HomeMy WebLinkAbout21CV-0734 - Declaration Filed_Helios Dayspring1-
DAYSPRING DECLARATION IN OPPOSITION TO DEMURRER
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John Armstrong
Armstrong Law Group
23232 Peralta Drive
Suite 102
Laguna Hills, CA 92653
Tel. 949-942-6069
Cell. 949-390-4307
Attorneys for Petitioner/Plaintiff
NHC SLO, LLC
john@armstronglawgroup.co
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN LUIS OBISPO
NHC SLO, LLC,
Petitioner and Plaintiff,
versus
CITY OF SAN LUIS OBISPO; CITY
COUNCIL OF AND FOR THE CITY OF
SAN LUIS OBISPO; AND DOES 1-10,
INCLUSIVE,
Defendants and
Respondents.
Case No.: 21CV-0734
Assigned to: Judge Rita Federman
DECLARATION OF HELIOS
DAYSPRING SUPPORTING
OPPOSITION TO DEMURRER
Dept.: 2
Time: 8:30a.m.
Date: 07-07-2022
NHCSLO0001
ELECTRONICALLY
FILED
6/23/2022 11:55 PM
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DAYSPRING DECLARATION IN OPPOSITION TO DEMURRER
DECLARATION OF HELIOS DAYSPRING
1. I, Helios Dayspring, am over 18 years, and declare as follows.
2. I make this Declaration for Petitioner/Plaintiff NHC SLO, LLC in this action.
3. When California passed Proposition 215 in 1996, the Compassionate Use Act, I
started a cannabis business to enable persons seeking medical cannabis the ability to
get cannabis in California.
4. With the passage of Proposition 64 in 2016, my cannabis businesses grew.
5. At all times, I have operated cannabis businesses in a manner that complied with
California s ever changing cannabis laws, despite cannabis remaining illegal at the
federal level.
6. In 2019, my partners and I sought to obtain a cannabis dispensary permit in the City
of San Luis Obispo.
7. As part of the application process, I disclosed that I likely had committed cannabis
and related crimes from my operation of cannabis businesses when California
decriminalized cannabis to a certain extent under Proposition 215 and first began
trying to create a legal market in 2016 with the passage of Proposition 64.
8. Not only did I disclose that I had likely committed cannabis crimes in the past, I also
signed consents to allow both the City of San Luis Obispo and the City police to fully
investigate myself and all members of NHC SLO, LLC, which they did.
9. Specifically, I was interviewed extensively by City Detective Suzie Walsh, and the City
required me to sign a 60-day waiver/release to conduct a thorough background check
into my personal and business finances and criminal past.
10.Based on the SLO City Police Department s investigation as to my disclosed criminal
activities, the City Police Department recommend that the City deny NHC SLO s
cannabis application because of my involvement, and the City expressly told me that
its Police Department was disapproving NHC SLO s cannabis business permit
application because of my involvement.
11.After reviewing the SLO Police Department s reasons for disqualifying NHC SLO
based on my interview, I obtained copies and showed the City that its Police
NHCSLO0002
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DAYSPRING DECLARATION IN OPPOSITION TO DEMURRER
Department edited my interview to make it appear I had not disclosed matters they
had inquired about, when the unedited recordings showed I had disclosed everything.
12.I provided the City and the City police information regarding my other cannabis
businesses and provided copies of all my filed tax returns in 2019, providing the City
police and the City of SLO information regarding my other cannabis businesses,
portfolio of properties, which was about 25 different properties, as well as my tax
returns for the previous 5 years (2013-2018).
13.I also disclosed to the City that I was the major financial contributor to NHC SLO,
LLC and that I had made most of my fortune selling cannabis.
14.Despite these disclosures and the extensive background investigation into my
criminal past, the City voted to approved NHC SLO, LLC s cannabis application,
making it one of three total applications to be awarded a Cannabis Business
Operator s Permit on October 22, 2019.
15.Because of the economic and public relations advantages to having a female minority
own the controlling interest in NHC SLO, LLC, I transferred all of my interest in NHC
SLO, LLC with the City of San Luis Obispo s approval in October of 2020 to
Valnette Garcia.
16.Additionally, because of my negative interaction with the City s background
investigator, Suzie Walsh, and her insistent and borderline criminal behavior trying
to disqualify NHC SLO s application and to discredit me, as well as the economic risk
I had taken in investing so heavily in the real estate, I made the business decision that
it would be wiser for NHC SLO to continue on its path without me for licensing
without my direct involvement as I felt that the City management being made up of
mostly women would treat NHC SLO better if it were ran by a woman, as well as
potentially qualifying for special programs available to minority/women led
businesses.
17.At the time I transferred my ownership, to my knowledge at the time, there were no
criminal charges filed against regarding tax evasion or bribery.
NHCSLO0003
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DAYSPRING DECLARATION IN OPPOSITION TO DEMURRER
18.To comply with State law and the City s Cannabis Ordinance, NHC SLO, LLC
thereafter applied for the California State Retail Dispensary License, and was granted
that license, after the Bureau of Cannabis Control (now Department of Cannabis
Control) confirmed with the City of San Luis Obispo that NHC SLO, LLC had
obtained a valid Cannabis Operator s Business Permit to operate a retail, cannabis
dispensary within City limits, and awarded the State cannabis license in June of
2021.
19.Regarding cannabis financing, I also provided most of the financing for the other two
successful applications in 2019 that the City of San Luis Obispo awarded Cannabis
Business Operator Permits, namely, Megan s Organic Market, LLC and SLO Cal
Roots, LLC.
20.I also provided substantial support and assistance to Megan s Organic Market and
SLO Cal Roots and have personal knowledge that these entities failed to disclose that
I was providing much of their financing since I assisted with their applications.
21.I was also contacted by the principals of SLO Cal Roots and Megan s Organic Market
that the City had sent them the same follow up financing questionnaires that had
been sent to NHC SLO.
22.These subsequent disclosures to the City showed that the City knew I provided most
of the financing for all three successful cannabis business operator permit, but the
City only took action against NHC SLO for misrepresentations in the original
cannabis applications even though all three successful applicants made material
omissions/misstatements.
23.That is, to date, has taken no action to disqualify either SLO Cal Roots or Megan s
Organic Market, and has only gone after NHC SLO s license.
24.From 2019 up through late 2021, the City put pressure on NHC SLO, LLC and myself
to complete the build out for the commercial property where NHC SLO, LLC was to
operate.
NHCSLO0004
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DAYSPRING DECLARATION IN OPPOSITION TO DEMURRER
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25.The total costs to acquire the property was $4.2 million, and over $3,700,000 was
spent building it to the City s requirements, plus over $1,000,000 to meet the City s
final requirements to activate the permit, for a total of nearly $9,000,000.
26.Without a permit, the estimated value of the commercial property at issue around
3,000,000, but because location where a cannabis retail dispensary may be
conducted, it is likely worth close to $6.000,000+ if there is an operational cannabis
retail dispensary at the property.
27.Throughout 2021, the City was threatening that it would take action against the
issued Cannabis Business Operator s Permit awarded to NHC SLO, LLC if the build
outs demanded by the City s specifications were not timely completed , requiring that
I invest additional monies into the property.
28.On July 28, 2021, the U.S. Department of Justice reported that I was pleading guilty
to federal tax evasion charges (see San Luis Obispo Man Agrees to Plead Guilty to
Bribing County Supervisor to Vote on Issues Affecting His Cannabis Businesses |
USAO-CDCA | Department of Justice) and in early August of 2021, local news media
began reporting the SLO City Mayor, Heidi Harmon, was resigning because of the
combination of the criminal charges against me and that had previously done
fundraisers for her and other SLO City Council members to get re-elected (see Heidi
Harmon to announce career change amid local bribery case - Cal Coast Times).
29.Shortly thereafter in August of 2021, the City of San Luis Obispo sent all three
Cannabis Business Operator Permit Holders, namely, NHC SLO, LLC, Megan s
Organic Market (MOM ), and SLOC Cal Roots, LLC a supplemental 5 question
document relating to financial interests and information not disclosed during the
application period, as previously mentioned above.
30.A true and correct copy of the August 23, 2021 City Letter requesting follow up
disclosures to all cannabis permit holders because of the criminal charges brought
against me is attached as Exhibit A to this Declaration.
31.These questions showed that City that I, Helios Dayspring, was the primary financer
for all three successful cannabis applications.
NHCSLO0005
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DAYSPRING DECLARATION IN OPPOSITION TO DEMURRER
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The City was aware that I was incurring significant, post-Covid construction costs to
get the cannabis dispensary built by the City s October 2022 deadline for NHC SLO s
location to meet all City approvals for being open to the public.
I estimate that between July of 2021 through October of 2021, I spent over
1,000,000 to complete the construction and tenant build outs for the dispensary as
set out by the City s October 22, 2022 deadline based on the 1-year time window NHC
SLO had from the date the City issued its permit.
The court can click on the following link to see the final virtual walk through that was
built, which shows it cost millions to complete the build out of this dispensary. See
https://my.matterport.com/show/?m=zPceG3t8dSx.)
Starting in September of 2021, NHC SLO, LLC started getting roadblocked by various
City of San Luis Obispo Departments who need to confirm that the now built
cannabis dispensary is safe to open to the public, encouraging me to spend even more
money.
Attached as Exhibit B to this Declaration is the September 13, 2021 from the City of
SLO s Planning Department, informing NHC SLO that it had until October 22, 2022
to get all its final inspections completed since it had only 12 months from its issuance
to be compliance, recommending that NHC SLO request final inspections to ensure
that the City would activate its issued cannabis operator s business permit.
he City wrote Valnette Garcia that the City had
confirmed the validity of NHC SLO s Cannabis Business Operator Permit and
confirmed that the City had approved the transfer of NHC SLO s ownership from me
to Valnette Garci A true and correct of the City s 11-13-202 correspondence
confirming NHC SLO s license and equity transfer is attached as Exhibit C.
I confirmed with NHC SLO, that it had reached out to all the City Departments to
request final sign offs and paid to make sure that all the build outs complied with all
the City s various requests for changes and additions to the built out retail dispensary
I had built for NHC SLO, LLC to comply with City s September 13, 2021 warning
letter.
NHCSLO0006
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DAYSPRING DECLARATION IN OPPOSITION TO DEMURRER
40.Notably, at the time that the City sent the September 13, 2021 letter instructing NHC
SLO to complete all final City walk-throughs by October 22, 2021, almost a year had
passed since I transferred my ownership in NHC SLO to Valnette Garcia, and the City
had been aware of the federal criminal action against me since July 28, 2021.
41. Then, on October 6, 2021, the City of San Luis Obispo sent NHC SLO, LLC a letter
that it was immediately terminating NHC SLO, LLC s City of San Luis Obispo
Cannabis Business Operator s Permit, and that this was not appealable to the City.
42. Thereafter, NHC SLO, LLC tried to resolve with the City without success, attempted
to appeal the City Manager s unilateral decision to terminate the permit, but the City
refused the appeal.
43.Thereafter, NHC SLO, LLC retained legal counsel regarding filing a writ since NHC
SLO, LLC had not violated the City s Cannabis Ordinance regarding operation of the
Cannabis Business Operator s Permit and the only provision in the City s Ordinance
that provides for termination or revocation of an issued Cannabis Business
Operator s Permit requires wrongful operation of the Permit.
44.Since NHC SLO, LLC never opened to the public, it could not have violated the City s
only Ordinance providing for termination or revocation of an issued Cannabis
Business Permit.
45.Instead, the City claimed that it had the right to treat NHC SLO, LLC s issued
Cannabis Business Operator s Permit as a mere application since it had not opened
to the public, however, I have personally reviewed ALL the City s Ordinances and
Cannabis Regulations and there is nothing in those regulations that allows the City to
treat an issued permit as if it still a mere application.
46.I have successfully applied for various Cannabis Permits in San Luis Obispo and
multiple other Counties and for cannabis permits with various Cities within those
Counties.
47.How the process works is that a County or City has full discretion to deny an
application for any reason or no reason at all, as these permits are discretionary.
NHCSLO0007
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DAYSPRING DECLARATION IN OPPOSITION TO DEMURRER
48.However, once an application ripens into a permit, the County or City must follow its
enacted Ordinance to revoke or terminate the license.
49.This makes senses because the government entity granting a permit conducts a
thorough examination of the application, at which point the applicant only has a mere
chance at procuring a license.
50.When a business is merely applying for a cannabis permit, lender, investors, and
others will provide little support for a cannabis application as so many of them are
denied.
51.Once a permit is issued, however, the property where the permitted cannabis
operation is to take place is usually worth 2-3x what its market value would otherwise
be.
52.Once a City or County issues a permit to an applicant, lenders and investors are
willing to fund these projects as the application has ripened into an
entitlement/permit, so there is much more certainty that an investor will see a return
on its investment.
53.This is why the City of San Luis Obispo s Ordinances and every other City and County
Ordinance regulating cannabis permits has different rules for whether an applicant
can get a license, which usually does not entitle an applicant to a hearing for being
unsuccessful, while require a full hearing and proof of wrongful/illegal operation of
the cannabis permit before the issued permit can be revoked or terminated.
54.Based on the information that City of SLO received on the questionnaires it sent out
to all three successful applicants who were awarded permits, namely, NHC SLO, SLO
Cal Roots, and Megan s Organic Market, the City has been aware since August of
2021 that none of three Cannabis Business Operator Permit Holders properly or
truthfully disclosed their financial or tax information to the City, yet the City has only
singled out NHC SLO, since I was the primary financial contributor to all three
successful applications.
55.For example attached as Exhibits D, E, F, and G to this Declaration are true and
correct copies of the following documents regarding Megan s Organic Market.
NHCSLO0008
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DAYSPRING DECLARATION IN OPPOSITION TO DEMURRER
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Exhibit D is part of the information Megan s Organic Market submitted as to who
the its principals were. Eric Powers states he has 5-years experience cultivating
thousands of pounds of cannabis, which should have generated millions in revenue.
For example two thousands pounds of cannabis at $1,000 per pound based on
2015-2019 prices should have generated at least $2,000,000 in gross revenue.
But in attached Exhibit E, the Ownership structure from Megan s Organic Market,
Mr. Powers claimed he made only $1 in 2016, $1,611 in 2017, and $8,875 in 2018,
which was coincid the exact amount that Megan Souza made in 2018.
Megan s Organic Market further stated in its application s Financial Investment
section to the City of SLO that all of the listed members self-funded Megan s
Organic Market, a true and correct copy of which is attached as Exhibit F.
However, on February 3, 2019, I loaned Megan s Organic Market $00,000
secured by a Promissory Note
true and correct copy of is attached as
Exhibit G
I have already sold however my interest Megan s Organic Market and presently have
no financial or other ties to the business.
I also loaned money under a convertible promissory note to SLO Cal Roots as well,
that gave me the right to a 34% interest in SLO Cal Roots, which SLO Cal Roots failed
to disclose in its application with the City of San Luis Obispo but later disclosed in
August of 2021. To date, the City has not taken any adverse licensing action against
SLO Cal Roots.
Further, Megan s Organic Market hired me as a consultant to operate its dispensary
under a management agreement, a true and correct copy of which is attached as
Exhibit H.///
NHCSLO0009
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DAYSPRING DECLARATION IN OPPOSITION TO DEMURRER
64.The foregoing Exhibits and the information provided in this Declaration so that the
City of San Luis Obispo is and has been aware of my involvement in all three awarded
Cannabis Business Operator Permits but has only taken action against the one
dispensary that I had the most financial involvement in, which shows selective
prosecution on the City s part.
Helios Dayspring, declarant
NHCSLO0010
EXHIBIT A
NHCSLO0011
City Attorney's Office
990 Palm Street.San Luls Oblspo.CA 93401-3249
805.781.7140
slocitymg
August 23,2021
Valnette Garcia
Natural Healing Center
2640 Broad St.
San Luis Obispo,CA 93401
Via First Class U.S.Mail and email to:
Valnette Garcia:val@nhcdispensaries.com
Paul F.Ready:PFReadz@FarmerandReady.com
Subject:City Request for Information from Cannabis Businesses
This correspondence is a formal request for information from Natural Healing Center
regarding the ownership,financial interests and operational control,related to the commercial
cannabis business in the City.In accordance with SLOMC 9.10.130 A,“each commercial
cannabis business shall allow city of San Luis Obispo officials to have access to the
commercial cannabis business’s books,records,accounts,and any and all data relevant to its
permitted activities for the purpose of conducting an audit,examination or inspection.”
As I am sure you are aware,several questions have been raised publicly regarding cannabis
business operations in the City following the recent federal investigation and criminal
proceeding involving Helios Dayspring,who was previously a principal interest holder in a
City permitted commercial cannabis business.The City requests the answers to the following
questions as a part of its efforts to conduct due diligence and to ensure the integrity,public
accountability,and transparency of its regulatory process,as well as to verify that its currently
permitted Commercial Cannabis Operator Permit holders are operating in strict compliance
with City regulations and state law.
We appreciate the investment in our community that your business has made,as well as your
cooperation with City permitting and regulatory processes.Our objective is to continue full
City support of legally compliant,permitted businesses and promote the public’s trust that
businesses in the City are operating in the best interests of the legally regulated cannabis
market and the health and safety of the entire community.To that end,please respond to the
following questions related to the permitted commercial cannabis business:
NHCSL00012
NHCSLO0013
Were all financial interests in 01‘to the permitted business,or affecting the
ownership,control,or operations of the business,fully disclosed to the City
during the application,background or permitting process?If not,please
provide any undisclosed interests and explain why interests were not
previously disclosed.
Has the business,or any of its individual or corporate permit
applicants/owners/operators/interest holders/affiliates,at any time from the
date of application with the City to present,had any financial,operational,
or ownership agreement of any kind,whether written or verbal,or any other
relationship or arrangement of any kind,that in any way affects the
operations,ownership,control or financial interests in or to the permitted
business,that has not been disclosed to the City?If so,please provide a
complete list of any such interests.
Has the business or any of its permit applicants/owners/operators/interest
holders/affiliates,at‘any time from the date of application with the City to
present,accepted any gift or loan of funds that in any way affects the
operations,ownership,control or financial interests in or to the permitted
business,which has not been disclosed to the City?If so,please list all such
funds and the source(s)of funds.
Has the permitted business,or any of its individual or corporate permit
applicants/owners/operators/interest holders/affiliates,at any time from the
date of application with the City to present,entered into any non-compete
or similar agreement with any individual or entity of any kind that in any
way affects the operations,ownership,control or financial interests in or to
the permitted business?If so,please identify all parties to any such
agreement.
Did any individual in any way affiliated with the cannabis business,or the
permitting application of the permitted business,receive information
regarding the City’s applicant rankings,permitting determinations,or
background investigations,from any person,prior to the City’s formal
notification to applicants or public disclosure of such information?If so,
please identify those individuals from whom information was received,
what information was received,and the manner in which it was received.
City Request for Information from Cannabis Businesses
Page 2
Please have a designated representative submit the answers to the questions above from all
current owners,and any proposed owners of businesses that have transfer of ownership
requests pending with the City,no later than 5:00 PM,August 31,2021,to
City_Attorney@slocity.org or in such other manner that we may mutually agree is appropriate
to address any confidentiality concerns regarding any information you may submit.Answers
should be submitted with an attestation as to the truthfulness of the information submitted and
an acknowledgement that failure to respond or submission of untruthful responses may be
deemed a violation of the City’s Municipal Code and a violation of the Commercial Cannabis
Operator Permit and could constitute a basis for revocation of an operator permit.
Please feel free to contact me with any questions you may have or have your legal counsel do
so if you will be represented regarding this matter.
Regards,
istine Dietrick
City Attorney
City Request for Information from Cannabis Businesses
Page 3
NHCSL00014
EXHIBIT B
NHCSLO0015
NHCSLO0016
Cwnaniv Devehprflena
919 Paun Street San Luis Obispo,CA 934014218
8057M 7:70
l(mi-;mu
September 13,2021
Craig R.Smith,AIA
CRSA Architecture
860 Walnut Street Suite B
SLO,CA 93401
SeaBay Building Contractors
205 S.Clark Drive Suite 1
Tempe,AZ 85281
NHC SLO,LLC
7510 Los Osos Valley Road
SLO,CA 93405
Dear Mr.Smith,Et a|.,
am writing in reference to the active building permit at 2640 Broad Street (BLDG-0434-2020).Over
the past year,the City has engaged with the project architect and contractor regarding the potential
for a temporary certificate of occupancy (TCO).The specific purpose of this letter is to inform you
that the City will no longer consider the issuance of a TCO for the project.
The business,NHC SLO,holds a cannabis business operator permit,which must be activated within
12 months of its issuance in order to stay in compliance with City Municipal Code requirements for
operating a cannabis business (SLOMC 9.10.070 &17.86.080).The City Council has recently conferred
a 12-month extension for all contingent cannabis business operator permits due to the Covid~19
pandemic.As a result,the new date of expiration for the operator permit in this case is October 22,
2021.The project must be complete by that time and the business open to the public for the permit
to be considered "activated.”
This decision is being communicated to you in advance so that you can prepare accordingly.You are
strongly encouraged to work with your Inspector and with all City departments that must sign off on
your permit before a certificate of occupancy can be issued.If there are outstanding items that need
correction,you will need to address those items before the business can open to the public.
0f particular concern is the lack of street trees,which will require modifications to the sidewalk
consistent with the permits issued for the project and City engineering standards.ln a review of the
inspections conducted for the project to date,many did not pass,requiring reinspection.City staff
strongly encourages quality control efforts for the project to help ensure that future inspections are
passed to help the project stay on schedule.It is recommended that you call forfinal inspection well
ahead of the October 22,2021,deadline so that any corrective action necessary can be taken prior
to the deadline for activation of the operator permit passing.
EXHIBIT C
NHCSLO0017
Communjty Development
r
919 Palm Street.San Luis Oblspo.CA 93401-3218
805.781.7170
November l3,2020
Sent via Email
Ms.Valnette Garcia
Natural Healing Center -SLO
7510 Los Osos Valley Rd.
San Luis Obispo,CA 93405
Subject:CANN-0070-2019 (2600/2640 Broad St.,93401)
Review of Commercial Cannabis Operator Permit -Natural Healing Center -SLO
Dear Ms.Garcia:
n January 2019 the City of San Luis Obispo received your application for a Commercial Cannabis
Operator Permit.Afier careful review and consideration by the Cannabis Review Panel and City
Manager,including a background investigation process,Natural Healing Center was granted a
Commercial Cannabis Operator Permit on October 22,2019.
This Operator Permit is valid unless findings are made that the business is operating in a manner that
is inconsistent with Municipal Code Sections 9.10 and 17.86.080.You are responsible for
familiarizing yourself with all sections of the Municipal Code,however,we would like to drawyourattentionto:
1.Municipal Code section 919,960:Natural Healing Center shall post a copy of this letter so
that it is readily visible to the public:
Dual Permits Posted and Visible.A copy of the commercial cannabis operator permit issued
by the city of San Luis Obispo pursuant to this chapter,together with a copy of the appropriate
state license(s)for the commercial cannabis activity being conducted,shall be posted andreadilyvisibletothepublicatalltimes,at each location where commercial cannabis activity occurs.”
2.Municipal Code Section 17.86.080:Each commercial cannabis operator permit must be
activated within twelve months of issuance.The permit is activated by the issuance of a use permit for
the commercial cannabis activity pursuant to Section 17.86.080,together with all other applicable city
permits and state licenses,and the commercial cannabis operator thereafter opening and continuously
operating the commercial cannabis activity.
3.1n accordance with section 17.104.070 Expiration:If building permits are not issued for site
development authorized by a discretionary permit within one year of the date of approval or such
longer time as may be stipulated as a condition of approval,the permit shall expire with the building
permit application...”
NHCSLOOOlB
Natural Healing Center -SLO
November 3,2020
Page 2
This Operator Permit is valid subject to the following conditions.
Conditions:
I.The commercial cannabis operator shall require all employees successfully pass a
background check conducted by the San Luis Obispo Police Department Cannabis Regulations
Unit prior to any such employee working on any permitted premises or conducting any
commercial cannabis business by or on behalf of the permitted cannabis operator.
2.The commercial cannabis operator and its employees shall wear a Cannabis Identification
Card issued by the San Luis Obispo Police Department at chest length,and visible at all
times while conducting commercial cannabis business.The operator and its
employees shall acknowledge in writing that a Cannabis Identification Card is property ofthe
City of San Luis Obispo.
3.The commercial cannabis operator shall adhere to the Cannabis Security Plan
submitted to the City,as approved by the Chief of Police or designee and shall not alteror
modify any improvement or procedure required by said plan without the express written
authorization of the Police Chief.or designee.
On October 29.2020 the City of San Luis Obispo accepted and approved the transfer of ownership
fi'om former principal Helios Dayspring to Valnette Garcia,another principal listed in the
application for Natural Healing Center.This Operator Permit is reissued to reflect the change of
ownership between Mr.Dayspring and Ms.Garcia.Ms.Garcia is now reflected as the primary
owner of Natural Healing Center.
The original date Natural Healing Center was issued an operator permit,October 22.20l9,remains
as their cunent Operator Permit issuance date.
If you have any questions.or if you need additional information.please contact me at (805)78 l-7l 87,
Or by email mcodron@§locit1.0rg
Sincerely.
Michael Codmn
Director of Community Development
City of San Luis Obispo
NHCSL00019
EXHIBIT D
NHCSLO0020
NHCSLO0021
MOM SLO LLC
Eric Powers
Eric has been a resident of San Luis Obispo County since 1996.He has
five years of local commercial cannabis retail experience and eighty
years of local commercial cannabis cultivation experience.Since 2010,
Eric has cultivated thousands of pounds of cannabis in SLO County,
which was distributed to more than 3,000 registered local patients
through the delivery service he co-founded with Megan Souza.Megan's
Organic Market.
Along with Megan.Eric also co-owns Red Truck Management LLC,which
possesses a Temporary Cannabis Cultivation License from the California
Department of Food and Agriculture for local outdoor cultivation in Les
0505.Red Truck Management LLC has also applied for a license for a.
3-acre outdoor cultivation site in Shandon.CA.
Eric also serves as treasurer of the Board of Directors for the Morro-
Bay Neighborhood Watch Association.and is a passionate advocate for
sustainable agriculture.
Melissa Seligman
Melissa is the fifth generation of her family to be born and raised on the
Central Coast.Her family has been in the real estate and small business
ownership industry since migrating to the area in a covered wagon
during the Gold Rush.
Vie
Following in her family’s entrepreneurial spirit.Melissa attended
cosmetology school immediately after graduating from Atascadero
High School.She paired her newly earned cosmetology degree with her
strong work ethic and business sawy,and went on to have a thriving
hairstylist practice for more than 22 years.owning and operating her
own salon for six of those years.
Now living in SLO and raising her daughter with husband Levi,Melissa is
looking forward to taking her entrepreneurial drive and business savvy
and applying it to the emerging cannabis industry in her hometown.
She wants people to understand the opportunities and possibilities that
are associated with this industry,and is ready to see it lose its negative-
stigma to become more widely accepted.
Melissa will work in the Operational Division of the dispensary.applying
her experience and skillset to the storefront layout and design,and to
treating a welcoming and positive customer experience.
EXHIBIT E
NHCSLO0022
NHCSLO0023
MOM SLO LLC ;-.K's-p
Ownership
Legal Structure
MOM SLO LLC is a registered California Limited Liability Company.Articles of Incorporation
can be found on the following page.
Equity Breakdown
MOM SLO LLC is a majority women owned business.There are 7 individuals who have equity:
Names denoted with an asterisk haVe earned at or
beiow the median household income at the time of
this application.
Principal Income Levels
Three of MGM‘s principals have historically and at the time of this application,earned at or
below median household income level.Those individuals are Megan Souza,Eric Powers and
Amanda Valeria.The following pages contain each principal's latest payr stub for 2019 with
year-to-date earnings,and last pay stub of 2018 with year-to-date earnings.Section 1-D:Tax
Compliance contains IRS tax returns for all three individuals.A summary of income is below:
Property Control
MOM holds complete ownership of the site property through its purchase agreement with
iron Door LLC.MOM principals Melissa Seligman and Levi Seligman also hava majority interest
in iron Door LLC.The following pages contain a copy of the purchase contract.
Megan Souza“31.5%
Eric Powers."31.5%
Melissa Seligman 9.5%
Lindsey Law 9.5%
Keith Sweeney 8%
Levi Seligmau 8%
Amanda Valena'*2%
Megan Souza Eric Powers Amanda Valena
2015 $19,297 $29,996 Not Required to File
2016 $26,187 $1 $3,602
2017 $27,666 $1,611 $13,651
2018 $8,875 $8,875 $19,863
2019 YTD $1,250 $1,250 $1,879
NHCSLO0024
MD M S'LO LLC
F Jill
Tax Compliance
MOM has operated as a local tax compliant cannabis busineSS for 5 years.Enclosed are:
Seller’s Permit
2014-2018 Quarterly Sales Tax Returns for Megan's Organic Market
Note:4th Quarter Sale Tax Return will be filed byJanuary 31,2019.
2014~2013 Payroll Tax Information
2014-2017 IRS Federal Income Tax Returns for Megan’s Organic Market
Note:Megan's Organic Market will file a 20181RS tax return dUe April 15,2019.
2018 Financial Statements
Additionally,principals Megan Souza,Eric Powers and Amanda Valena all earn below the
median household income therefore complying with Merit Criteria 3.1 "applicant includes
3 or more principals with 2%equity or higher who have earned at or below the median
household income at the time of application."
Enclosed are:
2017 personal tax returns for Megan Souza,Eric Powers and Amanda Valena
Note;201 8 and 2019 pay stubs are included starting on page 22 of this application.
Personal tax returns for years 2014-2016 are aVailable upon request.A summary is below:
Megan Souza Eric POWers Amanda Valena
2015 $19,297 $29,996 Not Required to File
2016 $26,187 $1 $3,602
2017 $27,666 $1,611 $13,651
2018 $3,875 $8,875 $19,868
2019 YTD $1,250 $1,250 $1,879
EXHIBIT F
NHCSLO0025
NHCSLO0026
Merit Criteria 7.0 -Financial Investment
7.1 -All of our financial capital comes directly from our ownership team.which we believe sets
us apart from other applicants who may be dependent on out—of-area funding.As individuals,
MOM's team members have the demonstrated capacity to create and sustain successful
businesses.As a team,we are confident that all required business operations associated With a
cannabis dispensary are supported,and that our dispensary would become a thriving and
vibrant part of SLO‘s economy.See Section i—G Financial Capacity (1 one pts.)
7.2 —Also unique to our team and our commercial cannabis-zoned property location is the
potential for improvements,facade rehabilitation,building expansion,removal of visual blight,
and general investment into this underutilizedlunderdeveloped corridor.We have extensive
plans for our property,which include an addition of solar panels,electric vehicle charging
stations,space for a community art installation.a delivery bay.and more.See Section ‘l—A
Business Plan:Proposed Site Summary and improvements and Exhibit M:Building Plans,Site
Plans,Elevations,and Renderings (55 pts.)
7.3 -Our location will incorporate 17 parking spaces (up from the 5 required spaces,per zoning
regulations),including 2 ADA spaces,2 electrical charging spaces,and safe,convenient access
for customersiemployees.See Section ‘l-A Business Plan,and Exhibit M:Building Plans,Site
Plans,Elevations,and Renderings (55 pts.)
TOTAL MERIT CRITERIA 7.0:20l20 pts.
TOTAL MERIT CRITERIA POINTS:140l140
Thank you for your time,and for your thorough consideration and review of the Megan‘s
Organic Market,Commercial Cannabis Operations Permit Application.If you have any
questions,updates,or would benefit from clarification or more information,please don't hesitate
to reach out to me at meqan.is.souza@qm_a_il.com or (805)709—0662.
We look forward to receiving your response!
Kind regards,
MegaZs‘jW 6
Principal,MOM SLO,LLC
EXHIBIT G
NHCSLO0027
IVA
I"'\\.
THIS NOTE AND THE SECURITIES ISSUABLEUPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,AS
AMENDED OR QUALIFIBDUND '"
THISNOTE AND THE SECURITIE-
MAY NOT BE SOLD OR TRANSFE ..,
REGISTRATION UNDER THE ACT QUALIFI TION UNDER SUCH STA-TESECURITIESLAWSUNLESSSUCHSALEOR‘:SFER IS ACCOMPLISHED
UNDER A VALID EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION REQUIREMENTS THIS NOTE AND THE SECURITIES ISSUABLE
UPON CONVERSION OF THIS NOTE MAY BE SUBJECT TO ADDITIONAL
RESTRICTIONS PURSUANT TO EXEMPTIONS IN THE VARIOUS STATES WHERE
THEY ARE BEING SOLD.
s Issv-ABLE UPON.CONVERSION OF THISNOTE
ABSENCE
0R“CA
comamLaesomssonrNom
San Luis Obi'spo,Calif0mi§
600,000.00 M2019
l.Obligation.FOR VALUE RECEIVED MOMSI.O,-LLC,a California limited
liability company (hereinafter called the "Company"),hereby promises to pay HELIOS
DAYSPRING,an individual,and NICHOLAS ANDRE,an individual,or order (hereinafier
collectively called the "Holder"),the principal.sumof Six Hundred Thousand Dollars Nollllfl
3600.000.00)(the "Lem Amount")and to payinterest on such principal sum from the date of
this Note at the annual rate of seven percent (7%)(based on a 365-day year,for the number of
days actually outstanding)until payment in full.
2.gayment of Pgincipnl and Interest.No installments ofinterest and/or principal
shall be due hereunder,until the Maturity Date,as set forthin Subparagrapb 3,below.
3.Maturigy Datg.Five (5)years from the date of this Note,all outstanding
principal and accrued and unpaid interest on this Note shall be due and payable in run (“Maturity
Date”),unless prior thereto,Holder shall have eitercised his right to convert the then outstanding
principal and accrued and unpaid interest under this Note into a 50%Membership Interest
Membership Interest”)of the Companym themanner provided'In Paragraph 6 hereof,and
such Membership Interest'ls issued to Holderin accordance with Paragraph 6 hereof.
4.Medium ot‘Paymeat.The principal and interest on this Note are payable in
lawful money of the United States of America at the Holdefls,address set forth below,or at such
other address as the Holder hereof may from time to time designate to the Company in writing.
5.Prepayment.The Company may not under any circumstance prepay this Note
widrout the prior written consentof the Holder.
6.Convgnig‘n.
1-
NHCSL00028
NHCSLO0029
3.)Conversion of Princrgal and Interest.tAll principal and any then
accrued and unpaid mterestvun"=it’ible,at the option of Dayspring
and/or Holder,at any timebypro.__,.C pajn‘y pursuant to the notice terms
of th1s Note.As a condition 19 Hbide'r conve;land accrued and unpaid interest
under thisNote into the Membershi ,ntereSt H be‘reqmred to execute a copy of the
Operating Agreement of the C9 _any in the form atta9hed hereto as Exhibit “A"(“Operating
Agreement”).and abide by its-terms
b)Descrigtmn of Membership Interestt,The Membership Interest to be
issued upon conversion shallconsrst9f11 47%Membership Interest'1n the Company issued to
Helios Dayspring and a 3%Membership Interest1n_the‘Company Issued to Nicholas Andre.
C)
Members of the Company,1n consideration 9fMegan‘Souza s position as Manager of the
Company,andm order to induce Holder to advance the monies pursuant
to this Note,the parties
and the Members of
the Company agree
that an ’d 2111 l__,.,._.from the exercise of
of the exerc1se ofthe conversionrights under tins _‘1 ..,flupon exercise of Holder 8
conversion rights,the Members-of the Company and their respective membership interests in the
Company shall be as follows:
Levi Seligman 8%
Melissa Seligman ,9.5%
Keith Sweeney 8%
Lindsey Law 9.5%
Amanda Valena 2%
Eric Powers 6.5%
Megan Souza 6.5%
Helios-Dayspring 47%,
Nicholas Andre 3%
d)
If Holder elects to convert thisNoteintoth9MembershipInterest,the outstandingprincipalof
the Note shall be deemed cashcapital contnbutmns to the”Companyfor purpose of distributions
on dissolution,and those capital contnbutrons shall be allocated 94%to Helios Dayspring and
6%to Nicholas Andre.
2.
NHCSLO0030
e)Surrender and Cancellation of Note.If Holder elects to convert this
Note into the Membership Interest,the outstanding prinCipal,accrued and unpaid interest
together with all other amounts due Holder under this Note shall be converted when:(i)Holder
delivers to Company a duly executedcopy of the Operating Agreementin the form attached
hereto as Exhibit A;and (ii)Holder delivers this Note to Company or its transfer agent.Upon
the occurrence of (i)and (ii)of this section 6(e),Company shallissue a revised Exhibit A to the
Operating Agreement evidencing the'issuance of the Membership Interest.The person or
persons entitled to receive the Interest upon such conversion shall be treated for all purposes as
the record holder or holders of such Membership Interest following the occurrence of (i)and (ii).
7.Representations and Warranties of Company.
This Note is issued and delivered by Company and accepted by Holder on the basis of
the following representations,warranties and covenants made'by Company:
a)Company has all necessary authority to issue,execute and deliver this Note
and to perform its obligations hereunder.This Note hasbeenduly authorized,issued,executed
and delivered by Company and'1s the valid and bindingobligation of Company,enforceable'in
accordance with its terms.
b)The Membership Interest issuable u.he exercise of the conversion rights
under this Note has been duly-authonzedand reserved»suance by Company and,when
issued'in accordance with the terms hereof,Will be val1dly1ssuedfully paid and nonassessable.
999.?
his
c)The'1ssuance,execution and delivery of this Note do not,and the'rssuance of
with the terms hereof will1101(1)violate or co ;avene Company s Operating Agreement or
Articles of Organization,or any law,statute,regulationrule;Judgment or order applicable to
Company,or (ii)require the consent or approval of:orthefilmg-of.any notice (other than,if any,
post-issuance state securities lawsfilings)'o'r registration1w1 113,11)":persOn or entity
6 Members st upon»6 exercxse o:qnyersxgnnghts under this Note in accordance
d)Prior to the conversion .of1 this Note,the Qperating Agreement shall not be
amended without the prior written consent ofboth of the Holders
8.Default/Remedies.-
a)Events Q De 1
Without nouce,eXcept as expressly provided herein,
the following will be deemedto?5 iofdefault.'
i)Beccrvershrg The entry of a decree or order of a court having
jurisdictionin the matter for theappointmentofa receiver for Company and such decree or order
has continued111 force undischarg'ed or unstayedfor apenod of mnety (90)days,or
fault
tie-events
ii)Bankruptgg The.Comp ymstitutes proceedings to be adjudged
a voluntary bankrupt,or consentstothefi."oeeedingS against it,or files a
petition or answer or consent.-seeking reorganization der the NatiOnal Bankruptcy Act or any
other similar or applicable federal or state law,or consents to the filing of any such petition,or
consents to the appointment of a receiver,liquidator,or trustee'1n bankruptcy,or makes a general
3.
NHCSLO0031
assignment for the benefit of-creditors,or admits in writing its inability to pay its debts generally
as they become due;or
iii)iReorganrzatro The (i)consolidation,merger or
reorganizationoftheCompanywherethemejibeSth‘e Companvnolongerhold a majoi‘ityof the voting”
memberslupinterests immed1atelyaftersuchconsolidationmerger or reorganization,or (ii)sale
by the Company0fsubstant1ally allof'its assets or '
iv)Default'in Pa ‘mentorIPerforrnance.Company fails to make any
payment when due under the terms OfthisNoteor to y erform any other obligation under
this Note which failurein payment or performance1snot-cured within ten (10)days of the date
due.
b)Default Interest.If any payment required to be made by this Noteis not
made when within ten (10)day,ease due,or if ther '_s_any other default under this Note,
interest on the outstandingprincip ,.shallaccrue fromthe date of the delinquency or default at
the rate often percent (10%)perannum-(“Default Interest”)
c)Payment On Acceleration.Upon any acceleration of the maturity ofthis
Note by Holder,this Note andalloutstandmg amounts payable hereunder,regardless of the
Maturity Date,shall be all due andpayable.
d)Remedies.All-fights undremedies aQf-‘Holder provided for in this Note are
cumulative and shall be'in’ia'ddition toull other rightsandéremedies-provided by law or in equity.
Holder exceed the highest ''
this Noteshall require payment of'interestin excess ofis 11 highest lawful rate,then company’s
obligations hereunder shall antomatically-be deemed reducedto the highest lawful rate
permissible under
applicableusury-laws
If Holdereverreceives as interest.an amount
which
applied to thereduction of th fun p
9.Attorneys'Fees.Company agrees to pay the.followmg costs,expenses,and
attorney feespaid
or mourredby Holder,or adjudged bya court.(a)reasonable costs
of
affectingcreditors rights-and:-mvolvmga claim under etc“and (0)costs of suit and such
sum as the court.may adjudgeasattorney fee inanyaction to enforce payment or
performanceofthisNoteoranypartof1ttotheextentHolderisdee'd
the prevailing party in such suit.
If any disputearises regarding the interpretation of this Note,the prevailing party
in any suchdispute shall beentitled.to reasonableattorneys?feesincurred to enforce or interpret
the terms and conditions of'this Note
NHCSLO0032
10.N otices Any notice,other communication or payment required or permitted
hereunder shall be'inWriting and shall be deemed to have been given upon delivery if personally
delivered or three business days after deposit if depOSitedin the United States mail for mailing
by certified mail,postage prepaid and addressed to Company and Holder as set forth on the
signature page hereto,and to Members of the Company at the addresses set forthin the
Operating Agreement.
11.Waivers.Company,endorsers,and all other persons liable or to become liable on
this Note hereby whives present,demand for performance,notice of non-performance,protest,
notice ofprotestand noticeof dishonor No delay on the part of Holder'in exercising any right
hereunder shall operate as a‘waiver cfsuch rightor any other right.
12 ApplicableLaw.This Note shall be governed by and construed'in accordance
with the laws of the state (if California apphcable to contracts between California residents
entered into and to be performed entirely within the State ofCalifornia.
Venue for any action brought under or arising out of this Note,shall be
exclusivelyin the state courts sittingin San Luis Obispo County,State of California.
13.fieverabiligg.Each provision ofthis Note shall be interpretedin such manner as to
be effective and valid under applicable law,but if-any provision of this Noteis held to be prohibited
by or invalid under applicable law,such provision shall be ineffective only to the extent of such
prohibition or invalidity,without invalidating the remainder of this Agreement.
Signatures appear on the fallowingpage]
In witness whereof,the parties-have executed or causedto be executed this Note as of the date
first-written above.
COMBAN-Y:
5-
MQM SLO.LLC
VII-California ted liability Company
By;
Seligm‘Manager
U ,‘iESfiEéfiey,Managcr
By:M .-j W
Megan -S Manager
Addresg:
I4OSGarden Street
SM'LQifi‘Obispo,CA 93401
By-z;
I?.,;.R*
Q
He‘IiEs béyspring.as
r
Nicholas Andre.est
m.“=
751E‘Ebsgosos Valley Rd.
San‘Luis Obispo CA 93405
Signatures continue on thefizllowing page]
NHCSL00033
m
Melissa Sehgman
T .I”.LJ9
Lindsey Law
w4—~xAmandaValanagm
Eric Powers
Megan (J
NHCSL00034
NHCSLO0035
AMENDMENT TO CONVERTIBLE PROMISSORY NOTE
THIS AMENDMENT TO CONVERTIBLE PROMISSORY NOTE (“Amendment”),dated
July 20,2020 (the “Effective Date”),is made by and between MOM SLO,LLC,a California
limited liability company (“Company”)and HELIOS DAYSPRING,an individual,and
NICHOLAS ANDRE,an individual (collectively,“Holder”).
Recitals
A.WHEREAS,Company is the borrower and Holder is the lender under that certain
Convertible Promissory Note dated February 3,2019 in the original principal amount of
600,000 (the “Note”).
B.WHEREAS,as of the Effective Date,Holder has disbursed a total of $546,685.50
pursuant to the Note at the direction of Company.
C.WHEREAS,Company has a need for additional capital and Holder and Company
have agreed to increase the total Loan Amount from $600,000 to $800,000.
NOW THEREFORE,for good and valuable consideration,the receipt and adequacy of
which is hereby acknowledged,Company and Holder agree as follows:
1.Acknowledgment by Company.Company hereby acknowledges that as of the
Effective Date,Holder has previously disbursed a total of $546,685 .50 pursuant to the Note
at the direction of Company.Company further acknowledges that as of the Effective Date,
Holder has fully complied with all of its obligations under the Note.
2.Ratification of Note.Company hereby acknowledges that the Note,including
Holder’s conversion right,is in full force and effect,is enforceable according to its terms,
and is ratified and confirmed by Company.
3.Amendment of Loan Amount.The Loan Amount as stated in Section l of the Note
is hereby amended and increased from Six Hundred Thousand Dollars ($600,000.00)to
Eight Hundred Thousand Dollars ($800,000.00).
4.Amendment of Section 6(d).Section 6(d)of the Note is hereby deleted and
replaced with the following:
d)Principal of Note as Deemed Cash Capital Contributions to Company.If
Holder elects to convert this Note into the Membership Interest,the outstanding
principal of the Note shall be deemed cash capital contributions to the Company for
the purpose of distributions on dissolution,and those capital contributions shall be
allocated to Helios Dayspring.”
5.general.Except as expressly amended herein,all of the terms and conditions of the
Note shall remain in full force and effect.
6.Lapwing.All capitalized terms not expressly defined in this Amendment shall
have the same meaning as in the Note.
7.The foregoing recitals are incorporated herein and made
apart hereof as if set forth in their entirety.
8.This Amendment may be executed in one or more
counterparts,each of which shall be deemed an original,but all of which together shall constitute
one and the same instrument.Executed counterparts of this Amendment may be delivered by
facsimile transmission or by delivery of a scanned counterpart in portable document format (PDF)
by e-mail,in either case with delivery continued.On such confirmed delivery,the signatures in the
facsimile or PDF data file shall be deemed to have the same force and effect as if the manually
signed counterpart had been delivered to the other party in person.
SEE LINE ITEMS 9-10 BELOW SIGNATURE LINES
IN WITNESS WHEREOF,Holder and Company have executed this Amendment in San
Luis ObiSpo,California.
COMPANY:HOLDER:
MOM SLO,LLC,
a California limited liability company
Dee-ism“by:noruslmd by.
By:mill)k:W!M I I “@0434...
Megan @0353?Manager Helios Dayspring
By:[gunfigfim
CM?§EO¢5£..
NHCSL00036
NHCSLO0037
Levi Seligman,Manager Nicholas Andre
DacuSlunad by:
By:Eu&,SWuqu
974M00893294B7...
Keith Sweeney,Manager
9.Tarah graves wiii receive 2%interest in MOM SLO LLC.New %intmest
1isted beiow
Member Name and Percentage Interest
Levi seiigman 8%
Meiissa Seiigman 9%
Keith Sweeney 8%
Lindsey Law 9%
Amanda Vaiena 2%
Eric Powers 6.5%
Megan Souza 6.5%
Tarrah Graves 2%
Heiios Dayspring 46%
Nick Andre 3%
10.Austen Conneiia wiii not receive any %interest in MOMS SLO LLC.
EXHIBIT H
NHCSLO0038
NHCSLO0039
A EMENT QERVI ,E N LT x REEM
This Management Services Consulting Agreement (“Agreement”)is made and entered
into as of March 19 2019 (the “Effective Date”),by and between SLO RETAIL
MANAGEMENT LLC,a Califomia limited liability company ("Consultant")and MOM SLO,
LLC,a California limited liability company ("Company").
Recitals
A.WHEREAS,Company intends to own and operate a commercial cannabis
dispensaty located at 280 Higuera Street,San Luis Obispo,California (the “Dispensary”).
B.WHEREAS,Company desires to engage a consultant to provide management
services for the operation of the Dispensary as more fully described in Section 2.01 below (the
Sewices”).
C.WHEREAS,Consultant’s chief executive has special knowledge and expertise
managing and supplying retail cannabis dispensaries.
D.WHEREAS,Company desires to engage Consultant to provide the Services on
the terms and conditions set forth herein.
NOW,THEREFORE,based on the foregoing recitals and the mutual promises and
covenants contained herein,Company and Consultant agree as follows:
Section 1.Term of Agreement
1.01 This Agreement will be effective as of the Effective Date,and will continue in effect
during the Term (as defined in Section 7.01,below).
Section 2.Services to be Performed by Consultant.
2.1 Specific Services.The services to be performed by Consultant include providing
general management services for the operation of the Dispensary,including but not limited to,
staff management guidance,systems management,contracting for supplies and inventory,
shelving,pricing and display of products,loss prevention,development and implementation of
security protocols,book keeping,payroll and bill payment (the “Services”).
2.2 Method of Performing Services.Consultant will determine the methods,details and
means of performing the above-described services subject to the limitations set forth below.
2.3 Employment of Assistants.Subject to Company approval,Consultant may employ
such assistants as Consultant deems necessary to perform the Services required of Consultant by
this Agreement.The costs and expenses of such assistants shall be shared 50-50 as between
Company and Consultant.Provided however,that the Company shall not control,direct,or
supervise Consultant's assistants or employees in the performance of their Services.
NHCSLO0040
2.4 Authority of Consultant Regarding Company Employees.Consultant shall have no
direct authority over or control of Company's staff.Company shall have sole and exclusive control
over such staff.Consultant shall have no power or authority to employ or terminate employees of
Company.
2.5 Authority of Consultant Regarding Pricing,Procurement and Merchandizing.
Consultant shall have authority over the shelving,stocking,and display of products attire
Dispensary,provided however that Company shall collaborate with Consultant over such
decisions.Except as described herein,Consultant shall have the authority and the power to bind
Company to contractual obligations relating to the procurement of inventory and merchandise
and Consultant will have authority over pricing of inventory and merchandise.Notwithstanding
the foregoing,it is understood among the parties that businesses in which Megan Souza,Eric
Powers,Helios Dayspring,and/or Consultant hold an interest (“Souza/Powers Entities”,
Dayspring Entities”,“Consultant Entities”,or collectively “Related Entities”)are authorized to
sell the Company products and/or inventory provided that such products and/or inventory meet
all requirements of merchantability and are sold to the Company for fair market wholesale value
or less (“Consultant/Meagan’s Market Products”).Consultant shall have the right to set the retail
price for Consultant/Meagan’s Market Products but shall not refuse to stock and display
Consultant/Meagan’s Market Products at Dispensary.Nothing in this paragraph shall prevent
Company from carrying,purchasing,marketing,and/or selling products from other businesses,
whether or not such businesses have exclusive distribution channels that Consultant,or the
Related Entities might not carry,market,or sell through Consultant or the Related Entities.
2.6 Limitation on Authorig of Consultant.
a.Audit Rights of Company.Company and its Managers shall have an absolute
right to review and audit Consultant’s Point of Sale software as it relates to the Dispensary (Le.
wholesale price,products offered,retail price,margins),and to personally review retail pricing
and stock offered for sale at the Dispensary.In addition,Company may at any time request a list
of current businesses and entities in which Consultant or any Member or interest holder of
Consultant possesses an interest and from which Consultant purchases or intends to purchase
stock sold at the Dispensary (“Consultant Affiliates”).Any list of Consultant Affiliates shall be
kept absolutely confidential by Company.
b.Notice of Disapproval.At any time,Company may notify Consultant in writing
of the Company’s disapproval of any product(s)sourced from a Consultant Affiliate (“Notice of
Disapproval”);the Notice of Disapproval shall state in writing the trade name of the product(s)
and the grounds upon which the Company disapproves of the objectionable products(s).Approval
and/or disapproval of transactions under Sections 2.05 and 2.06,shall not be unreasonably
withheld or given by Company.
c.Desist Purchase of Objectionable Product.Upon Consultant’s receipt of a
Notice of Disapproval,Consultant shall not enter into any future purchase,procurement,or
acquisition of products or inventory identified in the Notice of Disapproval and shall proceed to
wind down inventory of the inventory identified in the Notice of Disapproval.Because
Consultant’s practice is to order quantities of products reasonably calculated to be sold in two
weeks,it is anticipated that any wind down of objectionable product will take no more than two
weeks
NHCSLO0041
Section 3.Compensation
3.01 Compensation.As consideration for the Services to be provided by Consultant,the
Company shall pay Consultant an annual fee equal to forty-six and one-half percent (46.5%)of
the annual Net Cash Flow of the Company (the “Fee”)as defined in Section 4.5 of the Operating
Agreement of the Company.Provided however,that the Fee shall not be considered an operating
expense for purposes of calculating Net Cash Flow for purposes of this Section.For example,if
the Managers of the Company determine that $100,000 is available as Net Cash F low for
distribution to the Members,then $50,000 shall be paid to Consultant and the remaining $50,000
shall be Net Cash Flow available for distribution to the Members.The Fee (or portion of the Fee)
shall be paid at such times as any distributions are made to Members of the Company after the
Effective Date.
r Company will not withhold from its payments to Consultant any of the following:Social
Security,State and Federal Unemployment Insurance Contributions,State or Federal Income Tax,
or Disability Insurance Contributions.Company will not obtain Workman's Compensation
insurance for Consultant.
Section 4.Return of Property Upon Termination.
4.1 Delivery of Properg.On the termination of this Agreement,or whenever requested
by Company,Consultant shall promptly deliver to Company all property in its possession or
under its control belonging to Company,in good condition,ordinary wear and tear and damage
by any cause beyond the reasonable control of Consultant excepted.
4.2 Termination Meeting.On termination of this Agreement,Consultant shall meet
with designated representatives of Company and provide all information and execute all such
documents as Company may reasonably require to assure compliance with this Agreement.
Section 5.Obligations of Company
5.01 Cooperation of Company.Company agrees to comply with all reasonable requests
of Consultant necessary to the performance of Consultant’s duties under this Agreement.
Section 6.Obligations of Consultant
6.1 Cooperation of Consultant.Consultant’s performance under this Agreement shall
be conducted with due diligence and in full compliance with the professional standards of practice
in the industry.
6.2 Insurance.To the extent it can be obtained at commercially reasonable prices,
Consultant shall,at all times during the term of this Agreement,at Consultant’s sole cost and
expense,procure and maintain liability insurance covering the Services to be performed
hereunder by Consultant,its agents,representatives,employees,or subcontractors,in the form
and amounts as may be required by Company but at least as broad as:
i.Commercial General Liabilim Insurance Policy ("CGL"L Insurance Services Office
ISO)Form CG 00 01 covering CGL on an “occurrence”basis for bodily injury and
property damage,including products-completed operations,personal injury,and
3
NHCSLO0042
advertising injury,with limits no less than $1,000,000 per occurrence.If a general
aggregate limit applies,either the general aggregate limit shall apply separately to this
project/location or the general aggregate limit shall be twice the required occurrence limit.
ii.Business Automobile Liability Policy ("BAL’Q.ISO Form Number CA 0001 covering,
Code 1 (any auto),or if Consultant has no owned autos,Code 8 (hired)and 9 (non-
owned),with limit no less than $1,000,000 per accident for bodily injury and property
damage.
iii.Workers'Compensation and Employers’Liabilitv Insurance Policy {”WC/EL’Q.
Insurance as required by the State of California with statutory limits,and Employer’s
Liability Insurance with limit of no less than $1,000,000 per accident for bodily injury or
disease.If Consultant maintains higher limits than the minimums shown above,Company
shall be entitled to coverage for the higher limits maintained by Consultant.
iv.Professional Liability/Errors and Omissions.Insurance covering Consultant’s liability
arising from or related to this Agreement,with limits of not less than $1,000,000 per claim
and $2,000,000 aggregate.Further,Consultant understands and agrees it shall maintain
such coverage for a period of not less than three (3)years following this Agreement’s
expiration,termination or cancellation.
6.3 Additional insured.Company and each of its officers,managers,members,
employees,and volunteers are to be covered as additional insureds on the auto policy with reSpect
to liability arising out of automobiles owned,leased,hired or borrowed by or on behalf of
Consultant;and on the CGL policy with respect to liability arising out of work or operations
performed by or on behalf of Consultant including materials,parts,or equipment furnished in
connection with such work or operations.General liability coverage can be provided in the form
of an endorsement to Consultant’s insurance (at least as broad as ISO Form CG 20 10,ll 85 or
both CG 20 10 and CG 20 37 forms if later revisions used).
6.4 Notice of Cancellation.Each insurance policy required above shall state that
coverage shall not be canceled,except after thirty (30)days’prior written notice (ten (10)days
for nonpayment)has been given to Company.
6.5 Failure to Maintain Insurance.Consultant’s failure to maintain or to provide
acceptable evidence that it maintains the required insurance shall constitute a material breach of
the Agreement,upon which Company itrunediately may provide Consultant with a notice to cure
pursuant to Section 7.4,below.
6.6 Waiver of Subrogation.Consultant hereby grants to Company a waiver of any right
to subrogation which any insurer of Consultant may acquire against Company by virtue of the
payment of any loss under such insurance.Consultant agrees to obtain any endorsement that may
be necessary to affect this waiver of subrogation,but this provision applies regardless of whether
or not Company has received a waiver of subrogation endorsement from the insurer.
6.7 Deductibles and Self-Insured Retentions.Any deductibles or self-insured
retentions must be declared to and approved by Company.Company may require Consultant to
provide proof of ability to pay losses and related investigations,claim administration,and defense
expenses within the retention.
NHCSLO0043
6.8 Acceptabiligy of Insurers.Insurance is to be placed with insurers with a cunent
A.M.Best’s rating of no less than AzVII,unless otherwise acceptable to Company.
6.9 Claims Made Policies.If any of the required policies provide coverage on a claims»
made basis:
i.The retroactive date must be shown and must be before the date of the contractor
beginning of the contract work.
ii.Insurance must be maintained and evidence of insurance must be provided for at least five
5)years after completion of the contract work.
iii.If coverage is canceled or non~renewed,and not replaced with another claims—made policy
form with a retroactive date prior to the contract effective date,Consultant must purchase
extended reporting”coverage for a minimum of five (5)years after completion of the
contract work.
6.10 Separation of lnsureds.All liability policies shall provide cross-liability coverage
as would be afforded by the standard ISO (Insurance Services Office,Inc.)separation of insureds
provision with no insured versus insured exclusions or limitations.
6.11 Verification of Coverage.Consultant shall furnish original certificates and
amendatory endorsements or copies of the applicable policy language effecting coverage required
by this Section.Certificates and copies of any required endorsements shall be sent to the address
set forth in paragraph 9.07.
Section 7.Termination
7.1 Term of Aoreement.The initial term of this Agreement is for a period of two (2)
years commencing on March l,2019 and ending on February 28,2021 (“Term”,unless
terminated sooner in accordance with the provisions in this Agreement.Following such initial
term,this Agreement will automatically renew for successive two (2)month periods unless either
party provides a sixty (60)day written notice of non-renewal.
7.2 Early Termination Upon Exercise of Conversion Rights.This Agreement shall
terminate automatically in the event Helios Dayspring and Nick Andre (“Holders”)exercise their
conversion rights pursuant to that certain Convertible Promissory Note in the initial principal
amount of $600,000 between Holders and Company.
7.3 Termination by Consultant.Consultant shall give written notice of any material
failure by Company to carry out the terms of this Agreement.If Company fails to correct the
default within fifteen (15)calendar days thereafter,Consultant may terminate this Agreement
immediately by giving written notice to Company;provided,however,that if such default cannot
reasonably be cured within such fifteen (15)-day period,the non-performing party shall not be
deemed to be in default if that party shall within such period commence such cure and thereafter
diligently continue such cure to completion.Failure of Consultant to give notice of a default as
hereinabove provided shall not be deemed to constitute a waiver of the default by Consultant.
NHCSLO0044
7.4 Termination by Company.Company shall give written notice of any material
failure by Consultant to cany out the terms of this Agreement.If Consultant fails to correct the
default within fifteen (15)calendar days thereafter,Company may terminate this Agreement
immediately by giving written notice to Consultant;provided,however,that if such default cannot
reasonably be cured within such fifteen (15)—day period,the non-performing party shall not be
deemed to be in default if that party shall within such period commence such cure and thereafter
diligently continue such cure to completion.Failure of Company to give notice of a default as
hereinabove provided shall not be deemed to constitute a waiver of the default by Company.
7.5 Payment Ugon Termination.In the event that either party terminates this
Agreement for any reason other than the exercise of the conversion rights described in Section
7.02,this Agreement shall terminate but Consultant shall nonetheless be entitled to receive the
Fee until the earlier of:(a)the date six (6)months from the date of termination;or (b)the date the
Holders successfully exercise their conversion rights pursuant to that certain Convertible
Promissory Note in the initial principal amount of $600,000 between Holders and Company and
have been issued their membership interests in the Company.
7.6 Material Breach.A material breach includes but is not limited to the following:
i)Consultant’s uncured breach of any duty under Section 2 or 6;
ii)Consultant’s purchase of products priced above the median wholesale price for the
applicable order quantity tier,provided however,that any liability arising from such a
breach is limited to damages arising from excessively priced purchases made in the thirty
30)days immediately prior to the date notice of such breach was given;
iii)Consultant’s repeated and uncured neglect of any duty under this Agreement;
iv)Company’s uncured failure to pay for Consultant’s services under this Agreement;or
v)If Consultant,Company,or Helios Dayspring declares bankruptcy,becomes insolvent
or has a receiver of its/his assets or property appointed because of insolvency,makes a
general assignment for the benefit of creditors,or suffers any judgment against it/him to
remain unsatisfied and unbonded for 30 days or longer.
Section 8.Indemnification
8.1 Indemnification of Company.Consultant shall indemnify,defend and hold
Company harmless from and against any and all damages,claims,loss,expenses (including,but
not limited to reasonable attomeys'fees and disbursements)and liabilities resulting from the
negligence or intentional misconduct of Consultant in providing the Services.
8.2 Indemnification of Consultant.Company shall indemnify,defend and hold
Consultant harmless from and against any and all damages,claims,loss,expenses (including,but
not limited to reasonable attomeys‘fees and disbursements)and liabilities resulting from the
operations of the Company and/or the Dispensary not delegated to Consultant under this
Agreement.
Section 9.General Provisions
9.1 Exclusive Terms.The entire Agreement between the parties with respect to the
subject matter herein is contained in this Agreement,and any prior agreements between the parties
hereto are deemed superseded by this Agreement.Except as herein expressly provided to the
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NHCSLO0045
contrary,the provisions of this Agreement are for the benefit of the parties hereto solely and not
for the benefit of any other person,persons,or legal entities.
9.2 Representations and Warranties.The parties acknowledge that they have not been
induced to enter into this Agreement by any representations or statements,oral or written,not
expressly contained herein nor expressly incorporated by reference.
9.3 Independent Representation.Each of the parties to this Agreement acknowledge and
agree that it has been represented by,or has had the opportunity to consult with,independent
counsel of its own choice throughout all negotiations which preceded the execution of this
Agreement,and that it has executed this Agreement with the consent and upon the advice of said
independent counsel.
9.4 Independent Contractor.The parties hereto intend this Agreement to be an
agreement for an independent contractor and shall report it as such.It is understood that in the
performance of this Agreement,Consultant is not in any way acting as an employee of Company,
and Consultant will be responsible for all taxes,social security payments,and other similar
payments or contributions due as a result of any payments made pursuant to this Agreement.
9.5 Non-Exclusive Relationship.Company fully understands that Consultant will
continue to conduct its other business activity and not solely confine its efforts to the activities
provided under this Agreement,but Consultant agrees it shall expend sufficient time to properly
perform Consultant's obligations under this Agreement.
9.6 Waiver or Modifications.No waiver,alterations or modifications of any of the
provisions of this Agreement shall be binding unless in writing and signed by the duly authorized
representative of Company and Consultant.
9.7 Notice.All communications regarding this Agreement shall be sent to the parties at
the addresses set forth below,unless notified in writing of a different address.Any written notice
hereunder shall become effective as of the date of personal service or three (3)days after the date
of mailing by registered or certified mail,or one day after guaranteed express mail,if mail is used
to give notice.
If to Company:MOM SLO,LLC
1405 Garden Street
San Luis Obispo,CA 93401
Attn:Levi Seligman,Manager
If to Consultant:SLO Retail Management LLC
7510 Los Osos Valley Rd.
San Luis Obispo CA 93405
Attn:Helios Dayspring,Manager
NHCSLO0046
9.8 Governing Law;Venue.This Agreement shall be governed by the laws of the State
of California.Venue for any dispute arising from or relating to this Agreement shall be
exclusively in the Superior Courts of San Luis Obispo County.
9.9 Dispute Resolution.The parties agree to attempt to mediate any dispute or claim
arising out of or relating to this Agreement,including the interpretation,application of any
provision in this Agreement.Mediation shall take place within thirty (30)days of written notice
in accordance with the provisions in this Agreement for notice being served on the other party.
The mediator shall be a neutral mediator from a recognized mediation service with an office in
San Luis Obispo County.The fees and expenses of mediation shall be bome evenly by the parties.
Evidence of anything said,any admission made,or any documents prepared in the course of the
mediation shall not be admissible in evidence,or subject to discovery in any arbitration or court
action,pursuant to California Evidence Code §1152.
9.10 Severabilig.Should any portion of this Agreement be held unenforceable or
inoperative for any reason,such shall not affect any other portion of this Agreement,but the
remainder shall be as effective as though such ineffective portion has not been contained herein.
9.11 Attorneys'Fees.In any action or arbitration at law or in equity arising from or
relating to the terms of this Agreement,the prevailing party shall be entitled to recover its
reasonable attorneys'fees and costs incurred.
9.12 Successors and Assigns.This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective heirs,executors,administrators,successors,and
assigns.
9.13 Assignment.Consultant may not assign its rights under this Agreement without the
prior written consent of Company,which Company shall not unreasonably withhold,except that
Consultant may assign this Agreement:(i)to the purchaser in a sale of all or substantially all of
the assets of Consultant;(ii)to a successor entity of Consultant.Any purported assignment of this
Agreement by Consultant without the prior written consent of Company shall be void at the option
of Company.
9.14 Confidentiality.Each party acknowledges that this Agreement and its terms are
confidential,and each party agrees to keep the terms and conditions of this Agreement
confidential and not to disclose such terms and conditions to any third party,except as follows:
a)either party may disclose this Agreement or its terms as necessary to enforce this
Agreement;(b)either party may disclose this Agreement or its terms to such party’s attomeys,
accountants or tax return preparer;(c)either party may disclose this Agreement or its terms
internally within its organization,to any parent or affiliated entity or to any other entity to
whom disclosure is required for tax,financial reporting or governmental compliance purposes;
and (d)either party may disclose this Agreement or its terms as compelled by law or legal
process.Any party who makes a permitted disclosure will instruct the permitted recipient to
keep any such information disclosed confidential,and any failure of the permitted recipient to
keep such information confidential shall be deemed a breach by the party who made the
disclosure to the permitted recipient.
9.15 Countemarts;Signatures.
counterparts.Facsimile and PDF signatures shall be deemed to be originals.
This Agreement may be executed in one or more
IN WITNESS WHEREOF,the parties have executed this Agreement at San Luis Obispo.
California,as of the Effective Date.
CONSULTANT:
SLO RETAIL MANAGEMENT LLC,
a California limited liability company
DoeuSl MI!by:
l
1
By:K6
e nos aysP'fing,Manager
COMPANY:
MOM SLO,LLC,
a California limited liability company
accustom-thy:
By:I
Mew Son/‘70.
cgan ouza,Manager
DoeuSlgmd by:'
LU am,
By:
W S w
Levi Seligman,Manager
DoulSlanaaby:
By:
SW
1
Keith Sweeney,Manager
NHCSL00047