developer. Should the Party receiving the request not execute and return such certificate within the applicable period, this shall not be deemed to be a default, provided that such Party shall be deemed to have certified that the statements in clauses (a)(i) through (a)(iii) of this section are true, and any Party may rely on such deemed certification.

Section 6.10. Severability.

The unenforceability, invalidity or illegality of any provisions, covenant, condition or term of this Agreement shall not render the other provisions, covenants, conditions or terms unenforceable, invalid or illegal.

Section 6.11. Attorneys’ Fees and Costs.

If City or Developer initiates any action at law or in equity to enforce or interpret the terms and conditions of this Agreement, the prevailing Party shall be entitled to recover reasonable attorneys’ fees and costs in addition to any other relief to which it may otherwise be entitled.

Section 6.12. Transfers and Assignments.

The procedural and substantive requirements in this Section 6.12, rather than those in Section

5.42.50 of the Municipal Code, shall solely govern the transfer and assignability of this Agreement, the Regulatory Permit, and the other Project Approvals. From and after the Effective Date, Developer shall have the right, in its sole and absolute discretion, to transfer, convey, delegate and/or assign (collectively, “Assign”) its rights and obligations hereunder as well as the other Project Approvals in connection with the sale or lease of all or a portion of the Subject Property and/or the Project. Provided, however, that Developer shall notify City of any such Assignment by providing City with an executed assignment and assumption agreement; upon City’s receipt of the assignment and assumption agreement at issue, Developer shall be released from any further liability or obligation hereunder so conveyed and the Assignee shall be deemed to be Developer, with all rights and obligations related thereto, with respect to such conveyed property. Notwithstanding anything to the contrary in the foregoing, the Parties acknowledge and agree that any such Assignee shall be obligated to adhere to all conditions and requirements of this Agreement and the other Project Approvals.

Section 6.13. Other Necessary Acts.

Each Party shall execute and deliver to the other all such other further instruments and documents as may be reasonably necessary to carry out this Agreement in order to provide and secure to the other Party the full and complete enjoyment of its rights and privileges hereunder.

Section 6.14. Incorporation of Recitals.

The preamble, the recitals and all defined terms in this Agreement are hereby incorporated into this Agreement as if set forth herein in full.

Section 6.15. Agreement Runs with the Land.

All provisions, rights, terms, covenants and obligations contained in this Agreement shall be

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binding upon the Parties and their respective Assignees, and all other persons acquiring the Subject Property, or any portion thereof, or any interest therein, whether by operation of law or in any manner whatsoever. All provisions of this Agreement shall be enforceable as equitable servitude and shall constitute covenants running with the land pursuant to applicable laws, including, but not limited to, Section 1468 of the Civil Code of the State of California. Each covenant to do, or refrain from doing, some act on the Subject Property hereunder, or with respect to any owned property, (a) is for the benefit of such properties and is a burden upon such properties, (b) runs with such properties, and (c) is binding upon each Party and each successive owner during its ownership of such properties or any portion thereof, and shall be a benefit to and a burden upon each Party and its property hereunder and each other person succeeding to an interest in such properties.

Section 6.16. Notices.

All notices required or provided for under this Agreement shall be in writing. Notices required to be given to City shall be addressed as follows:

Attn: City Manager
City of Hollister
375 Fifth Street
Hollister, CA 95023
Notices required to be given to Developer shall be addressed as follows:

Attn: Patrick Orosco
Felipe Nine, LLC
10 Harris Court, Suite B-1
Monterey, CA 93940
With a copy to Developer’s legal counsel:

Attn: Nadia Costa
Miller Starr Regalia
1331 N. California Blvd., Fifth Floor
Walnut Creek, CA 94596

A Party may change address by giving notice in writing to the other Party and thereafter all notices shall be addressed and transmitted to the new address. Notices shall be deemed given and received upon personal delivery, or if mailed, upon the expiration of forty eight (48) hours after being deposited in the United States Mail. Notices may also be given by overnight courier, which shall be deemed given the following day, or by email transmission, which shall be deemed given upon verification of receipt.

Section 6.17. Agreement is Entire Understanding.

This Agreement constitutes the entire understanding and agreement of the Parties.

Section 6.18. Counterparts.

This Agreement is executed in two (2) duplicate originals, each of which is deemed to be an original. This Agreement, inclusive of its recitals and exhibits, constitutes the entire

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understanding and agreement of the parties. This Agreement may be signed in identical counterparts and the signature pages, together with appropriate acknowledgments, may be removed from the counterparts and attached to a single counterpart, which shall all be considered a fully-executed original for all persons and for purposes of recordation hereof.

Section 6.19. Recordation.

City shall record a copy of this Agreement within ten (10) days following execution by both Parties.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date and year first above written.

CITY DEVELOPER

City of Hollister Felipe Nine, LLC

By: By:

Patrick W. Orosco, Managing Member

Ignacio Velazquez
Mayor, City of Hollister

Christine Black, City Clerk

Approved as to form:

By:

Christopher R. Orosco, Managing Member

City Attorney
[NOTARIZATION ATTACHED]

EXHIBIT A

Exhibit A

Legal Description of Subject Property

Real property in the County of San Benito, State of California, described as follows:

[INSERT LEGAL DESCRIPTION]

EXHIBIT B

MEMORANDUM

DATE: July 20, 2019

TO: DEVELOPMENT SERVICES DIRECTOR

FROM: ENGINEERING DIVISION

SUBJECT: ADJUSTED FEES AND CHARGES AS ADOPTED AND ESTABLISHED BY RESOLUTIONS 2019-113, 2011-82, 2017-234, 2017-296, 89-134, 88-80, 94-70, 95-59, 89-46, 89-47

This memo supersedes our memo dated July 1, 2019 on the same subject. As of July 20, 2019, fees and charges shown in the table below shall be in effect based on 1,000 square feet of building area.

COMMERCIAL/INDUSTRIAL IMPACT FEES

Public Facility Impact Fees
Local
Commercial
*

Commercial Commercial
Office
Local
Industrial *

Industrial
Water (2) $286.00 $286.00 $286.00 $143.00 $143.00 Traffic (3 ) $1,705.62 $2, 168.88 $4,464 .09 $505.37 $590.65 Sewer - Collection (S) $656.10 $656.10 $656.10 $0.00 $0.00 Storm Drainaqe(6J $285.00 $285.00 $285.00 $589.00 $589.00 Police (BJ $283.70 $283.70 $283 .70 $283.70 $283 .70
Fire (9) $378 .30 $378.30 $378.30 $378 .30 $378 .30 Detention (Jail/Juvenile Hall) (10 ) $0.50 $0.50 $0.38 $0.23 $0.23 City Hall/City Yard (11 ) $356 .00 $356.00 $465.00 $172.00 $172 .00 Total July 2019 Fees $3,951.22 $4,414.48 $6,818.57 $2,071.60 $2,156.88

Definition: Local Serving (Local Commercial and Local Industrial) applies ONLY to the traffic impact fee.

It is defined as a business which primarily serves local residents and local retail through vehicle trips considered to be generated from Zone 2 of the Traffic Impact Fees approval in Resolution 2016-46 and not considered to be peak traffic flows contributors on State Route 25 and State Route 156 as determined by

ADDITIONAL FEES:

There is an additional sewer treatment impact fee(4) and a water meter setting fee( 1) as shown on the following page.

) WATER METER FEE (1

Meter Size ** Min-Max GPM
Flow****
Connection
Fee
518" x %" 0 .5 - 20 $301.00
1" 1 - 50 $443.00
2" 2.5 - 160 $848 .00
2" Compound 0.5 - 200 $1,948.00
4" 10 - 1200 $2,630.00
4" Compound 1 - 1000 $4,433.00
6" 20 - 2500 $4,781.00
6" Compound 1.5 - 2000 $7,462 .00
8" 35 - 4000 $7,590 .00
8" Compound n/a $13,362 .00
10" 50 - 6500 $11,351 .00
1O" Compound n/a $18,987.00

** Compound meter shall be used when identified by City of Hollister Utility Department when varying flows are expected. Call (831- 636-4370.

*** Normal operating Range from Neptune Technology Group Water Meter Selector

Sewer Treatment Impact Fee (4)
Non-Residential : $27.44 gallons per day
School : $135.64 per student

SAMPLE:

Sewer Treatment Impact Fee

Unit

Flow GPO

Fee
Auto Repair 1000 sq . ft. 100 $2,744.41
Bar 1000 sq . ft. 350 $9,605.45
Barber/Beauty Shop 1000 sq. ft. 40 $1,097.77
Car Wash no recycling 1000 sq. ft. 3700 $101,543.31
Church 1000 sq. ft. 60 $1,646.65
Commercial Office 1000 sq. ft. 60 $1,646.65
Hospitals Bed 200 $5,488 .83
Laundromat Machine 500 $13,722.07
Mortuaries 1000 sq. ft. 100 $2,744.41
Market 1000 sq. ft. 60 $1,646.65
Motel Sleeping Room 125 $3,430 .52
Pharmacy 1000 sq. ft. 100 $2,744.41
Restaurants 1000 sq . ft. 150 $4, 116.62
Restaurants - Fast Food 1000 sq . ft. 570 $15,643.16
Retail Store 1000 sq . ft. 100 $2,744.41
Schools Student 4 .94 $135.64
Service Stations 1000 sq. ft. 100 $2,744.41
Theaters 1000 sq. ft. 90 $2,469 .97
Light Industrial 1000 sq. ft. 25 $686 .10
Warehouse 1000 sq . ft. 25 $686.10

Notes

1. Resolution No. 2011-82. (Water Meter Fee)
Resolution No. 2011-82 amends Table 7 of Resolution No. 2004-125.

Reference Resolutions : 2011-82, 2004-125, 87-90, 85-95

2. Resolution No. 2019-113 . (Water Impact Fee)
Resolution No. 2019-113 approved May 20, 2019 supersedes Resolution No. 85-95 .

1.00000

* Adjustments per "Employee Cost Index for State and Local Government Employees, Total compensation" published by Bureau of Labor statistics. Council may, by resolution, apply changes to Master Fee Schedule.

Reference Resolutions: 2013-113, 87-90, 85-95

3. Resolution No. 2017-234. (Traffic Impact Fee)
Resolution No. 2017-234 amends Resolution No. 2016-46

1.05285

Reference Resolutions : 2017-234, 2016-46, 2011-142, 2008-87, 2001-170, 98-73, 95-149, 95-131, 95-59, 93-66, 92-178, 88-100, 85-123, 85-99, 85-36

4. Resolution No. 2017-296 . (Sewer Impact Fee - Treatment) Resolution No. 2017-296 supersedes Resolution No. 2009-146 .

1.05150

Reference Resolutions : 2017-296, 2009-146, 2006-151, 89-134, 85-145, 85-93

5. Resolution No. 89-134. (Sewer Impact Fee - Collection) Resolution No. 89-134 amends Resolution No. 85-145 .

2.68217

Reference Resolutions: 89-134, 85-145, 85-93

6. Resolution No. 2019-113: (Storm Drainage Fee)
Resolution No. 2019-113 approved on May 20, 2019 supersedes Resolution No. 89-133.

1.00000

Reference Resolutions: 2019-113, 89-133, 85-144, 85-96 ENR Construction Cost Index April-19 11228.07
April-19 11228.07

ENR Construction Cost Index June-19 11268.48
June-17 10702.81

ENR Construction Cost Index Apr-19 11228 .07
Apr-17 10678.15

ENR Construction Cost Index June-19 11268.48
June 1985 4201 .26

ENR Construction Cost Index Apr-19 11228.07
Apr-19 11228.07

7. Resolution No. 88-80: (East Area Storm Drainage Fee) Resolution No. 88-80 amends Section 2 of Resolution No. 85-146. * please note, Resolution No. 88-80 is to be repealed.

2.68217

Reference Resolutions: 88-80, 87-92, 85-146

8. Resolution No. 89-46 : (Police Impact Fee)

2.36457

Reference Resolutions : 95-59, 89-46, 85-97

9. Resolution No. 89-47: (Fire Impact Fee)

2.36457

Reference Resolutions: 95-59, 89-47, 85-98

10. Resolution No. 2019-113 : (Jail and Juvenile Hall Facilities Impact Fee) Resolution No.2019-113 approved on May 20, 2019 supersedes Resolution No. 2000-64 .

1.00000

Reference Resolutions: 2019-113, 2000-64

11. Resolution No. 2019-113 : (City Hall/City Yard Impact Fee) Resolution 2019-113 approved on May 20, 2019 with a ENR Construction Cost Index.

1.00000

Reference Resolutions: 2019-113
ENR Construction Cost Index June-19 11268.48
June 1985 4201 .26

Consumer Price Index Dec-2018 289.896
Dec-1988 122.600

Consumer Price Index Dec-2018 289.896
Dec-1988 122.600

ENR Construction Cost Index Apr-19 11228.07
Apr-19 11228.07

ENR Construction Cost Index Apr-19 11228.07
Apr-19 11228.07

EXHIBIT C

OROS\56228\2186746.2

Cannabis Facility Regulatory Permit Applicant Release Agreement, Conditions of Approval and Affidavit of Acknowledgement

As an applicant for the Cannabis Facility, commonly known as “Felipe 9,” located on San Felipe Road, within City’s incorporated municipal boundaries, consisting of approximately 9.17 gross acres (APN: 051-100-031 and 051- 100-032) (“Subject Property”),

I, as the applicant and operator for the Cannabis Facility, hereby acknowledge and agree to the following conditions being imposed on the approval of the Regulatory Permit for the Felipe 9 Cannabis Facility.

CANNABIS FACILITIES AND DELIVERY REGULATIONS.

Cannabis Facility Infrastructure and Security Regulations

In addition to the infrastructure and security requirements expressly contained in the Hollister Municipal Code, Chapter 5.42, the Felipe 9 Cannabis Facility shall comply with the following infrastructure and security regulations:

The operator shall substantially comply with the Security Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Security Plan, the requirements in the Security Plan shall govern and control.

Alarms and closed circuit television. A Police Department-licensed, 24-hour centrally monitored alarm system is required. The system shall automatically notify the Police Department dispatch and allow camera system access for dispatch to relay vital information to responding officers on alarm activations.

Closed circuit television (“CCTV”) video monitoring shall be installed that meets the following criteria:

Continuous 24-hour operation and recording with minimum archival period of six months cloud-based storage for motion-activated movement.

Sufficient cameras shall be installed and maintained on-site, with angles of observation and lighting to allow facial feature identification of persons in interior and exterior areas where cannabis or cannabis products are present at any time.

Sufficient cameras shall be installed and maintained on-site, with angles of observation and lighting to allow facial feature identification of persons in the immediate exterior areas of doors, windows, or other avenues of potential access , with 20 feet on either side and out from every door.

All CCTV recordings shall be accessible to law or code enforcement officers at all times during operating hours and otherwise upon reasonable request. All CCTV recording systems shall have the capability of producing tapes, DVDs or other removable media of recordings made by the CCTV system, including still photograph images.

To prevent tampering, the CCTV recorder shall be kept in a secure, locked location and all recordings shall be date and time stamped.

Windows and glass panes shall have vandal-resistant glazing, shatter-resistant film, glass block, or bars installed and equipped with latches that may be released quickly from the inside to allow exit in the event of emergency.

Windows vulnerable to intrusion by a vehicle must be protected by bollards or a landscaping grade separation that is reasonably sufficient to prevent such intrusion.

Roofs, roof hatches, sky lights, and ceilings: All reasonable means of gaining unauthorized access to the roof shall be eliminated. Exterior roof ladders shall be secured with locked ladder covers.

Roof hatches and skylights shall be reasonably secured so as to prevent intrusion.

Visibility: Cannabis or cannabis products or graphics depicting cannabis or cannabis products within the cannabis facility shall not be visible with the naked eye from the perspective of a pedestrian immediately exterior to the property line of the cannabis facility.

Exterior landscaping within 10 feet of a cannabis facility shall be free of locations which could reasonably be considered places where a person could conceal themselves considering natural or artificial illumination.

OROS\56228\2186746.2

Exterior building lighting and parking area lighting must be of sufficient foot-candles and color rendition, so as to allow the ready identification of any individual committing a crime on site at a distance of no less than forty feet.

Fire suppression system: An approved automatic fire sprinkler system, designed in compliance with International Fire Code is required, unless otherwise determined not to be necessary pursuant to applicable Fire Code provisions given the nature of the structure being constructed.

Entrances, exits, and doors: A cannabis facility shall have a single plainly identified primary entrance/exit site that is visible from public or common areas.

Any exit or entrance that is not visible from a public or common area shall be plainly marked as an emergency exit only. Such emergency exits shall be self-closing, self-locking, with commercial grade locks equipped with an alarm and not used except in an emergency.

Any aluminum door shall be fitted with steel inserts at the lock receptacles.

Any outward opening doors shall be fitted with hinge stud kits, welded hinges or set-screw hinge pins.

Panic exit hardware shall be “push-bar” design.

Double doors shall be fitted with three-point locking hardware and push-bars consistent with fire agency regulations or requirements.

All emergency exits shall be solid core doors featuring hinge-pin removable deterrence. Emergency exit doors shall have latch guards at least 12 inches in length protecting the locking bolt area. Latch guards shall be of minimum 0.125-inch thick steel, affixed to the exterior of the door with non-removable bolts, and attached so as to cover the gap between the door and the doorjamb for a minimum of six inches both above and below the area of the latch.

All glass doors or doors with glass panes shall have shatter-resistant film affixed to prevent glass breakage.

Identification and access badges: Managers and employees of a cannabis facility may wear identification badges with photo identification on breakaway style lanyards, at chest height.

The identification badges shall the means to access areas of the cannabis facility not designed for public access.

The identification badge access system shall have a duress feature.

The identification badge access system shall have a readily available recorded log for entry/exit time of areas of the cannabis facility not designed for public access. The electronic logs must be retained for 90 days.

Biometric access system: Entrances to areas of a cannabis facility where cannabis or cannabis products are cultivated, manufactured, processed, stored, tested, or labeled must have biometric scanners for individual unmistakable identifying access.

The biometric access system shall have a readily available recorded log for entry/exit time for to the secured areas. The electronic logs must be retained for 90 days.

Security personnel: A cannabis facility shall utilize adequate security personnel and patrols to ensure the safety of persons and to protect the facility from theft at all times.

All security personnel utilized by the cannabis facility shall be licensed and possess a valid Department of Consumer Affairs “Security Guard Card” at all times.

Security liaison: A cannabis facility shall provide the City Manager or designee with the name, telephone number, and email address of a security liaison to whom the City can provide notice if there are security problems associated with the cannabis facility or refer members of the public who may have any concerns or complaints regarding the security of the cannabis facility. Each cannabis facility shall also provide the above information to all businesses and residences located within 100-foot radius of the cannabis facility.

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The security liaison shall be reasonably available to meet with the City Manager, the City’s Police Chief, or their designees, regarding any security related measures or and operational issues.

All Cannabis Facility General Operating Requirements

In addition to the operating requirements applicable to cannabis facilities expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis facilities shall comply with the following general operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

A cannabis facility shall post, in a prominent location within the facility, a copy of its cannabis facility Regulatory Permit and a document that provides (a) the name, telephone number, and address of a person(s) authorized to accept service of process on behalf of the cannabis facility, (b) the name, telephone number, and address of the facility’s community relations liaison required pursuant to Section 5.42.240 of the Municipal Code, and (c) the name, telephone number, and address of the facility’s security liaison required pursuant to this condition.

There shall be at least one responsible person at the cannabis facility to act as manager and supervise employees at all times during business hours. Such responsible person shall undergo a Fingerprint- Based Criminal History Records Check conducted by the City Police Department pursuant to Section 5.42.060 of the Municipal Code and shall not have been convicted of an offense listed in Section 5.42.070.7.A of the Municipal Code.

All finished cannabis and cannabis products (except for limited amounts of cannabis used for display purposes, samples, or immediate sale) shall be secured and locked in a room, safe, or vault in a manner as to prevent diversion, theft, and loss. No outdoor storage of cannabis or cannabis products is permitted at any time.

A cannabis facility shall utilize an inventory and point-of-sale tracking system to track and report on all aspects of the facility’s business including, but not limited to, such matters as cannabis tracking, inventory data, and gross sales (by weight and by sale). The cannabis facility shall ensure that such information is compatible with the City’s record-keeping systems. The system must have the capability to produce historical transactional data for review by the City Manager or designee.

A cannabis facility shall use weighing or measuring devices that meet standards equivalent to Division 5 of the Business and Professions Code.

All cannabis or cannabis products sold, distributed, tested, or manufactured by cannabis facility shall be cultivated, manufactured, and transported by licensed facilities that maintain operations in full conformance with the State and local regulations.

Signage and notices: In addition to the requirements otherwise set forth in this section, business identification signage for a cannabis facility shall conform to the applicable requirements of the Municipal Code, including, but not limited to, seeking the issuance of a City sign permit.

No signs placed on the premises of a cannabis facility shall obstruct any entrance or exit to the building or any window.

Each entrance to a cannabis facility shall be visibly posted with a clear and legible notice indicating that smoking, ingesting, or otherwise consuming cannabis on the premises or in the areas adjacent to the cannabis facility is prohibited.

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 facility shall advertise by having an individual holding a sign and advertising the business to passersby, whether such person is on the premises of the cannabis facility or elsewhere including, but not limited to, the public right-of-way. No “A Frame” style signs allowed in front of business or on curbside.

Signage shall not be directly illuminated, internally or externally, except that the name and address of the business may be illuminated at night.

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Odor control: Odor control devices and techniques shall be incorporated in all cannabis facilities to ensure that odors from cannabis are mitigated to the maximum extent reasonably practicable so as to minimize off-site detection. All cannabis facilities shall provide a sufficient odor absorbing ventilation and exhaust system so that odor generated inside the cannabis facility that is distinctive to its operation is mitigated to the maximum extent reasonably practicable so as to minimize off-site detection, anywhere on adjacent property or adjacent public rights-of-way, on or about the exterior or interior common area walkways, hallways, breezeways, foyers, lobby areas, or any other areas available for use by common tenants or the visiting public, or within any other non-cannabis unit located inside the same building as the cannabis facility. As such, cannabis facilities must install and maintain the following equipment or any other equipment which the City Manager or designee determines is a more effective method or technology: exhaust air filtration system with odor control that prevents internal odors, to the maximum extent reasonably practicable, from being emitted externally.

An air system that creates negative air pressure between the cannabis facility’s interior and exterior, so that the odors generated inside the cannabis business are not detectable, to the maximum extent reasonably practicable, on the outside of the cannabis business.

A cannabis facility shall (i) prohibit loitering by individuals outside the cannabis facility, whether the loitering is occurring immediately outside the cannabis facility or anywhere else on the project site; (ii) on-site consumption of cannabis or alcohol; and (iii) loud car stereos or activities disruptive to the neighboring businesses or residences outside the cannabis facility, whether the disruption is occurring immediately outside the cannabis facility or anywhere else on the project site.

A cannabis facility shall notify the City Manager or designee IMMEDIATELY after discovering any of the following:

(i) Discrepancies identified during inventory.

(ii) Diversion, theft, loss, or any criminal activity involving the cannabis business or any agent or employee of the cannabis business.

(iii) The loss or unauthorized alteration of records related to cannabis, , or employees or agents of the cannabis facility.

(iv) Any other material breach of security.

Agents or employees of the City requesting access to a cannabis facility or the records required to be maintained by a cannabis facility to document compliance with these conditions shall be given reasonable access to same.

A cannabis facility shall implement and monitor procedures for cash management, security, and storage.

A cannabis facility shall secure worker’s compensation insurance covering employees of the medical facility.

A cannabis facility shall secure general liability insurance with an aggregate limit not less than $1,000,000.00.

Cannabis Cultivation Facility Operating Requirements

In addition to the operating requirements applicable to cannabis cultivation facilities contained in the Hollister Municipal Code, Chapter 5.42, cannabis cultivation facilities shall comply with the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

A cannabis cultivation facility shall not use pesticides or insecticides prohibited by applicable federal, State, or local law for fertilization or production of edible produce.

A cannabis cultivation facility shall comply with all applicable federal, State, and local laws regarding use and disposal of pesticides and fertilizers.

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Until regulatory implementation of the Medicinal and Adult-Use Cannabis Regulation and Safety Act ( MAURA), a cannabis cultivation facility shall send (or make arrangements for a cannabis distribution facility to send) cannabis cultivated by the facility for batch testing to a cannabis testing center that maintains operations in full conformance with the applicable State and local regulations prior to distribution to a cannabis dispensary.

Prior to transportation, a cannabis cultivation facility shall package and seal all cannabis in tamper- evident packaging and use a unique identifier, such as a batch and lot number or bar code, to identify and track the cannabis.

Cannabis Manufacturing Facility Operating Requirements

In addition to the operating requirements applicable to cannabis manufacturing facilities expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis manufacturing facilities shall comply with the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

All cannabis manufacturing facilities must adhere to applicable City of Hollister Building Department Codes as required by the Building Official.

All manufacturers, whether Type 7 or Type S, must adhere to all applicable regulations and requirements set by the California Department of Public Health ( California Code of Regulations, Title 17; Division 1, Chapter 13. Manufactured Cannabis Safety.

A cannabis manufacturing facility shall only produce, distribute, provide, donate, or sell non-potentially hazardous food, as established by the State Department of Public Health pursuant to Section 114365.35 of the Health and Safety Code.

Prior to transportation, a cannabis manufacturing facility shall package and seal all cannabis products in tamper-evident packaging and use a unique identifier, such as a batch and lot number or bar code, to identify and track the cannabis products.

Cannabis Distribution Facility Operating Requirements

In addition to the operating requirements applicable to cannabis distribution facilities expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis distribution facilities shall comply with the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

A cannabis distribution facility shall only procure, sell, or transport cannabis or cannabis products that are packaged and sealed in tamper-evident packaging that uses a unique identifier, such as a batch and lot number or bar code, to identify and track the cannabis or cannabis products.

A cannabis distribution facility shall maintain a database and provide a list of the individuals and vehicles authorized to conduct transportation on behalf of the cannabis distribution facility to the City Manager or designee.

Individuals authorized to conduct transportation on behalf of the cannabis distribution facility shall have a valid California Driver’s License.

Individuals authorized to conduct transportation on behalf of the cannabis distribution facility shall undergo a Fingerprint-Based Criminal History Records Check conducted by the City Police Department pursuant to Section 5.42.060 of the Municipal Code and shall not have been convicted of an offense listed in Section 5.42.070.7.A of the Municipal Code.

Individuals transporting cannabis or cannabis products on behalf of the cannabis distribution facility shall maintain a physical copy of the transportation request (and/or invoice) and shall make it available upon request of agents or employees of the City requesting documentation.

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During transportation, the individual conducting transportation on behalf of the cannabis distribution facility shall maintain a copy of the cannabis distribution facility’s regulatory permit and shall make it available upon request of agents or employees of the City requesting documentation.

A cannabis distribution facility shall only transport cannabis or cannabis products in a vehicle that is (a) insured at or above the legal requirement in California, (b) capable of securing (locking) the cannabis or cannabis products during transportation, and (c) capable of being temperature controlled if perishable cannabis or cannabis products are being transported.

Operating Requirements for the Transportation of Cannabis or Cannabis Products

In addition to any applicable operating requirements expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis cultivation facilities and cannabis manufacturing facilities may transport cannabis or cannabis products produced at the particular facility subject to the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated , 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

The facility shall maintain a database and provide a list of the individuals and vehicles authorized to conduct transportation on behalf of the facility to the City Manager or designee.

Individuals authorized to conduct transportation on behalf of the facility shall have a valid California Driver’s License.

Individuals authorized to conduct transportation on behalf of the facility shall undergo a Fingerprint- Based Criminal History Records Check conducted by the City Police Department pursuant to Section 5.42.060 of the Municipal Code and shall not have been convicted of an offense listed in Section 5.42.070.7.A of the Municipal Code.

Individuals transporting cannabis or cannabis products on behalf of the facility shall maintain a physical copy of the transportation request (and/or invoice) and shall make it available upon request of agents or employees of the City requesting documentation.

During transportation, the individual conducting transportation on behalf of the facility shall maintain a copy of the facility’s cannabis facility regulatory permit and shall make it available upon request of agents or employees of the City requesting documentation.

A facility shall only transport cannabis or cannabis products in a vehicle that is (a) insured at or above the legal requirement in California, (b) capable of securing (locking) the cannabis or medical cannabis products during transportation, and (c) capable of being temperature controlled if perishable cannabis or cannabis products are being transported.

Cannabis Testing Center Operating Requirements

In addition to the operating requirements applicable to cannabis testing centers expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis testing centers shall comply with the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

A cannabis testing center shall adopt a standard operating procedure using methods consistent with general requirements established by the International Organization for Standardization, specifically ISO/IEC 17025, to test cannabis and cannabis products.

A cannabis testing center shall be accredited by a body that is a signatory to the International Laboratory Accreditation Cooperation Mutual Recognition Arrangement.

A cannabis testing center shall establish standard operating procedures that provide for adequate chain of custody controls for samples transferred to the testing laboratory for testing.

A cannabis testing center shall destroy the remains of samples of cannabis or medical Cannabis product upon completion of analyses.

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Cannabis Delivery Operating Requirements

In addition to the operating requirements applicable to delivery (as defined Section 5.42.180 of the Hollister Municipal Code) expressly contained in the Hollister Municipal Code, Chapter 5.42, cannabis facilities involving delivery uses shall comply with the following operating requirements:

The operator shall substantially comply with the Business Plan, approved by City and dated _, 2020. In the event of any conflict between requirements set forth in these conditions and those set forth in the Business Plan, the requirements in the Business Plan shall govern and control.

A cannabis facility shall ensure that all cannabis and medical cannabis products sold, given away, or donated by the facility were batch tested by a cannabis testing center that maintains operations in full conformance with the applicable State and local regulations prior to delivery.

Prior to delivery, a cannabis facility shall ensure that all cannabis and cannabis products are packaged and sealed in tamper-evident packaging that includes a unique identifier, such as a batch and lot number or bar code, to identify and track the cannabis or cannabis products.

“CALIFORNIA PROP. 65 WARNING: Smoking of cannabis and cannabis-derived products will expose you and those in your immediate vicinity to cannabis smoke. Cannabis smoke is known by the State of California to cause cancer.”

A cannabis facility shall facilitate the delivery of cannabis or cannabis products with a technology platform owned by or licensed to the facility that uses point-of-sale technology to track and database technology to record and store the following information for each transaction involving the exchange of cannabis or cannabis products between the facility and the customer.

(i) The identity of the individual delivering cannabis or cannabis products on behalf of the facility.

(ii) The identity of the customer receiving cannabis or cannabis products from the facility.

(iii)(i) The type and quantity of cannabis or cannabis products delivered and received.

(iv) The dollar amount charged by the facility and received by the individual delivering cannabis or cannabis products on behalf of the facility for the cannabis or cannabis products delivered and received.

A cannabis facility shall maintain a database and provide a list of the individuals and vehicles authorized to conduct delivery on behalf of the facility to the City Manager or designee and the City Police Department.

Individuals authorized to conduct delivery on behalf of the facility shall have a valid California Driver’s License.

Individuals authorized to conduct delivery on behalf of the facility shall undergo a Fingerprint-Based Criminal History Records Check conducted by the City Police Department pursuant to Section 5.42.060 of the Municipal Code and shall not have been convicted of an offense listed in Section 5.42.070.7.A of the Municipal Code.

Individuals delivering cannabis or cannabis products on behalf of the facility shall maintain a physical copy of the delivery request (and/or invoice) and shall make it available upon request of agents or employees of the City requesting documentation.

During delivery, the individual conducting delivery on behalf of the facility shall maintain a copy of the dispensary’s cannabis facility regulatory permit, and shall make it available upon request of agents or employees of the City requesting documentation.

A facility shall only delivery cannabis or cannabis products in a vehicle that is (a) insured at or above the legal requirement in California, (b) capable of securing (locking) the cannabis or cannabis products during transportation, (c) capable of being temperature controlled if perishable cannabis or cannabis products are being transported, and (d) does not display advertising or symbols visible from the exterior of the vehicle that suggest the vehicle is used for delivery or affiliated with a cannabis facility.

A facility shall facilitate delivery with a technology platform owned by or licensed to the permittee that uses Global Positioning System technology to track and database technology to record and store the following information:

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(i) The time that the individual delivering cannabis or cannabis products on behalf of the facility.

(ii) The time that the individual delivering cannabis or cannabis products on behalf of the facility completed delivery to the customer.

(iii) The time that the individual delivering cannabis or cannabis products on behalf of the facility.

(iv) The route the individual delivering cannabis or cannabis products on behalf of the facility.

(v) For each individual delivery transaction, the identity of the individual delivering cannabis or cannabis products on behalf of the facility.

(vi) For each individual delivery transaction, the vehicle used to deliver cannabis or cannabis products on behalf of the facility.

(vii) For each individual delivery transaction, the identity of the customer receiving cannabis or cannabis products from the facility.

(viii) For each individual delivery transaction, the type and quantity of cannabis or cannabis products delivered and received.

(ix) For each individual delivery transaction, the dollar amount charged by the facility and received by the individual delivering cannabis or cannabis products on behalf of the facility for the cannabis or cannabis products delivered and received.

(x) The individual delivering cannabis or cannabis products on behalf of the facility shall personally verify for each individual delivery transaction of the identity of the customer receiving cannabis or cannabis products from the facility.

No delivery transactions shall occur in the City of Hollister between the hours of 09:00 p.m. and 7:00 a.m.

I understand the applicant and the employees of the cannabis facility may be subject to prosecution under federal laws.

I understand the City of Hollister accepts no legal liability in connection with the approval and subsequent operation of the cannabis facility.

For the cost to the City of administering the cannabis facilities and operations, fees are due and payable to the City in the manner set forth in that certain Development Agreement for the Felipe 9 Cannabis Facility, entered into on .

Record at the request and for the
benefit of the City of Hollister
Pursuant to Government Code §§ 6301 and 27383

DEVELOPMENT AGREEMENT

BY AND BETWEEN

THE CITY OF HOLLISTER, A CALIFORNIA MUNICIPAL CORPORATION, AND

WRIGHT THIRTEEN, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY

OROS\56228\2198903.3
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RECORDING REQUESTED BY:

CITY OF HOLLISTER
When Recorded Mail To:

City Clerk
City of Hollister
375 Fifth Street
Hollister, CA 95023
Space above this line for Recorder's use

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DEVELOPMENT AGREEMENT BY AND BETWEEN

THE CITY OF HOLLISTER AND WRIGHT THIRTEEN, LLC
(Wright Thirteen)
This Development Agreement ("Agreement ') is entered into on , 2019, by and between the City of Hollister, a California municipal corporation ( " City") , and Wright Thirteen, LLC, a California limited liability company ( "Developer' ') . City and Developer are individually referred to herein as a "Party'' and collectively as the "Parties."

RECITALS

A. To strengthen the public planning process, encourage private participation and comprehensive planning, and reduce the economic risk of development, the California Legislature adopted sections 65864 et seq. of the Government Code ( "Development Agreement Statute") , which authorize a city to enter into an agreement with any person having a legal or equitable interest in real property, providing for the development of such property and establishing certain development rights therein.

8. Developer has a legal or equitable interest in certain real property located on Wright Road, within City's incorporated municipal boundaries, consisting of approximately

12.92 gross acres (APN: 053-350-005) ( "Subject Property' '), as more particularly described in attached Exhibit A and shown in attached Exhibit 8. The Subject Property has a General Plan land use designation of North Gateway Commercial (NG) and is zoned North Gateway Commercial (NG).

C. Developer seeks approval of a project on the Subject Property on which it desires to construct approximately construct approximately three hundred and forty thousand (340,000) square feet of buildings for a cannabis facility (as defined below) (with cultivation, manufacturing, research, delivery and office uses}, including on-site parking and all utility connections , drainage and landscape improvements, as further described in the Current Approvals (as defined below) ( "Project').

D. City is a general law city and municipal corporation of the State of California and is duly organ ized, existing, and authorized to exercise powers under the laws of California and the Hollister Municipal Code ( "Municipal Code").

E. In accordance with the Development Agreement Statute, City has enacted a development agreement ordinance pursuant to the provisions thereof (Section 17.24.280 of the Municipal Code; "Development Agreement Ordinance"). The provisions of the Development Agreement Statute and the Development Agreement Ordinance are collectively referred to herein as the "Development Agreement Law."

F. City has adopted Chapter 5.42 of the Municipal Code ("Local Cannabis Regulations") , which sets forth a regulatory framework to allow for cannabis facilities. The purpose of Chapter 5.42 is to provide for "reasonable regulations pertaining to cannabis dispensary, cultivation, and manufacturing facilities to ensure that qualified patients and their primary caregivers are afforded safe and convenient access to cannabis, while at the same time ensuring that such uses do not conflict with the general plan, are not inconsistent with surrounding uses, and are not detrimental to the public health, safety and welfare" of the citizens of Hollister, and to ensure that operation of such facilities is in compliance with

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applicable state laws and regulations.

G. The Parties intend for this Agreement to be a statutory development agreement, pursuant to the Development Agreement Law, and include conditions and requirements for the development of the Subject Property, as well as vest Developer's rights to develop the Project as provided for in this Agreement. In addition, the Parties intend this Agreement to satisfy the requirements of the Local Cannabis Regulations, which require those operating a cannabis facility to enter into a "development agreement and operating plan" setting forth "the terms and conditions under which the cannabis facility will operate that are in addition to the requirements of this chapter, including, but not limited to, public outreach and education, community service, payment of fees and other charges as mutually agreed, and such other terms and conditions that will protect and promote the public health, safety, and welfare."

H. Pursuant to the Local Cannabis Regulations, those who desire to operate a cannabis facility are required to obtain a regulatory permit pursuant to Section 5.42.050 of the Municipal Code ("Regulatory Permit' ) .

I. Developer anticipates entering into a lease with an entity(ies) (" Tenant') to hold the Regulatory Permit and to operate the Project on the Subject Property, once constructed, in accordance with the Project Approvals (as defined below), including, among others, the Project's Regulatory Permit and the City Rules (as defined below).

J. Developer proposes to develop and use the Subject Property as a cannabis facility pursuant to this Agreement, the requirements set forth in the Municipal Code, and as described more fully in the Project Approvals (as defined below). "Cannabis facility" shall have the meaning set forth as in Chapter 5.42.020 of the Municipal Code, and shall include, without limitation, a facility where cannabis or cannabis products are cultivated, possessed, manufactured, processed, stored, tested, labeled, transported, delivered, distributed, or sold, and for any other lawful use not prohibited under state and local laws and regulations, and/or any additional uses that may be approved of by City in the future at Developer's request.

K. Pursuant to Chapter 5.42 and the Zoning Ordinance in the Municipal Code, the cannabis facilities uses and related improvements as contemplated by the Project constitute a permitted use in the North Gateway Commercial (NG) zoning district, subject to approval of a Regulatory Permit. The Project complies with all applicable commercial development standards for the North Gateway Commercial (NG) zoning district set forth in the Municipal Code.

L. The Project requires the issuance by City of several discretionary entitlements, as set forth in Recital R below; accordingly, the Project is required to comply with the California Environmental Quality Act (Public Resources Code § 21000 et seq . and CEQA Guidelines § 15000 et seq. (collectively, " CEQA"). Pursuant to CEQA, City, as the lead agency, has caused to be prepared an Initial Study/Mitigated Negative Declaration ("ISIMND") for the Project, which circulated for public review and comment for a thirty (30) day period of time, from December 28, 2018 to January 28, 2019 .

M. On September 26, 2019, the City's Planning Commission (" Planning Commission") held a duly noticed public hearing and considered Developer's application for the Project's Site and Architectural Review (" Site Plan and Architectural Review") as well

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as the proposed Minor Subdivision (2018-6) (" Tentative Parcel Map"), along with the IS/MND that was prepared in connection therewith. After taking testimony and closing the public hearing, the Planning Commission deliberated and considered the matter, adopted the IS/MND and approved the Project's Site and Architectural Review as well as the Tentative Parcel Map, as reflected in Resolution No. 2019-2019-44, Resolution No. 2019-2019-44, and Resolution No. 2019-2019-46, respectively.

N. As noted further herein, City has given the required notice of its intention to consider adoption of this Agreement and has conducted public hearings thereon pursuant to Government Code Section 65867. In addition, City has reviewed and evaluated this Agreement in accordance with the Development Agreement Law, the Local Cannabis Regulations and other relevant provisions of the Municipal Code and found that the provisions of this Agreement and its purposes are consistent therewith and the applicable goals, policies, standards and requirements specified in the General Plan and the Municipal Code.

0. On December 16, 2019, the Hollister City Council ("City Councif' ) held a duly noticed public hearing and considered this Agreement. After taking testimony and closing the public hearing, the City Council deliberated and considered the matter, confirmed that the IS/MND remained adequate for purposes of considering this Agreement , adopted a Mitigation Monitoring and Reporting Program and made the required findings of fact related thereto (as set forth in Resolution No. _); and introduced Ordinance No. approving this Agreement (" DA Ordinance" ). On , 2020, the City Council subsequently adopted the DA Ordinance, which became effective on , 2020.

P. The Site and Architectural Review, the Tentative Parcel Map and this Development Agreement shall be referred to herein as the "Current Approvals."

Q. City anticipates that during the Term (as defined below) of this Agreement and subsequent to the Effective Date (as defined below), Developer will seek from City (as well as any other public agencies having jurisdiction over aspect(s) of the Project) certain other implementing approvals, entitlements and permits that are necessary or desirable for the Project, which may include, without limitation, the Regulatory Permit, final subdivision and parcel maps, lot line adjustments, encroachment permits, grading permits, building permits, and/or certificates of occupancy (each, a "Subsequent Approvalf' and collectively, the "Subsequent Approvals" ).

R. City and Developer desire the timely, efficient, and orderly development of the Project as contemplated herein and in accordance with the Current Approvals and the Subsequent Approvals, as and when obtained (collectively, "Project Approvals" ).

S. The terms and conditions of this Agreement have undergone review by City staff, its Planning Department, and the City Attorney, as well as the City Council at duly noticed public meetings and hearings and have been found to be fair, just and reasonable. City further finds that this Agreement is consistent with the City's General Plan and any applicable specific plan; is in conformity with the public convenience, general welfare, and good land use practices; is not inconsistent with surrounding land uses; will not be detrimental to the health, safety, and general welfare of persons residing in the immediate area nor be detrimental or injurious to property or persons in the general neighborhood or to the general welfare of the residents of the City of Hollister as a whole; will not adversely affect the orderly development of property or the preservation

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of property values; and is consistent with the Development Agreement Law and applicable state law and regulations regarding cannabis facilities. The Project will facilitate economic generation for the City of Hollister in a number of ways, including, without limitation, job creation (both construction- and operation-oriented); property tax generation; and payment of Impact Fees and the Cannabis Business Fees (as those terms are defined below).

T. City and Developer have reached mutual agreement and desire to voluntarily enter into this Agreement to facilitate development of the Project in conformance with the Development Agreement Law and the Local Cannabis Regulations, to vest Developer's right to develop the Project on the Subject Property, and to establish Developer's obligations related thereto, as more particularly set forth herein.

NOW, THEREFORE, in consideration of the mutual promises, covenants and provisions set forth herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows.

AGREEMENT

ARTICLE I: DESCRIPTION OF SUBJECT PROPERTY, PROPOSED DEVELOPMENT, EFFECTIVE DATE AND TERM.

Section 1.1. Description of Subject Property.

This Agreement vests the laws applicable to development of the Project on the Subject Property as of the Effective Date, as set forth more fully herein.

Section 1.2. Proposed Development.

Subject to the terms and conditions of this Agreement, Developer shall have the vested right to construct and operate (and/or lease the Project to Tenant(s) for purposes of operation consistent with the Regulatory Permit) the Project in accordance with the Current Approvals, as well as the Subsequent Approvals once granted and effective. Developer shall have the right to have Subsequent Approvals, as well as any amendment(s) to the Current Approval(s) proposed by Developer, considered by City for approval or denial based upon the terms, standards, criteria and requirements set forth in the Current Approvals and in accordance with Developer's vested rights hereunder . In exercising its discretion when acting upon Subsequent Approval(s) to the extent the same are discretionary in nature, City shall apply the Current Approvals as the controlling body of law within which City's discretion shall be exercised. Furthermore, City shall process applications for any amendment(s) to the Current Approval(s) proposed by Developer as well as all applications for Subsequent Approval(s) expeditiously and in accordance with this Section 1.2.

Section 1.3. Effective Date and Term.

(a) Effective Date. The effective date of this Agreement shall be thirty (30) days after the date that the City Council adopts the DA Ordinance ("Effective Date") and shall be inserted above where indicated. The Parties acknowledge that section 65868.5 of the Development Agreement Statute requires City to record this Agreement with the San Benito County Recorder no later than ten (10) days after the Parties enter into this Agreement and that the burdens of this Agreement shall be binding upon and the benefits shall inure to all successors in interest to

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the Parties, subject to the assignment provisions in Section 6.12 below.

(b) Term. Subject to extension(s) granted pursuant to subsection (c) below, the term of this Agreement shall commence on the Effective Date and extend twenty (20) years thereafter (" Term") . Unless earlier terminated (pursuant to the terms of this Agreement), following the expiration of the Term, this Agreement shall be deemed terminated and of no further force and effect, except for the provisions of this Agreement that expressly survive termination , if any.

(c) Extension(s) of Term. Developer may, in its sole and absolute discretion, request up to, and upon receipt of a written request from Developer, City shall grant a total of three (3) ten (10) year extensions; assuming all extensions are requested by Developer, the Term of this Agreement shall be a total of fifty (50) years, at which point this Agreement shall automatically terminate.

ARTICLE II: STANDARDS, LAWS, AND PROCEDURES GOVERNING THE PROPOSED DEVELOPMENT.

Section 2.1. Vested Right to Develop.

In recognition of the extraordinary , long-term investment in planning, engineering, design, technical review and legal resources necessary to develop the Subject Property with the Project, Developer shall have the vested right to develop and operate the Project on the Subject Property in accordance with all valid applicable adopted ordinances, resolutions, statutes, codes, laws, rules, regulations, initiatives, referenda, and/or official policies of City, including, without limitation, City's General Plan; the Municipal Code; and City's environmental laws, entitlements, approvals , licenses, and permits issued to Developer by City (including, without limitation, the Current Approvals), in effect on the Effective Date of this Agreement (collectively, "City Rules" ) . The Subsequent Approval(s) shall be considered for approval or denial based upon the terms, provisions, standards, criteria and requirements set forth in the City Rules.

Section 2.2. Permitted Uses.

The permitted uses of the Subject Property; the density and intensity of uses; the maximum height, bulk, and size of proposed buildings; provisions for reservation or dedication of land for public purposes and location and maintenance of on-site and off-site improvements and the location of public utilities operated by City (water and wastewater); and other terms and conditions of development applicable to the Project, shall be those set forth in this Agreement , the other Current Approvals, any amendment(s) to the Current Approval(s) proposed by Developer and approved by City, and the Subsequent Approval(s) once granted and effective.

Section 2.3. Application of Subsequently Enacted Rules, Regulations and Official Policies.

This Agreement is a legally binding contract that shall supersede any initiative, measure, moratorium, statute, ordinance, or other limitation enacted after the Effective Date (collectively, "New Rules") except as expressly provided herein and as otherwise provided for in accordance with applicable laws and regulations . Notwithstanding the foregoing , the Parties acknowledge and agree that New Rules shall be applicable to the Project if and only to the extent that such application will not conflict with any of the vested rights granted to Developer hereunder. Any New Rules shall be deemed to conflict with Developer's vested rights hereunder if the New Rule(s) seek to limit or reduce the density or intensity of development of the Project; impose in

[Final Version]
an ad hoc manner on the Project additional material financial obligations; or seek to modify the timing of the development of the Project as contemplated in the Project Approvals .

Notwithstanding anything to the contrary in this Section 2.3 and in accordance with Sections 2 .5 and 2.7 below, City shall not be precluded from applying any New Rules to the Project under the following circumstances, where the New Rules are: (a) specifically mandated by changes in state or federal laws or regulations adopted after the Effective Date as provided in Government Code Section 65869.5, subject to the terms of Section 2.7(a) below; (b) specifically mandated by a court of competent jurisdiction; or (c) changes to the Uniform Building Code or similar uniform construction codes, or to City's local construction standards for public improvements so long as such code or standard has been formally adopted by City and is in effect on a city-wide basis.

Section 2.4. Vested Against Moratoria, Quotas, Restrictions or Other Cannabis Facilities Development Limitations.

City agrees that, except as otherwise expressly provided in or expressly limited by the provisions of this Agreement, this Agreement vests the Project against New Rules that would directly or indirectly limit the rate, timing, or sequencing of development of the Project on the Subject Property, or that would prevent or conflict with the permitted uses, or the density or intensity of uses, or the terms, provisions, criteria, standards or requirements of development, as set forth in the Current Approvals and the Subsequent Approval(s) once granted and effective. The foregoing shall include, without limitation, any New Rules that seek to restrict the number, type or nature of cannabis facilities in City.

Section 2.5. Vested Rights Exclude Building and Fire Codes.

City shall apply to the Project the applicable provisions of the California Building Code, Plumbing Code, Electrical Code, Mechanical Code, Fire Code, Water Conservation laws, Energy Code, and Green Building Standards, as may be amended from time to time, as adopted by City, as well as the applicable provisions of the Federal Americans with Disabilities Act (ADA) (collectively , "Applicable Uniform Codes") in effect at the time the applicable building, grading, encroachment or other construction permit is submitted for review for the Project. If no construction permit is required for infrastructure improvement(s), such improvement(s) shall be constructed in accordance with the Applicable Uniform Codes in effect at the time of approval by City of the improvement plans for such infrastructure. Provided, however, that the Parties acknowledge and agree that for purposes of applying the Applicable Uniform Codes to the Project, the occupancy classification for agricultural buildings and greenhouses shall be designated as Group "U" pursuant to Section 312 of the 2016 California Building Code.

Section 2.6. Vested Rights Exclude Regulatory Processing Fees, Annual Operating Fees, and Cannabis Facilities Registration and Renewal Fees.

Developer shall pay City's actual expenses to process applications for the Subsequent Approval(s) and to conduct plan check and inspections (collectively, "Regulatory Processing Fees") in accordance with City's adopted Regulatory Processing Fee schedule in effect at the time that each Subsequent Approval application is formally submitted . In addition, Developer shall pay all applicable annual renewal fees, as well as any fees for inspection or investigation that are required by Municipal Code Section 5.42.080 for the Project except as otherwise expressly set forth in Section 2.8 below and so long as each said fee has been lawfully adopted and applied on a city-wide basis and is applied to the Project only on a prospective basis. The

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various fees expressly referenced in this Section 2.6 are distinct from and shall be treated differently than the Cannabis Business Fees (as defined below), for which Developer has vested rights pursuant to section 2.8 below. Notwithstanding anything to the contrary in the foregoing, nothing in this Section 2.6 is intended to limit non-City public agencies' legal authority, to the extent such otherwise exists, to impose fees on the Project.

Section 2.7. Vested Rights Exclude Changes in State or Federal Laws.

(a) Changes in State or Federal Laws. This Agreement shall not preclude the application to the Project of changes in City Rules, the terms of which are specifically mandated and required by changes in state or federal law(s) and/or regulation(s). In the event state and/or federal law(s) and/or regulation(s) enacted after the Effective Date prevent or preclude compliance with one or more provisions of this Agreement, the Party identifying the conflict shall provide the other Party, as soon as practicable after the conflict becomes known to the notifying Party, written notice of the conflict, a copy of the law(s) or regulation(s) that give rise to the conflict, and a statement explaining the nature of the conflict. Within thirty (30) days after that notice is given, the Parties shall meet and confer in good faith in a reasonable attempt to modify this Agreement so as to comply with the state and/or federal law(s) or regulation(s) giving rise to the conflict, pursuant to Government Code section 65869 .5. If Developer does not consent to an amendment that is required to make this Agreement consistent with state and/or federal law(s) or regulation(s) in accordance with Government Code section 65869.5, City shall provide Developer written notice of the immediate suspension of this Agreement, and this Agreement shall remain suspended until the date this Agreement is so amended to eliminate the conflict.

Notwithstanding this Section 2.7(a), the parties acknowledge that all commercial cannabis activity is prohibited under federal law, and any new federal law or regulation pertaining to commercial cannabis activity shall have no impact on this Agreement, unless and to the extent such new federal law or regulation imposes or increases City's legal or financial liability under such new law.

(b) No Vesting into State Laws. The operation of cannabis facilities is a highly regulated business activity, and it is subject to various state and local laws and regulations. This Agreement does not, and City cannot and does not intend to, give Developer the vested right to continue Project operations without complying with applicable state and local laws and regulations governing the operations of cannabis facilities. This Agreement only "vests" those regulations expressly referenced in the Development Agreement Statute, which include rules, regulations, and official policies governing permitted uses of the land, density, and design, improvement, and construction standards and specifications, applicable to development of the Project, and as described more fully herein.

(c) Conflict with Cannabis Regulation and Safety Act. If there is any conflict between any provision of this Agreement and any provision of the Cannabis Regulation and Safety Act, formerly known as the Marijuana Regulation and Safety Act, which is comprised of Assembly Bill 243, Assembly Bill 266, and Senate Bill 643 (Bus. & Prof. Code Section 19300 et seq.; H&S Code Section 11362.769-11362.777; and Water Code Section 13276), the provisions of the Cannabis Regulation and Safety Act shall control. Nothing in this Agreement is intended to nor shall it be construed or interpreted to allow or require Developer to do anything or take any action related to the performance of this Agreement that is contrary to, prohibited by, or not allowed under the Cannabis Regulation and Safety Act and any regulations issued by the State pursuant thereto . Nor shall this Agreement be construed or interpreted to allow or authorize Developer to not do anything or not take any action related to the performance of this Agreement that is required by said Act and related regulations.

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(d) In addition to the above provisions of this Section 2.7, in the event state or federal laws or regulations negate, legally or financially, any lease agreement between Developer and a Tenant of the Subject Property, whether wholly or in part, Developer agrees and acknowledges that City shall have no liability to Developer for any loss, financial or otherwise, which Developer consequent ly incurs.

Section 2.8. Vested Rights Regarding Development I mpact Fees and Cannabis Business Fee.

(a) Development Impact Fees. Developer shall vest into the Impact Fee(s) (as defined below) that are in place on the Effective Date and are set forth in attached Exhibit B, and therefore City shall have no right to impose on the Project any increase in existing Impact Fee(s) (except for a standard inflationary increase as reflected in the Consumer Price Index) or any new type(s) of Impact Fees; provided, however, that if City adopts Impact Fee(s) that are less in amount (or eliminates a type of Impact Fee) after the Effective Date, Developer shall have the vested right to pay that lower amount (or avoid payment of the eliminated fee altogether) , so long as said lower amount remains subject to standard inflationary increases as reflected in the Consumer Price Index. Notwithstanding the above, however, if Developer seeks a certificate of occupany more than ten (10) years following the Effective Date of this Agreement, then Developer shall pay the greater of the Impact Fees as of the Effective Date of this Agreement or the Impact Fees as of the date Developer seeks a certificate of occupancy .

Developer shall have the vested right to pay all applicable Impact Fees at time of issuance of the relevant certificate of occupancy for the Project rather than building permit. "Impact Fee(s)" means any monetary amount charged by City or other governmental or quasi-governmental agency in connection with a Project Approval in order to lessen, offset, mitigate or compensate for the impacts of development of the Project on the environment ; facilities, services, improvements , and/or infrastructure or other public interests, including, without limitation, any "fee" as that term is defined by Government Code section 66000(b) as well as any fee imposed "in lieu of' an Exaction. "Exaction" means an exaction that may be imposed by City as a condition of developing the Project, including, without limitation , requirements for acquisition , dedication or reservation of land; and obligations to construct on-site or off-site public and private infrastructure improvements such as roadways, utilities or other improvements ; this is the case whether such exactions constitute subdivision improvements, mitigation measures in connection with environmental review of the Project, or impositions made under the City Rules.

A requirement imposed by City or other governmental or quasi-governmental authority on the Project that meets both the definitions of an Impact Fee and an Exaction shall be considered to be an Impact Fee. Notwithstanding anything to the contrary in the foregoing , the parties acknowledge and agree that this subsection (a) does not apply or otherwise affect the treatment of the Cannabis Business Fee (as defined below).

(b) Cannabis Business Fee. Subject to the time frames and limitations set forth in this subsection (b), Developer shall include a provision in any and all lease(s) with Tenant(s) who will operate the Project that the Tenant(s) pay to City the annual cannabis business fees (collectively , " Cannabis Business Fees"):

(i) A per square foot ("psf') fee in the amount defined by the table below as applied to the Active Cultivation Area (as defined below) within the Project, unless City later adopts a modified cultivation tax or fee that is lower, in which event the lower amount shall apply to the Project on a going-forward basis.

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Total Facility (SF)
City Fee Rate ($) per SF of
Active Cultivation Area
Cumulative City
Annual Tax ($)
100,001 I 150,000 $3.00 450,000
150,001 I 1,000,000 $1.00 1,300,000

"Active Cultivation Area" shall mean the floor area of canopy, as that term is defined in CDFA regulations, for fully licensed and operational businesses at the Project whose gross receipts are at least five (5) times greater than the Cannabis Business Fee owed in any particular quarter. For avoidance of doubt, Active Cultivation Area shall exclude areas such as those which are used for : hallways, unoccupied perimeters, entryways or lobbies, offices or administration, security or video surveillance monitoring, personnel or human resources, break rooms, kitchens, locker rooms, and restrooms; storage, curing, drying, trimming, processing, packaging or labeling, sorting, transporting, loading or unloading, shipping or distributing raw materials, packaging, equipment, cannabis products or plants; all nurseries, clone, 'mother' or propagation rooms, all mechanical, electrical, fire suppression, plumbing or irrigation equipment rooms; and waste disposal areas, among others.

(ii) A per square foot ("psf' ) fee in the amount defined by the table below as applied to the Active Manufacturing Area (as defined below) within the Project, unless City later adopts a modified manufacturing or extraction tax or fee that is lower, in which event the lower amount shall apply to the Project on a going-forward basis.

City Fee Rate ($) per SF of Cumulative City
Total Facility (SF)
100,001 I 150,000
Active Manufacturing Area
$3.00
Annual Tax ($)
450,000
150,001 I 1,000,000 $1.00 1,300,000

"Active Manufacturing Area" shall mean the floor area where commercial cannabis manufacturing activity is conducted, including extraction; refinement, infusion, cooking, mixing, making, batch sampling or other active manufacturing operations directly related to the production of consumer and pre-consumer commercial cannabis products such as cannabis oils, shake, shatter, wax, edibles, drinks, vape pens and other devices, salves, creams, or tinctures, for fully licensed and operational businesses whose gross receipts are at least five (5) times greater than the Cannabis Business Fees due in any particular quarter. For avoidance of doubt, Active Manufacturing Area shall exclude areas such as those which are used for:
hallways, unoccupied perimeters, entryways or lobbies, offices or administration, security or video surveillance monitoring, personnel or human resources, break rooms, kitchens, locker rooms, and restrooms; storage, curing, drying, trimming, processing, packaging or labeling, sorting, transporting, loading or unloading, shipping or distributing raw materials, ·packaging, equipment, cannabis products or plants; all nurseries, clone, 'mother' or propagation rooms, all mechanical, electrical, fire suppression, plumbing or irrigation equipment rooms; and waste disposal areas, among others.

"Total Facility" shall mean the gross area of all buildings on the Subject Property, within the Felipe Nine project, and the Briggs Seventeen project. ·

If, in any particular quarter, gross receipts are not five (5) times greater than the Cannabis Business Fees due for any particular Tenant, then that Tenant shall pay a fee equal to one

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)
)
)
percent (1%) of gross receipts for that particular quarter in lieu of the psf fee described above.

(iii) So long as the Tenant is engaged in either manufacturing or cultivation of commercial cannabis, there shall be no Cannabis Business Fee due in connection Tenant's distribution of commercial cannabis products from the same Project in which such cultivation or manufacturing activity is conducted.

The payment of the first (151 quarterly installment of the Cannabis Business Fees shall not be deemed delinquent until such time as the second (2"d) quarterly payment is due. The first (151 quarter shall commence on or about the date when the Subject Property is fully operational, which is further defined as when the Subject Property is engaged in full capacity cultivation and manufacturing activities . Notwithstanding the foregoing, if operation of cultivation, manufacturing and/or distribution activities are phased in accordance with phased certificates of occupancy or temporary certificates of occupancy issued by City, the first (151 quarter for each phase of cultivation, manufacturing and/or distribution shall be deemed as commencing on or about the date the certificate of occupancy or temporary certificate of occupancy is issued by the City for each phase of operation .

Notwithstanding anything to the contrary in the foregoing , Developer shall, under no circumstances , have the obligation to pay the Cannabis Business Fees. Payment of this obligation shall be attached as a condition to the Regulatory Permit, for which the Tenant , as the holder of the Regulatory Permit, shall have the sole responsibility to pay.

Section 2.9. Priority of Enactments.

In the event of any conflict or inconsistency between this Agreement and any of the other Current Approval(s) (including, without limitation, any conditions attached thereto) , or between this Agreement and any Subsequent Approval(s), to the fullest extent legally possible, this Agreement shall prevail and control. Furthermore, any conflict or inconsistency between this Agreement and the Municipal Code, to the fullest extent legally possible, this Agreement shall prevail and control.

Section 2.10. Life of Vesting Tentative Map and Other Approval(s).

The term of the Current Approvals including, without limitation, the Tentative Parcel Map (pursuant to Government Code section 66452 .6(a)), the, as well as the term of any and all Subsequent Approval(s) once granted and effective, including, without limitation, the Regulatory Permit, shall be deemed extended for the longer of the Term of this Agreement or the term · otherwise applicable to such Approval(s) . The Tentative Parcel Map complies with the provisions of California Government Code Section 66473.7 , as applicable . Notwithstanding this Section 2.10, City shall have the right to schedule and conduct a periodic review per Section

6.2, below.

ARTICLE 111: OTHER DEVELOPER OBLIGATIONS.

Section 3.1. First Source Hiring.

Subject to applicable laws and regulations governing such arrangements , Developer shall use good faith and diligent efforts to implement a "Local First Source Hiring" program to support local employment opportunities for residents of the City of Hollister in connection with the Project.

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Section 3.2. Compliance with Operating Conditions.

Pursuant to Section 5.42.090 of the Municipal Code, Developer shall include in any lease(s) with Tenant(s) the requirement that the Tenant (as the holder of the Regulatory Permit) shall adhere to all conditions of the Regulatory Permit, including, without limitation, those that set forth the terms and conditions under which the Project shall operate, which shall be in substantially the same form as attached Exhibit C. In the event there is any conflict between said conditions and the operational requirements in the Local Cannabis Regulations, the conditions in the Regulatory Permit shall govern. If Tenant(s) fail, in a material way, to comply with any such conditions, then the City Planning Director (" Planning Director' ) shall notify Tenant (with a copy to Developer) in writing of its non-compliance and in said notice, shall provide with reasonable specificity the basis for City's finding of non-compliance, and shall identify the reasonable means by which Tenant may come into compliance (" Condition Non- compliance Notice" ). Tenant shall cure any such non-compliance within ninety (90) days of receipt of the Condition Non-Compliance Notice unless the non-compliance is such that it cannot be remedied within said 90-day period, in which case Tenant's commencement of said cure within this 90-day period and its diligent prosecution of said cure thereafter to completion shall constitute a cure for purposes of this Section 3.2. If Tenant fails to cure any such non- compliance during this 90-day period (or fails to commence the cure as provided in this Section

3.2, then City shall have the right, but not the obligation, to commence revocation proceedings pursuant to Section 4.1(c) below. Notwithstanding anything to the contrary in the foregoing, Tenant and/or Developer shall have the right to appeal any Condition Non-Compliance Notice issued by the Planning Director to the City Council, as well as appeal any decision by the Planning Director to revoke or revise the Regulatory Permit (pursuant to Section 4.1 (c) below) to the City Council. Any decisions made by City pursuant to this Section 3.2 shall be made in writing and supported by substantial evidence .

Notwithstanding anything to the contrary in the foregoing, the Parties acknowledge and agree that the Tenant (as the holder of the Regulatory Permit) shall have the sole responsibility to adhere to the conditions attached to the Regulatory Permit, and that Developer shall have no such obligations under any circumstances . Provided, however, Developer shall have the right, but not the obligation, to step into Tenant's place to cure any non-compliance pursuant to this Section 3.2. If Developer elects, in its sole and absolute discretion, to do so and the method of cure would involve replacement of the Tenant, then Developer shall have the right to replace the Tenant who violated the Regulatory Permit with another Tenant and City shall accept this substitution so long as the new Tenant meets the objective criteria set out in the Local Cannabis Regulations for purposes of operating a cannabis facility.

Section 3.3. Compliance with Other Project Approval Conditions.

Subject to the limitations set forth in Section 3.2 above, Developer (or its successor(s) and assign(s), as applicable) shall comply with the conditions imposed on other Project Approvals, including, without limitation, all mitigation measures and requirements to construct public improvements, as set forth therein.

Section 3.4. No Obligation to Construct. By entering this Agreement, Developer shall not be obligated to develop all or any portion of the Subject Property, and, unless Developer elects to develop all or any portion(s) of the Subject Property with the Project, Developer shall not be required to perform any obligations under this Agreement. Notwithstanding this Section 3.4, the parties agree that if Developer has not demonstrated a good faith effort to commence construction of the Project on the tenth (101 ) anniversary of the Effective Date, then City shall