churchwellwhite.com
1414 K Street, 3rd Floor
Sacramento, CA 95814
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October 28, 2020
VIA CERTIFIED MAIL/RETURN RECEIPT REQUESTED
Sadie Schut
Central Valley – Sierra Associates
100 West Las Palmas Avenue, Suite H
Patterson, CA 95363
Archer Norris, PLC
2033 North Main Street, Suite 800
Walnut Creek, CA 94596
Re: Development Agreement: Default: Notice
Dear Ms. Schut:
On December 5, 2017, the Patterson City Council (“City Council”) adopted Ordinance No. 812 approving the development agreement (the “Agreement”) by and between the City of Patterson (the “City”) and Central Valley – Sierra Associates, a California nonprofit mutual benefit corporation (the “Developer”) to allow Developer to operate a commercial cannabis retail business (the “Project”) at 100 West Las Palmas Avenue, Suite H, Patterson, CA 95363 (the “Property”).
This communication is formal notice that Developer is in default of the Agreement for the reason specified below. In the event the Developer fails to rectify the breach by the end of the Cure Period discussed below, the City will take the necessary steps to terminate the Agreement and revoke the Project’s Conditional Use Permit (“CUP”).
Failure to Pay Public Benefit
In consideration for Developer’s vested right to operate the Project, the Developer is required to pay the City a “Public Benefit Amount” due on the first business day of any applicable month. Pursuant to section 4.2 of the Agreement, Developer is obligated to Nubia I. Goldstein
T: 916.468.0946
[email protected]
Sadie Shut
October 28, 2020
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make minimum payments to the City of Ten Thousand Dollars ($10,000) or five percent (5%) of gross receipts, whichever is greater, from operations for the first twelve (12) months. On the first (1st) day of the thirteenth (13th) month of operation through the end of the Agreement, Developer is required to pay the City Twenty-Five Thousand Dollars ($25,000) or five percent (5%) of gross receipts, whichever is greater, from all operations.
On November 29, 2018, Developer executed a side letter (“Initial Side Letter”) agreeing to a deferral for a portion of the Public Benefit Amount until Developer opens the Project (“Deferred Benefit Fee”). On May 30, 2019, the City and Developer entered into a second side letter (“Side Letter”) wherein Developer agreed to pay Fifty Percent (50%) of the Deferred Benefit Fee, Forty-Eight Thousand Seven Hundred and Fifty Dollars ($48,750), within sixty (60) days of opening the Project. Developer further agreed and acknowledged that the Deferred Benefit Fee in the Initial Side Letter and the Public Benefit Amount shall be paid in full.
Pursuant to section 4.2 of the Agreement, the City has calculated the Developer’s outstanding Public Benefit Amount to be at six hundred and forty-five thousand dollars ($645,000.00). As of October 21, 2020, Developer has paid a total of seventy thousand seven hundred and fifty dollars ($70,750.00) of the Public Benefit Amount.
Based on Developer’s partial payments and non-payments, the total Public Benefit Amount due to date is five hundred and seventy-four thousand and two hundred and fifty dollars ($574,250.00). This is despite Developer’s license renewal documents showing Developer’s annual income to be seven hundred thousand dollars ($700,000).
Developer’s failure to remit the required payments of the Public Benefit Amount to the City constitutes a default of the Agreement pursuant to section 8.1(a).
In addition to the Public Benefit Amount, the City is entitled to impose a NonPerformance Penalty of one percent (1%) to all past due payments, pursuant to section
4.5 of the Agreement, and an additional ten percent (10%) penalty for failing to comply with the Side Letter (“Non-Performance Penalties”). Bringing Developer into compliance with the Agreement forces the City to accrue considerable costs, and is a primary consideration when deciding whether to apply the Non-Performance Penalties. Although the City has not yet imposed the Non-Performance Penalties, it still remains an option. Further, section 4.6 of the Agreement imposes an additional Sadie Shut
October 28, 2020
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Non-Performance Penalty of eighteen percent (18%) per annum for failure to pay the one percent (1%) Non-Performance Penalty.
Cure Period
Developer has ten (10) calendar days of this notice (the “Cure Period”) to cure Developer’s failure to pay the outstanding Public Benefit Amount in full. Once the Cure Period lapses and Developer has not made the required payment, the City may institute procedures to terminate the Agreement and revoke the CUP.
If you have any questions or concerns regarding the contents of this letter, please do not hesitate to contact me.
Kind regards,
Churchwell White LLP
/s/ Nubia I. Goldstein
Nubia I. Goldstein
cc: Ken Irwin, City Manager (via email)