NORTHEAST PATIENTS GROUP TARGET OF LAWSUIT

Northeast Patients Group, which holds permits to open medical
marijuana dispensaries in Portland, Bangor and elsewhere in Maine, is
being sued by its former financial backer in California.

In court filings, Berkeley Patients Group alleges Augusta-based
Northeast Patients Group failed to pay back more than $630,000 in
loans used for salaries and start-up funds during the successful 2010
permitting process.

Northeast's chief executive Becky DeKeuster is also named in the
lawsuit, which was filed July 6 in Cumberland County Superior Court.
DeKeuster, who severed ties with Berkeley in February, is accused of
breach of contract, breach of fiduciary duty and disclosing trade
secrets to a competitor. She declined to be interviewed yesterday.

Dan Walker, an attorney with Preti Flaherty, said in a written
statement that Northeast and DeKeuster disputed Berkeley's version of
events. Walker said he would file a counterclaim soon.

Meanwhile, he added that Northeast expected to "have necessary
funding and support to open (its) dispensaries in the very near term."

Berkeley officials also declined to comment on the lawsuit.

DeKeuster, a former educator, began working for Berkeley in 2004. She
was later named a director of company, which operates one of the
largest dispensaries in Berkeley.

She was still working for Berkeley when she moved to Maine, sometime
after the successful 2009 referendum that allowed medical marijuana
dispensaries to open, according to court documents. Her title in
Maine was "New England Expansion Director" for Berkeley.

DeKeuster was paid up to $125,000 per year by the California firm to
oversee the medical marijuana permitting process in Maine. During
that time, Berkeley says it provided Northeast with more than
$632,000 in loans.

According to court filings, the company expected it would partner
with Northeast if dispensary permits were awarded by the state.

Even so, it isn't clear if the two sides signed any formal
partnership, other than DeKeuster's employment contract. That
contract stipulates that her role in Maine was to work "for the
benefit of [BPG]" and not "engage in any practice that competes with
[BPG's] interest]."

In 2010, Northeast received permits to open four medical marijuana
dispensaries: one in Portland, Bangor, the Augusta area and along the
Midcoast. Like all dispensary operators in Maine, Northeast is a nonprofit.

However, DeKeuster left Berkeley in late February, before any of
Northeast's dispensaries had opened.

In court filings, Berkeley claims she quit immediately prior to
signing a letter of intent with Mobley Pain Management and Wellness
Center, which Berkeley considers a competitor.

Mobley Pain Management is led by a former NBA player Cuttino Mobley,
who is also affiliated with Summit Compassion Center, a dispensary
planned for Warwick, R.I. Mobley played college basketball at
University of Rhode Island and also attended Maine Central Institute
in Pittsfield.

Mobley's group planned to loan Northeast $2 million to get its Maine
dispensaries up and running. Terms outlined in the letter of intent
show Mobley would provide that funding in several increments, to be
paid back over seven years at 18 percent interest.

Northeast was also to receive a $100,000 bridge loan from Mobley once
the letter of intent was signed.

According to the lawsuit, DeKeuster never told Berkeley officials
about her discussions with Mobley - which Berkeley says occurred
while she was still on their payroll. For that, she is accused of
breach of contract.

"Suffice it to say that we and our clients have a much different view
of the underlying facts and are prepared to present our case and
counterclaims in court," said Walker, the attorney for Northeast.

The lawsuit is the latest in a series of setbacks for Northeast,
which is the only permit holder that hasn't opened its dispensary. To
date, facilities have opened in Biddeford, Ellsworth, Frenchville and Auburn.

Aside from financial issues, Northeast has run into zoning troubles
in several Maine communities.

Catherine Cobb, director of Licensing & Regulatory Services in the
state Department of Health and Human Services, told the Bangor Daily
News that Northeast was finalizing an arrangement with Mobley's group.

Meanwhile, Northeast is already growing medical marijuana at a
facility in Thomaston. Once it secures new funding, the firm's
dispensaries should open soon afterward, Cobb said.

"I am supposed to receive final term sheet on their permanent
financing this week," said Cobb. "I anticipate that after that they
will be able to settle any issue they have with Berkeley."

Cobb says she doesn't believe the lawsuit will result in further
delays for Northeast's dispensaries.

According to paperwork filed with the state, Northeast expects to
draw nearly 250 patients in Portland during its first full year in
operation, which it says would yield more than $1.7 million in
revenues. In year two, the company expects to have more than 400
patients and earn more than $3.2 million.

In a recent interview, DeKeuster said she is still looking at
locations for Northeast's Portland dispensary, which she said should
be open this fall.

Northeast has reportedly leased space at 959 Congress Street, at the
intersection with St. John Street, although DeKeuster wouldn't confirm that.