400659.1
ATTACHMENT 2
Notice of Breach from the City to Zengrow
(February 5, 2025)
City of Barstow
220 East Mountain View Street, Suite A
Barstow California 92311-2839
388420.1
February 5, 2025
Sent via Certified Mail, Return Receipt Requested
Zengrow Inc.
3746 Foothill Blvd #129
Glendale, CA 91214
Zengrow Inc.
2861 Lenwood Rd Bldg 2
Barstow, CA 92311
Re: Notice of Breach – Commercial Cannabis Business Development Agreement Notice of Violation – Barstow Cannabis Permit Laws
Operator: Zengrow Inc. (“Operator” or “you”)
Owner: Edvin Mehrabyan (“Owner”)
Premises: 2861 Lenwood Rd Bldg 2 (“Premises”)
Dear Operator:
NOTICE OF BREACH – COMMERCIAL CANNABIS
BUSINESS DEVELOPMENT AGREEMENT
YOU ARE HEREBY NOTIFIED that you are in breach of that certain Commercial Cannabis Business Development Agreement (“Development Agreement”) entered into by and between you, the City of Barstow (“City”), and Owner on January 17, 2023 specifically described herein.
Development Agreement Payment Obligations
Under the Development Agreement, you were required to comply with the following payment terms:
“Fees. Operator… agrees to pay all permit fees and charges adopted by [Barstow] City Council by Fee Resolution pursuant to Chapter 19.27 of the Barstow Municipal Code, as well as any fees set forth in this Agreement.” (Section 7.a.).
You were further obligated to pay the permit renewal fee under, without limitation, sections 2.a.IV., 4.a., and/or 18 of the Development Agreement. Pursuant to the City of Barstow’s Master Fee Schedule, adopted by City Council resolution, the annual permit renewal fee is $14,107.85 for fiscal years 2024 and 2025 Barstow Municipal Code (“BMC”) § 19.27.110(b), requires that you to renew your cannabis business permit and pay the permit renewal application fee, established by City through its adoption of its Master Fee Schedule, at least 60 days before the expiration date of your permit.
Notice of Breach of Development Agreement and Right to Cure You have failed to renew your cannabis business permit and/or pay the cannabis business permit renewal application fee at least 60 days before the expiration date of your cannabis business permit. More specifically, you failed to pay the following amount(s) to the City as and when due under the Development Agreement, Barstow City Council Resolution(s), and/or Barstow Municipal Code in breach of the Development Agreement and/or the Barstow Municipal Code, each of which is a separate and distinct breach:
FEE TYPE FISCAL YEAR AMOUNT
DUE
Operating Fee 2024 $108,570.00
Operating Fee Penalty 2024 $27,142.50
Permit Renewal 2024 $14,107.85
Permit Renewal Penalty 2024 $3,526.96
Community Benefits Program 2024 $43,428.00
Quarterly Inspection 4th Qtr (Sep24 – Nov24) $550.00
Quarterly Inspection 1st Qtr (Dec24 – Feb25) $550.00
TOTAL DUE $197,875.31
To cure the foregoing breach(es), you must pay each outstanding amount and any associated penalty described above to the City within 35 days after the date of this notice. Payment may be made by one or more of these methods:
☐ Business Check ☐ Cashier’s Check ☐ Credit / Debit ☐ Cash Checks shall be made payable to “City of Barstow.” Cash and checks must be delivered to: Amy Sanchez, Administrative Analyst / Cannabis Division Coordinator, 220 E Mountain View St, Ste. A, Barstow, CA 92311. If paying by cash, you must schedule an appointment with Amy Sanchez in advance, which said appointment and payment must occur within the 35-day cure period.
Failure to Cure and Termination Hearing
If you fail to cure this Notice of Breach, then you will be in default of the Development Agreement and the City will hold a public hearing to consider whether to terminate the Development Agreement.
Notice of Public Hearing
NOTICE IS HEREBY GIVEN that the City Council will hold a public hearing to consider whether to terminate your Development Agreement at the following date, time, and location:
Hearing Date / Time: April 7, 2025 at 7:00 p.m.
Hearing Location: Barstow City Hall
220 E Mountain View Street
Barstow, CA 92311
You have the right to be heard at the public hearing and you may present physical evidence, testimony, and argument supporting your position.
If the City terminates the Development Agreement, the City shall retain any and all benefits, including, without limitation, money or land received by the City, under the Development Agreement, as provided in section 14.e. of the Development Agreement.
NOTICE OF VIOLATION – BARSTOW CANNABIS LAWS
Permit Revocation Authority
BMC § 19.27.160(b) provides:
“If the city manager determines that a cannabis business in the city has violated the requirements of this Code or any other applicable law, including the terms of each cannabis business’ development agreement, conditional use permit, and cannabis business permit, the city manager may issue the cannabis business a written notice of violation, which shall identify each violation, specify the facts underlying each violation, and specify any administrative penalty imposed for each violation.”
BMC § 19.27.160(c) provides:
“The city manager may impose one or more of the following administrative penalties on a cannabis business for violation of this chapter or any other applicable law: (1) Suspension of permit; (2) Revocation of permit; (3) Imposition of more restrictive permit operating requirements; (4) Order to take corrective action.”
Acting City Manager Determination and Penalty Imposition I, Chris Heldreth, Acting City Manager for the City of Barstow, have determined that you have violated the Barstow Municipal Code and your Development Agreement by failing to renew your cannabis business permit and/or pay the cannabis business permit renewal application fee at least 60 days before the expiration date of your cannabis business permit, as more specifically described above. This letter is your written notice of violation under Barstow Municipal Code § 19.27.160(b). The specific facts underlying said violation(s) are described in the “Development Agreement Payment Obligations” and “Notice of Breach of Development Agreement and Right to Cure” sections above.
Because of the foregoing violation(s) and having considered relevant factors including those set forth in BMC § 19.27.160(d), including specifically, but without limitation, the substantial length of time the permit fees have gone unpaid and the significant amount of the unpaid permit fees due, I hereby impose the following, appropriate, administrative penalty under BMC § 19.27.160(c):
Your cannabis business permit is and shall be revoked effective April 7, 2025 at the end of the day.
Opportunity to Cure
However, if you cure this Notice in the manner and by the deadline set forth in the “Notice of Breach of Development Agreement and Right to Cure” section above, then this Notice of Violation served under Barstow Municipal Code § 19.27.160 shall automatically become null and void and your permit will not be revoked on April 7, 2025.
Effective Date of Revocation / Right to Pre-Revocation Hearing Upon Request This Notice of Violation shall be final and effective 30 days from the date of this Notice of Violation unless you timely appeal under Barstow Municipal Code § 19.27.170. You may appeal this Notice of Violation and the administrative penalty of permit revocation under Barstow Municipal Code § 19.27.170.
This Notice of Violation, including the administrative penalty of permit revocation imposed hereby, will not be effective during the pendency of a timely appeal, which allows the Operator to request a prerevocation hearing.
NOTICE IS HEREBY GIVEN that if you appeal this Notice of Violation, then the City Council will hold a public hearing to consider your appeal at the same hearing date and time and at the same hearing location described in the “Notice of Public Hearing” section above. At such a public hearing, you will have a reasonable opportunity to present evidence and arguments concerning your appeal. The City Council will decide whether to uphold, reverse, or modify the city manager’s decision and the City Council’s decision will become effective upon issuance.
Moving Forward
While this correspondence is concerned with your unpaid cannabis business permit, please be advised you may be responsible for other amounts due and owing to the City under the Development Agreement, which may include, without limitation, the yearly operating fee (section 7.c.1.) and annual community benefits program payments (section 5.b.). The omission of any other outstanding amounts due under the Development Agreement from this letter shall not be construed as a waiver and the City expressly reserves any and all right to pursue all such amounts.
The City hopes this letter will prompt your compliance with the Development Agreement and the laws of the City of Barstow within the cure period provided. At the same time, the City is ready to take all available action to enforce the Development Agreement and the Barstow Municipal Code, including, without limitation, termination of the Development Agreement, revocation of your cannabis business permit, and legal action.
Thank you in advance for your compliance with this letter.
Sincerely,
Chris Heldreth
Acting City Manager
cc: Matthew T. Summers
Barstow City Attorney