UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): March 13, 2015
DIEGO
PELLICER WORLDWIDE, INC. |
(Exact
name of registrant as specified in its charter) |
Delaware |
|
333-189731 |
|
33-1223037 |
(State
or other jurisdiction of
incorporation) |
|
(Commission
File Number) |
|
(IRS
Employer
Identification No.) |
6800 Owensmouth Avenue, Suite 350, Los Angeles, CA 91303
(Address
of principal executive offices) (Zip Code) |
Registrant’s
telephone number, including area code: (818) 703-8300
P.O.
Box 11383
Washington,
DC 20008 |
(Former
name or former address, if changed since last report.) |
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2. below):
|
☐ |
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
☐ |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
☐ |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
☐ |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c) |
SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
This
Current Report on form 8-K (this “Report”) contains forward-looking statements. The forward-looking statements are
contained principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from
any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can
identify forward-looking statements by terms such as “anticipates,” “believes,” “seeks,” “could,”
“estimates,” “expects,” “intends,” “may,” “plans,” “potential,”
“predicts,” “projects,” “should,” “would” and similar expressions intended to
identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are
based on assumptions and subject to risks and uncertainties. These risks and uncertainties include, but are not limited to, the
factors described in the section captioned “Risk Factors” below. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. Such statements may include, but are not limited to, information related
to: anticipated operating results; relationships with our customers; consumer demand; financial resources and condition; changes
in revenues; cost of sales; selling, general and administrative expenses; interest expense; legal proceedings and claims.
Also,
forward-looking statements represent our estimates and assumptions only as of the date of this Report. You should read this Report
and the documents that we reference and filed as exhibits to this Report completely and with the understanding that our actual
future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any
forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in
any forward-looking statements, even if new information becomes available in the future.
Item
1.01 |
Entry
Into A Material Definitive Agreement |
Merger
and Share Exchange Agreement
On
March 13, 2015 (the “Closing Date”), Diego Pellicer Worldwide, Inc. (f/k/a Type 1 Media, Inc.) (the “Company”
or “PubCo”) closed on a merger and share exchange agreement (the “Merger Agreement”) by and among (i)
the Company, and (ii) Diego Pellicer World-wide 1, Inc., a Delaware corporation, (“Diego”), and (iii) Jonathan White,
the majority shareholder of the Company (the “Majority Shareholder”). Pursuant to the terms of the Merger Agreement,
Diego shall be merged with and into the Company, with the Company to continue as the surviving corporation (the “Surviving
Corporation”) in the Merger, and the Company succeeding to and assuming all the rights, assets, liabilities, debts, and
obligations of Diego (the “Merger”).
In connection with the closing of the
Merger, on the Closing Date, Jonathan White and Thomas Baxter submitted to the Company a resignation letter pursuant to which
they resigned from their positions as officers and members of the Board of Directors of the Company. Messrs. White and Baxter’s
resignations were not a result of any disagreements relating to the Company’s operations, policies or practices. On the
Closing Date, the board of directors of the Company (the “Board”) and the majority stockholders of the Company (the
“Shareholders”) accepted the resignations of Messrs. White and Baxter and, contemporaneously appointed: (i) Philip
Gay to serve as the Chief Executive Officer and member of the Board of Directors, (ii) Ron Throgmartin to act as Chief Operating
Officer, (iii) Nick Roberts to act as Chief Financial Officer; and (iv) Alan Valdes, Douglas Anderson, and Stephen Norris to serve
as members of the Board of Directors.
In
anticipation of the Merger, the Company changed its name from “Type 1 Media, Inc.” to “Diego Pellicer Worldwide,
Inc.” on February 26, 2015.
The
foregoing descriptions of the terms of the Merger Agreement are qualified in its entirety by reference to the provisions of the
Exchange Agreement filed as Exhibit 2.1 to this Report, which is incorporated by reference herein.
Cancellation
Agreement
In
connection with the Merger, the Company entered into a cancellation agreement with the Majority Shareholder (the “Cancellation
Agreement”) whereby the Majority Shareholder, owning an aggregate of 55,000,000 (post-split) shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”) agreed to cancel the 55,000,000 shares of
Common Stock, in exchange for $169,000.
The
foregoing descriptions of the terms of the Cancellation Agreement are qualified in its entirety by reference to the provisions
of the Cancellation Agreement filed as Exhibit 10.6 to this Report, which is incorporated by reference herein.
Item 2.01 |
Completion
Of Acquisition Or Disposition Of Assets |
Reference
is made to the disclosure set forth under Item 1.01 of this Report, which disclosure is incorporated herein by reference.
On
March 13, 2015, we acquired Diego pursuant to the Merger Agreement. The assets and liabilities of the acquired entity have been
brought forward at their book value and no goodwill has been recognized.
FORM
10 DISCLOSURE
As
disclosed elsewhere in this Report, on March 13, 2015, the Company acquired Diego in a merger transaction. Item 2.01(f) of Form
8-K provides that if the registrant was a shell company, other than a business combination related shell company, as those terms
are defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the “Exchange Act”), immediately before the reverse
acquisition transaction, then the registrant must disclose the information that would be required if the registrant were filing
a general form for registration of securities on Form 10 under the Exchange Act reflecting all classes of the registrant’s
securities subject to the reporting requirements of Section 13 of the such Exchange Act upon consummation of the transaction.
Although
we were not a shell company at any point before the reverse acquisition transaction disclosed under Item 2.01, we are providing
below the information that we would be required to disclose on Form 10 under the Exchange Act if we were to file such form. Please
note that the information provided below relates to the combined enterprises after the acquisition of Diego, except that information
relating to periods prior to the date of the reverse acquisition only relate to Diego unless otherwise specifically indicated.
Diego World-wide 1, Inc. is referred to in this section collectively as “we,” “us” the “Company”
and “Diego” unless the context indicates otherwise.
Information
in response to this Item 2.01 below is keyed to the items numbers of Form 10.
Item
1. |
Description
Of Business |
Business
Overview
Diego
is a real estate and a consumer retail development company that is focused on developing “Diego Pellicer” as the world’s
first “premium” marijuana brand by adhering to the highest quality and standards for its facilities along with both
cannabis and non-cannabis products. The Company’s initial focus is to acquire and develop legally compliant real estate
locations for the purposes of leasing them to state licensed companies in the cannabis industry. Diego does not grow or sell marijuana
or marijuana infused products in the early stages of this plan.
Diego’s
initial revenues derive from leasing real estate and selling non-cannabis related products; however, when it is federally
legal to do so, Diego will be properly positioned to take advantage of pre-negotiated acquisition contracts with selected
Diego tenants in marijuana retail and production facilities throughout the country. Diego’s proprietary model will
allow it to become a nationally branded marijuana retailer and producer, instantaneously, with the change of federal law. The
company is in the process of drafting these pre-negotiated acquisition contracts at this time.
To
operate within the constraints set forth by the US government, the purpose of this business plan is to describe Diego; however,
to describe the successes of Diego Pellicer branding, this business plan will contain operational and financial highlights
of grow and retail operations with which Diego has pre-negotiated acquisition contracts. These external operations are presented
as DP Grow and DP Retail, and the results of these operations as presented will not directly benefit Diego until after Federal
legalization.
Our
Corporate History and Background
Diego Pellicer Inc. was formed in the
state of Washington of December 5, 2012, with the intent to produce and sell cannabis in the state of Washington. The Company
determined that in order to be successful and avoid any potential violation of federal law, it would form a new corporation that
would not produce or sell cannabis directly. Therefore, Diego Pellicer Worldwide, Inc. was formed as a Delaware corporation, on
August 26, 2013. The Company was developed to position itself in such a way that if the cannabis industry were to federally legalize,
then it would be in an advantageous position to quickly become one of the first luxury integrated brands in the industry. Currently,
the Company’s focus is to acquire and develop legally compliant real estate locations for the purposes of leasing them to
state licensed companies in the cannabis industry. Diego does not grow or sell marijuana or marijuana infused products at this
time.
Mission
Diego
will fuse the stringent quality standards of the brand, with award-winning legal growers and retailers, throughout the country,
where recreational and/or medical marijuana sales and cultivation are permitted by State law. As a tenant of Diego, these operators
will have access to Diego’s world class management team with expertise in real estate, retail management, agriculture and
USDA experts, legal, marketing and branding, product development and creative teams.
Diego’s
mission is to globally dominate the marijuana marketplace, when the US and countries around the world, legalize commerce of marijuana
on a national and international platform. Diego will accomplish this by positioning the Company, through its proprietary business
model, to be the first fully integrated marijuana retail operation and premium brand, known for its beautifully designed user
friendly retail stores offering the finest quality products at competitive prices, when the US and other countries legalize the
sale of marijuana.
Philosophy
We
believe that legalizing marijuana, regulating it and taxing it, will cause less harm and do more good than the prohibition environment.
We believe marijuana should be elevated to its proper place among other legal recreational intoxicants such as fine wines, liquors,
beers, cigars, etc. There is an overwhelming amount of scientific evidence that supports our philosophy, as well as a growing
number of supporters ranging from high-ranking US and foreign politicians to prominent figures in the entertainment industry.
In addition, we believe that legalization will help unlock the phenomenal power of cannabis as a medicinal treatment for numerous
ailments from headaches to cancer.
Brand
History
Diego
Pellicer was a Spanish colonial vice governor of Cebu, a major island in the Philippine archipelago. He grew to become the largest
grower of hemp in the world and is our name sake. He serves as an inspiration to our executive team, as well as distinctive brand
befitting the quality of Diego Pellicer Worldwide.
Vision
Our
vision is to continue to develop Diego Pellicer as a premium brand that is valued and positioned to appeal to a broad customer
base. Management feels a good analogy for the perception of our brand is that Diego Pellicer is to marijuana what Davidoff is
to cigars, Godiva to chocolate and Starbucks to coffee.
In
addition, Diego believes that in the very near future, the US and other countries will embrace the will of the people, and legalize
the responsible adult use of marijuana. Legalizing national and international commerce of marijuana, will allow Diego to take
its brand and unmatched quality standards to markets all around the globe.
Value
Proposition
The initial value proposition of Diego
consists of a standardized approach to the build-outs of real estate holdings, customized for premium marijuana grow and retail
operations. The build-out model is optimized to maximize resources while minimizing costs and overhead. With each build-out, Diego
pre-negotiates acquisition contractions with licensed DP Grow and DP Retail tenants, which, upon changes to federal law, introduces
our second value proposition—ownership of operations from seed to sale in an industry that is projected to exceed $8 billion
by 2018 and we hope will soon rival that of traditional markets such as tobacco and alcohol.
Market
Size
The US state-sanctioned medical marijuana
market generated a total revenue of $1.6 billion in 2013, an estimated increase of 33% over 2012, exceeding industry estimates
by more than $100M. By comparison, the marijuana market is less than 2% of the US tobacco market, a $153.5 billion market that
has no medicinal value, and less than 1% of the alcohol market, which valued at $197.8 billion in 2012 (Ginley, 2013; MarketLine,
2013). As states legalize marijuana, and international markets develop, the emerging legalized marijuana industry will begin to
rival that of tobacco and alcohol.
Target
Geographies
Diego
has entered a rapid growth and expansion stage in its evolution toward becoming an internationally recognized brand. The target
geographies for Diego are all US states in which recreational or medicinal marijuana is legalized. This is a phased implementation
that carefully pre-stages funding and materials to be first to market, with a proprietary model, as each state rules on legalization.
In certain scenarios, Diego may choose to allow weak competitors to fail, making available prime real estate that otherwise would
be inaccessible.
Target
Consumers
There
are an estimated 1.3 million medical marijuana patients in the US and nearly 4,000 retailers. California has the largest number
of marijuana patients at more than 500,000, followed by Michigan at 344,000 and Colorado with 109,000. Washington is a close 4th
at 103,000 registered patients.
The
demographics for consumers that have tried marijuana at least once, range between ages 18 to 49, with the greatest numbers between
the ages 26 and 34. These consumers are predominantly male and college educated.
Alaska
has the fastest growing population of potential consumers, followed by Washington DC, Colorado, New Mexico and Hawaii, with Washington
just a few points below. In 2012, Montana, Colorado, California, and Washington had the greatest increase in disposable income,
thus increasing the breadth of target consumers.
Material
Agreements
On
April 19, 2014, the Company entered into a commercial agreement and merger agreement with Diego Pellicer, Inc., a Washington corporation
(“Diego Washington”). Diego Washington agreed to making a capital contribution from its current investors of not less
than $350,000 in the Company and that the Company agreed to offer to the holders of Series A Preferred Stock of Diego Washington
and to current holders of convertible promissory notes convertible for shares of Diego Washington, the right to exchange that
same number of shares to shares the Company.
On September 19, 2014, the Company
entered into a Lease Agreement with M-P Properties whereby the Company agreed to lease the property located at 2215 4th
Avenue, Seattle, Washington, for a term of five years with an option to renew. The Company agreed to pay $78,000 per year.
On March 1, 2014, the Company entered
into a Sublease Agreement with Diego Pellicer, Inc., a Washington entity whereby the Company agreed to sublease the property located
at 2215 4th Avenue, Seattle, Washington, for a term of four years.
On June 12, 2014, the Company entered
into a Lease Agreement with Shamira, LLC whereby the Company agreed to lease the property located at 4242 Elizabeth Street, Denver,
Colorado, for five years with an option to renew. The Company agreed to pay $360,000 per year for the first year of the agreement,
with an increase of 3% for year subsequent year.
On August 14, 2014, the Company entered
into a Commercial Sublease Agreement with DPCO, Inc., a Colorado corporation, whereby the Company subleased the property located
at 4242 Elizabeth Street, Denver, Colorado for a term of five years.
On July 14, 2014, the Company entered
into a Lease Agreement with 2949 W. Alameda Ave LLC whereby the Company agreed to lease the property located at 2949 W. Alameda
Avenue, Denver, Colorado, for five years with an option to renew. The Company agreed to pay $20,000 per month in rent.
On August 14, 2014, the Company entered
into a Sublease Agreement with DPCO, Inc., a Colorado corporation, whereby the Company agreed to sublease the property located
at 2949 W. Alameda Avenue, Denver Colorado for a year of five years.
On August 13, 2014, the Company entered
into a Sublease Agreement with MandS LLC whereby the Company agreed to lease the property located at 755 South Jason Street, Denver,
Colorado, for four years. The Company agreed to pay $25,000 per month in rent.
On August 14, 2014, the Company entered
into a Sublease Agreement with DPCO, Inc. a Colorado corporation, whereby the Company subleased the property located at 755 South
Jason Street, Denver, Colorado for a term of four years.
On September 15, 2014, the Company entered into a Lease Agreement with
Oakway Golf Course, Inc. whereby the Company agreed to lease the property located at 800 North 42nd Street, Springfield,
Oregon, for five years with an option to renew. The Company agreed to pay $7,227 for the first year of the lease, with a $150
increase in each subsequent year.
Our
Industry
We are in a burgeoning industry, centered
on the production and sales of medical and recreational marijuana. Diego Pellicer is focused on providing legally compliant retail
andand production facilities to State licensed operators. In addition, Diego Pellicer offers branding opportunities to state licensed
producers and retailers that meet our stringent qualifications.
In
addition to providing fully branded and built real estate to qualified tenants, Diego Pellicer offers non-cannabis infused products,
apparel, and other tangible products at a wholesale rate. To become a qualified tenant, Diego requires its tenants to strictly
adhere to testing and labeling requirements along with all state laws and federal guidelines to assure quality and consistency
of marijuana products, ensuring safe sale and consumption. Table 7 provides a list of our current property portfolio.
Our
Business Strategy
Market
Definition and Roles
The
marijuana market consists of medical and recreational regulators, producers, testers, processors, wholesalers, retailers, collectives,
consumers and real estate holders. Since data pertaining to specific aspects of marijuana sales, such as processor revenues, is
virtually non-existent for the marijuana market, the market is valued according to retail sales data provided by state and federal
governing bodies. Below is a brief summary of each role:
| ● | Regulators:
State and federal lawmakers. |
| ● | Producer
or Grower: Cash crop farmers and grow shops. |
| ● | Tester:
Testers of marijuana for quality and other required measures. |
| ● | Processor
or Infuser: Processers of marijuana into a commercial product (flower, concentrates,
and edibles). |
| ● | Wholesaler:
Buyers from producers or processors that sell in bulk to other processers and retailers. |
| ● | Retailer:
For profit (proprietorship, partnerships, or for-profit business) sellers to consumers
and patients. |
| ● | Collective
or Cooperative: Non-profit organizations selling mostly to patients. |
| ● | Recreational
Consumers or Patients (local and marijuana tourist): Consumers of marijuana products,
recreationally or by medical prescription. |
| ● | Real
Estate Holdings: Companies that specialize in building-out and managing real estate for
all aspects of operations (e.g., grow, retail, processing and packaging, etc.) |
Market
Strategy
Our
short-term strategy is to profit only from the lease payments of our real estate holdings and from the sale of branded, non-cannabis
products. Diego has pre-negotiated acquisition contracts with selected tenants that trigger only when it is legal, or not illegal,
to conduct interstate commerce in marijuana.
The
three pillars of our strategy are:
| 1. | Acquire
compliant properties legally, and build-out high-quality marijuana grow and retail locations,
and lease these locations to tenants that are stand-alone, independent corporations with
the ability to meet Diego Pellicer quality and branding standards |
| 2. | While
initially Diego does not have an ownership stake in grow or retail companies, our strategy
is to execute pre-negotiated acquisition contracts with its tenants whereby Diego has
the exclusive option to acquire these independent operator lessees. These options shall
only be executed when and if the company deems it sufficiently legal to do so and there
is no guarantee these options will be exercised. |
| 3. | Develop
and sell quality non-cannabis ancillary products including apparel, luxury merchandise
products, non-cannabis chocolates and pastries, just to name a few. These products will
be sold in DP retail outlets where allowed or in proximate independent stores and through
e-commerce. |
A
very important aspect of our marketing plan is to build Diego Pellicer as a luxury brand. This not only enables us to establish
further and exploit Diego Pellicer as a premium brand, but also to generate significant revenues off of non-cannabis products.
For
the consumer, both the retail stores and e-commerce platform offers an informative and personalized way to shop and purchase products
anywhere, at any time and from any device. Diego Pellicer enhances the shopping experience by providing a fun and easy to use
e-commerce that delivers product and content from brand influencers that will help inform, personalize and curate products specific
to the consumers’ needs and desires.
Market
Size
The
US marijuana market has experienced rapid, chaotic growth in recent years, which is set to continue beyond the forecast target
of 2019 due primarily to regulatory misalignment between state and federal governments.
The marijuana secondary and tertiary
markets have not yet been analyzed as sources of revenue; however, emerging secondary markets such as marijuana tourism could
become a significant source of income for recreational legal states. As a point of comparison, Holland earns $48.55 billion per
year in tourist dollars. Of the 10 million tourists, 5.5 million or 55% of tourists visit bars and cafes, generating a total of
nearly $27 billion and 220,000 jobs (NBTC, 2009). This equals roughly 30% of all business revenue generated in Washington state
in 2012 (Washington State Department of Revenue, 2014).
The US state-sanctioned medical marijuana
market generated a total revenue of $1.6 billion in 2013, an estimated increase of 33% over 2012, exceeding industry estimates
by more than $100M. By comparison, the marijuana market is less than 2% of the US tobacco market, a $153.5 billion market that
has no medicinal value, and less than 1% of the alcohol market, which valued at $197.8 billion in 2012 (Ginley, 2013; MarketLine,
2013).
Marijuana
has become a major issue in state elections as voters are seeking politicians that support legalization (Gutwillig, 2014). As
states legalize marijuana, and international markets develop, the emerging legalized marijuana industry will begin to rival that
of tobacco and alcohol. Table 1 summarizes revenues generated by marijuana retail sales based on a number of sources, including
state marijuana program reports.
Table
1: US Marijuana Retail Sales, 2013
|
State |
2013 |
|
|
Alaska |
$165,056 |
|
|
Arizona |
$304,000,000 |
|
|
California |
$760,000,000 |
|
|
Colorado |
$318,300,000 |
|
|
Connecticut |
$- |
|
|
DC |
$2,000,000 |
|
|
Delaware |
$- |
|
|
Hawaii |
$2,251,287 |
|
|
Illinois |
$- |
|
|
Maine |
$3,453,515 |
|
|
Massachusetts |
$3,983,570 |
|
|
Michigan |
$54,000,000 |
|
|
Montana |
$4,352,110 |
|
|
Nevada |
$5,597,050 |
|
|
New
Hampshire |
$- |
|
|
New
Jersey |
$12,800,000 |
|
|
New
Mexico |
$6,419,467 |
|
|
Oregon |
$130,800,000 |
|
|
Rhode
Island |
$3,960,918 |
|
|
Vermont |
$1,126,400 |
|
|
Washington |
$561,000 |
|
Source: (Brown
and Resnick, 2013; California Department of Public Health, 2014b; California State Board of Equalization, 2009; Colorado
Office of Research and Analysis, 2013a, 2013b, 2013c, 2013d, 2013e, 2014; Illinois Cannabis Patients Association, 2010; Leal,
2014; Marijuana Business Daily, 2013)
Figure
2 illustrates the market structure by state and retail sales revenues. Of the 21 states in which marijuana is legal, California
generated the most revenue at $760M, followed by California was Colorado at $318M and Arizona at $304M. Most States operating
in 2012 experienced double and triple digit growth into 2013, with the exception to California, which has leveled out from 2011
to 2013.
![](image_001.jpg)
Figure
2: US Marijuana Retail Sales, 2013
Various industry reports estimate that
marijuana sales could generate as much as $8.7 billion in state and federal taxes; however, data to support that estimate is not
yet available.
Market
Growth
The performance of the market is forecast
to accelerate, with an anticipated growth of an average of 27% over the next four years to an expected market value greater than
$8 billion by the end of 2018. Table 2 and Figure 3 provide estimated market growth from 2011 to 2018. This growth assumes that
no additional states legalize. If additional states legalize, growth estimates will likely increase significantly.
Table
2: US Industry Estimates, 2013 to 2018
|
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
Medicinal |
1.5 |
1.2 |
1.6 |
1.9 |
2.3 |
2.9 |
3.5 |
4 |
Recreational |
|
|
|
0.07 |
1.4 |
2 |
2.5 |
4.2 |
Total |
1.5 |
1.2 |
1.6 |
1.97 |
3.7 |
4.9 |
6 |
8.2 |
Billions
of Dollars, US
Source:
(Brown and Resnick, 2013; California Department of Public Health, 2014b; CannaBusiness Media, 2014; Colorado Office of
Research and Analysis, 2013a, 2013b, 2013d, 2013e, 2014; Fairchild, 2013a, 2013b; Galvin, 2013; Illinois Cannabis Patients
Association, 2010; Leal, 2014; Marijuana Business Daily, 2013; Office of Financial Management, 2012)
![](image_002.jpg)
Figure
3: US Industry Estimates, 2011 to 2018
Market
Distribution
Market distribution must be measured
indirectly with registered medical consumers and dispensaries. As expected, California has the largest number of marijuana patients
at more than 500,000, followed by Michigan at 344,000 and Colorado with 109,000. Washington is a close 4th at 103,000 registered
patients as listed in Table 3 and illustrated in Figure 4. There are currently an estimated 1.3 million medical marijuana patients
in the US.
Table
3: Registered Medical Marijuana Patients
|
State |
Registered
Patients |
|
|
Alaska |
1,246 |
|
|
Arizona |
40,328 |
|
|
California |
553,684 |
|
|
Colorado |
109,622 |
|
|
Connecticut |
1,684 |
|
|
DC |
800 |
|
|
Delaware |
21 |
|
|
Hawaii |
11,695 |
|
|
Illinois |
0 |
|
|
Maine |
16,444 |
|
|
Massachusetts |
0 |
|
|
Michigan |
344,000 |
|
|
Montana |
30,000 |
|
|
New
Hampshire |
1,600 |
|
|
New
Jersey |
1,670 |
|
|
New
Mexico |
9,760 |
|
|
Nevada |
5,162 |
|
|
Oregon |
60,516 |
|
|
Rhode
Island |
5,941 |
|
|
Vermont |
846 |
|
|
Washington |
103,236 |
|
|
Estimated
Total Patients |
1,298,255 |
|
Source: (Arizona Department of Health
Services, 2013; Brown and Resnick, 2013; Burke, 2012; California Department of Public Health, 2014a; Department of Health Medicinal
Marijuana Program, 2014; Division of Public and Behavioral Health Medical Marijuana Program, 2014; Gryczan, 2013; Marijuana Policy
Project, 2013; Montana Department of Public Health and Human Services, 2012, 2013; Oregon Health Authority, 2014; Pierre, 2012;
ProCon.org, 2012; Washington State Institute for Public Policy, 2014)
![](image_003.jpg)
Figure
4: Registered Medical Marijuana Patients
Another
indirect measure of market distribution is the number of medical marijuana dispensaries. Table 4 and Figure 5 provide the distribution
of dispensaries across the US. The number of patients and dispensaries are mostly aligned; however, certain states such as Michigan
have much higher ratio of patients to dispensaries than other states. This could be the result of inaccurate data.
Table
4: Registered Medical Marijuana Dispensaries
|
State |
Registered
Dispensaries |
|
|
Alaska |
0 |
|
|
Arizona |
98 |
|
|
California |
2,000 |
|
|
Colorado |
532 |
|
|
Connecticut |
27 |
|
|
DC |
4 |
|
|
Delaware |
1 |
|
|
Hawaii |
0 |
|
|
Illinois |
60 |
|
|
Maine |
8 |
|
|
Massachusetts |
35 |
|
|
Michigan |
215 |
|
|
Montana |
100 |
|
|
New
Hampshire |
4 |
|
|
New
Jersey |
6 |
|
|
New
Mexico |
23 |
|
|
Nevada |
66 |
|
|
Oregon |
200 |
|
|
Rhode
Island |
3 |
|
|
Vermont |
4 |
|
|
Washington |
334 |
|
|
Estimated Total Dispensaries |
3,720 |
|
Source:
(Americans for Safe Access, 2011; Connecticut Department of Consumer Protection, 2014; FindTheBest.com, 2014; Noble, 2013)
![](image_004.jpg)
Figure
5: Registered Medical Marijuana Dispensaries
Competitive
Analysis and Benchmarking
Diego was one of the first to the market
with a real estate holding and branding business model; however, other companies have since adopted similar strategies. Key differentiators
between Diego and its competitors are superior branding, optimized build-out and turnkey grow and retail development, and, most
importantly, pre-negotiated acquisition contracts. As with other marijuana-related financial data, collecting benchmark data on
Diego competitors was especially challenging in that many of these companies fail to report or are unable to report the fundamentals
of financial information. Table 5 provides a financial benchmark of Diego’s nearest competitors.
Table
5: 2013 Real Estate Holding and Branding Financial Benchmark—$000
| |
Market Cap | | |
Rev | | |
Cost of Rev | | |
Gross Margin % | | |
EBITDA Margin % | | |
Net Profit | |
Medbox, Inc. (MDBX) | |
$ | 258,700 | | |
$ | 5,203 | | |
$ | 2,657 | | |
| 51.1 | % | |
| -14.8 | % | |
$ | (660 | ) |
Advanced Cannabis Solutions, Inc. (CANN) Grey Market (3 Qtrs) | |
$ | 59,600 | | |
$ | 129 | | |
$ | 23 | | |
| 82.2 | % | |
| (542 | %) | |
$ | (1,277 | ) |
Mountain High Acquisitions Corp. (MYHI) OTCQB | |
$ | 14,300 | | |
| - | | |
| | | |
| - | | |
| - | | |
$ | (1,336 | ) |
Agritek Holdings, Inc. (AGTK) | |
$ | 8,410 | | |
$ | 79 | | |
$ | 86 | | |
| 7.6 | % | |
| (1189 | %) | |
$ | (1,453 | ) |
Home Treasure Finders, Inc. (HMTF)(MJ real estate lessor) | |
$ | 4,160 | | |
$ | 203 | | |
$ | 0 | | |
| INF | | |
| (44 | %) | |
$ | (92 | ) |
Source:
Finance.yahoo.com and CNBC.com
Tourism
Effect
The secondary and tertiary effects
of the marijuana market have received little attention by market analyst; however, markets such as marijuana tourism could become
a significant source of revenue for recreationally legal states. For example, The Netherlands earns $48.55 billion per year in
tourist dollars. Of the 10M tourists, 5.5 million or 55% visit marijuana bars and cafes, generating a total of nearly $27 billion
and 220,000 jobs. Likewise, Colorado reported note that marijuana tourism is responsible for 90% of all retail sales in resort
towns (Weissmann, 2014).
Peak
Sales and Product Segmentation
Peak
marijuana sales occur during two calendar periods: December/January and July/August. Smokable Marijuana sales exceed other product
categories representing 87% of the market, which is followed by concentrates at 7% and edibles at 4% while drinks, topicals, accessories
and clones generate the least amount of revenue at less than 1% each. The top marijuana product according to an analysis of a
market leading dispensary is Bruce Banner followed by 303 Kush.
Legalization
by State
Support
for medical and recreational marijuana use has increased significantly over the past 20 years. According to a recent CNN poll,
greater than 50% of the US population supports marijuana legalization. Figure 6 illustrates a select set of CNN poll results.
![](image_005.jpg)
Figure
6: CNN/ORC Poll Results on Marijuana Use in the US
Two
states, Colorado and Washington, have passed legislation for recreational marijuana. Several other states in which medical marijuana
is currently legal will likely follow suite for reasons such as substantial tax revenues and a positive public support for legalization.
States are learning from one another, refining legislation and establishing realistic tax strategies. The Obama administration
has pledged to end Federal raids on state-sanctioned dispensaries (Furlow, 2012). Similar movements are occurring in other democratic
countries such as Australia in which several states have decriminalized possession (Thies, 2012). Table 6 lists recreational and
medicinal marijuana legalization status by state.
Table
6: State Recreational Marijuana Laws
|
State |
Status/Year |
Type
of Legalization |
|
|
Alaska |
Decriminalized |
Medical
(Rec on Nov 2014 ballot) |
|
|
Arizona |
Passed
(2010) |
Medical |
|
|
California |
Decriminalized |
Medical |
|
|
Colorado |
Passed
(2012) |
Medical
and Recreational |
|
|
Connecticut |
Decriminalized |
Medical |
|
|
Delaware |
Pending |
Medical |
|
|
Florida |
Pending |
Medical |
|
|
Hawaii |
Passed
(2000) |
Medical |
|
|
Illinois |
Passed
(2013) |
Medical |
|
|
Maine
(Portland only) |
Decriminalized
(2013) |
Medical |
|
|
Maryland |
Decriminalized
(2014) |
Medical |
|
|
Massachusetts |
Decriminalized
(2012) |
Medical |
|
|
Michigan |
Passed |
Medical |
|
|
Minnesota |
Passed
(2014) |
Medical |
|
|
Mississippi |
Pending |
Pending |
|
|
Montana |
Pending |
Medical |
|
|
Nebraska |
Pending |
Pending |
|
|
Nevada |
Passed
(2000) |
Medical |
|
|
New
Hampshire |
Passed
(2013) |
Medical |
|
|
New
Jersey |
Passed
(2010) |
Medical |
|
|
New
Mexico |
Passed
(2007) |
Medical |
|
|
New
York |
Passed
(2014) |
Medical |
|
|
North
Carolina |
Pending |
Medical |
|
|
Ohio |
Decriminalized |
Medical |
|
|
Oregon |
Decriminalized |
Medical
(Rec on Nov 2014 ballot) |
|
|
Pennsylvania |
Pending |
Medical |
|
|
Rhode
Island |
Decriminalized |
Medical |
|
|
Vermont |
Decriminalized
(2013) |
Medical |
|
|
Washington |
Passed
(2012) |
Medical
and Recreational |
|
|
Washington
DC |
Decriminalized |
Medical |
|
Source:
(California State Board of Equalization, 2009; Gacek, 2014; ProCon.org, 2014; U.S. Office of National Drug Control Policy, 2014)
Target
Geographies
Diego
has entered a rapid growth and expansion stage in its evolution toward becoming an internationally recognized brand. The target
geographies for Diego are all US states in which recreational or medicinal marijuana is legalized. This is a phased implementation
that carefully pre-stages funding and materials to be first to market, with our proprietary model, as each state rules on legalization.
In certain scenarios, Diego may choose to allow weak competitors to fail, making available prime real estate that otherwise would
be inaccessible.
Target
Consumers
There
are an estimated 1.3M medical marijuana patients in the US and nearly 4,000 retailers. California has the largest number of marijuana
patients at more than 500,000, followed by Michigan at 344,000 and Colorado with 109,000. Washington is a close 4th at 103,000
registered patients.
The
demographics for consumers that have tried marijuana at least once, range between ages 18 to 49, with the greatest numbers between
the ages 26 and 34. These consumers are predominantly male, and college educated.
Alaska
has the fastest growing population of potential consumers, followed by Washington DC, Colorado, New Mexico and Hawaii, with Washington
just a few points below. In 2012, Montana, Colorado, California, and Washington had the greatest increase in disposable income,
thus increasing the breadth of target consumers.
Future
Markets
Studies
on marijuana use in The Netherlands have demonstrated that the availability of marijuana in café’s has had very
little effect on increasing or decreasing marijuana use (MacCoun, 2011). As such, the next progression in the US market,
following Federal legalization, is the establishment of café’s or other types of service centers for marijuana
consumption. The number of café’s in The Netherlands has ranged between 700 and 800 over the past 15 years, and
currently operates about 700 or 1 per 29,000 citizens, employing 4,000 workers and generating $832.2M annually (Monshouwer,
Van Laar, and Vollebergh, 2011). Extrapolating this to the US market would indicate approximately 10,000 café’s
and service centers where actual consumption of cannabis can take place.
Primary
Service
Our
primary service is fully branded and built real estate to qualified tenants. Our branding includes non-cannabis infused products,
apparel, and other tangible products at a wholesale rate. To become a qualified tenant, Diego requires its tenants to strictly
adhere to testing and labeling requirements along with all state laws and federal guidelines to assure quality and consistency
of marijuana products, ensuring safe sale and consumption. Table 7 provides a list of our current property portfolio.
Table
7: Property Portfolio
Purpose |
Size |
City |
State |
Retail
(recreational and medical) |
3,300
sq.ft. |
Denver |
CO |
Grow
Warehouse |
18,600
sq.ft. |
Denver |
CO |
Grow
Warehouse |
14,800
sq.ft. |
Denver |
CO |
Grow
Warehouse |
16,060
sq.ft. |
Springfield |
OR |
Flagship
recreational MJ store w/café and apparel |
4,500
sq.ft. |
Seattle |
WA |
Diego
Pellicer creates a user friendly customer experience regardless of venue or form of media making it easy and safe for them to
purchase. A major aspect of our marketing plan is to inform and educate consumers in a way that allows them to rely on DP as a
trusted and valued brand. DP information and products will be available in all forms of media with a variety of different forms
of content including videos, social media, online newsletters and blogs and TV.
| ● | Consumers
will find Diego on custom e-commerce websites and via online syndication at web portals,
mobile and video destinations (Yahoo!, MSN, Google/YouTube, Hulu, Verizon, etc.) as a
dedicated selling platform that will serve Diego created video as information and entertainment. |
| ● | Consumers
will find our custom content via a cooperative syndication platform in which product
partners leverage each other’s audiences for the distribution of their content
and products. |
| ● | Through
events in Diego stores and outlets |
| ● | Mass
audiences could find Diego on network or cable television as the setting for a reality
show or documentary series. |
| ● | Mobile
marketing and Mobile apps |
This
will give our brand, products and content the flexibility and portability that consumers demand. This digital syndication strategy
will be executed through a series of revenue sharing deals with partners through viral seeding strategies and via paid media through
specific targeted websites and venues.
Revenue
Generation and Growth
Diego
generates current revenue and stages future revenue streams through the following processes:
| ● | Acquire
via lease or purchase, target properties to be improved for the growing, processing,
distribution, and sale of medical and recreational marijuana, extracts and ancillary
products. |
| ● | Sub-leases
or leases these properties to state licensed operators. |
| ● | Capitalizes,
where possible, on the build-out and leases near turnkey Retail, Processing and/or Growing
facilities. |
| ● | Creates
future merger agreements with those operators deem capable of carrying the Diego brand. |
| ● | Hold
Merger Agreements with Diego and other favored partners that will trigger when marijuana
commerce becomes legal (or not illegal) federally. |
| ● | Own
DP Brands and other Intellectual Property (IP) in all places filed. |
| ● | Charge
reasonable Market Net-Rents to the store owners/Operators to recover all build-out and
start-up investment plus profit margin over the first lease term (generally five years.) |
| ● | Sell
non-cannabis branded products lines such as apparel and edibles at wholesale to leased
stores. |
| ● | Create
an e-commerce platform selling non-cannabis branded merchandise |
| ● | Continue
to build and market the brand utilizing all forms of media including traditional and
digital media, social media, e-commerce, and strategic partners. |
U.S.
Federal Law
While
marijuana is legal under the laws of several U.S. States (with vastly differing restrictions), at the present time, the concept
of "medical marijuana" and "retail marijuana" do not exist under U.S. federal law. The United States Federal
Controlled Substances Act classifies "marijuana" as a Schedule I drug. Under U.S. federal law, a Schedule I drug
or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of safety for the use of
the drug under medical supervision.
The
United States Supreme Court has ruled in a number of cases that the federal government does not violate the federal constitution
by regulating and criminalizing cannabis, even for medical purposes. Therefore, federal law criminalizing the use of marijuana
pre-empts state laws that legalizes its use for medicinal purposes.
In
a memorandum dated August 29, 2013 addressed to "All United States Attorneys" from James M. Cole, Deputy Attorney General
("Cole Memo"), the U.S. Department of Justice acknowledged that certain U.S. States had enacted laws relating to the
use of marijuana and outlined the U.S. federal government's enforcement priorities with respect to marijuana notwithstanding the
fact that certain U.S. States have legalized or decriminalized the use, sale and manufacture of marijuana:
| ● | Preventing
the distribution of marijuana to minors; |
| ● | Preventing
revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels; |
| ● | Preventing
the diversion of marijuana from U.S. states where it is legal under state law in some
form to other U.S. states; |
| ● | Preventing
U.S. state-authorized marijuana activity from being used as a cover or pretext for the
trafficking of other illegal drugs or other illegal activity; |
| ● | Preventing
violence and the use of firearms in the cultivation and distribution of marijuana; |
| ● | Preventing
drugged driving and the exacerbation of other adverse public health consequences associated
with marijuana use; |
| ● | Preventing
the growing of marijuana on public lands and the attendant public safety and environmental
dangers posed by marijuana production on public lands; and |
| ● | Preventing
marijuana possession or use on U.S. federal property. |
There
is no guarantee that the current presidential administration will not change its stated policy regarding the low-priority enforcement
of U.S. federal laws that conflict with state laws. Additionally, any new U.S. federal government administration that follows
could change this policy and decide to enforce the U.S. federal laws vigorously. Any such change in the U.S. federal government's
enforcement of current U.S. federal laws could cause adverse financial impact to the Company's business. See "Risk Factors.”
In
February 2014, FinCEN issued guidelines allowing banks to legally provide financial services to Licensed Operators that hold a
valid License ("FinCEN Memo"). The rules re-iterated the guidance provided by the Cole Memo, stating that banks can
do business with Licensed Operators and "may not" be prosecuted. The guidelines provide that "it is possible [for
the banks] to provide financial services" to Licensed Operators and while remaining in compliance with federal anti-money
laundering laws. The guidance falls short of the explicit legal authorization that banking industry officials anticipated and
the outcome of the banks relying on this guidance in transacting with Licensed Operators is currently unclear. See "Risk
Factors.”
Employees
We
presently have 5 full-time employees and 0 part-time employees. We consider our relationship with our employees to be excellent.
We also had independent consultants under contract to provide financial management services, business development services, and
sales management services. In addition to the diverse technical, intellectual property, legal, financial, marketing and business
expertise of our professional team, from time to time we rely on advice from outside specialists to fulfill unique technology
and other needs.
An
investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together
with all of the other information included in this Report, before making an investment decision. If any of the following risks
actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our
shares of common stock could decline, and you may lose all or part of your investment. You should read the section entitled “Special
Note Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements,
as well as the significance of such statements in the context of this Report.
Risks
Related to Our Business
The
Company’s Growth and Operations are Subject to Regulatory Restrictions.
The
regulations adopted in Washington and Colorado place restrictions on companies engaged in the recreational cannabis industry in
those states. The Company may execute its business model of acquiring or leasing and improving real estate, and leasing or subleasing
that real estate to recreational and medical cannabis companies in Washington, Colorado and other states where cannabis legal,
but the current regulations in Washington and Colorado prohibit the Company from producing, processing, or selling recreational
cannabis. The Company will not produce, process, or cell cannabis until and unless it is legal under Federal law.
The
Company has received a subpoena from the United States Department of Justice.
The
Company has received a subpoena from the United States Department of Justice, represented by the United States Attorney’s
Office for the Western District of Washington, requesting the production of certain Company documents, records and banking records,
including, but not limited to, those relating to Diego Pellicer, Inc., securities offerings, and potential investors of the Company.
The Company believes that it has complied fully with all applicable laws, rules and regulations, and intends to cooperate fully
with the government’s investigation. At this time, the Company is unable to determine the potential impact, if any, that
will result from this investigation. If the Company, its officers or its directors are deemed to have taken unlawful action with
respect to these matters, we may be subject to fines and other contractual and regulatory remedies, including being required to
suspend or cease its operations. Such actions could have a material adverse effect on the conduct of our business, our financial
condition or could result in the loss of your investment.
U.S.
Federal Laws
The
concepts of "medical marijuana and "retail marijuana" do not exist under U.S. federal law. The Federal Controlled
Substances Act classifies "marijuana" as a Schedule I drug. Under U.S. federal law, a Schedule I drug or substance has
a high potential for abuse, no accepted medical use in United States, and a lack of safety for the use of the drug under medical
supervision. As such, marijuana-related practices or activities, including without limitation, the manufacture, importation, possession,
use or distribution of marijuana are illegal under U.S. federal law. Strict compliance with state laws with respect to marijuana
will neither absolve the Company of liability under U.S. federal law, nor will it provide a defense to any federal proceeding
which may be brought against the Company. While U.S. Department of Justice has instructed U.S. Attorneys that they need not expend
resources with respect to entities selling marijuana pursuant to strict U.S. State licensing regimes, this directive can change,
and U.S. Attorneys have discretion to interpret the Cole Memo as they see fit. Moreover, U.S. Attorneys have significant discretion
with respect to the activities they seek to prosecute, regardless of any directive from the Department of Justice.
On
December 9, 2014, Consolidated and Further Continuing Appropriations Act, 2015 ("Cromnibus Bill") was passed by the
United States Senate approving the federal spending through to September 30, 2015. Sections 583 and 214 of the Cromnibus Bill
protect medical marijuana laws in every state that has legalized it by prohibiting the U.S. Department of Justice from using federal
funds to prosecute medical marijuana actors in states where their actions are legal. Nevertheless, there can be no certainty that
future U.S. federal funding bills will include similar protection of medical marijuana laws.
Regulation
that may hinder the Company's Ability to Establish and Maintain Bank Accounts
The
U.S. federal law prohibitions on the sale of marijuana may result in the Company being restricted from accessing the U.S. banking
system and they may be unable to deposit funds in federally insured and licensed banking institutions. While the Company does
not anticipate dealing with banking restrictions directly relating to its business, banking restrictions could nevertheless be
imposed due to the Company's banking institutions not accepting payments from Royalty Producers. Royalty Producers at times do
not have deposit services and are at risk that any bank accounts they have could be closed at any time. Such risks increase costs
to the Company. Additionally, similar risks are associated with large amounts of cash at these businesses. These businesses require
heavy security with respect to holding and transport of cash, whether or not they have bank accounts.
The
guidance provided in the FinCEN Memo may change depending on the incumbent U.S. government administration and is subject to revision
or retraction in the future, which may restrict the Company's or Royalty Producers' access to banking services. The inability
of the Company to access banking services can make it difficult to structure royalty agreements in a manner acceptable to the
Company.
In
the event financial service providers do not accept accounts or transactions related to the marijuana industry, it is possible
that Royalty Producers may seek alternative payment solutions, including but not limited to crypto currencies such as Bitcoin.
There are risks inherent in crypto currencies, most notably its volatility and security issues. If the industry was to move towards
alternative payment solutions and accept payments in crypto currency the Company would have to adopt policies and protocols to
manage its volatility and exchange rate risk exposures. The Company's inability to manage such risks may adversely affect the
Company's operations and financial performance.
Enforcement
Risk
The
sale and distribution of marijuana in certain U.S. States is legal subject to compliance with applicable state regulatory regimes.
U.S. federal law currently classifies marijuana as a controlled substance and its manufacture, sale, distribution, and use is
illegal under U.S. federal law. The U.S. Department of Justice has indicated in the Cole Memo that is does not intend to interfere
with the sale or distribution of marijuana in U.S. States where such sale and distribution is legal provided the regulations are
complied with.
Certain
U.S. States have recently legalized marijuana that is grown and sold pursuant to applicable laws and regulations for medical purposes
(as opposed to recreational purposes) (“Medical Marijuana”). Two U.S. States have further legalized the recreational
use of marijuana.
While
the marijuana industry is legal in certain U.S. States, it is regulated differently. Consequently, certain activities conducted
by the Company may be permissible under one regulatory regime while not under another. Additionally, because marijuana is illegal
under U.S. federal law, the courts in the U.S. may take the position that parties to contracts involving marijuana, whether directly
or indirectly, may not enforce such contracts because they concern an illegal product or activity.
Our
ability to grow and compete in the future will be adversely affected if adequate capital is not available to us or not available
on terms favorable to us.
The
Company is not currently profitable, there is no guarantee that the Company will ever become profitable, and if the Company does
become profitable, this is no guarantee that it will remain profitable. The Company may need to raise additional financing to
support its operations and such financing(s) will be dilutive to the Company’s stockholders. There is no guarantee that
the Company will be able to raise such additional financing on terms acceptable to the Company or its stockholders, or even to
raise such additional financing at all.
The
ability of our business to grow and compete depends on the availability of adequate capital, which in turn depends in large part
on our cash flow from operations and the availability of equity and debt financing. We cannot assure you that our cash flow from
operations will be sufficient or that we will be able to obtain equity or debt financing on acceptable terms or at all to implement
our growth strategy. We estimate that we will need a minimum of $4,000,000 to successfully implement our short-term business
plans. As a result, we cannot assure you that adequate capital will be available to finance our current growth plans, take advantage
of business opportunities or respond to competitive pressures, any of which could harm our business.
We
have a Limited Operating History and have not yet generated revenues.
The
Company is an early stage business that was founded in 2013, with a limited operating history from which to evaluate its business
prospects. The Company faces risks encountered by early stage companies in general, including but not limited to: difficulty in
raising sufficient funding to achieve growth objectives, uncertainty of market acceptance of the Company’s products and
services, and the ability to attract and retain qualified personnel. There can be no guarantees that the Company will be successful
in managing these risks, and if the Company is unsuccessful in doing so, the Company’s investors face the risk of losing
their entire investment.
We
are operating under a new and unproven business plan.
The
Company’s potential for future profitability must be considered in light of the risks, uncertainties, and difficulties encountered
by companies that are in new and rapidly evolving markets and continuing to innovate with new and unproven technologies or services,
as well as undergoing significant change. If the Company fails to adapt or innovate as these changes occur, investors face the
risk of losing their entire investment.
Our
new business model may be subject to legal and regulatory compliance.
The
Company has a new, emerging, untested, and evolving business model and it is unclear how existing and/or future statutes and regulations
currently apply or will apply to the Company’s business model. Such laws and regulations include, but are not limited to,
the regulations adopted by the Washington State Liquor Control Board and the Colorado Department of Revenue, the Washington criminal
code, the Colorado criminal code, and federal criminal statutes.
The
Company’s operations may also be subject to municipal zoning restrictions.
Certain
municipalities have placed zoning restrictions on where cannabis retailers, producers, and processors may be located. Restrictions
on the Company’s ability to obtain the best production, processing or retail locations could have significant impacts on
the Company’s ability to meet its financial and growth objectives.
The
Company’s product and service offerings are still in the early developmental stage.
If
the Company fails to develop products and services on schedule or to further develop and refine its product and service offerings
to meet customer demand, and/or if customers fail to adopt the Company’s product and service offerings at the price points
presently contemplated by the Company, the Company’s financial condition, prospects, and results from operations will be
materially affected.
The
Company relies on intellectual property rights.
The
Company relies on a combination of trade secrets, non-disclosure, and other contractual arrangements, and copyright and trademark
laws to protect its proprietary rights. The Company’s future success is dependent, in part, upon its ability to protect
its intellectual property rights. The Company seeks to enter into confidentiality agreements with its partners, suppliers, and
associates and generally requires that its partners, suppliers, and associates enter into such agreements, and limits access to
and distribution of proprietary information. There can be no assurance that the steps taken by the Company in this regard will
be adequate to deter misappropriation of its proprietary information or that the Company will be able to detect unauthorized use
of and take the appropriate steps to enforce its intellectual property rights.
We
may not be successful in competing current and future participants in our industry.
The
cannabis-related services industry is evolving rapidly and without certainty, and the Company may not be successful in competing
against current and future participants in this market. Some of the Company’s competitors may have longer operating histories,
possess greater industry and brand name recognition, and/or have significantly greater financial, technical, and marketing resources
than does the Company.
Unfavorable
media coverage could affect the company’s business.
The
Company may receive a high degree of media coverage, both in the U.S. and around the world. Unfavorable publicity regarding the
Company, its business model, its industry, its directors, officers and senior management team, product or service offerings or
changes, litigation, regulatory activity, or the Company’s customers could adversely affect the Company’s reputation.
Such negative publicity could materially and adversely affect the Company’s operational and financial conditions, prospects,
and results from operations.
Our
operating results and financials could be materially affected by the operations of our tenants and occupants.
If
the tenants of any property acquired or leased by the Company default under their leases or subleases, do not renew or extend
their leases or subleases, or terminate their leases or subleases, or if issues arise with respect to the permissibility of certain
uses of a property acquired or leased by the Company, the operating results and financial viability of that property and the Company
could be substantially and materially affected. There is a risk of seizure of property by the federal or state governments if
tenants are deemed to be operating outside of laws and or regulations.
We
may face difficulty maintaining and attracting tenants.
The
Company currently intends to hold properties in fee simple, or to lease them, and to lease or sublease them to tenants. There
can be no assurance that the Company will be able to lease or sublease enough properties to meet its financial goals. It may be
necessary to make substantial concessions in terms of rent and lease incentives, and construct unplanned tenant improvements to
attract and retain tenants. If these expenditures and concessions are necessary and exceed the funds reserved out of the Company’s
capital resources, the financial performance of the Company may be adversely affected.
There
can be no assurance that cash flow or profits will be generated by any property held by the Company.
The
lack of cash flow or profits would negatively affect the Company’s ability to meet its goals. The Company’s management
is not obligated to provide investors with a guarantee against a loss on their investment or negative cash flows and the Company
management does not have, nor do they intend to provide, such a guarantee.
Unfavorable
changes in market and economic conditions could hurt property occupancy or rental rates.
The
demand, price and rents for rental real property have historically been positively and negatively affected by the sector’s
economic performance, any decrease in which could result in the market for real estate being adversely impacted.
Risks
Related to Ownership of Our Common Stock
There
is no public trading market for our Common Stock and you may not be able to resell your Common Stock.
There
is no established public trading market for our securities. Although we intend to be quoted on the OTC Markets in the United States,
our shares are not and have not been quoted on any exchange or quotation system. We cannot assure you that a market maker will
agree to file the necessary documents with the FINRA, nor can there be any assurance that such an application for quotation will
be approved or that a regular trading market will develop or that if developed, will be sustained. In the absence of a trading
market, an investor may be unable to liquidate its investment, which will result in the loss of your investment.
Future
issuance of our Common Stock could dilute the interests of existing shareholders.
We
may issue additional shares of our Common Stock in the future. The issuance of a substantial amount of Common Stock could have
the effect of substantially diluting the interests of our shareholders. In addition, the sale of a substantial amount of Common
Stock in the public market, either in the initial issuance or in a subsequent resale by the target company in an acquisition which
received such Common Stock as consideration or by investors who acquired such Common Stock in a private placement could have an
adverse affect on the market price of our Common Stock.
We
have no plans to pay dividends.
To
date, we have paid no cash dividends on our common shares. For the foreseeable future, earnings generated from our operations
will be retained for use in our business and not to pay dividends.
The
application of the Securities and Exchange Commission’s “penny stock” rules to our Common Stock could limit
trading activity in the market, and our shareholders may find it more difficult to sell their stock.
It
is expected our Common Stock will be trading at less than $5.00 per share and is therefore subject to the SEC penny stock rules.
Penny stocks generally are equity securities with a price of less than $5.00. Penny stock rules require a broker-dealer, prior
to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that
provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer
with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer
must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading
activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens
imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities,
which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of
broker-dealers to sell our Common Stock and may affect your ability to resell our Common Stock.
We
will have broad discretion over the use of the net proceeds to the company and may not use them effectively.
Our
management will have broad discretion to use the net proceeds to the company for a variety of purposes, including, further
development of our products and operations, working capital and general corporate purposes. We may spend or invest these
proceeds in a way with which our shareholders disagree. Failure by our management to effectively use these funds could harm our
business and financial condition. Until the net proceeds are used, they may be placed in investments that do not yield a favorable
return to our investors, do not produce significant income or lose value.
If
we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet
our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory
scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on
the market price for shares of our Common Stock.
Effective
internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system
of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal
executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles.
As
a public company, we will have significant additional requirements for enhanced financial reporting and internal controls. We
will be required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial
reporting. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate
and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain
a system of internal controls that is adequate to satisfy our reporting obligations as a public company.
We
cannot assure you that we will not, in the future, identify areas requiring improvement in our internal control over financial
reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful
or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue
our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us
to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results,
subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have
a negative effect on the market price for shares of our Common Stock.
Lack
of experience as officers of publicly-traded companies of our management team may hinder our ability to comply with Sarbanes-Oxley
Act.
It
may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required
by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff or consultants
in order to develop and implement appropriate internal controls and reporting procedures.
We
will incur increased costs as a public company which may affect our profitability.
Bio-En
previously operated as a private company in Delaware. As a public company, we will incur significant legal, accounting and
other expenses that we did not incur as a private company. We are subject to the SEC’s rules and regulations relating to
public disclosure. SEC disclosures generally involve a substantial expenditure of financial resources. Compliance with these rules
and regulations will significantly increase our legal and financial compliance costs and some activities will become
more time-consuming and costly. Management may need to increase compensation for senior executive officers, engage additional
senior financial officers who are able to adopt financial reporting and control procedures, allocate a budget for an investor
and public relations program, and increase our financial and accounting staff in order to meet the demands and financial reporting
requirements as a public reporting company. Such additional personnel, public relations, reporting and compliance costs may negatively
impact our financial results.
In
the event a market develops for our Common Stock, the market price of our Common Stock may be volatile.
In
the event a market develops for our Common Stock, the market price of our Common Stock may be highly volatile, as is the stock
market in general, and the market for OTC Market quoted stocks in particular. Some of the factors that may materially affect the
market price of our Common Stock are beyond our control, such as changes in financial estimates by industry and securities analysts,
conditions or trends in the industry in which we operate or sales of our Common Stock. These factors may materially adversely
affect the market price of our Common Stock, regardless of our performance. In addition, the public stock markets have experienced
extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many
companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations
may adversely affect the market price of our Common Stock.
Public
company compliance may make it more difficult to attract and retain officers and directors.
The
Sarbanes-Oxley Act and rules subsequently implemented by the SEC have required changes in corporate governance practices of public
companies. As a public company, we expect these rules and regulations to increase our compliance costs and to make certain activities
more time consuming and costly. As a public company, we also expect that these rules and regulations may make it more difficult
and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced
policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be
more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.
Because
our directors and executive officers are among our largest shareholders, they can exert significant control over our business
and affairs and have actual or potential interests that may depart from those of subscribers in the Offering.
Our
directors and executive officers collectively and beneficially own approximately 48% of outstanding common stock. Additionally,
the holdings of our directors and executive officers may increase in the future upon vesting or other maturation of exercise rights
under any of the options or warrants they may hold or in the future be granted or if they otherwise acquire additional shares
of our Common Stock. The interests of such persons may differ from the interests of our other shareholders, including purchasers
of Units in the Offering. As a result, in addition to their board seats and offices, such persons will have significant influence
over and control all corporate actions requiring shareholder approval, irrespective of how the Company’s other shareholders,
including purchasers in the Offering, may vote, including the following actions:
|
● |
to
elect or defeat the election of our directors; |
|
● |
to
amend or prevent amendment of our Certificate of Incorporation or By-laws; |
|
● |
to
effect or prevent a merger, sale of assets or other corporate transaction; and |
|
● |
to
control the outcome of any other matter submitted to our shareholders for vote. |
Such
persons’ stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain
control of the Company, which in turn could reduce our stock price or prevent our shareholders from realizing a premium over our
stock price.
Item
2. |
Financial
Information |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF OPERATIONS
The
following discussion and analysis of the results of operations and financial condition for the year ended December
31, 2014 and for the period of August 26, 2013 (inception) to December 31, 2013, should be read in conjunction with our financial
statements and the notes to those financial statements that are attached as Exhibit A to this Report. The Financial Statements
should not be relied on for an understanding of the current financial status of the Company.
OVERVIEW
AND OUTLOOK
Our
Operations
Diego
Pellicer Worldwide, Inc. was established on August 26, 2013 to take advantage of the recent legislation that allowed for the legalization
of cannabis operations in several states, namely Colorado, Washington and Oregon, with a number of other states giving consideration
to this market as well. The industry will operate under stringent regulations within the various state jurisdictions.
The
Company’s primary business plan was to lease various properties and develop them in a manner that would allow others to
grow, process and retail cannabis and related products. These leases were designed to provide a substantial stream of income.
It is hoped that as laws evolve, the Company can participate directly in these operations as well.
REVENUES
| |
| | |
From Inception | | |
| | |
| |
| |
Year Ended | | |
(August 26, 2013) to | | |
| | |
| |
| |
December 31, | | |
December 31, | | |
Increase (Decrease) | |
| |
2014 | | |
2013 | | |
$ | | |
% | |
REVENUES | |
| | |
| | |
| | |
| |
Rental income | |
$ | 497,638 | | |
$ | - | | |
$ | 497,638 | | |
| * | |
Licensing revenue | |
| 48,567 | | |
| - | | |
| 48,567 | | |
| * | |
Provision for uncollectable rents | |
| (497,638 | ) | |
| - | | |
| (497,638 | ) | |
| * | |
Total Revenues | |
$ | 48,567 | | |
$ | - | | |
$ | 48,567 | | |
| * | |
* Not divisible by zero
For
the four months of operation in 2013, the Company was only functionally in the organizational and developmental stage, and
did not generate any revenues for that short period, as the focus was to secure investment funding.
In
2014, after securing initial funding, the Company began to lease certain properties and secured an appropriate sub-lessee. However,
the industry being in its infancy, this tenant was also in a development stage of operations and could not conduct operations
until they received the proper licenses from the State. As a result, the Company entered into a $2.5 million Line of Credit Agreement
with the tenant, wherein, they would provide funds for development of the properties to grow, process and sell their products.
In addition, they would also underwrite the rental cost until they became operational, which is expected in early summer of 2015.
In 2014, the Company recorded rental
income of $497,638 but management felt it prudent to provide a full reserve for the potential uncollectibility until such time
that the tenant obtains the appropriate licenses.
In
January 2014, the Company also entered into a Licensing Agreement with Plandai Biotechnology, publicly traded company, to license
their Diego Pellicer brand in exchange for 3,333,334 warrants with a 10-year term, to purchase Plandai’s common stock. At
the time of the Agreement, the publicly traded shares in Plandai were valued at $525,567. In October 2014, the Company filed a
Notice of Exercise to obtain the shares, and have recorded their value as deferred income. For the year ended 2014, $48,567 was
recognized as licensing revenue.
RESULTS
OF OPERATION
| |
| | |
From Inception | | |
| | |
| |
| |
Year Ended | | |
(August 26, 2013) to | | |
| | |
| |
| |
December 31, | | |
December 31, | | |
Increase (Decrease) | |
| |
2014 | | |
2013 | | |
$ | | |
% | |
COSTS AND EXPENSES (other income) | |
| | |
| | |
| | |
| |
General and administrative expenses | |
$ | 3,624,507 | | |
$ | 412,646 | | |
$ | 3,211,861 | | |
| 778.4 | % (a) |
Rent expense | |
| 487,533 | | |
| - | | |
| 487,533 | | |
| | (b) |
Write-off of line of credit receivable | |
| 777,816 | | |
| - | | |
| 777,846 | | |
| - | (b) |
Other income (interest) | |
| (73,198 | ) | |
| - | | |
| (73,198 | ) | |
| - | (b) |
Total costs and expenses | |
$ | 4,816,688 | | |
$ | 412,646 | | |
$ | 4,404,042 | | |
| 1067.3 | % (a) |
(a) Being a start-up with only 4 months of activity does not make
the % change meaningful
(b) Not divisible by zero
General and
administrative. Our general and administrative expenses for the twelve months ended December 31, 2014 were $3,624,507, which
represents an increase of $3,211,861, or 778.4% from general and administrative costs for the four months ended December 31, 2013
of $412,646. Included in general and administrative costs are consultants, professional fees, travel and entertainment,
compensation to founding members, and other operating expenses.
Consultants.
Our consultant costs for the twelve months ended December 31, 2014 were $982,896, which represents an increase of $776,911,
or 377.2% from the four months ended December 31, 2013 of $205,985. The principal difference was related to a full year’s
amount versus only four months in 2013. The remaining effect can be attributed to increases in the compensation authorized by
contractual agreement in September 2014.
Professional
and other fees. Our professional fees for the twelve months ended December 31, 2014 were $544,907, which represents an increase
of $444,820, or 444.4% from the four months ended December 31, 2013 of $100,087. The large increase was mainly due to increased
legal fees related to both the organizational development and structure of the Company and financing efforts to raise capital.
Travel
and entertainment. Our travel and entertainment expenses for the twelve months ended December 31, 2014 were $384,324, which
represents an increase of $311,262, or 426.0% from the four months. Much of the increase was due to extensive travels nationally
and internationally seeking investment capital, property acquisition and legal matters. The amount spent in 2013 was mostly attributable
to development efforts.
Compensation founding
members. The compensation expense to founding members of $1,176,563
in 2014 is related to the accounting treatment for awarding common stock options under the Equity Incentive Plan to those individuals
and firms who were instrumental to the development of the Company. There was no stock granted in 2013.
Other
operating expenses. Our other operating expenses for the twelve months ended December 31, 2014 were $485,203 which
represents an increase of $451,691, or 1347.8% over the $33,512 incurred for the four months ended December 31, 2013. These expenditures
consisted of normal costs including, but not limited to, marketing and promotion, utilities, supplies, design and other fees.
Rent expense.
Our rental expenses for the twelve months ended December 31, 2014 were $487,533 compared to no rent expense for the four months
ended December 31, 2013. The rental amount incurred is attributable to the leasing cost for properties acquired for sublease to
those who would operate the growing, processing and selling of cannabis products. In addition, there were several properties leased
that have either yet to be subleased or abandoned as not viable opportunities.
Bad
debt expense. Bad debt expense for the twelve months ended December 31, 2014 was $777,846 and was comprised of the provision
against the $2.5 million line of credit to the sub-lessee for both a loan for operating and development costs and the accrued
interest due. The Company advances funds for their operational costs to develop these properties, as they await licensing by the
State to begin operations. There was no line of credit in 2013.
Other
income (interest). The interest income as of December 31, 2014 represents the interest that was charged to the lessee for
the $2.5 million line of credit in developing the properties. It is reported as an offset in the costs and expenses to correspond
to the bad debt expense.
LIQUIDITY
AND CAPITAL RESOURCES
| |
| | |
Since Inception | | |
| | |
| |
| |
Year Ended | | |
(August 26, 2013) to | | |
| | |
| |
| |
December 31, | | |
December 31, | | |
Increase (Decrease) | |
| |
2014 | | |
2013 | | |
$ | | |
% | |
Net Cash used in operating activities | |
$ | (2,602,044 | ) | |
$ | (329,151 | ) | |
$ | (2,272,893 | ) | |
| 690.5 | % |
Net Cash used in investing activities | |
| (1,209,899 | ) | |
| (74,341 | ) | |
| (1,135,558 | ) | |
| 1527.5 | % |
Net cash provided by financing activities | |
| 3,704,960 | | |
| 543,576 | | |
| 3,161,384 | | |
| 581.6 | % |
Net (Decrease) Increase in Cash | |
| (106,983 | ) | |
| 140,084 | | |
| (247,067 | ) | |
| -176.4 | % |
Cash - beginning of period | |
| 140,084 | | |
| - | | |
| 140,084 | | |
| | |
Cash - end of year | |
$ | 33,101 | | |
$ | 140,084 | | |
$ | (106,983 | ) | |
| -76.4 | % |
Operating Activities. The net
cash used for the year ended in December 31, 2014 was $2,602,044, an increase of $2,272,893 over the year ended December 31, 2013.
The primary factor was generated by the large net loss of $4,768,121, compared to the loss for the year ended December 31, 2013
of $412,646.
A significant portion of that loss can
be attributed largely to reserve for bad debts ($777,846) and the potential uncollectibility of rent subleases ($497,638). Another
large contributor to the loss was the expense reported for awarding Equity Incentive stock to founding members ($1,176,563). The
other contributing factors extensive professional fees and higher consultant’s fees incurred for a full year compared to
the four month period from 2013.
Investing Activities. The cash
used for investing activities for the year ended December 31, 2014 and December 31, 2013 was $1,209,899 and $74,341 respectively.
The major factors for this increase of $1,135,558 were security deposits and end-of-lease deposits in acquiring the properties
totaling $303,000, and the build out and acquisition of certain property and cushion.
Financing
Activities. Funds provided for the year ended December 31, 2014 was $3,704,960, a significant increase of $3,161,384 over the
$543,576 provided for the year ended December 31, 2013. Virtually, all of the funds provided came from investors in the Series
A Preferred offering.
Off-Balance
Sheet Arrangements
We
had no off-balance sheet arrangements as of March 13, 2015.
Inflation
We
do not believe that inflation has had a material effect on our Company’s results of operations.
Critical
Accounting Policies
Critical accounting
policies are those we believe are most important to portraying our financial condition and results of operations and also require
the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application
of these policies may result in materially different amounts being reported under various conditions or using different assumptions.
We consider the following policies to be the most critical in understanding the judgment that is involved in preparing our consolidated
financial statements.
Fair value of financial
instruments
As required by the Fair
Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets;
(Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level
3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The three
levels of the fair value hierarchy are described below:
Level 1: Unadjusted quoted
prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices
in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of
the asset or liability; and
Level 3: Prices or valuation
techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or
no market activity).
Fair value estimates discussed
herein are based upon certain market assumptions and pertinent information available to management as of and December 31, 2014
and December 31, 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair
values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate
carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values
or they are payable on demand.
Cash
The Company maintains cash
balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation
up to $250,000. The Company's accounts at these institutions may, at times, exceed the federal insured limits. The
Company has not experienced any losses in such accounts.
Property and equipment
and depreciation policy
Property and equipment are
stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the
assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.
The Company intends to take
depreciation or amortization on a straight-line basis for all properties, beginning when they are put into service, using the following
life expectancy:
Equipment
– 5 years
Leasehold
Improvements – 10 years, or the term of the lease, whichever is shorter
Buildings
– 20 years
Revenue recognition
The Company recognizes revenue
from rent, tenant reimbursements, and other revenue sources once all of the following criteria are met in accordance with SEC Staff
Accounting Bulletin 104, Revenue Recognition, (“SAB 104”): (a) the agreement has been fully executed and delivered;
(b) services have been rendered; (c) the amount is fixed or determinable; and (d) the collectability of the amount is reasonably
assured.
In accordance with FASB Statement
of Financial Accounting Standards No. 13, Accounting for Leases (“SFAS 13”), as amended and interpreted,
minimum annual rental revenue is recognized in rental revenues on a straight-line basis over the term of the related lease. Rental
revenue recognition commences when the tenant takes possession or controls the physical use of the leased space. In order for the
tenant to take possession, the leased space must be substantially ready for its intended use. To determine whether the leased space
is substantially ready for its intended use, management evaluates whether the Company or the tenant is the owner of tenant improvements
for accounting purposes. When management concludes that the Company is the owner of tenant improvements, rental revenue recognition
begins when the tenant takes possession of the finished space, which is when such tenant improvements are substantially complete.
In certain instances, when management concludes that the Company is not the owner (the tenant is the owner) of tenant improvements,
rental revenue recognition begins when the tenant takes possession of or controls the space.
When management concludes
that the Company is the owner of tenant improvements, for accounting purposes, management records the cost to construct the tenant
improvements as a capital asset. In addition, management records the cost of certain tenant improvements paid for or reimbursed
by tenants as capital assets when management concludes that the Company is the owner of such tenant improvements. For these tenant
improvements, management records the amount funded or reimbursed by tenants as deferred revenue, which is amortized as additional
rental income over the term of the related lease. When management concludes that the tenant is the owner of tenant improvements
for accounting purposes, management records the Company’s contribution towards those improvements as a lease incentive, which
is amortized as a reduction to rental revenue on a straight-line basis over the term of the lease.
In January 2014, the Company
entered into an agreement to license certain intellectual property to a third party. In consideration, the Company received warrants
to purchase shares of common stock, which were valued based on an appraisal of the warrants by an independent third party appraiser.
The revenue from the licensing agreement, which is initially recorded as deferred revenue, is being amortized over the ten year
term of the licensing agreement.
The Company records is rents
due from the tenants on a current basis. However, as part of the Line of Credit Agreement, the Company has deferred collection
of such rents until the tenants receive the proper governmental licenses to begin operation. It is anticipated that such licenses
should be obtained in early summer 2015. Management has decided to take the prudent approach and reserve these amounts due to the
contingency factor and experience with typical delays in governmental action.
Leases
The Company currently leases
properties in locations that would be acceptable for regulatory purposes and acceptable to sub-lessees for the manufacturing and
development of their products. The Company evaluates the lease to determine its appropriate classification as an operating or capital
lease for financial reporting purposes. The Company currently has a number of leases, which are all classified as operating leases.
Minimum base rent for the
Company’s operating leases, which generally have escalating rentals over the term of the lease, is recorded on a straight-line
basis over the lease term. The initial rent term includes the build-out, or may include a short rent holiday period, for the Company’s
leases, where no rent payments are typically due under the terms of the lease.
Income Taxes
Income taxes are provided
for using the liability method of accounting in accordance with the Income Taxes Topic of the FASB ASC. Deferred tax assets and
liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation
allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized and when, in the opinion
of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The computation
of limitations relating to the amount of such tax assets, and the determination of appropriate valuation allowances relating to
the realizing of such assets, are inherently complex and require the exercise of judgment. As additional information becomes available,
the Company continually assesses the carrying value of their net deferred tax assets.
Research and development
costs
Research and development
costs are charged to the statement of operations as incurred.
Preferred Stock
We apply the guidance enumerated
in ASC 480 “Distinguishing Liabilities from Equity” when determining the classification and measurement of preferred
stock. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair
value. We classify conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption
rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely
within our control, as temporary equity. At all other times, we classified our preferred shares in stockholders’ equity.
Our preferred shares do not feature any redemption rights within the holders’ control or conditional redemption features
not within our control. Accordingly all issuances of preferred stock are presented as a component of consolidated stockholders’
equity (deficit).
Common Stock Purchase Warrants
and Other Derivative Financial Instruments
We classify as equity any
contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement or settlement
in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined
in ASC 815-40 ("Contracts in Entity's Own Equity"). We classify as assets or liabilities any contracts that require net-cash
settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control)
or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
We assess classification of our common stock purchase warrants and other free standing derivatives at each reporting date to determine
whether a change in classification between assets and liabilities is required.
Stock-Based Compensation
We recognize compensation
expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair
value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock
for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based
awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards, however, the awards
are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time
the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based
award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The
estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates
differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider
many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.
Recently
Issued Accounting Pronouncements
There
are no recently issued accounting pronouncements that are expected to have a material impact on the consolidated financial statements
or notes thereto.
The
Company has five properties described below:
| ● | Production
Facility - 4242 Elizabeth St. Denver, CO (18,000 square feet). The property is completely
built out and operational. It currently has 200 flower hoods and has the room to add
an additional 400 flower hoods, if necessary. Once 400 flower hoods are in use, the facility
has the capability of producing 3,600 pounds of product per year. |
| ● | Retail
and Production Facility - 755 South Jason St Denver, CO (14,800 square feet, 2,000
square feet of retail space). The property is completely built out and operational
and has 300 flower hoods. It has the capability of producing 2,700 pounds of product
per year. |
| ● | Retail
Facility - 2949 W Alameda Avenue Denver, CO (3,300 square feet). The property is
a free standing facility. |
| ● | Retail
Facility - 2215 4th Avenue S. Seattle, WA (4,500 square feet). The property is a
free standing facility. |
| ● | Production
Facility - 800 N 42nd Street Springfield, OR (16,060 square feet). The property has
the capacity to hold 400 flower foods and the capability of producing 3,600 pounds of
product per year. |
Item
4. |
Security
Ownership Of Certain Beneficial Owners And Management |
The
following table sets forth certain information as of March 13, 2015, with respect to the holdings of: (1) each person known to
us to be the beneficial owner of more than 5% of our Common Stock; (2) each of our directors, nominees for director and named
executive officers; and (3) all directors and executive officers as a group. To the best of our knowledge, each of the persons
named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with
respect to such shares, unless otherwise indicated.
Name of Beneficial Owner and Address (1) | |
Amount and Nature of Beneficial Ownership of Common Stock | | |
Percent of Common Stock (2) | |
5% Shareholders | |
| | |
| |
TMK Holdings LLC (3) | |
| 3,840,000 | | |
| 13.43 | % |
Wall Street Capital Partners LLC (4) | |
| 7,020,000 | | |
| 25.12 | % |
Directors and Executive Officers | |
| | | |
| | |
Philip Gay(5) | |
| 75,000 | | |
| * | |
Douglas Anderson | |
| 5,882,800 | | |
| 21.04 | % |
Alan Valdes (4) | |
| 3,900,000 | | |
| 13.95 | % |
Stephen Norris | |
| 59,000 | | |
| * | |
Ron Throgmartin (4) | |
| 1,820,000 | | |
| 6.51 | % |
Nick Roberts | |
| * | | |
| | * |
| |
| | | |
| | |
All directors and officers as a group (4 people) | |
| | | |
| 41.87 | % |
(1) |
Unless
otherwise noted, the address of each beneficial owner is c/o 6800 Owensmouth Avenue, Suite 350, Los Angeles, CA 92303. |
(2) |
Based
on 27,954,469 shares of Common Stock issued and outstanding as of March 13, 2015. |
(3) |
TMK
Holdings holds 3,200,000 shares of common stock and 640,000 warrants. |
(4) |
7,020,000
shares of Wall Street Capital Partners LLC are beneficially owned as follows: (a) 3,900,000 by Alan Valdes; (b) 1,160,000
Ron Throgmartin, (c) 910,000 Julie Throgmartin, the wife of Ron Throgmartin, and (d) 1,300,000 by Steve Hubbard. |
(5) |
Philip
Gay holds 75,000 warrants in the Company. |
* |
Less
than 1 percent |
Changes
in Control
We
are not aware of any person who owns of record, or is known to own beneficially, five percent or more of our outstanding securities
of any class, other than as set forth above. Reference is made to Item 2.01 and Item 5.01 for a description of the
change in control of the Company as a result of the transactions disclosed herein.
Item
5. |
Directors
And Executive Officers |
The following
table sets forth the names and ages of all of our directors, executive officers and key employees; and all positions and offices
held as of the date of this Report. The directors will hold such office until the next annual meeting of shareholders and until
his or her successor has been elected and qualified.
Name |
|
Age |
|
Position |
Philip Gay |
|
57 |
|
Chief Executive
Officer, Director |
Nick Roberts |
|
73 |
|
Chief Financial
Officer |
Ron Throgmartin |
|
51 |
|
Chief Operating
Officer |
Alan Valdes |
|
56 |
|
Chairman of the
Board |
Douglas Anderson |
|
52 |
|
Director |
Steve Norris |
|
64 |
|
Director |
Business
Experience
The
following summarizes the occupation and business experience during the past five years for our officers, directors and key employees
as of the date of this Report:
Officers
and Directors
Philip
Gay joined the Company as Chief Executive Officer in February 2015. Mr. Gay currently serves as Managing Director of Triple
Enterprises, a business advisory service firm that assists mid-cap sized companies with financing, mergers and acquisitions and
strategic financing, which he had previously managed from March 2000 until June 2004. From June 2004 until June 2010, Mr. Gay
served as President, Chief Executive Officer and a Director of Grill Concepts, Inc., a company that operates a chain of upscale
casual restaurants throughout the United States. From March 2000 to November 2001, Mr. Gay served as an independent consultant
with El Paso Energy from time to time and assisted El Paso Energy with its efforts to reduce overall operating and manufacturing
overhead costs. Previously he has served as chief financial officer for California Pizza Kitchen (1987 to 1994) and Wolfgang Puck
Food Company (1994 to 1996), and he has held various Chief Operating Officer and Chief Executive Officer positions at Color Me
Mine and Diversified Food Group from 1996 to 2000. Mr. Gay is also a retired Certified Public Accountant, a former audit manager
at Laventhol and Horwath and a graduate of the London School of Economics. Mr. Gay should serve as a member of our board of directors
due to the perspective and experience he brings as CEO and his former experiences in executive positions at other large corporations.
Nick Roberts joined the
Company as Chief Financial Officer of the Company in March 2015. Mr. Roberts currently works at as a Financial Manager at Triple
Enterprises which he joined in October 2014. Previously, he had been in the executive search field for more than 25 year where
he founded Pacific Search Group, Inc., in 1997 and Spectrum Search Associates, Inc. in 1987, before selling his interest in the
firm. He conducted searches primarily for senior level financial talent. Prior to this, he worked in the private sector for over
20 years and rose to CFO for some major national companies, including IHOP Corp. (now DineEquity, Inc.), an international restaurant
chain His early career began with a large CPA firm, where he obtained his CPA. Nick received both his B.S. and MBA degrees from
the University of California, Los Angeles. We believe that Mr. Roberts should serve as a member of our board of directors due
to the perspective and experience he brings as our CFO.
Ron
Throgmartin joined as CEO of Diego Pellicer Worldwide Inc. in August 2013. Mr. Throgmartin currently serves as COO. In May
2010 Mr. Throgmartin began serving as an independent consultant for a medical marijuana company in Colorado where he managed State
licensing, compliance, retail operations and production. From 2003-2008 Mr. Throgmartin was involved with the largest privately
owned cattle producers in the United States with operations that encompassed 11 states. In 1989, Mr. Throgmartin started his own
commercial development company, where over a span of 20 years he developed over 3 million square feet of commercial projects,
working with some of the top rated retailers in the country, including Lowes, Home Depot, HH Gregg, Staples, McDonalds, Steak-n-Shake.
From 1981-1989 Mr. Throgmartin worked for his family business HH Gregg, where he served in many roles including Operations and
new and store development. Today HH Gregg (HHG) is a publicly owned and operated appliance and electronics retailer covering 16
states, and over $2.4 billion in annual sales. Mr. Throgmartin is a graduate of Ball State University with a Bachelor of Science
degree. We believe that Mr. Throgmartin should serve as a member of the board of directors due to the perspective and experience
he brings as our COO and his experience in the medical marijuana industry.
Douglas Anderson is the
Founder, Vice-Chairman of the Board and Senior Vice President of Strategy and Vision of the company. Mr. Anderson serves as CEO
of Wall Street Capital Partners, a Wall Street consulting firm that assists early stage, high growth companies. Mr. Anderson is
on the Advisory Boards of the U.N., U.S. Veterans Cemetery and Strang Cancer Prevention Center (Strang invented the PAP Test, which
has saved more women from cancer than all other preventatives combined). From 1997 to 2008, Mr. Anderson served as President of
Anderson Corporate Finance and Investments a business advisory, development and management firm. From 1995 to 1997 Mr. Anderson
worked as an investment banker for a northwest merchant bank. From 1988 to 1995 Mr. Anderson was formally trained as an underwriter
in New York and worked for Fortune 500 companies in financial services. Mr. Anderson served in the U.S.M.C. with the elite reconnaissance
battalion overseas and also at American Embassies for the U.S. State Department. Mr. Anderson is a graduate of the University of
Washington and attended Texas A&M and Harvard. We believe that Mr. Anderson should serve as a member of the board of directors
due to his experience working with early stage corporations, like the Company.
Alan Valdes has operated
as Chairman of the Company since inception. Mr. Valdes has over 35 years’ experience on Wall Street. He appears
regularly on television giving market comments on such networks as CNN, CNBC, CCTV and many other domestic and foreign media outlets.
Since 2013, Mr. Valdes has worked as a senior partner at SilverBear Capital Inc., where he is in charge investment and development
projects in the United States and Canada. Additionally, Mr. Valdes is currently a partner at Wall Street Capital Partners, a boutique
Wall Street consultant that assists clients in accomplishing what the best and largest firms do within a fraction of the cost
and time. He is also a co-founder and partner of the Louisiana International Gulf Terminal project, a $1.5 billion port project,
the largest in the United States. He is also currently a board member of the World Air League and the Strang Cancer Prevention
Center. Mr. Valdes is a graduate on Seton Hall University, New York University and Harvard University. We believe that Mr. Valdes
should serve as a member of the board of directors due to his experience working for the Company since inception and the with
early stage corporations, like the Company.
Steve
Norris was elected a director of the Company in October 2015. Currently serving as Chairman of Stephen Norris Capital
Partners, LLC, Mr. Norris has substantial expertise in structuring, negotiating and implementing leveraged buy-outs, cash-flow-based
investments and financing strategies in the public and private capital markets. Mr. Norris is one of five co-founders of the Carlyle
Group, a major merchant bank based in Washington, D.C. From 1988-1997, Mr. Norris served as Carlyle's President. He was a principal
participant and key advisor in Carlyle's numerous investments in various public and private companies. While at Carlyle, Mr. Norris,
along with other senior members of the Carlyle team, participated in the acquisition, disposition, strategic focusing and financing
(in public and private markets) of numerous companies involving several billion dollars of equity capital. Carlyle invested in
leveraged buyouts (LBOs), venture capital (particularly telecommunications and wireless companies in the pre-Internet days), and
real estate. Today, Carlyle is one of the largest and most successful private equity firms in the world. Prior to co-founding
Carlyle, Mr. Norris was a Corporate Vice President of Marriott Corporation in Washington, D.C. He was a principal strategist and
advisor for Marriott's substantial public and private financings, limited partnerships, acquisitions and divestitures from 1981
to mid-1987. In 1992, Mr. Norris was appointed by President George Bush, and confirmed by the U.S. Senate, as one of the five
board members of the approximately (at the time) $68 billion Federal Retirement Thrift Investment Board. During his tenure (1992-1995),
Mr. Norris successfully advocated for the right of Federal employees to allocate a greater portion of their savings into public
equities. Until late 1996, Mr. Norris served on the Advisory Committee of SEAG, Inc. which advises the Saudi Government on economic
development and diversification within the Kingdom of Saudi Arabia. Mr. Norris was a Fellow at Yale Law School (1977) and received
a B.S. and J.D. (1972, 1975) with honors from the University of Alabama, and an L.L.M. from New York University (1976). Management
believes that Mr. Norris’ past experience qualifies him for his position with the Company.
Family
Relationships
No
family relationship has ever existed between any director, executive officer of the Company, and any person contemplated to become
such.
Committees
The
board of directors has no standing committees. However, the Company intends to implement a comprehensive corporate governance
program, including establishing various board committees and adopting a Code of Ethics in the future.
Item
6. |
Executive
Compensation |
The
following table shows for the period ended December 31, 2014, the compensation awarded (earned) or paid by the Company to its
named executive officers or acting in a similar capacity as that term is defined in Item 402(a)(2) of Regulation S-K. There are
no understandings or agreements regarding compensation that our management will receive after a business combination that is required
to be included in this table, or otherwise.
Name and Principal Position | |
Fiscal Year | |
| |
Salary ($) | | |
Bonus | | |
Option Awards | | |
All Other Compensation | | |
Total ($) | |
| |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Doug Anderson - VP Strategy | |
2014 | |
Accrued | |
$ | 204,500 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 204,500 | |
| |
| |
Paid | |
$ | 192,833 | | |
| | | |
| | | |
| | | |
$ | 192,833 | |
| |
2013 | |
Accrued | |
$ | 56,250 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 56,250 | |
| |
| |
Paid | |
$ | 47,500 | | |
| | | |
| | | |
| | | |
$ | 47,500 | |
| |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Steven Hubbard - CFO | |
2014 | |
Accrued | |
$ | 180,000 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 180,000 | |
| |
| |
Paid | |
$ | 139,667 | | |
| | | |
| | | |
| | | |
$ | 139,667 | |
| |
2013 | |
Accrued | |
$ | 70,000 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 70,000 | |
| |
| |
Paid | |
$ | 70,000 | | |
| | | |
| | | |
| | | |
$ | 70,000 | |
| |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Alan Valdes - Chairman | |
2014 | |
Accrued | |
$ | 195,000 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 195,000 | |
| |
| |
Paid | |
$ | 154,667 | | |
| | | |
| | | |
| | | |
$ | 154,667 | |
| |
2013 | |
Accrued | |
$ | 18,000 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 18,000 | |
| |
| |
Paid | |
$ | 10,000 | | |
| | | |
| | | |
| | | |
$ | 10,000 | |
| |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ron Throgmartin - Former CEO | |
2014 | |
Accrued | |
$ | 213,250 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 213,250 | |
| |
| |
Paid | |
$ | 181,250 | | |
| | | |
| | | |
| | | |
$ | 181,250 | |
| |
2013 | |
Accrued | |
$ | 52,500 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 52,500 | |
| |
| |
Paid | |
$ | 50,000 | | |
| | | |
| | | |
| | | |
$ | 50,000 | |
| |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Steven Norris - Board Member | |
2014 | |
Accrued | |
$ | 25,000 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 25,000 | |
| |
2013 | |
| |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
Employment
and Director Agreements
The
Company entered into a consulting agreement with Triple Enterprises and affiliates on August 26, 2014. In exchange for
200,000 warrants and a monthly fee of $35,000, Triple Enterprises agreed to act as a financial advisor, provide supervisory
and advisory services and assist in the preparation of the Company’s public filings. Mr. Philip Gay is the Managing
Director of Triple Enterprises and Mr. Nick Roberts is the Financial Manager of Triple Enterprises.
On
September 17, 2014, the Company entered into a five year employment agreement with Doug C. Anderson as Vice Chairman and Vice
President of Strategy and Vision. Beginning in 2014, Mr. Anderson began earning an annual salary of two hundred fifty thousand
dollars ($250,000) per annum. Following the completion of an offering of the Company’s Series A Preferred stock, the Executive’s
Base Salary shall automatically be increased to Two Hundred Eighty Thousand ($280,000) per annum. For each year thereafter, the
Company’s Board (or compensation committee of the Company’s Board, or, at the discretion of the Company’s Board,
by a committee composed of two or more members of the Company’s Board (for purposes of this Agreement, the “Committee”)
shall review the Executive’s Base Salary and may provide for such increases therein as it may, in its discretion, deem appropriate.
The employment agreement also allows for a performance bonus, to be determined by the Company’s Board at the discretion
of the Company’s Board, and participation of any equity compensation plan of the Company.
If
Mr. Anderson’s employment is terminated prior to the expiration of the term of his employment agreement, certain significant
payments become due. The amount of such payments depends on the nature of the termination. In addition, the employment agreement
contains a change of control provision that provides for the payment of three times the then current base salary and five times
the average bonus paid to Mr. Anderson for the three full calendar years immediately prior to the change of control. The
employment agreement also contains both a confidentiality and noninterference provision which are effective from the date of employment
through one year from the date the employment agreement is terminated.
Mr.
Ron Throgmartin and Mr. Alan Valdes entered into agreements with identical terms to that of Mr. Anderson, for the position of
Chief Executive Officer and Chairman of the Board respectively. Following the Merger, Mr. Throgmartin’s position was changed
to Chief Operating Officer. The other terms of his agreement remained in place.
In
exchange for Mr. Norris’ service on the Board, he received 50,000 warrants with an exercise price of $0.0001. In addition,
Mr. Norris currently receives $10,000 per month in exchange for his services on the Board.
Option
Plan
The Company established an Equity Incentive
Plan to provide additional incentive to key employees, directors and consultants, and to promote the success of the Company’s
business. The terms of each option shall be no more than 10 years from the date of grant at an exercise price equal to the Fair
Market Value on the date of the grant.
Item
7. |
Certain
Relationships And Related Transactions |
Except
as disclosed below, none of the following persons has any direct or indirect material interest in any transaction to which we
are a party since our incorporation or in any proposed transaction to which we are proposed to be a party:
| (A) | Any
of our directors or officers; |
| (B) | Any
proposed nominee for election as our director; |
| (C) | Any
person who beneficially owns, directly or indirectly, shares carrying more than 10% of
the voting rights attached to our Common Stock; or |
| (D) | Any
relative or spouse of any of the foregoing persons, or any relative of such spouse, who
has the same house as such person or who is a director or officer of any parent or subsidiary
of our company. |
Director
Independence
Because
our common stock is not currently listed on a national securities exchange, we have used the definition of “independence”
of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director”
is a person other than an officer or employee of the Company or any other individual having a relationship which, in the opinion
of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
|
● |
the
director is, or at any time during the past three years was, an employee of the company; |
|
● |
the
director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period
of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including,
among other things, compensation for board or board committee service); |
|
● |
a
family member of the director is, or at any time during the past three years was, an executive officer of the company; |
|
● |
the
director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity
to which the company made, or from which the company received, payments in the current or any of the past three fiscal years
that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject
to certain exclusions); |
|
● |
the
director or a family member of the director is employed as an executive officer of an entity where, at any time during the
past three years, any of the executive officers of the company served on the compensation committee of such other entity;
or the director or a family member of the director is a current partner of the company’s outside auditor, or at any
time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s
audit. |
We
do not have any independent directors. We do not have an audit committee, compensation committee or nominating committee. We currently
do not have a code of ethics that applies to our officers, employees and director.
Item
8. |
Legal
Proceedings |
From
time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to
time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have
a material adverse affect on our business, financial condition or operating results, with the exception of those outlined below:
On
May 23, 2014, Diego Pellicer Worldwide Inc. received a subpoena from the United States Department of Justice, represented by the
United States Attorney’s Office for the Western District of Washington, requesting the production of the Company’s
banking records and documents and records relating to: the structure and organization of the Company; communications between the
Company and its affiliates, including Diego Pellicer, Inc., with potential investors; securities offerings; applications submitted
by Diego Pellicer, Inc. to the Washington State Liquor Control Board in connection with its application to become a retail seller
of cannabis in Washington State; and the Company’s relationship with Plandai Biotechnology.
Based
on limited discussions with the Department of Justice, the Company believes this subpoena was issued in order to determine: (i)
if the Company is or has been engaged in the production, processing or sale of cannabis; (ii) how the Company is related to Diego
Pellicer, Inc.; and (iii) whether investors or potential investors in the Company believed they were investing in a company that
would be engaged in the production, processing or sale of cannabis.
The
Company believes that it has complied fully with all applicable laws, rules and regulations, and intends to cooperate fully with
the government’s investigation.
Depending
on the extent to which the Department of Justice pursues this matter, the Company may be required to suspend or cease its operations,
which could lead to the possible loss of investors’ entire investment in the Company.
Further,
in the event the Company, its officers or its directors are determined to have taken any unlawful action with respect to these
matters, such officers and directors may be barred from performing services on behalf of the Company and/or incarcerated, the
Company may be required to pay fines, and/or the Company may be required to return investors’ investments in the Company.
There can be no guarantee that the Company will have sufficient funds to pay all or any portion of such fines and/or return all
or any portion of such investments made in the Company.
Item
9. |
Market
Price And Dividends On The Registrant’s Common Equity And Related Shareholder Matters |
There
is no established public trading market for our Common Stock. As of the date of this Report, there are outstanding options and
warrants to purchase 3,425,798 shares of Common Stock of the Registrant.
Record
Holders
As
of March 17, 2015, there were approximately 67 shareholders of record holding a total of 27,954,469 shares of Common Stock. The
holders of the Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders.
Holders of the Common Stock have no preemptive rights and no right to convert their Common Stock into any other securities. There
are no redemption or sinking fund provisions applicable to the Common Stock.
Dividends
The
Registrant has not declared any cash dividends since inception and does not anticipate paying any dividends in the foreseeable
future. The payment of dividends is within the discretion of the Board of Directors and will depend on the Company’s earnings,
capital requirements, financial condition and other relevant factors. There are no restrictions that currently limit the Registrant’s
ability to pay dividends on its Common Stock other than those generally imposed by applicable state law.
Item
10. |
Recent
Sales Of Unregistered Securities |
Reference
is made to the disclosure set forth under Item 3.02 of this Report, which disclosure is incorporated by reference into this section.
Item
11. |
Description
Of Securities |
Authorized
Capital Stock
Our
authorized capital stock consists of 95,000,000 shares of capital stock, par value $0.000001 per share, and 5,000,000 shares of
preferred stock, par value $0.000001 per share. As of March 13, 2015, 27,954,469 shares of our Common Stock and no shares of our
Preferred Stock were issued and outstanding.
Common
Stock
All
outstanding shares of Common Stock are of the same class and have equal rights and attributes. The holders of Common Stock are
entitled to one vote per share on all matters submitted to a vote of shareholders of the Company. All shareholders are entitled
to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available.
In the event of liquidation, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of
all liabilities. The shareholders do not have cumulative or preemptive rights.
Preferred
Stock
Our
certificate of incorporation provides that we are authorized to issue up to 5,000,000 shares of preferred stock with a par value
of $0.000001 per share. Our Board of Directors has the authority, without further action by the stockholders, to issue from time
to time the preferred stock in one or more series for such consideration and with such relative rights, privileges, preferences
and restrictions that the board may determine. The preferences, powers, rights and restrictions of different series of preferred
stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions and purchase funds and other matters. The issuance of preferred stock could adversely affect
the voting power or other rights of the holders of common stock.
As
of the date of this Report, no shares of preferred stock have been designated and none are issued and outstanding.
Dividends
We
have not paid any cash dividends to our shareholders. The declaration of any future cash dividends is at the discretion of our
board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic
conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future,
but rather to reinvest earnings, if any, in our business operations.
Warrants
Pursuant
to the Merger, the Company will issue (a) 150,798 five year warrants with a strike price of $1.40, (b) 640,000 five year warrants
with a strike price of $1.24 and (c) 475,000 five year warrants with a strike price of $1.50.
Options
There
are no outstanding options to purchase our securities.
Item
12. |
Indemnification
Of Directors And Officers |
(a) The
Company shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter
be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any claim, action, suit,
or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that
the person, or a person for whom he or she is the legal representative, is or was a Director or officer of the Company or is or
was serving at the request of the Company as a director, officer or fiduciary of another corporation or of a partnership, joint
venture, trust, non-profit entity, or other enterprise, including service with respect to employee benefit plans, against all
expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid
or to be paid in settlement) reasonably incurred or suffered by such person. The right to indemnification conferred in this Bylaw
shall be a contract right. Except as provided in paragraph (c) of this Bylaw with respect to proceedings seeking to enforce rights
to indemnification, the Company shall indemnify a person in connection with a proceeding initiated by such person or a claim made
by such person against the Company only if such proceeding or claim was authorized in the specific case by the Board of Directors
of the Company.
(b)
Subject to applicable law, the Company shall pay the expenses incurred in defending
any proceeding in advance of its final disposition, provided, however, that if and to the extent required by law the payment of
expenses incurred by any person covered hereunder in advance of the final disposition of the proceeding shall be made only upon
receipt of an undertaking by or on behalf of the affected person to repay all amounts advanced if it should ultimately be determined
that such person is not entitled to be indemnified under this Bylaw or otherwise.
(c)
If a claim for indemnification (following the final disposition of such proceeding)
or advancement of expenses under this Bylaw is not paid in full within thirty days, or such other period as might be provided
pursuant to contract, after a written claim therefor has been received by the Company, the claimant may file suit to recover the
unpaid amount of such claim or may seek whatever other remedy might be provided pursuant to contract. In any such action the Company
shall have the burden of proving that the claimant was not entitled to the requested indemnification or advancement of expenses
under applicable law. If successful in whole or in part, claimant shall be entitled to be paid the expense of prosecuting such
claim to the fullest extent permitted by law. Neither the failure of the Company (including its Directors, independent legal counsel
or shareowners) to have made a determination prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because the claimant has met the applicable standard of conduct set forth in the General Corporation
Law of Delaware, nor an actual determination by the Company (including its Directors, independent legal counsel or shareowners)
that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that
the claimant has not met the applicable standard of conduct.
(d)
Any determination regarding whether indemnification of any person is proper in
the circumstances because such person has met the applicable standard of conduct set forth in the General Corporation Law of Delaware
shall be made in accordance with the applicable provisions of Section 145 of the General Corporation Law of Delaware.
(e)
The Company may, but shall not be required to, indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made
or is threatened to be made a party or is otherwise involved in any claim, action, suit, or proceeding, whether civil, criminal,
administrative or investigative (a “proceeding”) by reason of the fact that the person, or a person for whom he or
she is the legal representative, is or was an employee or agent of the Company or is or was serving at the request of the Company
as an employee or agent of another corporation or of a partnership, joint venture, trust, non-profit entity, or other enterprise,
including service with respect to employee benefit plans, against all expense, liability and loss (including attorneys’
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered
by such person.
(f)
The rights conferred on any person by this Bylaw shall not be exclusive of any
other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation,
these Bylaws, agreement, vote of shareowners or disinterested Directors or otherwise.
(g)
Any repeal or modification of the foregoing provisions of this Bylaw shall not
adversely affect any right or protection hereunder of any person with respect to any act or omission occurring prior to or at
the time of such repeal or modification for which indemnification or advancement of expenses is sought.
(h)
The Company’s obligation, if any, to indemnify or to advance expenses to
any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, enterprise or nonprofit entity shall be reduced by any amount such person may collect as indemnification
or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.
Item
13. |
Financial
Statements And Supplementary Data |
Information
concerning the financial information of the Registrant set forth under Item 9.01 of this Report is incorporated by reference.
Item
14. |
Changes
In And Disagreements With Accountants On Accounting And Financial Disclosure |
None.
Item
5.01 |
Changes
in Control of Registrant. |
Reference
is made to the disclosure set forth under Items 1.01 of this Report, which disclosure is incorporated herein by reference.
Item
5.02 |
Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain
Officers. |
Reference
is made to the disclosure set forth under Items 1.01 and 2.01 of this Report, which disclosure is incorporated herein by reference.
Item
5.03 |
Amendment
to Articles of Incorporation or Bylaws; Change in Fiscal Year |
In
anticipation of the Merger, the Company changed its name from “Type 1 Media, Inc.” to “Diego Pellicer Worldwide,
Inc.” on February 26, 2015 (the “Name Change”).
On
March 13, 2015, FINRA granted final approval of the Name Change and new Ticker Symbol of “DPWW”. Additionally FINRA
approved an 11:1 forward split of the Company’s common stock, bringing the total issued and outstanding shares of Common
Stock from 5,700,000 to 62,700,000 before the Merger. The total issued and outstanding shares of Common Stock following the Merger
is 27,954,469. Unless otherwise stated, all share amounts in this Report have been updated to post-split numbers.
Item
9.01 |
Financial
Statements and Exhibits. |
(a) Financial
Statements of Business Acquired. In accordance with Item 9.01(a), the Company’s audited financial statements for the year
ended December 31, 2014 and for the period from August 26, 2013 to December 31, 2013 are filed in this Current Report on Form
8-K as Exhibit 99.1.
(b) Pro
Forma Financial Information. In accordance with Item 9.01(b), our pro forma financial statements are filed in this Current Report
on Form 8-K as Exhibit 99.2.
(d) Exhibits
Exhibit
No. |
|
Description |
2.1 |
|
Merger and Share
Exchange Agreement, by and among the Company, Diego Pellicer World-wide 1, Inc., and Jonathan White, dated March 13,
2015. |
3.1(i) |
|
Articles of Incorporation |
3.2 |
|
By-Laws |
10.1 |
|
Employment Agreement
by and between the Company and Ron Throgmartin, dated September 17, 2014 |
10.2 |
|
Employment Agreement
by and between the Company and Doug C. Anderson, dated September 17, 2014 |
10.3 |
|
Employment Agreement
by and between the Company and Alan D. Valdes, dated September 17, 2014 |
10.4 |
|
Commercial Agreement,
by and between the Company and Diego Pellicer, Inc., dated April 19, 2014 |
10.5 |
|
Amended and Restated
Agreement and Plan of Merger of Diego Pellicer Inc., and the Company, dated April 19, 2014 |
10.6 |
|
Cancellation Agreement,
by and between the Company and Jonathan White, dated March 13, 2015. |
10.7 |
|
Lease Agreement
by and between the Company and Shamira, LLC, dated June 12, 2014 |
10.8 |
|
Lease Agreement,
by and between the Company and 2949 W. Alameda Ave LLC, dated July 14, 2014 |
10.9 |
|
Sublease Agreement,
by and between the Company and M&S LLC, dated August 14, 2014 |
10.10 |
|
Lease Agreement,
by and between the Company and Oakway Golf Course, Inc., dated September 15, 2014 |
10.11 |
|
Sublease Agreement,
by and between the Company and Diego Pellicer, Inc., dated March 1, 2014 |
10.12 |
|
Sublease Agreement,
by and between the Company and DPCO, Inc., dated August 14, 2014 (4242 Elizabeth Street property) |
10.13 |
|
Sublease Agreement,
by and between the Company and DPCO, Inc., dated August 14, 2014 (2949 W. Alameda Avenue property) |
10.14 |
|
Sublease Agreement,
by and between the Company and DPCO, Inc., dated August 14, 2014 (755 South Jason Street property) |
10.15 |
|
Lease
Agreement, by and between the Company and M&P Properties, dated September 19, 2013
|
99.1 |
|
Consolidated Financial
Statements for the year ended December 31, 2014 |
99.2 |
|
Pro Forma Financial
Information |
99.3 |
|
Press Release |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
DIEGO
PELLICER WORLDWIDE, INC. |
Date:
March 19, 2015 |
|
|
|
By: |
/s/
Philip Gay |
|
|
Name: Philip Gay |
|
|
Title: Chief Executive
Officer |
|
|
(Duly Authorized,
Principal Executive Officer) |
40
Exhibit 2.1
EXECUTION COPY
MERGER
AGREEMENT
This
MERGER AGREEMENT (this “Agreement”), dated as of March 13, 2015 (the “Effective Date”),
by and among DIEGO PELLICER WORLDWIDE, INC. (f/k/a Type 1 Media, Inc.), a Delaware corporation (“PubCo”), JONATHAN
WHITE (the “PubCo Principal Shareholder”); and DIEGO PELLICER WORLD-WIDE 1, INC., a Delaware corporation
(“Diego”). Each of PubCo, PubCo Principal Shareholder, and Diego is sometimes referred to herein as a “Party,”
and together they are sometimes referred to herein as the “Parties.”
WITNESSETH:
WHEREAS,
the respective Boards of Directors of PubCo and Diego have determined that it is advisable and in the best interests of the respective
corporations and their shareholders to be merged (the “Merger”); and
WHEREAS,
pursuant to the Merger and, in connection therewith, (i) each issued and outstanding share of common stock, par value $0.0001
per share, of Diego (“Diego Common Stock”), will be converted into one (1) share of PubCo common stock, $0.000001
par value per share (“PubCo Common Stock” or “PubCo Shares”); (ii) each issued and outstanding
share of Series A Preferred Stock, par value $0.0001 per share, of Diego, with the exception of the TMK Shares (“Diego
Series A Share”), will be converted into 1.031157 share(s) of PubCo Common Stock; (iii) each issued and outstanding
share of the Series A Preferred Stock, par value $0.0001 per share, of Diego issued to TMK Holdings LLC (“TMK Shares”),
will be converted into one (1) share of PubCo Common Stock (iv) each issued and outstanding share of Series B Preferred Stock,
par value $0.0001 per share, of Diego (“Diego Series B Share”, and together with the Diego Common Stock, Diego
Series A Shares and TMK Shares, the “Diego Shares”), will be converted into one (1) share of PubCo Common Stock;
(v) the issued and outstanding warrant to purchase Diego Series A Shares (“Diego A Warrants”), will be converted
into warrants to purchase share of PubCo Common Stock, in substantially the form attached hereto as Exhibit C (“PubCo
A Warrants”); and (vi) the issued and outstanding warrant to purchase Diego Series B Shares (the “Diego B Warrants”
and together with the Diego A Warrants, the “Diego Warrants”), will be converted into a warrant to purchase
share of PubCo Common Stock, in substantially the form attached hereto as Exhibit D (“PubCo B Warrants” and,
together with the PubCo A Warrant, the “PubCo Warrants”) in accordance with the provisions of Article II of
this Agreement; and
WHEREAS,
for federal income tax purposes, the Merger is intended to qualify as a tax-free reorganization under the provisions of Section
368 of the United States Internal Revenue Code of 1986, as amended (the “Code”); and
WHEREAS,
PubCo and Diego desire to make certain representations, warranties, covenants and agreements in connection with the Merger and
also to prescribe certain conditions to the Merger; and
WHEREAS,
the respective Boards of Directors of each of PubCo and Diego have approved this Agreement and the merger on the terms and conditions
contained in this Agreement;
Diego
– Merger Agreement Execution Copy
WHEREAS,
simultaneously, the PubCo Principal Shareholder owning an aggregate of 55,000,000 shares of PubCo’s shall enter into a Cancellation
Agreement, dated as of the date of this Agreement, in substantially the form attached hereto as Exhibit A (the “Cancellation
Agreement”), pursuant to which the PubCo Principal Shareholder agrees to cancel the 55,000,000 shares in PubCo, for
an aggregate price of $169,000 (the “Cancellation Consideration”).
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the Parties,
intending to be legally bound hereby, hereby agree as follows:
ARTICLE
I
THE MERGER
Section
1.1 Cancellation and Merger. At the ‘Effective Time,’ as hereinafter defined, subject to the terms and on
the conditions of this Agreement, Diego shall be merged with and into PubCo, with PubCo to continue as the surviving corporation
(the “Surviving Corporation”) in the Merger, and PubCo succeeding to and assuming all the rights, assets, liabilities,
debts, and obligations of Diego in accordance with the Delaware General Corporation Law (the “DGCL”). Simultaneously,
at the Effective Time, the PubCo Principal Shareholder, owning an aggregate of 55,000,000 shares of PubCo’s common stock
shall cancel the 55,000,000 remaining shares pursuant to the Cancellation Agreement.
Section
1.2 The Closing: Effective Time. The consummation of the Merger shall be effected as promptly as practicable, but in no
event more than three business days after the satisfaction or waiver of the conditions set forth in Article VII of this Agreement,
and the parties hereto will cause a copy of the Certificate of Merger, to be properly completed consistent with the terms hereof
(the “Certificate of Merger”), and to be executed, delivered and filed with the Secretary of State of the State
of Delaware (the “Closing Date”). The Merger shall become effective immediately upon the filing of such Certificate
of Merger with the Delaware Secretary of State in substantially the form attached hereto as Exhibit B. The date and time on which
the Merger shall become effective is referred to herein as the “Effective Time” or “Effective Date”.
Section
1.3 Subsequent Actions. If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary
or desirable to vest, perfect or confirm the Surviving Corporation’s right, title or interest in, to or under any of the
rights, properties, privileges, franchises or assets of either of its constituent corporations acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with the Merger, or otherwise to carry out the intent of this Agreement,
the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf
of the Surviving Corporation, all such deeds, bills of sale, assignments and assurances and to take and do in the name and on
behalf of each such corporation, all such other actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties, privileges, franchises or assets in the Surviving
Corporation or otherwise to carry out the intent of this Agreement.
Diego
– Merger Agreement Execution Copy
Section
1.4 Surviving Corporation; Articles of Incorporation; By-Laws; Officers; and Directors.
Unless otherwise agreed to by PubCo and Diego prior to the Closing, at the Effective Time:
(a)
the Articles of Incorporation of PubCo as in effect immediately prior to the Effective Time with such changes as shall be acceptable
to Bio-En shall be, at and after the Effective Time, the Articles of Incorporation of the Surviving Corporation (the “Articles
of Incorporation”) until further altered, amended or repealed in accordance with the Articles of Incorporation or applicable
law;
(b)
the by-laws of PubCo as in effect immediately prior to the Effective
Time with such changes as shall be acceptable to Diego shall be, at and after the Effective Time, the by-laws of the Surviving
Corporation until further altered, amended or repealed in accordance with the Articles of Incorporation, such by-laws or applicable
law; and
(c)
the officers and directors of the Surviving Corporation from and
after the Effective Time shall be the officers and directors of PubCo immediately prior to the Effective Time.
ARTICLE
II
CAPITAL STOCK
Section
2.1 Treatment of Capital Stock. The manner and basis of converting shares of Diego Common Stock by virtue of the Merger
and without any action on the part of Diego and PubCo or any holder thereof, shall be as set forth in this Article II.
Section
2.2 Conversion of Diego Common Stock.
(a)
At the Effective Time, each share of Diego Common Stock, Diego Series A Share, TMK Shares, and Diego Series B Share, issued and
outstanding immediately prior to the Effective Time, the same as delineated on the attached Schedule 2.2, and all rights
in respect thereof, shall forthwith cease to exist and shall be converted into the right to receive an aggregate of 20,144,469
shares of validly issued, fully paid and non-assessable shares of PubCo Common Stock (the “Issuable Shares”).
At the Effective Time, each Diego A Warrant issued and outstanding immediately prior to the Effective Time, the same as delineated
on the attached Schedule 2.2, and all rights in respect thereof, shall forthwith cease to exist and shall be converted
into the right to receive an aggregate of $790,798 PubCo A Warrants (the “Issuable A Warrants”). At the Effective
Time, each Diego B Warrant issued and outstanding immediately prior to the Effective Time, the same as delineated on the attached
Schedule 2.2, and all rights in respect thereof, shall forthwith cease to exist and shall be converted into the right to
receive an aggregate of $475,000 PubCo B Warrants (the “Issuable B Warrants” and, together with the Issuable
A Warrants, the “Warrants” or “Issuable Warrants”). Each holder of a certificate representing
any Diego Shares, Diego Warrants shall, to the extent such certificate or warrant represents such shares, cease to have any rights
with respect to such shares, except the right to receive the Issuable Shares and Issuable Warrants allocable to the shares represented
by such certificate upon surrender of such certificate in accordance with Section 2.3. Such Issuable Shares and Issuable Warrants
shall be held in escrow by PubCo until the Closing Date (defined below) pending the completion of all conditions of closing set
forth in Article V;
Diego
– Merger Agreement Execution Copy
(b)
Except as otherwise provided herein, commencing immediately after the Effective Time, each certificate (a “Certificate”)
which, immediately prior to the Effective Time, represents issued and outstanding Diego Shares,
shall evidence the right to receive shares of PubCo Common Stock on the basis set forth in Section 2.2(a). No fractional shares
shall be issued and all fractional shares shall be rounded up to the next whole share.
(c)
Except as otherwise provided herein, commencing immediately after the Effective Time, each Diego Warrant, shall evidence the right
to receive PubCo Warrants on the basis set forth in Section 2.2(a). No fractional warrants shall be issued and all fractional
warrants shall be rounded up to the next whole warrant.
Section
2.3 Exchange Procedures. If applicable, as soon as reasonably practicable after
the
Effective Time, PubCo shall implement a process to mail to each record holder a certificate representing shares of PubCo Common
Stock and PubCo Warrant as provided in this Article II.
Section
2.4 Transfer Books. The stock transfer books of Diego shall be closed at the Effective Time and no transfer of any Diego
Shares will thereafter be recorded on any of such stock transfer books.
Section
2.5 Restricted Securities. The parties acknowledge and agree that there is only a limited market through the facilities
of the National Quotation Bureau for the PubCo Common Stock, that the offers and issuance of shares of PubCo Common Stock under
this Agreement has not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act")
or any state securities laws and that such offer and issuance are being made in reliance upon exemptions from the registration
all shares of PubCo Common Stock issued in connection with the Merger will be "restricted securities," as that term
is defined in Rule 144 promulgated under the Securities Act, and all certificates representing shares of PubCo Common Stock will
bear the following legend or other legend substantially similar:
“THESE
SECUTRITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR INVESTMENT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AS AMENDED (THE “ACT”), HAVE BEEN OFFERED AND SOLD IN RELIANCE UPON THE EXEMPTION SET FORTH IN SECTION
4(2) OF THE ACT AND UPON REGULATION D PROMULGATED THEREUNDER AND HAVE BEEN SOLD AS “RESTRICTED SECURITIES” AS SUCH
ARE DEFINED UNDER THE ACT. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, EXCEPT UPON DELIVERY TO THE CORPORATION ON THE OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION TO
THE EFFECT THAT ANY SUCH TRANSFER WOULD NOT BE IN VIOLATION OF THE ACT, APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION
PROMULGATED THEREUNDER.”
Diego
– Merger Agreement Execution Copy
ARTICLE
III
REPRESENTATIONS AND WARRANTIES OF PUBCO
PubCo
hereby represents and warrants, as of the date hereof and as of the Closing Date, to Diego as follows:
Section
3.1 Organization and Standing of PubCo. PubCo is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware and has the corporate power to carry on its business
as now conducted and to own its assets and is duly qualified to transact business as a foreign corporation in each state where
such qualification is necessary. PubCo has no Subsidiaries and no interest in any other corporation, partnership, joint venture
or other entity.
Section
3.2 Capitalization. The authorized capital stock of PubCo consists of 100,000,000
shares of capital stock, consisting of 95,000,000 shares of common stock, par value $0.000001 per share, and 5,000,000 shares
of preferred stock, par value $0.000001. As of the Effective Date, there are 62,700,000 shares of common stock and no shares of
preferred stock issued and outstanding. All issued and outstanding shares of common stock are duly authorized, validly issued,
fully paid, and non-assessable, and were not issued in violation of any “Laws”, as hereinafter defined, or the pre-emptive
rights of any Person. The PubCo Shares to be issued pursuant to this Agreement when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and non-assessable, and will not be issued in violation of any
Laws or the pre-emptive rights of any Person. There are no outstanding rights, subscriptions, warrants, puts, calls, unsatisfied
preemptive rights, options or other agreements (including shareholder agreements), of any kind relating to shares of PubCo Common
Stock, or any other security of PubCo and there are no authorized or outstanding securities convertible into or exchangeable for
any such PubCo Common Stock or other security of PubCo.
Section
3.3 Non-Reporting Company. PubCo is not a reporting company under the rules and regulations of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
Section
3.4 Authorization: Validity. PubCo has the necessary corporate power to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by PubCo of this
Agreement, the performance by PubCo of its obligations hereunder and the consummation by PubCo of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part of PubCo. This Agreement has been duly executed
and delivered by PubCo constitutes a valid and binding obligation of PubCo enforceable against each in accordance with the terms
hereof, subject to the “Enforceability Exceptions”, as hereinafter defined.
Section
3.5 No Conflict: Required Filings and Consents. (a) The execution and delivery by PubCo of this Agreement does not, and
the performance by PubCo of its respective obligations hereunder and the consummation by PubCo of the transactions contemplated
hereby, will not: (i) violate or conflict with the certificate of incorporation or by-laws of PubCo; (ii) subject to obtaining
or making the notices, reports, filings, waivers, consents, approvals or authorizations referred to in Section 3.5(b), conflict
with or violate any law, regulation, court order, judgment or decree applicable to PubCo or any of its ‘Subsidiaries’,
as hereinafter defined, or by which any of their respective assets or property is bound or subject; and/or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, cancellation, vesting, modification, alteration or acceleration of any obligation under,
or result in the creation of a lien, claim or encumbrance on any of the properties or assets of PubCo pursuant to, or result in
the loss of any benefit under (including an increase in the price paid by, or cost to, PubCo), or require the consent of any other
party to, or result in any obligation on the part of PubCo to repurchase (with respect to a bond or a note), any agreement, contract,
instrument, bond, note, indenture, permit, license or franchise to which PubCo is
a party or by which PubCo, any of its Subsidiaries or any of their respective assets or properties are bound or subject.
Diego
– Merger Agreement Execution Copy
(b)
PubCo is not required to submit any notice, report or other filing with any governmental entity in connection with the execution,
delivery, performance or consummation of this Agreement or the Merger. Except as set forth in the immediately preceding sentence,
no waiver, consent, approval or authorization of any governmental entity is required to be obtained by PubCo in connection with
the execution, delivery, performance or consummation by it of this Agreement or any agreement or instrument or other document
contemplated hereby or the transactions contemplated hereby or thereby.
Section
3.6 Full Disclosure. None of representations and warranties made by PubCo contains any untrue statement of a material fact,
or omits any material fact the omission of which would be misleading under the circumstances by which it was made.
Section
3.7 Contract and Leases; Liabilities; Properties; Employees. Except as disclosed on
Schedule 3.7, PubCo (i) has no assets; (ii) conducts no business; (iii) is not a party to any contract, agreement or lease;
(iv) has no liabilities (absolute, accrued, contingent or otherwise); or (v) owns no property (real, personal or otherwise). No
Person holds a power of attorney from PubCo.
Section
3.8 Compliance with Laws. To the best of its knowledge, PubCo has substantially complied with, and is not in material violation
of any federal, state, or local statute, law, rule and/or regulation.
Section
3.9 Litigation. PubCo is not a party to any suit, action, arbitration, or legal, administrative,
or other proceeding, or pending governmental investigation. To the best knowledge of PubCo, there is no basis for any such action
or proceeding and no such action or proceeding is threatened against PubCo. PubCo is not subject to or in default with respect
to any order, writ, injunction, or decree of any federal, state, local, or foreign court, department, agency or instrumentality.
Section
3.10 Delivery of Documents; Corporate Records. Diego has heretofore received true, correct and complete copies of
all documents, instruments, agreements and records referred to in Article 3 of this Agreement and copies of the minute and stock
record books of PubCo. The minute and stock record books of PubCo, in all material respects, contain true, correct and complete
copies of the records of all meetings and consents in lieu of meetings of PubCo’s Board of Directors (and all committees
thereof) and the shareholders since date of incorporation.
Section
3.11 Validity of Documents. All minutes, consents or other documents pertaining to PubCo to be delivered at or prior to
closing shall be valid and in accordance with the applicable state law.
Section
3.12 Title to Shares. Except to any transferability restriction as required as under this Agreement and/or imposed under
applicable securities laws, the PubCo Shares to be issued pursuant to this Agreement will be, at closing, free and clear of all
liens, security interests, pledges, charges, claims, encumbrances and restrictions of any kind.
Diego
– Merger Agreement Execution Copy
Section
3.13 Board Action: Required Vote.
(a)
PubCo’s Board of Directors has unanimously adopted (and not withdrawn) a resolution approving this Agreement, and the transactions
contemplated hereby.
(b)
The votes taken by PubCo referred to in paragraph (a) are the only votes required by holders of any class or series of PubCo capital
stock required to approve this Agreement and the transactions contemplated hereby.
Section
3.14 Brokers. There is no broker, finder or investment banker or other Person entitled to any brokerage, finder’s,
investment banking or other similar fee or commission in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of PubCo.
Section
3.15 Taxes. (a) Except as Disclosed on Schedule 3.15, all Tax Returns, as hereinafter defined, required to be filed
by PubCo on or prior to the Effective Time or with respect to taxable periods ending on or prior to the Effective Time have been
or will be prepared in good faith and timely filed with the appropriate Governmental Entity on or prior to the Effective Time
or by the due date thereof including extensions.
(b)
All “Taxes”, as hereinafter defined, that are required to be paid have been
or will be fully paid.
(c)
PubCo has not waived any statute of limitations with respect to federal and state income Taxes or agreed to any extension of time
with respect to federal income or state Tax assessment or deficiency.
(d)
As of the date hereof, there are not pending or, to the knowledge of PubCo, threatened any audits, examinations, investigations
or other proceedings in respect of matters of Tax that (i) were raised by any taxing authority in a written communication to PubCo
or any thereof; and (ii) would, if determined adversely to PubCo, individually or in the aggregate, reasonably be expected to
have an PubCo Material Adverse Effect.
(e)
PubCo has made available to Diego true and correct copies of the United States federal income and all material state income or
franchise Tax Returns filed by PubCo for each of its fiscal years ended 2012 and 2013.
Section
3.16 No Other Agreements to Sell. PubCo has no obligation, absolute or contingent, legally binding or otherwise to any
other ‘Person’, as hereinafter defined, to sell any portion of its assets, to sell any portion of its capital stock
or other ownership interests or to effect any merger, consolidation or other reorganization of itself or to enter into any agreement
with respect thereto.
Section
3.18 PubCo Shareholders. PubCo has delivered to Diego a shareholder list prepared by its transfer agent, which, to PubCo’s
knowledge, is a complete and accurate undated list setting forth the following information with respect to each Person who is
a record holder of any PubCo Shares: (a) such Person’s name; and (b) the number of PubCo Shares held by such Person.
Diego
– Merger Agreement Execution Copy
Section
3.19 Government Consent. No consent, waiver, approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other federal, state, county, local or other foreign governmental authority,
instrumentality, agency or commission or any third party, including a party to any agreement with PubCo, is required by or with
respect to PubCo in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may
be required under applicable securities laws thereby, and (ii) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF DIEGO
Diego
hereby represents and warrants, as of the date hereof and as of the Closing Date, to PubCo as follows:
Section
4.1 Organization. Diego is a corporation or other business entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, with all requisite corporate or other organizational power
to own, operate or lease its properties and to carry on its business as it is now being conducted, and is duly qualified and in
good standing as a foreign corporation authorized to do business in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its business or activities makes such qualification necessary, in each case, except as would
not, individually or in the aggregate, reasonably be expected to have a ‘Diego Material Adverse Effect’, as hereinafter
defined.
Section
4.2 Authorization: Validity. The Board of Directors of Diego has determined that the Merger is advisable and in the best
interests of the stockholders of Diego and, shall recommend that Diego’s stockholders vote to approve and adopt this Agreement.
Diego has the necessary corporate power to execute and deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Diego, the performance by Diego
of its obligations hereunder and the consummation by Diego of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action on the part of Diego. This Agreement has been duly executed and delivered by Diego and, assuming
the due authorization, execution and delivery by PubCo hereof, constitutes a valid and binding obligation of Diego enforceable
against it in accordance with the terms hereof, subject to the Enforceability Exceptions.
Section
4.3 Capitalization. The authorized capital stock of Diego consists of 100,000,000 shares
of capital stock, consisting of 87,000,000 shares of common stock, par value $0.0001 per share, and 13,000,000 shares of preferred
stock (the “Diego Preferred Stock”), par value $0.0001 per share. As of the Effective Date, there are 14,590,038
shares of common issued and outstanding, 4,836,769 shares of Series A Preferred Stock issued and outstanding, and 666,667 shares
of Series B Preferred Stock issued and outstanding. As of the Effective Date, there are an aggregate of $790,798 warrants to purchase
shares of Series A Preferred Stock and an aggregate of $475,000 warrants shares of Series B Preferred Stock issued and outstanding.
All issued and outstanding shares of common stock and shares of common stock underlying the Diego Preferred Stock and warrants
are duly authorized, validly issued, fully paid, and non-assessable, and were not issued in violation of any Law, or the pre-emptive
rights of any Person. There are no outstanding rights, subscriptions, warrants, puts, calls, unsatisfied
preemptive rights, options or other agreements (including shareholder agreements), of any kind relating to shares of Diego Common
Stock, or any other security of Diego and there are no authorized or outstanding securities convertible into or exchangeable for
any such Diego common stock or other security of Diego.
Diego
– Merger Agreement Execution Copy
Section
4.4 No Conflict: Required Filings and Consents. (a) The execution and delivery by Diego of this Agreement does not, and
the performance by Diego of its obligations hereunder and the consummation by Diego of the transactions contemplated hereby will
not: (i) subject to the adoption of this Agreement by Diego’s stockholders, violate or conflict with the Articles of Incorporation
or by-laws of Diego; (ii) subject to obtaining or making the notices, reports, filings, waivers, consents, approvals or authorizations
referred to in Section 4.4(b) below, conflict with or violate any law, regulation, court order, judgment or decree applicable
to Diego or by which any of its assets or property is bound or subject; (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination,
cancellation, vesting, modification, alteration or acceleration of any obligation under, or result in the creation of a lien,
claim or encumbrance on any of the properties or assets of Diego pursuant to, or result in the loss of any benefit under (including
an increase in the price paid by, or cost to, Diego), or require the consent of any other party to, or result in any obligation
on the part of Diego to repurchase (with respect to a bond or a note), any agreement, contract, instrument, bond, note, indenture,
permit, license or franchise to which Diego is a party or by which Diego or any of its respective assets or properties are bound
or subject.
Section
4.5 Full Disclosure. None of representations and warranties made by Diego contains any untrue statement of a material fact,
or omits any material fact the omission of which would be misleading under the circumstances by which it was made.
Section
4.6 Brokers. There is no broker, finder or investment banker or other Person entitled to any brokerage, finder’s,
investment banking or other similar fee or commission in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Diego.
Section
4.7 Compliance With Law. Except as otherwise disclosed, Diego materially complies with material Laws applicable to it.
Section
4.8 Litigation. Except as disclosed on Schedule 4.8, Diego is not a party to any suit, action, arbitration, or legal,
administrative, or other proceeding, or pending governmental investigation. To the best knowledge of Diego, there is no basis
for any such action or proceeding and no such action or proceeding is threatened against Diego. Diego is not subject to or in
default with respect to any order, writ, injunction, or decree of any federal, state, local, or foreign court, department, agency
or instrumentality.
Section
4.9 Diego Shareholders. Diego on or before the Effective Date shall deliver to PubCo a complete and accurate list setting
forth the following information with respect to each Person who is a holder of any Diego Shares: (a) such Person’s name;
and (b) the number of Diego Shares held by such Person.
Diego
– Merger Agreement Execution Copy
Section
4.10 Government Consent. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or commission or other federal, state, county, local
or other foreign governmental authority, instrumentality, agency or commission or any third party, including a party to any agreement
with Diego, is required by or with respect to Diego in connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable securities laws thereby, and (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware.
Section
4.11 Restrictions on Business Activities. There is no agreement (non-compete or otherwise), commitment, judgment, injunction,
order or decree to which Diego is a party or otherwise binding upon Diego which has or may have the effect of prohibiting or impairing
any business practice of Diego, any acquisition of property (tangible or intangible) by Diego or the conduct of business by Diego.
Without limiting the foregoing, Diego has not entered into any agreement under which Diego is restricted from selling, licensing
or otherwise distributing any of its technology or products to or providing services to, customers or potential customers or any
class of customers, in any geographic area, during any period of time or in any segment of the market.
Section
4.12 No Undisclosed Liabilities. Except as previously disclosed, there are no liabilities or debts of Diego of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result in such a liability or debt.
Section
4.13 Material Contracts. Except as a previously disclosed, Diego’s Material Contracts are enforceable in accordance
with their respective terms, and to the knowledge of Diego, Diego is not in violation of, and has received no notice of being
in violation of such Material Contracts.
Section
4.14. Taxes. (a) All Tax Returns required to be filed by Diego on or prior to the Effective Time or with respect to taxable
periods ending on or prior to the Effective Time have been or will be prepared in good faith and timely filed with the appropriate
Governmental Entity on or prior to the Effective Time or by the due date thereof including extensions.
(b)
All “Taxes”, as hereinafter defined, that are required to be paid have been or will be fully paid.
(c) Diego
has not waived any statute of limitations with respect to federal and state income Taxes or agreed to any extension of time with
respect to federal income or state Tax assessment or deficiency.
(d) As of the date hereof, there are not pending or, to the knowledge of PubCo, threatened any audits, examinations, investigations
or other proceedings in respect of matters of Tax that (i) were raised by any taxing authority in a written communication to Diego
or any thereof; and (ii) would, if determined adversely to PubCo, individually or in the aggregate, reasonably be expected to
have an Diego Material Adverse Effect.
(e) Diego has made available to PubCo true and correct copies of the United States federal income
and all material state income or franchise Tax Returns filed by Diego and its Subsidiaries
for each of its fiscal year ended 2013.
Diego
– Merger Agreement Execution Copy
ARTICLE
V
CONDITIONS TO CLOSING
Section
5.1 Financial Statements. This Agreement shall become effective as of such date
and time as when PubCo shall have received copies of (i) audited financial statements for Diego for its most recently ended fiscal
year, or such shorter period if agreed by the parties, and (ii) unaudited quarterly financial statements for Diego for the quarter
ended following the completion of its most recent fiscal year, the same to be included with PubCo's expected Current Report Form
8-K to be filed with the Securities and Exchange Commission.
ARTICLE
VI
CONDUCT PENDING THE MERGER
Section
6.1 Stockholder Approval. Diego and PubCo shall seek to secure from their stockholders
approval pursuant to the written consent of the holders of such number of shares as may be permitted for the approval of a transaction
of the type provided for herein, and shall further promptly comply with such notice requirements to the remaining shareholders.
Section
6.2 Operations of PubCo. (a) PubCo covenants for itself that, after the date hereof and prior to the Effective Time (unless
Diego shall otherwise approve in writing or required by applicable law) PubCo shall not:
(i)
conduct any business;
(ii)
(A) except as previously disclosed, amend its certificate of incorporation
or by-laws, or adopt any stockholders’ rights plan or enter into any agreement with any of its stockholders in their capacity
as such, (B) split, combine, subdivide or reclassify its outstanding shares of its capital, (C) declare, set aside, make or pay
any dividend or distribution payable in cash, stock or property in respect of any of its capital stock, or, (D) repurchase, redeem
or otherwise acquire to purchase, redeem or otherwise acquire, any shares of its capital stock;
(iii)
take or fail to take any action that would (A) prevent the Merger
from qualifying as a “reorganization” within the meaning of Section 368 of the Code, or (B) cause any of its representations
and warranties herein to become inaccurate or misleading in any material respect;
(iv)
except as expressly contemplated by this Agreement issue, deliver,
sell or encumber shares of any class of its capital stock or any securities convertible into, or any rights, warrants or options
to acquire, any such shares;
(v)
acquire or make any investment in any business or other Person,
whether by merger, consolidation, purchase of property or assets or otherwise; and/or,
(vi)
except as previously disclosed, enter into any commitments or
agreements to do any business or other Person, whether by merger, consolidation, purchase of property or assets or otherwise;
Diego
– Merger Agreement Execution Copy
(b)
From the date hereof through the Closing Date, PubCo shall promptly notify Diego of any investigations of which PubCo has knowledge
or any claims which, after the date hereof, are commenced or threatened against PubCo, thereof or any of the properties or assets
of PubCo, or any officer, director or employee of PubCo arising out of or relating to the affairs or conduct of the business of
PubCo.
(c)
Diego and its employees, independent accountants, attorneys, agents and authorized representatives shall have reasonable opportunity
and access during normal business hours to the plants, properties, documents, files, books and records of PubCo, and shall be
provided with such information as to the business, properties and assets of PubCo as Diego may from time to time reasonably request
to update Diego with respect to events occurring after the date hereof.
ARTICLE
VII
ADDITIONAL AGREEMENTS
Section
7.1 Publicity. No Party shall issue any press release or otherwise make any public statements
with respect to the Merger without the prior consent of the other Party.
Section
7.2 Further Actions. Each of the Parties shall, subject to the fulfillment at or before
the Effective Time of each of the conditions of performance set forth herein or the waiver thereof, use its reasonable best efforts:
(a) to perform such further acts and execute such documents as may be reasonably required to: (i) effect the transactions contemplated
hereby, (ii) obtain in a timely manner all necessary waivers, consents and approvals, and (iii) effect all necessary registrations
and filings; and, (b) to take, or cause to be taken, all other actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable the Merger.
Section
7.3 Expenses. Whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby, shall be paid by the Party incurring such expenses.
Section
7.4 Notification of Certain Matters. Each Party shall give prompt notice to the other Party(ies) of the following:
(a)
the occurrence or nonoccurrence of any event whose occurrence or nonoccurrence is reasonably expected to cause not to be satisfied
any of the conditions precedent set forth in Article VII; and,
(b)
the status of matters relating to the completion of the Merger, including promptly furnishing the other Party with copies of notices
or other communications received by such notifying Party from any third party and/or Governmental Entity with respect to this
Agreement or the transactions contemplated hereby, including the Merger.
Section
7.5 Review of Information. Subject to applicable laws relating to the exchange of information, each Party shall have the
right to review in advance, and to the extent practicable, each will consult with the other about all information relating to
that appears in any filing made with, or written materials submitted to, any third party and/or any Governmental Entity in connection
with the Merger. In exercising the foregoing right, each of the Parties shall act reasonably and as promptly as practicable.
Diego
– Merger Agreement Execution Copy
Section
7.6 Indemnification. From and after the Effective Time, PubCo shall, or shall cause the Surviving Corporation to, defend,
indemnify and hold harmless each present and former director and officer of Diego (to the extent such Person is or was acting
in such capacity) (the “Indemnified Parties”), against any costs or expenses (including reasonable attorneys’
fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or investigative, for acts or omissions existing or occurring at or
prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted
under applicable law. The provisions of this Section 6.6 are intended to be for the benefit of, and shall be enforceable by, each
of the Indemnified Parties, their heirs and their representatives.
Section
7.7 Tax-Free Reorganization. Each of the Parties will use its reasonable best efforts to cause the Merger to qualify as
a tax-free “reorganization” under Section 368 of the Code.
Section
7.9 Regulation D. From and after the Effective Time, PubCo shall comply with the requirements of Regulation D under the
Securities Act and state securities laws.
ARTICLE
VIII
CONDITIONS TO THE MERGER
Section
8.1 Conditions to the Obligations of the Parties to Consummate the Merger. The respective obligation of each Party to
consummate the Merger shall be subject to the satisfaction of each of the following conditions:
(a) No
order, decree or injunction shall have been entered or issued by any
Governmental Entity which shall be in effect and shall have the effect of making the Merger illegal or otherwise prohibiting consummation
of the Merger. Each Party agrees that, in the event that any such order, decree or injunction shall be entered or issued, it shall
use its reasonable best efforts to cause the same to be lifted or vacated.
Section
8.2 Additional Conditions to the Obligations of PubCo. The obligations of PubCo to consummate the Merger shall also be
subject to the satisfaction or waiver of each of the following conditions:
(a)
Representations and Warranties. The representations and warranties of Diego contained in this Agreement (without giving effect
in any such representation or warranty to any materiality or the Diego Material Adverse Effect standard, qualification or exception
contained therein) shall be true at and as of the Closing Date with the same effect as though made at and as of such time (except
for representations and warranties which speak as of a different date, which shall be true as of such date).
(b)
Agreements and Covenants. Diego shall have performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or before the Effective Time.
Diego
– Merger Agreement Execution Copy
(c)
Consents. Diego shall have obtained all consents, approvals, releases or authorizations from, and Diego shall have made all
filings and registrations to or with, any Person, including without limitation any Governmental Entity, necessary to be obtained
or made by Diego in order for Diego to consummate the Merger, unless the failure to obtain any of such consents, approvals, releases
or authorizations or make any such filings or registrations would not, individually or in the aggregate, reasonably be expected
to have a Diego Material Adverse Effect.
(d)
No Material Adverse Change. Since the date of this Agreement, no change or circumstance resulting in a Bio-E Material Adverse
Effect shall have occurred.
(e)
Stockholder Adoption/Approval. The requisite holders of the stock of Diego shall have voted to adopt this Agreement in accordance
and such adoption shall have been certified by the Secretary or Assistant Secretary of Diego.
(f)
Certificate of Good Standing. Diego shall
have delivered to PubCo a certificate as to the good standing of Diego in the State of Delaware certified by the Secretary of
State of the State of Delaware on or within 20 calendar days of the Closing Date. PubCo shall have delivered to Diego a certificate
as to the good standing of PubCo in the State of Delaware certified by the Secretary of State of the State of Delaware on or within
20 calendar days of the Closing Date
Section
8.3 Additional Conditions to the Obligations of Diego. The obligations of Diego to consummate the Merger shall also be
subject to the satisfaction or waiver of each of the following conditions:
(a)
Representations and Warranties. The representations and warranties of PubCo contained in this Agreement shall be true at and
as of the Closing Date with the same effect as though made at and as of such time.
(b)
Agreements and Covenants. PubCo shall have performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or before the Closing Date.
(c)
Consents. PubCo shall have obtained all consents, approvals, releases or authorizations from, and PubCo shall have made all
filings and registrations to or with, any Person, including without limitation any Governmental Entity, necessary to be obtained
or made by PubCo in order for PubCo to consummate the Merger, unless the failure to obtain any such consents, approvals, releases
or authorizations or make any such filings or registrations would not, individually or in the aggregate, be reasonably expected
to have a PubCo Material Adverse Effect.
(d)
No Material Adverse Change. Since the date of this Agreement, no change or circumstance resulting in PubCo Material Adverse
Effect shall have occurred.
(e)
Certificate of Good Standing. PubCo shall have delivered to Diego a certificate as to the good standing of PubCo in the State
of Delaware certified by the Secretary of State of the State of Delaware on or within 20 calendar days of the Closing Date.
Diego
– Merger Agreement Execution Copy
ARTICLE
IX
TERMINATION AND AMENDMENT
Section
9.1 Termination. This Agreement may be terminated at any time before the Effective Time (except as otherwise provided)
as follows:
(a)
by mutual written consent of the Parties;
(b)
by either Party, if a Governmental Entity shall have issued an order, decree or injunction having the effect of making the Merger
illegal or permanently prohibiting the consummation of the Merger, and such order, decree or injunction shall have become final
and non-appealable (but only if such Party shall have used its reasonable best efforts to cause such order, decree or injunction
to be lifted or vacated); and
(c)
by either Party, if (x) there shall have been a material breach by the other Party of any of its representations, warranties,
covenants or agreements contained in this Agreement, which breach would result in the failure to satisfy one or more of the conditions
set forth in Section 7.2(a) or (b) (in the case of a breach by Diego) or Section 7.3(a) or (b) (in the case of a breach by PubCo),
and (y) such breach shall be incapable of being cured or, if capable of being cured, shall not have been cured immediately upon
the receipt by the Party alleged to be in breach of written notice thereof.
Section
9.2 Effect of Termination and Abandonment. In the event of the termination of this Agreement pursuant to this Article VIII,
this Agreement shall become void and of no effect with no liability on the part of any Party (or of any of its Representatives);
provided, however, that (i) no such termination shall relieve any Party from any liability for damages resulting from any
willful and intentional breach of this Agreement, and (ii) this Article VIII, Sections shall survive such termination.
Section
9.3 Amendment. This Agreement may be amended at any time before the Effective Time, but only pursuant to a writing executed
and delivered by all Parties.
ARTICLE
X
GENERAL PROVISIONS
Section
10.1 Survival of Representations, Warranties and Agreements. The representations, warranties, covenants and agreements
shall survive the Effective Date.
Section
10.2 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed
to have been duly given or made as of the date of receipt and shall be delivered personally, mailed by registered or certified
mail (postage prepaid, return receipt requested), sent by overnight courier, sent by email, or sent by telecopy, to the applicable
Party at the following addresses or telecopy numbers (or at such other address or telecopy number for a Party as shall be specified
by like notice):
|
(a) |
if to PubCo: |
Diego Pellicer Worldwide, Inc. (f/k/a Type
1 Media, Inc.) |
|
|
|
|
|
|
|
c/o
Szaferman Lakind Blumstein & Blader, PC
101 Grovers Mill Road, Second Floor
Lawrenceville, NJ 08648
Fax: 609-557-0969
Email:
gjaclin@szaferman.com Attn.: Gregg Jaclin, Esq.
|
Diego – Merger Agreement Execution Copy
|
(b) |
if to Diego: |
Diego Pellicer World-wide 1, Inc. |
|
|
|
c/o Szaferman Lakind Blumstein
& Blader, PC
101 Grovers Mill Road, Second Floor
Lawrenceville, NJ 08648
Fax: 609-557-0969
Email: gjaclin@szaferman.com
Attn.: Gregg Jaclin, Esq. |
Section
10.3 Certain Definitions: Interpretation. (a) For purposes of this Agreement, the following terms shall have the following
meanings:
“Diego
Material Adverse Effect” means any material adverse change in or material adverse effect (x) on the business, results
of operations, financial condition or prospects of Diego (or its successor), or (y) that will prevent or materially impair Diego’s
ability to consummate the Merger.
"PubCo
Material Adverse Effect” means (x) a material change in liability or (y) that will prevent or materially impair PubCo’s
ability to consummate the Merger or the issuance by PubCo of shares of PubCo Common Stock in accordance with the terms hereof.
“C(c)ontract”
shall mean any agreement, contract, license, indenture, lease, mortgage, license, plan, arrangement, commitment or instrument
including any note or other debt instrument (whether written or oral).
“C(c)onsents”
shall refer to the consents or approval of any third party including any governmental agency or registered securities association
required in connection with the Merger.
“Enforceability
Exceptions” shall mean the extent to which enforceability of an obligation may be limited by applicable bankruptcy,
insolvency, re-organization or other similar laws affecting the enforcement of creditors’ rights generally and by principles
of equity regarding the availability of remedies.
“GAAP”
shall refer to generally accepted accounting principles as applicable in the United States.
“Governmental
Entity” shall mean braches, departments and agencies (and subunits theref) of the federal, state and local government
created by federal or state statutes, federal or state executive orders, or local ordinances or resolutions.
“K(k)nowledge”
shall mean with respect to a party's awareness of the presence or absence of a fact, event or condition (a) actual knowledge plus,
if different, (b) the knowledge that would be obtained if such party conducted itself faithfully and exercised a sound discretion
in the management of his own affairs.
Diego – Merger Agreement Execution Copy
“L(l)aws”
shall mean all laws, common laws, rules, regulations, ordinances, codes, judgments, injunctions, orders, decrees, permits, policies
and other requirements of the United States and other jurisdictions to which a party, is subject, including all foreign and local
governments and all agencies and instrumentalities thereof, including any administrative agencies or administrative body created
by any such government.
“L(l)iabilities”
shall mean any indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, choate
or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise, whether or not of a
kind required by generally accepted accounting principles to be set forth on a financial statement including the notes thereto.
“L(l)ien”
means any mortgage, pledge, lien, encumbrance, charge, adverse claim or restriction of any kind affecting title or resulting in
an encumbrance against property, real or personal, tangible or intangible, or a security interest of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, any third party option or other agreement to sell and
any filing of or agreement to give, any financing statement under the Uniform Commercial Code (or equivalent statute) of any jurisdiction).
“P(p)erson(s)”
means an individual, corporation, partnership, joint venture, limited liability company, association, trust, unincorporated organization,
entity or group (as defined in the Securities Exchange Act of 1934, as amended).
“Subsidiary(ies)”
of a Person means any corporation or other legal entity (A) which is directly or indirectly owned or controlled by such Person
(either alone or through or together with any other Subsidiary or Subsidiaries), and (B) of which such Person (either alone or
through or together with any other Subsidiary or Subsidiaries) (x) is the general partner or managing entity or (y) controls,
directly or indirectly, at least a majority of the stock or other equity interests which are generally entitled to be voted by
the holders thereof for the election of the board of directors (or others performing similar functions of such corporation or
other legal entity).
“Taxes”
shall mean any income, alternative or add-on minimum, business, employment, franchise, occupancy, payroll, property, sales, transfer,
use, value added, withholding or other tax, levy, impost, fee, imposition, assessment or similar charge together with any related
addition to tax, interest, penalty or fine thereon.
“Tax
Returns” means any and all reports, returns, declarations, claims for refund, elections, disclosures, estimates, information
reports or returns or statements required to be supplied to a governmental authority in connection with Taxes, including any schedule
or attachment thereto or amendment thereof.
(b) When
a reference is made in this Agreement to Articles, Sections, or Exhibits, such reference is to an Article or a Section of, or
an Exhibit to, this Agreement, unless otherwise indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words
“include,” “includes” or “including” are used in this Agreement, they shall
be understood to be followed by the words “without limitation.”
Diego – Merger Agreement Execution Copy
Section
10.4 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section
10.5 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially
adverse to any Party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced,
the Parties shall negotiate in good faith to modify this Agreement so as to affect the original intent of the Parties as closely
as possible such that the transactions contemplated hereby are fulfilled to the maximum extent possible.
Section
10.6 Entire Agreement: No Third-Party Beneficiaries. This Agreement, together with the Exhibits and Schedules, constitutes
the entire agreement and supersedes any and all other prior agreements and undertakings, both written and oral, among the Parties,
or any of them, with respect to the subject matter hereof and, except for Section 6.6 (Indemnification) does not, and is not intended
to, confer upon any Person other than the parties hereto any rights of remedies hereunder.
Section
10.7 Assignment. This Agreement shall not be assigned by any Party by operation of law or otherwise without the express
written consent of each of the other Parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective permitted successors and assigns.
Section
10.8 Governing Law. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE, INCLUDING LAWS RELATING TO THE VALIDITY, INTERPRETATION AND EFFECT OF THIS AGREEMENT, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE OF DELAWARE AND/OR THE STATE OF NEW YORK SHALL SPECIFICALLY
AND MANDATORILY APPLY TO THE MERGER AND THE RIGHTS OF STOCKHOLDERS INCIDENTAL THERETO.
(b)
EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATES OF NEW YORK AND THE COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE CITY OF NEW YORK, FOR ANY LITIGATION ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE MERGER OR ANY OF THE OTHER TRANSACTION CONTEMPLATED HEREBY. EACH PARTY AGREES NOT
TO COMMENCE ANY LITIGATION RELATING HERETO EXCEPT IN SUCH COURTS REFERENCED ABOVE, AND FURTHER AGREES THAT SERVICE OF ANY PROCESS,
SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO ITS RESPECTIVE ADDRESS SET FORTH IN SECTION 10.2 SHALL BE EFFECTIVE SERVICE
OF PROCESS FOR ANY LITIGATION BROUGHT AGAINST IT IN ANY SUCH COURT. EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY OBJECTION TO THE LAYING OF VENUE IN THE ABOVE REFERENCED COURTS.
Diego – Merger Agreement Execution Copy
(c)
EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE MERGER OR ANY OF THE OTHER TRANSACTIONS CONTEMPLATED HEREBY.
Section
10.10 Counterparts. This Agreement may be executed in one or more counterparts, and by the different Parties in separate
counterparts, each of which when executed shall be deemed to be an original, but all of which shall constitute one and the same
agreement.
Section
10.11 Exclusivity. Except for the transactions contemplated by this Agreement, none of the Parties shall (i) solicit, initiate,
or encourage the submission of any proposal or offer relating to the acquisition of any capital stock or other voting securities
or any substantial portion of the assets of such or any other Party hereto (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any
of the foregoing. The Parties shall notify each other Party immediately if any Person makes any proposal, offer, inquiry, or contact
with respect to any of the foregoing.
Section
10.12 Diego Operations.
(a)
As part of the transaction herein. PubCo shall assume from Diego the following assets, which shall hereinafter collectively be
designated the "Assets":
(i)
Proprietary Rights - Any and all of the following used by Diego in connection with Diego’s business, including:
(A)
production operations and processes, trade secrets, know-how and confidential, information, customer lists and information;
(B)
logos, trade dress (including, without limitation, configuration, design and packaging), goodwill, rights of publicity and privacy
(including, without limitation, photographic and other releases, whether published or unpublished), marketing rights, and any
similar rights, together with the goodwill of the Diego Business associated therewith and/or symbolized thereby;
(C)
other intellectual property, intangible industrial property and proprietary rights, titles, interests and privileges, however
designated, that are similar or analogous to any of the foregoing including, without limitation any and all rights in and to product
configurations and designs, label, designs, graphic and artistic designs; artwork; dyes; character; rights; and UPC bar codes;
(D)
registrations, applications, renewals, and extensions with respect to each of the foregoing now or hereafter in force, in whole
and/or in part;
(E)
rights of possession, ownership, use and enjoyment with respect to each of the foregoing, including, without limitation, the right
to license, sublicense, assign, pledge sell, transfer, convey, grant, gift over, divide, partition or use (or not use) in any
way any of the foregoing now or hereafter (including without limitation any claims, demands or causes of action of any kind with
respect thereto);
Diego – Merger Agreement Execution Copy
(F)
Diego’s customers, and their related information;
(G)
all books and records relating to the Assets;
(H)
claims, demands and causes of action of any kind with respect to, and any and all other rights relating to the enforcement of,
any of the foregoing, including, without limitation, any claims, demands or causes of action for any infringement, conversion,
misappropriation, dilution or other violation of or injury to any of them.
Each
and all of the foregoing being hereinafter referred to collectively as the "Proprietary Rights." To the extent, if any,
that any rights of Diego or of the author of any work encompassed by the Proprietary Rights cannot be legally transferred by Diego,
they shall be waived in a signed writing providing for same;
(b)
Diego shall execute and deliver to PubCo such other documents as may be reasonably required by PubCo to evidence
PubCo’s assumption of the Assets.
10.13 Share
Cancellation. Purchase and Sale. Simultaneously, at the Effective Time the PubCo Principal Shareholder, owning an
aggregate of 55,000,000 shares of PubCo’s common stock shall cancel the 55,000,000 shares pursuant to the Cancellation
Agreement in exchange for an aggregate cancellation price of $169,000.
[SIGNATURE
PAGE TO FOLLOW IMMEDIATELY]
Diego
– Merger Agreement Execution Copy
IN
WITNESS WHEREOF, the Parties hereto have executed this instrument the date first above written.
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DIEGO PELLICER WORLD-WIDE 1, INC. |
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By: |
/s/ Philip Gay |
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Name: |
Philip Gay |
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Title: |
Chief Executive Officer |
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DIEGO PELLICER WORLDWIDE, INC. (f/k/a TYPE 1 MEDIA,
INC.) |
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By: |
|
|
Name: |
Jonathan White |
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Title: |
President |
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B: |
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JONATHAN WHITE, Individually |
The
rest of this page is left intentionally blank.
Diego – Merger Agreement Execution Copy
IN
WITNESS WHEREOF, the Parties hereto have executed this instrument the date first above written.
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DIEGO PELLICER WORLD-WIDE 1, INC. |
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|
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By: |
|
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Name: |
Philip Gay |
|
Title: |
Chief Executive Officer |
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DIEGO PELLICER WORLDWIDE, INC. (f/k/a TYPE 1 MEDIA,
INC.) |
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By: |
/s/ Jonathan White |
|
Name: |
Jonathan White |
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Title: |
President |
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B: |
/s/ Jonathan White |
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JONATHAN WHITE, Individually |
The
rest of this page is left intentionally blank.
Diego
– Merger Agreement Execution Copy
SCHEDULES
Schedule
2.2 Diego Shareholders
Common
Stock Holder | |
Number
of Shares of Diego Common Stock | | |
Number
of Shares of PubCo Common Stock to be Issued | |
WSCP | |
| 7,020,000 | | |
| 7,020,000 | |
D. Anderson | |
| 5,941,800 | | |
| 5,941,800 | |
W. Gosnell | |
| 192,000 | | |
| 192,000 | |
Nick & Barbara
Cerwin | |
| 80,000 | | |
| 80,000 | |
Christine Becker | |
| 20,000 | | |
| 20,000 | |
Robert & Kristen
Lanigan | |
| 20,000 | | |
| 20,000 | |
John Davis | |
| 51,000 | | |
| 51,000 | |
Povilos Stravinski | |
| 7,000 | | |
| 7,000 | |
Louis Moore | |
| 2,000 | | |
| 2,000 | |
Company/Treasury | |
| 58,200 | | |
| 58,200 | |
M. Gosnell | |
| 64,000 | | |
| 64,000 | |
C.
Gosnell | |
| 64,000 | | |
| 64,000 | |
Total | |
| 13,520,000 | | |
| 13,520,000 | |
Diego
Series A Holder | |
Number
of Shares of Diego Series A Stock | | |
Number
of Shares of PubCo Common Stock to be Issued | |
J
Murphy | |
| 35,733 | | |
| 36,846 | |
Close
Trust | |
| 53,400 | | |
| 55,063 | |
M
Gunn | |
| 53,333 | | |
| 54,995 | |
Greener
Investments LLC | |
| 40,000 | | |
| 41,246 | |
G
Thrall | |
| 26,666 | | |
| 27,497 | |
B
Heimann | |
| 26,666 | | |
| 27,497 | |
G
Sickler | |
| 26,666 | | |
| 27,497 | |
Basalt
Investments, LLC | |
| 106,000 | | |
| 109,302 | |
D
Koweleski | |
| 29,866 | | |
| 30,797 | |
D
Primbs | |
| 27,224 | | |
| 28,073 | |
J
Maguire | |
| 53,333 | | |
| 54,995 | |
M
Gothberg | |
| 27,242 | | |
| 28,091 | |
M
Osgood | |
| 5,436 | | |
| 5,605 | |
W
Primbs | |
| 44,778 | | |
| 46,173 | |
A
Goltzman | |
| 5,333 | | |
| 5,499 | |
K
Khan | |
| 26,700 | | |
| 27,531 | |
D
Youngwall | |
| 53,333 | | |
| 54,995 | |
A
Goltzman | |
| 5,333 | | |
| 5,499 | |
J
Rosenthal | |
| 26,666 | | |
| 27,497 | |
D
& J Jasura | |
| 26,666 | | |
| 27,497 | |
T
Huesers | |
| 26,666 | | |
| 27,497 | |
M
Karukin | |
| 26,666 | | |
| 27,497 | |
T
Mangurian | |
| 22,400 | | |
| 23,097 | |
TMK
Holdings LLC | |
| 3,200,000 | | |
| 3,200,000 | |
JDF
Capital | |
| 106,666 | | |
| 109,990 | |
M
Hemenway | |
| 160,000 | | |
| 164,985 | |
J
Fink | |
| 100,000 | | |
| 103,115 | |
M
Hemenway | |
| 53,333 | | |
| 54,995 | |
R
Drake | |
| 26,666 | | |
| 27,497 | |
L
Drake | |
| 26,666 | | |
| 27,497 | |
A
Verglay | |
| 266,666 | | |
| 274,975 | |
R
Neubauer | |
| 30,000 | | |
| 30,934 | |
A
Blum | |
| 26,666 | | |
| 27,497 | |
M
Siebert | |
| 32,000 | | |
| 32,997 | |
D
Sullivan | |
| 32,000 | | |
| 32,997 | |
TOTAL | |
| 4,836,769 | | |
| 4,887,765 | |
Diego – Merger Agreement Execution Copy
Schedule
2.2
Diego
Series B Holder | |
Number
of Shares of Diego Series B Stock | | |
Number
of Shares of PubCo Common Stock to be Issued | |
Aureis
(Anaford) | |
| 200,000 | | |
| 200,000 | |
Compasss
Ventures | |
| 466,666 | | |
| 466,666 | |
Total | |
| 666,666 | | |
| 666,666 | |
Diego
WA Conversion Common Stock | |
Number
of Shares of Diego Common Stock | | |
Number
of Shares of PubCo Common Stock to be Issued | |
Jamen Shively | |
| 44,528 | | |
| 44,528 | |
Randy Aliment | |
| 89,056 | | |
| 89,056 | |
James Kossert | |
| 89,056 | | |
| 89,056 | |
Kazuaki (Butch) | |
| 55,268 | | |
| 55,268 | |
Sugiyama | |
| 33,150 | | |
| 33,150 | |
Thaddeus Dancer | |
| 276,055 | | |
| 276,055 | |
Tiberius Group | |
| 5,508 | | |
| 5,508 | |
Brad Blake | |
| 16,526 | | |
| 16,526 | |
Lauri Sikler-Tock | |
| 27,473 | | |
| 27,473 | |
Marianne | |
| 27,254 | | |
| 27,254 | |
Maksirisonbat | |
| 27,231 | | |
| 27,231 | |
Elena Byrne | |
| 54,462 | | |
| 54,462 | |
Ethan Crawford | |
| 108,902 | | |
| 108,902 | |
Gracie
Close | |
| 108,902 | | |
| 108,902 | |
Eli Hastings | |
| | | |
| | |
Casey
Hastings | |
| 963,371 | | |
| 963,371 | |
Subtotal | |
| | | |
| | |
| |
| | | |
| | |
Series
A | |
| 26,667 | | |
| 26,667 | |
Julie Evans Reid | |
| 53,333 | | |
| 53,333 | |
John
Charles Russell | |
| 26,667 | | |
| 26,667 | |
Jason
& Kirsten L. Russell | |
| 106,667 | | |
| 106,667 | |
Subtotal | |
| | | |
| | |
| |
| | | |
| | |
Total DPWW Shares | |
| 1,070,038 | | |
| 1,070,038 | |
Diego – Merger Agreement Execution Copy
Diego
Series B Warrant Holder | |
Value
of Diego B Warrant Held | | |
Value
of PubCo B Warrant to be Issued | |
Larry
Wiebe | |
| 125,000 | | |
| 125,000 | |
Doug
Froese | |
| 125,000 | | |
| 125,000 | |
Chester
Aldridge | |
| 125,000 | | |
| 125,000 | |
Merriman | |
| 100,000 | | |
| 100,000 | |
Total | |
| 475,000 | | |
| 475,000 | |
Diego
series A Warrant Holder (@$1.40) | |
Value
of Diego A Warrant Held | | |
Value
of PubCo A Warrant to be Issued | |
M
Hemenway | |
| 32,000 | | |
| 32,000 | |
J
Fink | |
| 20,000 | | |
| 20,000 | |
M
Hemenway | |
| 10,666 | | |
| 10,666 | |
R
Drake | |
| 5,333 | | |
| 5,333 | |
L
Drake | |
| 5,333 | | |
| 5,333 | |
A
Verglay | |
| 53,333 | | |
| 53,333 | |
R
Neubauer | |
| 6,000 | | |
| 6,000 | |
A
Blum | |
| 5,333 | | |
| 5,333 | |
M
Siebert | |
| 6,400 | | |
| 6,400 | |
D
Sullivan | |
| 6,400 | | |
| 6,400 | |
| |
| 150,798 | | |
| 150,798 | |
Diego
Series A Warrant Holder (@1.24) | |
Value
of Diego B Warrant Held | | |
Value
of PubCo B Warrant to be Issued | |
TMK
Holdings LLC | |
| 640,000 | | |
| 640,000 | |
Diego – Merger Agreement Execution Copy
| |
Value
of | | |
Value
of | |
| |
Option/ | | |
Option/ | |
Diego
Warrant/Option Holder | |
Warrant
Held | | |
Warrant
to be Issued | |
Philip
Gay/Rick Demarco/Don Fitzgerald | |
| 200,000 | | |
| 200,000 | |
Greg
Reid | |
| | | |
| | |
Ron Throgmartin | |
| 600,000 | | |
| 600,000 | |
Dr. Robert
Epstein | |
| 250,000 | | |
| 250,000 | |
Jon Fink | |
| 50,000 | | |
| 50,000 | |
Dr. Michael
Osborne | |
| 50,000 | | |
| 50,000 | |
Steve
Norris | |
| 50,000 | | |
| 50,000 | |
Jean
Marie Auboines | |
| 50,000 | | |
| 50,000 | |
Carolyn
Gang | |
| 50,000 | | |
| 50,000 | |
Greg
Quist | |
| 50,000 | | |
| 50,000 | |
Gregg
Jaclin | |
| 25,000 | | |
| 25,000 | |
Dr.
Michael Toney | |
| 15,000 | | |
| 15,000 | |
Turabi
Topal | |
| 10,000 | | |
| 10,000 | |
Mike
Smith | |
| 3,000 | | |
| 3,000 | |
Gino
Rodrigues | |
| 2,000 | | |
| 2,000 | |
Anthony
Vaz | |
| 10,000 | | |
| 10,000 | |
Mark
Moscowitz | |
| 15,000 | | |
| 15,000 | |
Total | |
| 25,000 | | |
| 25,000 | |
| |
| 1,455,000 | | |
| 1,455,000 | |
Diego – Merger Agreement Execution Copy
Schedule
3.7 Contract and Leases; Liabilities; Properties; Employees (PubCo)
The
remaining assets of the company are as follows:
An
account at Bank of America account with less than $1,000
Minimal production equipment
Diego
– Merger Agreement Execution Copy
Schedule
3.15 Taxes (PubCo)
Taxes
have been completed for 2012 and 2013 in both the United States and Canada. PubCo expects to be filing should be filing 2014
United State taxes by March 12, 2015 and the 2014 Canadian taxes by March 31, 2015.
Diego – Merger Agreement Execution Copy
Schedule
4.8 Litigation (Diego)
On
May 23, 2014, Diego Pellicer Worldwide Inc. received a subpoena from the United States Department of Justice, represented by the
United States Attorney’s Office for the Western District of Washington, requesting the production of the Company’s
banking records and documents and records relating to: the structure and organization of the Company; communications between the
Company and its affiliates, including Diego Pellicer, Inc., with potential investors; securities offerings; applications submitted
by Diego Pellicer, Inc. to the Washington State Liquor Control Board in connection with its application to become a retail seller
of cannabis in Washington State; and the Company’s relationship with Plandai Biotechnology.
Based
on limited discussions with the Department of Justice, the Company believes this subpoena was issued in order to determine: (i)
if the Company is or has been engaged in the production, processing or sale of cannabis; (ii) how the Company is related to Diego
Pellicer, Inc.; and (iii) whether investors or potential investors in the Company believed they were investing in a company that
would be engaged in the production, processing or sale of cannabis.
The
Company believes that it has complied fully with all applicable laws, rules and regulations, and intends to cooperate fully with
the government’s investigation.
Depending
on the extent to which the Department of Justice pursues this matter, the Company may be required to suspend or cease its operations,
which could lead to the possible loss of investors’ entire investment in the Company.
Further,
in the event the Company, its officers or its directors are determined to have taken any unlawful action with respect to these
matters, such officers and directors may be barred from performing services on behalf of the Company and/or incarcerated, the
Company may be required to pay fines, and/or the Company may be required to return investors’ investments in the Company.
There can be no guarantee that the Company will have sufficient funds to pay all or any portion of such fines and/or return all
or any portion of such investments made in the Company.
Diego
– Merger Agreement Execution Copy
EXHIBIT
A
CANCELLATION
AGREEMENT
Diego
– Merger Agreement Execution Copy
EXHIBIT
B
CERTIFICATE
OF MERGER
Diego
– Merger Agreement Execution Copy
EXHIBIT
C
FORM
OF PUBCO A WARRANT
Diego
– Merger Agreement Execution Copy
EXHIBIT
D
FORM
OF PUBCO B WARRANT
Diego – Merger Agreement Execution Copy
33
Exhibit 3.1
The
First State
I,
JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF
THE RESTATED CERTIFICATE OF "DIEGO PELLICER WORLDWIDE INC.", FILED IN THIS OFFICE ON THE TWENTY-FOURTH DAY OF SEPTEMBER,
A.D. 2013, AT 1:19 O'CLOCK P.M.
A
FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.
|
|
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|
/s/ Jeffrey
W. Bullock |
5389014
8100
131121583
You
may verify this certificate online
at corp.delaware.gov/authver.shtml |
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|
|
Jeffrey
W. Bullock, Secretary of State
AUTHENTICATION:
0760874
DATE:
09-24-13 |
State
of Delaware |
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|
Secretary
of State |
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|
Division
of Corporations |
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|
Delivered
01:54 PM 09/24/2013 |
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FILED
01:19 PM 09/24/2013 |
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SRV
131121583 - 5389014 FILE |
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AMENDED
AND RESTATED
CERTIFICATE
OF INCORPORATION OF
DIEGO
PELLICER WORLDWIDE INC.
Diego
Pellicer Worldwide Inc., a corporation organized and existing under the laws of the State of Delaware (the
“Corporation"), certifies that:
1. The name of the Corporation is Diego Pellicer Worldwide
Inc. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware
on August 26, 2013.
2. This Amended and Restated Certificate of Incorporation
was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, and has been
duly approved by the written consent of the stockholders of the Corporation in accordance with Section 228 of the General Corporation
Law of the State of Delaware.
3. The text of the Certificate of Incorporation is
amended and restated to read as set forth in EXHIBIT A attached hereto.
IN WITNESS
WHEREOF, Diego Pellicer Worldwide Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by Ron Throgmartin,
a duly authorized officer of the Corporation, on September 23, 2013.
|
/s/ Ron Throgmartin |
|
Ron Throgmartin,
Chief Executive Officer |
EXHIBIT
A
ARTICLE I
The name
of the Corporation is Diego Pellicer Worldwide Inc.
ARTICLE
II
The
purpose of this corporation is to engage in any lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE
III
The
address of the Corporation's registered office in the State of Delaware 2711 Centerville Road, Suite 400, New Castle County, Wilmington,
DE 19808. The name of the registered agent at such address is Corporation Service Company.
ARTICLE
IV
The
total number of shares of stock that the corporation shall have authority to issue is 100,000,000, consisting of 87,000,000 shares
of Common Stock, $0.0001 par value per share, and 13,000,000 shares of Preferred Stock, $0.0001 par value per share. The first
series of Preferred Stock shall be designated "Series A Preferred Stock" and shall consist of 13,000,000
shares.
ARTICLE
V
The terms
and provisions of the Common Stock and Preferred Stock are as follows:
1. Definitions.
For purposes of this ARTICLE V, the following definitions shall apply:
(a) "Board
of Directors" shall mean the board of directors of the Corporation.
(b) "Conversion
Price" shall mean $0.9375 per share for the Series A Preferred Stock (subject to adjustment from time to time for
Recapitalizations and as otherwise set forth elsewhere herein).
(c) "Convertible
Securities" shall mean any evidences of indebtedness, shares or other securities convertible into or exchangeable
for Common Stock.
(d) "Corporation"
shall mean Diego Pellicer Worldwide Inc.
(e) "Distribution"
shall mean the transfer of cash or other property without consideration whether by way of dividend or otherwise, other than
dividends on Common Stock payable in Common Stock, or the purchase or redemption of shares of the Corporation by the Corporation
for cash or property other than: (i) repurchases of Common Stock issued to or held by employees, officers, directors or consultants
of the Corporation or its subsidiaries upon termination of their employment or services pursuant to agreements providing for the
right of said repurchase, (ii) repurchases of Common Stock issued to or held by employees, officers, directors or consultants
of the Corporation or its subsidiaries pursuant to rights of first refusal contained in agreements providing for such right, (iii)
repurchase of capital stock of the Corporation in connection with the settlement of disputes with any stockholder, and (iv) any
other repurchase or redemption of capital stock of the Corporation approved by the holders of the Common and Preferred Stock of
the Corporation voting as separate classes.
(f) "Liquidation
Preference" shall mean $0.9375 per share for the Series A Preferred Stock (subject to adjustment from time to time
for Recapitalizations as set forth elsewhere herein).
(g) "Options"
shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(h) "Original
Issue Price" shall mean $0,9375 per share for the Series A Preferred Stock (subject to adjustment from time to time
for Recapitalizations as set forth elsewhere herein).
(i) "Original
Issue Date" shall mean the date on which the first share of Series A Preferred Stock was issued.
(j) "Preferred
Stock" shall mean the Series A Preferred Stock.
(k) "Recapitalization"
shall mean any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other
similar event.
2. Dividends.
(a) Preferred
Stock. In any calendar year, the holders of outstanding shares of Preferred Stock shall be entitled to
receive dividends, when, as and if declared by the Board of Directors, out of any assets at the time legally available
therefor, payable in preference and priority to any declaration or payment of any Distribution on the Common Stock in such
calendar year, No Distributions shall be made with respect to the Common Stock unless dividends of an equal amount per share
on the Preferred Stock have been declared and paid or set aside for payment to the Preferred Stock holders. The right to
receive dividends on shares of Preferred Stock shall not be cumulative, and no right to dividends shall accrue to holders of
Preferred Stock by reason of the fact that dividends on said shares are not declared or paid.
(b) Common
Stock. Dividends may be paid on the Common Stock when, as and if declared by the Board of Directors, subject to the prior
dividend rights of the Preferred Stock and to Section 6.
(c) Non-Cash
Distributions. Whenever a Distribution provided for in this Section 2 shall be payable in property other than cash, the
value of such Distribution shall be deemed to be the fair market value of such property as determined in good faith by the Board
of Directors.
(d) Waiver
of Dividends. Any dividend preference of any series of Preferred Stock may be waived, in whole or in part, by the
consent or vote of the holders of the majority of the outstanding shares of such series.
3. Liquidation
Rights.
(a) Liquidation
Preference. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or
involuntary, the holders of the Preferred Stock shall he entitled to receive, prior and in preference to any Distribution of any
of the assets of the Corporation to the holders of the Common Stock by reason of their ownership of such stock, an amount per
share for each share of Preferred Stock held by them equal to the sum of (i) the Liquidation Preference specified for such share
of Preferred Stock and (ii) all declared but unpaid dividends (if any) on such share of Preferred Stock, or such lesser amount
as may be approved by the holders of the majority of the outstanding shares of Preferred Stock. If upon the liquidation, dissolution
or winding up of the Corporation, the assets of the Corporation legally available for distribution to the holders of the Preferred
Stock are insufficient to permit the payment to such holders of the full amounts specified in this Section 3(a), then the entire
assets of the Corporation legally available for distribution shall be distributed with equal priority and pro rata among
the holders of the Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive pursuant to this
Section 3(a).
(b) Remaining
Assets. After the payment or setting aside for payment to the holders of Preferred Stock of the full amounts specified
in Section 3(a), the entire remaining assets of the Corporation legally available for distribution shall be distributed pro
rata to holders of the Common Stock of the Corporation in proportion to the number of shares of Common Stock held by them.
(c) Shares
not Treated as Both Preferred Stock and Common Stock in any Distribution. Shares of Preferred Stock shall not be
entitled to be converted into shares of Common Stock in order to participate in any Distribution, or series of Distributions,
as shares of Common Stock, without first foregoing participation in the Distribution, or series of Distributions, as shares of
Preferred Stock.
(d) Reorganization.
For purposes of this Section 3, a liquidation, dissolution or winding up of the Corporation shall be deemed to be occasioned
by, or to include, (i) the acquisition of the Corporation by another entity by means of any transaction or series of related transactions
to which the Corporation is party (including, without limitation, any stock acquisition, reorganization, merger or consolidation
but excluding any sale of stock for capital raising purposes) other than a transaction or series of related transactions in which
the holders of the voting securities of the Corporation outstanding immediately prior to such transaction or series of related
transactions retain, .immediately after such transaction or series of related transactions, as a result of shares in the Corporation
held by such holders prior to such transaction or series of related transactions, at least a majority of the total voting power
represented by the outstanding voting securities of the Corporation or such other surviving or resulting entity (or if the Corporation
or such other surviving or resulting entity is a wholly-owned subsidiary immediately following such acquisition, its parent);
(ii) a sale, lease or other disposition of all or substantially all of the assets of the Corporation and its subsidiaries taken
as a whole by means of any transaction or series of related transactions, except where such sale, lease or other disposition is
to a wholly-owned subsidiary of the Corporation; or (iii) any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary. The treatment -of any transaction or series of related transactions as a liquidation, dissolution
or winding up pursuant to clause (i) or (ii) of the preceding sentence may be waived by the consent or vote of a majority of the
outstanding Preferred Stock (voting as a single class and on an as-converted basis).
(e) Valuation
of Non-Cash Consideration. If any assets of the Corporation distributed to stockholders in connection with any
liquidation, dissolution, or winding up of the Corporation are other than cash, then the value of such assets shall be their fair
market value as determined in good faith by the Board of Directors, except that any publicly-traded securities to be distributed
to stockholders in a liquidation, dissolution, or winding up of the Corporation shall be valued as follows:
(i) if
the securities are then traded on a national securities exchange, then the value of the securities shall be deemed to be the
average of the closing prices of the securities on such exchange over the ten (10) trading day period ending five (5) trading
days prior to the Distribution;
(ii) if
the securities are actively traded over-the-counter, then the value of the securities shall be deemed to be the average of
the closing bid prices of the securities over the ten (10) trading day period ending five (5) trading days prior to the
Distribution.
In
the event of a merger or other acquisition of the Corporation by another entity, the Distribution date shall be deemed to be the
date such transaction closes.
For
the purposes of this subsection 3(e), "trading day" shall mean any day which the exchange or system
on which the securities to be distributed are traded is open and "closing prices" or "closing
bid prices" shall be deemed to be: (i) for securities traded primarily on the New York Stock Exchange, the
American Stock Exchange or a Nasdaq market, the last reported trade price or sale price, as the case may be, at 4:00 p.m., New
York time, on that day and (ii) for securities listed or traded on other exchanges, markets and systems, the market price as of
the end of the regular hours trading period that is generally accepted as such for such exchange, market or system. If, after
the date hereof, the benchmark times generally accepted in the securities industry for determining the market price of a stock
as of a given trading day shall change from those set forth above, the fair market value shall be determined as of such other
generally accepted benchmark times.
4. Conversion.
The holders of the Preferred Stock shall have conversion rights as follows:
(a) Right
to Convert. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the Corporation or any transfer agent for the Preferred Stock, into
that number of fully-paid, nonassessable shares of Common Stock determined by dividing the Original Issue Price for the relevant
series by the Conversion Price for such series. (The number of shares of Common Stock into which each share of Preferred Stock
of a series may be converted is hereinafter referred to as the "Conversion Rate" for each such series.)
Upon any decrease or increase in the Conversion Price for any series of Preferred Stock, as described in this Section 4, the Conversion
Rate for such series shall be appropriately increased or decreased.
(b) Automatic
Conversion. Each share of Preferred Stock shall automatically be converted into fully-paid, non-assessable shares
of Common Stock at the then effective Conversion Rate for such share (i) immediately prior to the closing of a firm commitment
underwritten initial public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as
amended (the "Securities Act"), covering the offer and sale of the Corporation's Common Stock, provided
that the aggregate gross proceeds to the Corporation are not less than $35,000,000, (ii) upon the receipt by the Corporation
of a written request for such conversion from the holders of a majority of the Preferred Stock then outstanding (voting as a single
class and on an as-converted basis), or, if later, the effective date for conversion specified in such requests, or (iii) upon
the merger of Diego Pelticer, Inc., a Washington corporation ("Diego Washingion"), with and into the
Corporation (the "Diego Acquisition") (each of the events referred to in (i), (ii) and (iii) above are
referred to herein as an "Automatic Conversion Event").
(c) Mechanics
of Conversion. No fractional shares of Common Stock shall be issued upon conversion of Preferred Stock. In lieu
of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the then fair market value of a share of Common Stock as determined by the Board of Directors. For such purpose,
all shares of Preferred Stock held by each holder of Preferred Stock shall be aggregated, and any resulting fractional share of
Common Stock shall be paid in cash. Before any holder of Preferred Stock shall be entitled to convert the same into full shares
of Common Stock, and to receive certificates therefor, he shall either (A) surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for the Preferred Stock or (B) notify the Corporation
or its transfer agent that such certificates have been lost, stolen or destroyed and execute an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates, and shall give written
notice to the Corporation at such office that he elects to convert the same; provided, however, that on the date of an
Automatic Conversion Event, the outstanding shares of Preferred Stock shall be converted automatically without any further action
by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation
or its transfer agent; provided further, however, that the Corporation shall not be obligated to issue certificates evidencing
the shares of Common Stock issuable upon such Automatic Conversion Event unless either the certificates evidencing such shares
of Preferred Stock are delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation
or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to ,the
Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. On the datc of the
occurrence of an Automatic Conversion Event, each holder of record of shares of Preferred Stock shall be deemed to be the holder
of record of the Common Stock issuable upon such conversion, notwithstanding that the certificates representing such shares of
Preferied Stock shall not have been surrendered at the office of the Corporation, that notice from the Corporation shall not have
been received by any holder of record of shares of Preferred Stock, or that the certificates evidencing such shares of Common
Stock shall not then be actually delivered to such holder.
The
Corporation shall, as soon as practicable after such delivery, or after such agreement and indemnification, issue and deliver
at such office to such holder of Preferred Stock a certificate or certificates for the number of shares of Common Stock to which
the holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result
of a conversion into fractional shares of Common Stock, plus any declared and unpaid dividends on the converted Preferred Stock.
Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of
the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such
date; provided, however, that if the conversion is in connection with an underwritten offer of securities registered pursuant
to the Securities Act or a merger, sale, financing, or liquidation of the Corporation or other event, the conversion may, at the
option of any holder tendering Preferred Stock for conversion, be conditioned upon the closing of such transaction or upon the
occurrence of such event, in which case the person(s) entitled to receive the Common Stock issuable upon such conversion of the
Prefer-ed Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of
such transaction or the occurrence of such event.
(d) Adjustments
to Conversion Price for Diluting Issues.
(i) Special
Definition. For purposes of this paragraph 4(d), "Additional Shares of Common" shall mean all
shares of Common Stock issued (or, pursuant to paragraph 4(d)(iii), deemed to he issued) by the Corporation after the filing of
this Amended and Restated. Certificate of Incorporation, other than issuances or deemed issuances of:
(1) shares
of Common Stock upon the conversion of the Preferred Stock;
(2) shares
of Common Stock and options, warrants or other rights to purchase Common Stock issued or issuable to employees, officers or
directors of, or consultants or advisors to the Corporation or any subsidiary pursuant to stock grants, restricted stock
purchase agreements, option plans, purchase plans, incentive programs or similar arrangements, shares of or options,
warrants or other rights to purchase Common Stock net of any stock repurchases or expired or terminated options pursuant to
the terms of any option plan, restricted stock purchase agreement or similar arrangement;
(3) shares
of Common Stock upon the exercise or conversion of Options or Convertible Securities;
(4) shares
of Common Stock issued or issuable as a dividend or distribution on Preferred Stock or pursuant to any event for which adjustment
is made pursuant to paragraph 4(e), 4(f) or 4(g) hereof;
(5) shares
of Common Stock issued or issuable in a registered public offering under the Securities Act pursuant to which all outstanding
shares of Preferred Stock are automatically converted into Common Stock pursuant to an Automatic Conversion Event;
(6) shares
of Common Stock issued or issuable pursuant to the acquisition of another corporation by the Corporation by merger, purchase of
substantially all of the assets or other reorganization or to a joint venture agreement, provided, that such issuances
are approved by the Board of Directors;
(7) shares
of Common Stock issued or issuable to banks, equipment lessors or other financial institutions pursuant to a debt financing or
commercial leasing transaction approved by the Board of Directors;
(8) shares
of Common Stock issued or issuable in connection with any settlement of any action, suit, proceeding or litigation approved by
the Board of Directors;
(9) shares
of Common Stock issued or issuable in connection with sponsored research, collaboration, technology license, development, OEM,
marketing or other similar agreements or strategic partnerships approved by the Board of Directors; and
(10) shares
of Common Stock issued or issuable to suppliers or third party service providers in connection with the provision of goods or
services pursuant to transactions approved by the Board of Directors.
(ii) No
Adjustment of Conversion Price. No adjustment in the Conversion Price of a particular series of Preferred
Stock shall be made in respect of the issuance of Additional Shares of Common unless the consideration per share (as
determined pursuant to paragraph 4(d)(v)) for an Additional Share of Common issued or deemed to be issued by the Corporation
is less than the Conversion Price in effect on the date of, and immediately prior to such issue, for such series of Preferred
Stock,
(iii) Deemed
Issue of Additional Shares of Common. In the event the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible
Securities, the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities,
the exercise of such Options and the conversion or exchange of the underlying securities, shall be deemed to have been issued
as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record
date, provided that in any such case in which shares arc deemed to be issued:
(1) no
further adjustment in the Conversion Price of any series of Preferred Stock shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock in connection with the exercise of such Options or conversion or exchange of such Convertible
Securities;
(2) if
such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any change in
the consideration payable to the Corporation or in the number of shares of Common Stock issuable upon the exercise,
conversion or exchange thereof (other than a change pursuant to the anti-dilution provisions of such Options or Convertible
Securities such as this Section 4(d) or pursuant to Recapitalization provisions of such Options or Convertible Securities
such as Sections 4(e), 4(f) and 4(g) hereof), the Conversion Price of each series of Preferred Stock and any subsequent
adjustments based thereon shall be recomputed to reflect such change as if such change had been in effect as of the original
issue thereof (or upon the occurrence of the record date with respect thereto);
(3) no
readjustment pursuant to clause (2) above shall have the effect of increasing the Conversion Price of a series of Preferred
Stock to an amount above the Conversion Price that would have resulted from any other issuances of Additional Shares of
Common and any other adjustments provided for herein between the original adjustment date and such readjustment
date;
(4) upon
the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not
have been exercised, the Conversion Price of each Series of Preferred Stock computed upon the original issue thereof (or upon
the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon shall, upon such
expiration, be recomputed as if:
(a) in
the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common issued were the shares of
Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities
and the consideration received therefor was the consideration actually received by the Corporation for the issue of such exercised
Options plus the consideration actually received by the Corporation upon such exercise or for the issue of all such Convertible
Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation
upon such conversion or exchange, and
(b) in
the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof
were issued at the time of issue of such Options, and the consideration received by the Corporation for the Additional Shares
of Common deemed to have been then issued was the consideration actually received by the Corporation for the issue of such exercised
Options, plus the consideration deemed to have been received by the Corporation (determined pursuant to Section 4(d)(v)) upon
the issue of the Convertible Securities with respect to which such Options were actually exercised; and
(5) if
such record date shall have been fixed and such Options or Convertible Securities are not issued on the date fixed therefor,
the adjustment previously made in the Conversion Price which became effective on such record date shall be canceled as of the
close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this paragraph
4(d)(iii) as of the actual date of their issuance.
(iv) Adjustment
of Conversion Price Upon Issuance of Additional Shares of Common. In the event this Corporation shall issue
Additional Shares of Common (including Additional Shares of Common deemed to be issued pursuant to paragraph 4(d)(iii))
without consideration or for a consideration per share less than the applicable Conversion Price of a series of Preferred
Stock in effect on the date of and immediately prior to such issue, then, the Conversion Price of the affected series of
Preferred Stock shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined by
multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of shares which the aggregate consideration received by the
Corporation for the total number of Additional Shares of Common so issued would purchase at such Conversion Price, and the
denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue plus the
number of such Additional Shares of Common so issued. Notwithstanding the foregoing, the Conversion Price shall not be
reduced at such time if the amount of such reduction would be less than $0.01, but any such amount shall be carried forward,
and a reduction will be made with respect to such amount at the time of, arid together with, any subsequent reduction which,
together with such amount and any other amounts so carried forward, equal $0.01 or more in the aggregate. For the purposes of
this subsection 4(d)(iv), all shares of Common Stock issuable upon conversion of all outstanding shares of Preferred Stock
and the exercise and/or conversion of any other outstanding Convertible Securities and all outstanding Options shall be
deemed to be outstanding.
(v) Determination
of Consideration. For purposes of this subsection 4(d), the consideration received by the Corporation for the issue
(or deemed issue) of any Additional Shares of Common shall be computed as follows:
(1) Cash
and Property. Such consideration shall:
(a) insofar
as it consists of cash, be computed at the aggregate amount of cash received by the Corporation before deducting any reasonable
discounts, commissions or other expenses allowed, paid or incurred by the Corporation for any underwriting or otherwise in connection
with such issuance;
(b) insofar
as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined
in good faith by the Board of Directors; and
(c) in
the event Additional Shares of Common are issued together with other shares or securities or other assets of the Corporation for
consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (a) and
(b) above, as reasonably determined in good faith by the Board of Directors.
(2) Options
and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common
deemed to have been issued pursuant to paragraph 4(d)(iii) shall be determined by dividing:
(x) the
total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration)
payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or
in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities by
(y) the
maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(e) Adjustments
for Subdivisions or Combinations of Common Stock. In the event the outstanding shares of Common Stock shall be subdivided
(by stock split, by payment of a stock dividend or otherwise), into a greater number of shares of Common Stock, the Conversion
Price of each series of Preferred Stock in effect immediately prior to such subdivision shall, concurrently with the effectiveness
of such subdivision, be proportionately decreased. In the event the outstanding shares of Common Stock shall be combined (by reclassification
or otherwise) into a lesser number of shares of Common Stock, the Conversion Prices in effect immediately prior to such combination
shall, concurrently with the effectiveness of such combination, be proportionately increased.
(f) Adjustments
for Subdivisions or Combinations of Preferred Stock. In the event the outstanding shares of Preferred Stock or a series
of Preferred Stock shall be subdivided (by stock split, by payment of a stock dividend or otherwise), into a greater number of
shares of Preferred Stock, the Original Issue Price and Liquidation Preference of the affected series of Preferred Stock in effect
immediately prior to such subdivision shall, concurrently with the effectiveness of such subdivision, be proportionately decreased.
in the event the outstanding shares of Preferred Stock or a series of Preferred Stock shall he combined (by reclassification or
otherwise) into a lesser number of shares of Preferred Stock, Original Issue Price and Liquidation Preference of the affected
series of Preferred Stock in effect immediately prior to such combination shall, concurrently with the effectiveness of such combination,
.be proportionately increased.
(g) Adjustments
for Reclassification, Exchange and Substitution. Subject to Section 3 ("Liquidation Rights"), if
the Common Stock issuable upon conversion of the Preferred Stock shall he changed into the same or a different number of shares
of any other class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision
or combination of shares provided for above), then, in any such event, in lieu of the number of shares of Common Stock which the
holders would otherwise have been entitled to receive each holder of such Preferred Stock shall have the right thereafter to convert
such shares of Preferred Stock into a number of shares of such other class or classes of stock which a holder of the number of
shares of Common Stock deliverable upon conversion of such series of Preferred Stock immediately before that change would have
been entitled to receive in such reorganization or reclassification, all subject to further adjustment as provided herein with
respect to such other shares.
(h) Certificate
as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section
4, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any
holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the conversion of Preferred Stock.
(i) Waiver
of Adjustment of Conversion Price. Notwithstanding anything herein to the contrary, any downward adjustment of the Conversion
Price of any series of Preferred Stock may be waived by the consent or vote of the holders of the majority of the outstanding
shares of such series either before or after the issuance causing the adjustment. Any such waiver shall bind all future holders
of shares of such series of Preferred Stock.
(j) Notices
of Record Date. In the event that this Corporation shall propose at any time:
(i) to
declare any Distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular
cash dividend and whether or not out of earnings or earned surplus;
(ii) to
effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or
(iii) to
voluntarily liquidate or dissolve or to enter into any transaction deemed to be a liquidation, dissolution or winding up of the
corporation pursuant to Section 3(d);
then,
in connection with each such event, this Corporation shall send to the holders of the Preferred Stock prior written notice of
the date on which a record shall be taken for such Distribution (and specifying the date on which the holders of Common Stock
shall be entitled thereto and, if applicable, the amount and character of such Distribution) or for determining rights to vote
in respect of the matters referred to in (ii) and (iii) above.
Such
written notice shall be given by first class mail (or express courier), postage prepaid, addressed to the holders of Preferred
Stock at the address for each such holder as shown on the books of the Corporation and shall be deemed given on the date such
notice is mailed.
The
notice provisions set forth in this section may be shortened or waived prospectively or retrospectively by the consent or vote
of the holders of a majority of the Preferred Stock, voting as a single class and on an as-converted basis.
(k) Reservation
of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding
shares of the Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purpose.
5. Voting.
(a) Restricted
Class Voting. Except as otherwise expressly provided herein or as required by law, the holders of Preferred Stock and
the holders of Common Stock shall vote together and not as separate classes.
(b) No
Series Voting. Other than as provided herein or required by law, there shall be no series voting.
(c) Preferred
Stock. Each holder of Preferred Stock shall be entitled to the number of votes equal to the number of shares of
Common Stock into which the shares of Preferred Stock held by such holder could be converted as of the record date. The holders
of shares of the Preferred Stock shall be entitled to vote on all matters on which the Common Stock shall be entitled to vote.
Holders of Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Corporation.
Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating
all shares into which shares of Preferred Stock held by each holder could be converted), shall be disregarded.
(d) Adjustment
in Authorized Common Stock. The number of authorized shares of Common Stock may be increased or decreased (but not below
the number of shares of Common Stock then outstanding) by an affirmative vote of the holders of a majority of the stock of the
Corporation.
(e) Common
Stock. Each holder of shares of Common Stock shall be entitled to one vote for each share thereof held.
6. Amendments
and Changes. As long as at least fifty percent of the shares of Preferred Stock issued as of the Original Issue Date remain
issued and outstanding, the Corporation shall not, without first obtaining the approval (by vote or written consent as provided
by law) of the holders of more than fifty percent of the outstanding shares of the Preferred Stock:
(a) amend,
alter or repeal any provision of the Certificate of Incorporation or bylaws of the Corporation (including pursuant to a merger
(but specifically excluding the Diego Acquisition)) if such action would adversely alter the rights, preferences, privileges or
powers of, or restrictions provided for the benefit of the Preferred Stock or any series thereof;
(b) increase
or decrease (other than for decreases resulting from conversion of the Preferred Stock) the authorized number of shares of Preferred
Stock or any series thereof;
(c) authorize
or create (by reclassification, merger or otherwise) or issue or obligate itself to issue any new class or series of equity security
(including any security convertible into or exercisable for any equity security) having rights, preferences or privileges with
respect to dividends or payments upon liquidation senior to any series of Preferred Stock, or having voting rights other than
those granted to the Preferred Stock generally;
(d) enter
into any transaction or series of related transactions deemed to be a liquidation, dissolution or winding up of the Corporation
pursuant to Section 3(d);
(e) authorize
a merger, acquisition or sale of substantially all of the assets of the Corporation or any of its subsidiaries (other than a merger
exclusively to effect a change of domicile of the Corporation);
(f) voluntarily
liquidate or dissolve;
(g) declare
or pay any Distribution with respect to the Common Stock of the Corporation;
(h) amend
this Section 6.
For
purposes of clarity, the approval of the Preferred Stock shall not be required for the consummation of the Diego Acquisition.
7. Notices.
Any notice required by the provisions of this ARTICLE V to be given to the holders of Preferred Stock shall be deemed given
if deposited in the United States mail, postage prepaid, and addressed to each holder of record at such holder's address appearing
on the books of the Corporation.
ARTICLE
VI
The Corporation
is to have perpetual existence.
ARTICLE
VII
Elections
of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
ARTICLE
VIII
Unless
otherwise set forth herein, the number of directors that constitute the Board of Directors of the Corporation shall be fixed by,
or in the manner provided in, the Bylaws of the Corporation.
ARTICLE
IX
In
furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized
to adopt, amend or repeal the Bylaws of the Corporation.
ARTICLE
X
1. To
the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director
of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for a breach of
fiduciary duty as a director. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the Delaware General Corporation Law, as so amended.
2. The
Corporation shall have the power to indemnify, to the extent permitted by the Delaware General Corporation Law, as it
presently exists or may hereafter be amended from time to time, any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding") by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to
employee benefit plans, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with any such Proceeding.
3. Neither
any amendment nor repeal of this ARTICLE X, nor the adoption of any provision of this Corporation's Certificate of Incorporation
inconsistent with this ARTICLE X, shall eliminate or reduce the effect of this ARTICLE X, in respect of any matter occurring,
or any action or proceeding accruing or arising or that, but for this ARTICLE X, would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.
ARTICLE
XI
Meetings
of stockholders may be held within or without the State of Delaware, as the bylaws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
ARTICLE
XII
To
the extent permitted by law, the Corporation renounces any expectancy that a Covered Person offer the Corporation an opportunity
to participate in a Specified Opportunity and waives any claim that the Specified Opportunity constitutes a corporate opportunity
that should have been presented by the Covered Person to the Corporation; provided, however, that the Covered Person acts
in good faith. A "Covered Person" is any member of the Board of Directors of the Corporation (who is not
an employee of the Corporation or any of its subsidiaries) who is a partner, member or employee of a Fund. A "Specified
Opportunity" is any transaction or other matter that is presented to the Covered Person in his or her capacity as
a partner, member or employee of a Fund (and other than in connection with his or her service as a member of the Board of Directors
of the Corporation) that may be an opportunity of interest for both the Corporation and the Fund. A "Fund" is
an entity that is a holder of Preferred Stock and that is primarily in the business of investing in other entities, or an entity
that manages such an entity.
-13-
Exhibit 3.2
BYLAWS OF
DIEGO
PELLICER WORLDWIDE INC.
Adopted
September 5, 2013
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ARTICLE
I — MEETINGS OF STOCKHOLDERS |
1 |
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1.1 |
Place
of Meetings |
1 |
1.2 |
Annual
Meeting |
1 |
1.3 |
Special
Meeting |
1 |
1.4 |
Notice
of Stockholders' Meetings |
1 |
1.5 |
Quorum |
2 |
1.6 |
Adjourned
Meeting; Notice |
2 |
1.7 |
Conduct
of Business |
2 |
1.8 |
Voting |
2 |
1.9 |
Stockholder
Action by Written Consent Without a Meeting |
3 |
1.10 |
Record
Dates |
4 |
1.11 |
Proxies |
4 |
1.12 |
List
of Stockholders Entitled to Vote |
5 |
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ARTICLE
II — DIRECTORS |
5 |
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2.1 |
Powers |
5 |
2.2 |
Number
of Directors |
5 |
2.3 |
Election,
Qualification and Term of Office of Directors |
5 |
2.4 |
Resignation
and Vacancies |
5 |
2.5 |
Place
of Meetings; Meetings by Telephone |
6 |
2.6 |
Conduct
of Business |
6 |
2.7 |
Regular
Meetings |
7 |
2.8 |
Special
Meetings; Notice |
7 |
2.9 |
Quorum;
Voting |
7 |
2.10 |
Board
Action by Written Consent Without a Meeting |
7 |
2.11 |
Fees
and Compensation of Directors |
8 |
2.12 |
Removal
of Directors |
8 |
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ARTICLE
III — COMMITTEES |
8 |
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3.1 |
Committees
of Directors |
8 |
3.2 |
Committee
Minutes |
8 |
3.3 |
Meetings
and Actions of Committees |
8 |
3.4 |
Subcommittees |
9 |
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ARTICLE
IV — OFFICERS |
9 |
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|
4.1 |
Officers |
9 |
4.2 |
Appointment
of Officers |
9 |
4.3 |
Subordinate
Officers |
9 |
4.4 |
Removal
and Resignation of Officers |
9 |
4.5 |
Vacancies
in Offices |
10 |
4.6 |
Representation
of Shares of Other Corporations |
10 |
4.7 |
Authority
and Duties of Officers |
10 |
TABLE OF CONTENTS
(Continued)
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Page |
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ARTICLE
V — INDEMNIFICATION |
10 |
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5.1 |
Indemnification
of Directors and Officers in Third Party Proceedings |
10 |
5.2 |
Indemnification
of Directors and Officers in Actions by or in the Right of the Company |
10 |
5.3 |
Successful
Defense |
11 |
5.4 |
Indemnification
of Others |
11 |
5.5 |
Advanced
Payment of Expenses |
11 |
5.6 |
Limitation
on Indemnification |
11 |
5.7 |
Determination;
Claim |
12 |
5.8 |
Non-Exclusivity
of Rights |
12 |
5.9 |
Insurance |
12 |
5.10
|
Survival |
13 |
5.11
|
Effect
of Repeal or Modification |
13 |
5.12 |
Certain
Definitions |
13 |
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ARTICLE
VI — STOCK |
13 |
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6.1 |
Stock
Certificates; Partly Paid Shares |
13 |
6.2 |
Special
Designation on Certificates |
14 |
6.3 |
Lost
Certificates |
14 |
6.4 |
Dividends |
14 |
6.5 |
Stock
Transfer Agreements |
14 |
6.6 |
Registered
Stockholders |
14 |
6.7 |
Transfers |
15 |
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ARTICLE
VII — MANNER OF GIVING NOTICE AND WAIVER |
15 |
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7.1 |
Notice
of Stockholder Meetings |
15 |
7.2 |
Notice
by Electronic Transmission |
15 |
7.3 |
Notice
to Stockholders Sharing an Address |
16 |
7.4 |
Notice
to Person with Whom Communication is Unlawful |
16 |
7.5 |
Waiver
of Notice |
16 |
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ARTICLE
VIII — GENERAL MATTERS |
16 |
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8.1 |
Restrictions
on Operations |
16 |
8.2 |
Fiscal
Year |
17 |
8.3 |
Seal |
17 |
8.4 |
Annual
Report |
17 |
8.5 |
Construction;
Definitions |
17 |
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ARTICLE
IX — AMENDMENTS |
17 |
BYLAWS
ARTICLE
I — MEETINGS OF STOCKHOLDERS
1.1 Place
of Meetings. Meetings of stockholders of Diego Pellicer Worldwide Inc. (the "Company") shall be
held at any place, within or outside the State of Delaware, determined by the Company's board of directors (the "Board").
The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead
be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law (the
"DGCL"). In the absence of any such designation or determination, stockholders' meetings shall be held
at the Company's principal executive office.
1.2 Annual
Meeting. An annual meeting of stockholders shall be held for the election of directors at such date and time as
may be designated by resolution of the Board from time to time. Any other proper business may be transacted at the annual meeting.
The Company shall not be required to hold an annual meeting of stockholders, provided that (i) the stockholders are permitted
to act by written consent under the Company's certificate of incorporation and these bylaws, (ii) the stockholders take action
by written consent to elect directors, and (iii) the stockholders unanimously consent to such action or, if such consent is less
than unanimous, all of the directorships to which directors could be elected at an annual meeting held at the effective time of
such action are vacant and are filled by such action.
1.3 Special
Meeting. A special meeting of the stockholders may be called at any time by the Board, Chairperson of the Board,
Chief Executive Officer or President (in the absence of a Chief Executive Officer) or by one or more stockholders holding shares
in the aggregate entitled to cast not less than 10% of the votes at that meeting.
If
any person(s) other than the Board calls a special meeting, the request shall:
(i) be
in writing;
(ii) specify
the time of such meeting and the general nature of the business proposed to be transacted; and
(iii) be
delivered personally or sent by registered mail or by facsimile transmission to the Chairperson of the Board, the Chief Executive
Officer, the President (in the absence of a Chief Executive Officer) or the Secretary of the Company.
The
officer(s) receiving the request shall cause notice to be promptly given to the stockholders entitled to vote at such meeting,
in accordance with these bylaws, that a meeting will be held at the time requested by the person or persons calling the meeting.
No business may be transacted at such special meeting other than the business specified in such notice to stockholders. Nothing
contained in this paragraph of this Section 1.3 shall be construed as limiting, fixing, or affecting the time when a meeting
of stockholders called by action of the Board may be held.
1.4 Notice
of Stockholders' Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written
notice of the meeting shall be given which shall state the place, if any, date and hour of the meeting, the means of remote communications,
if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the record date
for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining
stockholders entitled to notice of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting
is called. Except as otherwise provided in the DGCL, the certificate of incorporation or these bylaws, the written notice of any
meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder
entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.
1.5 Quorum.
Except as otherwise provided by law, the certificate of incorporation or these bylaws, at each meeting of stockholders
the presence in person or by proxy of the holders of shares of stock having a majority of the votes which could be cast by the
holders of all outstanding shares of stock entitled to vote at the meeting shall be necessary and sufficient to constitute a quorum.
Where a separate vote by a class or series or classes or series is required, a majority of the outstanding shares of such class
or series or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter, except as otherwise provided by law, the certificate of incorporation or these bylaws.
If,
however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the
meeting, or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have the power
to adjourn the meeting from time to time, in the manner provided in Section 1.6, until a quorum is present or represented.
1.6 Adjourned
Meeting; Notice. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at
the same or some other place, and notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the
means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote
at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company
may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days,
a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment
a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix a new record date
for notice of such adjourned meeting in accordance with Section 213(a) of the DGCL and Section 1.10 of these bylaws, and
shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the
record date fixed for notice of such adjourned meeting.
1.7 Conduct
of Business. Meetings of stockholders shall be presided over by the Chairperson of the Board, if any, or in his
or her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by the Chief Executive
Officer, or in the absence of the foregoing persons by the President, or in the absence of the foregoing persons by a Vice President,
or in the absence of the foregoing persons by a chairperson designated by the Board, or in the absence of such designation by
a chairperson chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his or her absence the chairperson
of the meeting may appoint any person to act as secretary of the meeting. The chairperson of any meeting of stockholders shall
determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct
of business.
1.8 Voting.
The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions
of Section 1.10 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners
of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.
Except
as may be otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders
shall be entitled to one vote for each share of capital stock held by such stockholder which has voting power upon the matter
in question. Voting at meetings of stockholders need not be by written ballot and, unless otherwise required by law, need not
be conducted by inspectors of election unless so determined by the holders of shares of stock having a majority of the votes which
could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy
at such meeting. If authorized by the Board, such requirement of a written ballot shall be satisfied by a ballot submitted by
electronic transmission (as defined in Section 7.2 of these bylaws), provided that any such electronic transmission
must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized
by the stockholder or proxy holder.
Except
as otherwise required by law, the certificate of incorporation or these bylaws, in all matters other than the election of directors,
the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the stockholders. Except as otherwise required by law, the certificate
of incorporation or these bylaws, directors shall be elected by a plurality of the voting power of the shares present in person
or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or
series or classes or series is required, in all matters other than the election of directors, the affirmative vote of the majority
of shares of such class or series or classes or series present in person or represented by proxy at the meeting shall be the act
of such class or series or classes or series, except as otherwise provided by law, the certificate of incorporation or these bylaws.
1.9 Stockholder
Action by Written Consent Without a Meeting. Unless otherwise provided in the certificate of incorporation, any
action required by the DGCL to be taken at any annual or special meeting of stockholders of a corporation, or any action which
may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and
without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted.
An
electronic transmission (as defined in Section 7.2) consenting to an action to be taken and transmitted by a stockholder
or proxy holder, or by a person or persons authorized to act for a stockholder or proxy holder, shall be deemed to be written,
signed and dated for purposes of this section, provided that any such electronic transmission sets forth or is delivered
with information from which the Company can determine (i) that the electronic transmission was transmitted by the stockholder
or proxy holder or by a person or persons authorized to act for the stockholder or proxy holder and (ii) the date on which such
stockholder or proxy holder or authorized person or persons transmitted such electronic transmission.
In
the event that the Board shall have instructed the officers of the Company to solicit the vote or written consent of the stockholders
of the Company, an electronic transmission of a stockholder written consent given pursuant to such solicitation may be delivered
to the Secretary or the President of the Company or to a person designated by the Secretary or the President. The Secretary or
the President of the Company or a designee of the Secretary or the President shall cause any such written consent by electronic
transmission to be reproduced in paper form and inserted into the corporate records.
Prompt
notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to
those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been
entitled to notice of the meeting if the record date for notice of such meeting had been the date that written consents
signed by a sufficient number of holders to take the action were delivered to the Company as provided in Section 228
of the DGCL. In the event that the action which is consented to is such as would have required the filing of a certificate
under any provision of the DGCL, if such action had been voted on by stockholders at a meeting thereof, the certificate filed
under such provision shall state, in lieu of any statement required by such provision concerning any vote of stockholders,
that written consent has been given in accordance with Section 228 of the DGCL.
1.10
Record Dates. In order that the Company may determine the stockholders entitled to notice of any meeting
of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted by the Board and which record date shall not be more than 60 nor less than
10 days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining
the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later
date on or before the date of the meeting shall be the date for making such determination.
If
no record date is fixed by the Board, the record date for determining stockholders entitled to notice of and to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the meeting is held.
A
determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled
to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such
adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance with
the provisions of Section 213 of the DGCL and this Section 1.10 at the adjourned meeting.
In
order that the Company may determine the stockholders entitled to consent to corporate action in writing without a meeting, the
Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is
adopted by the Board, and which date shall not be more than 10 days after the date upon which the resolution fixing the record
date is adopted by the Board. If no record date has been fixed by the Board, the record date for determining stockholders entitled
to consent to corporate action in writing without a meeting, when no prior action by the Board is required by law, shall be the
first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company
in accordance with applicable law. If no record date has been fixed by the Board and prior action by the Board is required by
law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the Board adopts the resolution taking such prior action.
In
order that the Company may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or
for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action.
If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business
on the day on which the Board adopts the resolution relating thereto.
1.11 Proxies.
Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted
by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after
three years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face
that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.
1.12
List of Stockholders Entitled to Vote. The officer who has charge of the stock ledger of the Company shall
prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting; provided, however, if the record date for determining the stockholders entitled to vote is less than 10
days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting
date, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name
of each stockholder. The Company shall not be required to include electronic mail addresses or other electronic contact information
on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period
of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information
required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the
Company's principal place of business. In the event that the Company determines to make the list available on an electronic network,
the Company may take reasonable steps to ensure that such information is available only to stockholders of the Company. If the
meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole
time thereof, and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication,
then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible
electronic network, and the information required to access such list shall be provided with the notice of the meeting.
ARTICLE
II — DIRECTORS
2.1 Powers.
The business and affairs of the Company shall be managed by or under the direction of the Board, except as may be otherwise
provided in the DGCL or the certificate of incorporation.
2.2 Number
of Directors. The Board shall consist of one or more members, each of whom shall be a natural person. Unless the
certificate of incorporation fixes the number of directors, the number of directors shall be determined from time to time by resolution
of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director's
term of office expires.
2.3 Election,
Qualification and Term of Office of Directors. Except as provided in Section 2.4 of these bylaws, and subject
to Sections 1.2 and 1.9 of these bylaws, directors shall be elected at each annual meeting of stockholders. Directors
need not be stockholders unless so required by the certificate of incorporation or these bylaws. The certificate of incorporation
or these bylaws may prescribe other qualifications for directors. Each director shall hold office until such director's successor
is elected and qualified or until such director's earlier death, resignation or removal.
2.4 Resignation
and Vacancies. Any director may resign at any time upon notice given in writing or by electronic transmission
to the Company. A resignation is effective when the resignation is delivered unless the resignation specifies a later
effective date or an effective date determined upon the happening of an event or events. A resignation which is conditioned
upon the director failing to receive a specified vote for reelection as a director may provide that it is irrevocable. Unless
otherwise provided in the certificate of incorporation or these bylaws, when one or more directors resign from the Board,
effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become
effective.
Unless
otherwise provided in the certificate of incorporation or these bylaws:
(i) Vacancies
and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders
having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum,
or by a sole remaining director.
(ii) Whenever
the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by
a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director
so elected.
If
at any time, by reason of death or resignation or other cause, the Company should have no directors in office, then any officer
or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like
responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions
of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an
election as provided in Section 211 of the DGCL.
If,
at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least 10% of the voting stock at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211
of the DGCL as far as applicable.
A
director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office and until such
director's successor is elected and qualified, or until such director's earlier death, resignation or removal.
2.5 Place
of Meetings; Meetings by Telephone. The Board may hold meetings, both regular and special, either within or outside
the State of Delaware.
Unless
otherwise restricted by the certificate of incorporation or these bylaws, members of the Board, or any committee designated by
the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting
shall constitute presence in person at the meeting.
2.6 Conduct
of Business. Meetings of the Board shall be presided over by the Chairperson of the Board, if any, or in his or
her absence by the Vice Chairperson of the Board, if any, or in the absence of the foregoing persons by a chairperson designated
by the Board, or in the absence of such designation by a chairperson chosen at the meeting. The Secretary shall act as secretary
of the meeting, but in his or her absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
2.7 Regular
Meetings. Regular meetings of the Board may be held without notice at such time and at such place as shall from
time to time be determined by the Board.
2.8 Special
Meetings; Notice. Special meetings of the Board for any purpose or purposes may be called at any time by the Chairperson
of the Board, the Chief Executive Officer, the President, the Secretary or any two directors.
Notice
of the time and place of special meetings shall be:
(i) delivered
personally by hand, by courier or by telephone;
(ii) sent
by United States first-class mail, postage prepaid;
(iii) sent
by facsimile; or
(iv) sent
by electronic mail,
directed
to each director at that director's address, telephone number, facsimile number or electronic mail address, as the case may be,
as shown on the Company's records.
If
the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or (iii) sent by electronic
mail, it shall be delivered or sent at least 24 hours before the time of the holding of the meeting. If the notice is sent by
United States mail, it shall be deposited in the United States mail at least 4 days before the time of the holding of the meeting.
Any oral notice may be communicated to the director. The notice need not specify the place of the meeting (if the meeting is to
be held at the Company's principal executive office) nor the purpose of the meeting.
2.9 Quorum;
Voting. At all meetings of the Board, a majority of the total authorized number of directors shall constitute a
quorum for the transaction of business. If a quorum is not present at any meeting of the Board, then the directors present thereat
may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A
meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors,
if any action taken is approved by at least a majority of the required quorum for that meeting.
The
vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except
as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws.
If
the certificate of incorporation provides that one or more directors shall, have more or less than one vote per director on any
matter, every reference in these bylaws to a majority or other proportion of the directors shall refer to a majority or other
proportion of the votes of the directors.
2.10
Board Action by Written Consent Without a Meeting. Unless otherwise restricted by the certificate of incorporation
or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be
taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic
transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings
of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form
and shall be in electronic form if the minutes are maintained in electronic form.
2.11 Fees
and Compensation of Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws,
the Board shall have the authority to fix the compensation of directors.
2.12 Removal
of Directors. Unless otherwise restricted by statute, the certificate of incorporation or these bylaws, any director
or the entire Board may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at
an election of directors.
No
reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such
director's term of office.
ARTICLE
III — COMMITTEES
3.1 Committees
of Directors. The Board may designate one or more committees, each committee to consist of one or more of the directors
of the Company. The Board may designate one or more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise
all the powers and authority of the Board in the management of the business and affairs of the Company, and may authorize the
seal of the Company to be affixed to all papers that may require it; but no such committee shall have the power or authority to
(i) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors)
expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the Company.
3.2 Committee
Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board when required.
3.3 Meetings
and Actions of Committees. Meetings and actions of committees shall be governed by, and held and taken in accordance with,
the provisions of:
(i) Section
2.5 (Place of Meetings; Meetings by Telephone);
(ii) Section
2.7 (Regular Meetings);
(iii) Section
2.8 (Special Meetings; Notice);
(iv) Section
2.9 (Quorum; Voting);
(v) Section
2.10 (Board Action by Written Consent Without a Meeting); and
(vi) Section
7.5 (Waiver of Notice)
with
such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its
members. However:
(i) the
time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;
(ii) special
meetings of committees may also be called by resolution of the Board; and
(iii) notice
of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings
of the committee. The Board may adopt rules for the government of any committee not inconsistent with the provisions of these
bylaws.
Any
provision in the certificate of incorporation providing that one or more directors shall have more or less than one vote per director
on any matter shall apply to voting in any committee or subcommittee, unless otherwise provided in the certificate of incorporation
or these bylaws.
3.4 Subcommittees.
Unless otherwise provided in the certificate of incorporation, these bylaws or the resolutions of the Board designating
the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee,
and delegate to a subcommittee any or all of the powers and authority of the committee.
ARTICLE
IV — OFFICERS
4.1 Officers.
The officers of the Company shall be a President and a Secretary. The Company may also have, at the discretion of the
Board, a Chairperson of the Board, a Vice Chairperson of the Board, a Chief Executive Officer, one or more Vice Presidents, a
Chief Financial Officer, a Treasurer, one or more Assistant Treasurers, one or more Assistant Secretaries, and any such other
officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same
person.
4.2 Appointment
of Officers. The Board shall appoint the officers of the Company, except such officers as may be appointed in accordance
with the provisions of Section 4.3 of these bylaws.
4.3 Subordinate
Officers. The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive
Officer, the President, to appoint, such other officers and agents as the business of the Company may require. Each of such officers
and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or
as the Board may from time to time determine.
4.4 Removal
and Resignation of Officers. Any officer may be removed, either with or without cause, by an affirmative vote of
the majority of the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board,
by any officer upon whom such power of removal may be conferred by the Board.
Any
officer may resign at any time by giving written notice to the Company. Any resignation shall take effect at the date of the receipt
of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance
of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of
the Company under any contract to which the officer is a party.
4.5
Vacancies in Offices. Any vacancy occurring in any office of the Company shall be filled by the Board
or as provided in Section 4.3.
4.6
Representation of Shares of Other Corporations. Unless otherwise directed by the Board, the President or
any other person authorized by the Board or the President is authorized to vote, represent and exercise on behalf of the Company
all rights incident to any and all shares of any other corporation or corporations standing in the name of the Company. The authority
granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
4.7
Authority and Duties of Officers. Except as otherwise provided in these bylaws, the officers of the Company
shall have such powers and duties in the management of the Company as may be designated from time to time by the Board and, to
the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.
ARTICLE
V — INDEMNIFICATION
5.1
Indemnification of Directors and Officers in Third Party Proceedings. Subject to the other provisions
of this Article V, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect,
any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding") (other than an action by or in the
right of the Company) by reason of the fact that such person is or was a director or officer of the Company, or is or was a director
or officer of the Company serving at the request of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in connection with such Proceeding if such person acted in
good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Company, and,
with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. The
termination of any Proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably
believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that such person's conduct was unlawful.
5.2
Indemnification of Directors and Officers in Actions by or in the Right of the Company. Subject to the other
provisions of this Article V, the Company shall indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter
in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such person is or was
a director or officer of the Company, or is or was a director or officer of the Company serving at the request of the Company
as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the Company; except that no indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
5.3 Successful
Defense. To the extent that a present or former director or officer of the Company has been successful on the merits or
otherwise in defense of any action, suit or proceeding described in Section 5.1 or Section 5.2, or in defense of
any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
5.4 Indemnification
of Others. Subject to the other provisions of this Article V, the Company shall have power to indemnify
its employees and agents to the extent not prohibited by the DGCL or other applicable law. The Board shall have the power to delegate
to such person or persons the determination of whether employees or agents shall be indemnified.
5.5 Advanced
Payment of Expenses. Expenses (including attorneys' fees) incurred by an officer or director of the Company in
defending any Proceeding shall be paid by the Company in advance of the final disposition of such Proceeding upon receipt of a
written request therefor (together with documentation reasonably evidencing such expenses) and an undertaking by or on behalf
of the person to repay such amounts if it shall ultimately be determined that the person is not entitled to be indemnified under
this Article V or the DGCL. Such expenses (including attorneys' fees) incurred by former directors and officers or other
employees and agents may be so paid upon such terms and conditions, if any, as the Company deems appropriate. The right to advancement
of expenses shall not apply to any Proceeding for which indemnity is excluded pursuant to these bylaws, but shall apply to any
Proceeding referenced in Section 5.6(11) or 5.6(iii) prior to a determination that the person is not entitled to
be indemnified by the Company.
Notwithstanding
the foregoing, unless otherwise determined pursuant to Section 5.8, no advance shall be made by the Company to an
officer of the Company (except by reason of the fact that such officer is or was a director of the Company, in which event this
paragraph shall not apply) in any Proceeding if a determination is reasonably and promptly made (i) by a majority vote of the
directors who are not parties to such Proceeding, even though less than a quorum, or (ii) by a committee of such directors designated
by majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, that facts known to the decision-making party at the time such determination
is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe
to be in or not opposed to the best interests of the Company.
5.6 Limitation
on Indemnification. Subject to the requirements in Section 5.3 and the DGCL, the Company shall not be obligated
to indemnify any person pursuant to this Article V in connection with any Proceeding (or any part of any Proceeding):
(i) for
which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision,
vote or otherwise, except with respect to any excess beyond the amount paid;
(ii) for an accounting or disgorgement of profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended,
or similar provisions of federal, state or local statutory law or common law, if such person is held liable therefor (including
pursuant to any settlement arrangements);
(iii) for
any reimbursement of the Company by such person of any bonus or other incentive-based or equity-based compensation or of any profits
realized by such person from the sale of securities of the Company, as required in each case under the Securities Exchange Act
of 1934, as amended (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section
304 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), or the payment to the Company of profits
arising from the purchase and sale by such person of securities in violation of Section 306 of the Sarbanes-Oxley Act), if such
person is held liable therefor (including pursuant to any settlement arrangements);
(iv) initiated
by such person, including any Proceeding (or any part of any Proceeding) initiated by such person against the Company or its directors,
officers, employees, agents or other indemnitees, unless (a) the Board authorized the Proceeding (or the relevant part of the
Proceeding) prior to its initiation, (b) the Company provides the indemnification, in its sole discretion, pursuant to the powers
vested in the Company under applicable law, (c) otherwise required to be made under Section 5.7 or (d) otherwise required
by applicable law; or
(v) if
prohibited by applicable law.
5.7 Determination;
Claim. If a claim for indemnification or advancement of expenses under this Article V is not paid by the
Company or on its behalf within 90 days after receipt by the Company of a written request therefor, the claimant shall be entitled
to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of expenses.
To the extent not prohibited by law, the Company shall indemnify such person against all expenses actually and reasonably incurred
by such person in connection with any action for indemnification or advancement of expenses from the Company under this Article
V, to the extent such person is successful in such action [, and, if requested by such person, shall advance such expenses
to such person, subject to the provisions of Section 5.5]. In any such suit, the Company shall, to the fullest extent not prohibited
by law, have the burden of proving that the claimant is not entitled to the requested indemnification or advancement of expenses.
5.8 Non-Exclusivity
of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article
V shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may
be entitled under the certificate of incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors
or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office.
The Company is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees
or agents respecting indemnification and advancement of expenses, to the fullest extent not prohibited by the DGCL or other applicable
law.
5.9 Insurance.
The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person's status as such, whether or not the Company would have the
power to indemnify such person against such liability under the provisions of the DGCL.
5.10
Survival. The rights to indemnification and advancement of expenses conferred by this Article V shall
continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
5.11
Effect of Repeal or Modification. Any amendment, alteration or repeal of this Article V shall not
adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to such amendment,
alteration or repeal.
5.12 Certain
Definitions. For purposes of this Article V, references to the "Company" shall include,
in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions
of this Article V with respect to the resulting or surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued. For purposes of this Article V, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the
Company" shall include any service as a director, officer, employee or agent of the Company which imposes duties
on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants
or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed
to the best interests of the Company" as referred to in this Article V.
ARTICLE
VI — STOCK
6.1 Stock
Certificates; Partly Paid Shares. The shares of the Company shall be represented by certificates, provided that
the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the
Company. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of
the Company by the Chairperson of the Board or Vice-Chairperson of the Board, or the President or a Vice-President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Company representing the number of shares
registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue. The Company shall not have power to issue a certificate
in bearer form.
The
Company may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration
to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon
the books and records of the Company in the case of uncertificated partly paid shares, the total amount of the consideration to
be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Company
shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration
actually paid thereon.
6.2 Special Designation
on Certificates. If the Company is authorized to issue more than one class of stock or more than one series of any class,
then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each
class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be
set forth in full or summarized on the face or back of the certificate that the Company shall issue to represent such class or
series of stock; provided that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements
there may be set forth on the face or back of the certificate that the Company shall issue to represent such class or series of
stock, a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated
stock, the Company shall send to the registered owner thereof a written notice containing the information required to be set forth
or stated on certificates pursuant to this Section 6.2 or Sections 156, 202(a) or 218(a) of the DGCL or with respect to this Section
6.2 a statement that the Company will furnish without charge to each stockholder who so requests the powers, designations, preferences
and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations
of the holders of uncertificated stock and the rights and obligations of the holders of certificates representing stock of the
same class and series shall be identical.
6.3 Lost
Certificates. Except as provided in this Section 6.3, no new certificates for shares shall be issued to
replace a previously issued certificate unless the latter is surrendered to the Company and cancelled at the same time. The Company
may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged
to have been lost, stolen or destroyed, and the Company may require the owner of the lost, stolen or destroyed certificate, or
such owner's legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against
it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated
shares.
6.4 Dividends.
The Board, subject to any restrictions contained in the certificate of incorporation or applicable law, may declare and
pay dividends upon the shares of the Company's capital stock. Dividends may be paid in cash, in property, or in shares of the
Company's capital stock, subject to the provisions of the certificate of incorporation.
The
Board may set apart out of any of the funds of the Company available for dividends a reserve or reserves for any proper purpose
and may abolish any such reserve.
6.5 Stock
Transfer Agreements. The Company shall have power to enter into and perform any agreement with any number of stockholders
of any one or more classes of stock of the Company to restrict the transfer of shares of stock of the Company of any one or more
classes owned by such stockholders in any manner not prohibited by the DGCL.
6.6 Registered
Stockholders. The Company:
(i) shall
be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and
to vote as such owner;
(ii) shall
be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and
(iii) shall
not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether
or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
6.7 Transfers.
Transfers of record of shares of stock of the Company shall be made only upon its books by the holders thereof, in person
or by an attorney duly authorized, and, if such stock is certificated, upon the surrender of a certificate or certificates for
a like number of shares, properly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer.
ARTICLE
VII — MANNER OF GIVING NOTICE AND WAIVER
7.1 Notice
of Stockholder Meetings. Notice of any meeting of stockholders, if mailed, is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the Company's records.
An affidavit of the Secretary or an Assistant Secretary of the Company or of the transfer agent or other agent of the Company
that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
7.2 Notice
by Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders
pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the Company under
any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic
transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder
by written notice to the Company. Any such consent shall be deemed revoked if:
(i) the
Company is unable to deliver by electronic transmission two consecutive notices given by the Company in accordance with such consent;
and
(ii) such
inability becomes known to the Secretary or an Assistant Secretary of the Company or to the transfer agent, or other person responsible
for the giving of notice.
However,
the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
Any
notice given pursuant to the preceding paragraph shall be deemed given:
(i) if
by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;
(ii) if
by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;
(iii) if
by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later
of (A) such posting and (B) the giving of such separate notice; and
(iv) if
by any other form of electronic transmission, when directed to the stockholder.
An
affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Company that the notice has
been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated
therein.
An
"electronic transmission" means any form of communication, not directly involving the physical transmission
of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly
reproduced in paper form by such a recipient through an automated process.
Notice
by a form of electronic transmission shall not apply to Sections 164, 296, 311, 312 or 324 of the DGCL.
7.3 Notice
to Stockholders Sharing an Address. Except as otherwise prohibited under the DGCL, without limiting the manner
by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Company under the
provisions of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a single written notice
to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Any such
consent shall be revocable by the stockholder by written notice to the Company. Any stockholder who fails to object in writing
to the Company, within 60 days of having been given written notice by the Company of its intention to send the single notice,
shall be deemed to have consented to receiving such single written notice.
7.4 Notice
to Person with Whom Communication is Unlawful. Whenever notice is required to be given, under the DGCL, the certificate
of incorporation or these bylaws, to any person with whom communication is unlawful, the giving of such notice to such person
shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give
such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication
is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by
the Company is such as to require the filing of a certificate under the DGCL, the certificate shall state, if such is the fact
and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication
is unlawful.
7.5 Waiver
of Notice. Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation
or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person
entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent
to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends
a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless
so required by the certificate of incorporation or these bylaws.
ARTICLE
VIII — GENERAL MATTERS
8.1 Restrictions
on Operations. The Company shall not produce, process or retail cannabis, or own an entity that produces, processes
or retails cannabis, unless and until it becomes legal to engage in such operations in all jurisdictions in which the Company
operates and where its' directors, officers, employees and stockholders reside.
8.2 Fiscal Year. The
fiscal year of the Company shall be fixed by resolution of the Board and may be changed by the Board.
8.3 Seal.
The Company may adopt a corporate seal, which shall be in such form as may be approved from time to time by the Board.
The Company may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
8.4 Annual
Report. The Company shall cause an annual report to be sent to the stockholders of the Company to the extent required
by applicable law. If and so long as there are fewer than 100 holders of record of the Company's shares, the requirement of sending
an annual report to the stockholders of the Company is expressly waived (to the extent permitted under applicable law).
8.5 Construction;
Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions
in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and
a natural person.
ARTICLE
IX — AMENDMENTS
These
bylaws may be adopted, amended or repealed by the stockholders entitled to vote. However, the Company may, in its certificate
of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred
upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.
A
bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall
not be further amended or repealed by the Board.
CERTIFICATE
OF ADOPTION OF BYLAWS
OF
DIEGO
PELLICER WORLDWIDE INC.
The
undersigned certifies that he or she is the duly elected, qualified and acting Secretary of Diego Pellicer Worldwide Inc., a Delaware
corporation (the "Company"), and that the foregoitis bylaws, comprising twenty (20) pages, were
adopted as the bylaws of the Company on September 5, 2013 by the sole incorporator of the Company.
The
undersigned has executed this certificate as of September 5, 2013.
|
/s/
Steve Hubbard |
|
Steve
Hubbard, Secretary |
Exhibit 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT
AGREEMENT (“Agreement”), dated as of September 17, 2014, is made by and between Diego Pellicer Worldwide,
Inc., a Corporation organized under the laws of Delaware (the “Company”) and Ron Throgmartin
(the “Executive”). Each of the Company and the Executive are referred to herein individually as a “Party”
and collectively as the “Parties.”
RECITALS:
WHEREAS, the Company
wishes to employ the Executive as its Chief Executive Officer and the Executive wishes to accept such employment, on the terms
set forth below, effective as of September 16, 2014 (the “Effective Date”);
NOW, THEREFORE, in
consideration of the foregoing premises, and the covenants, representations and warranties set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the Parties, intending to
be legally bound, hereby agree as follows:
1.
Term. The Company hereby employs the Executive, and the Executive hereby accepts such employment, for an initial
term commencing as of the Effective Date and continuing for a term of five years, through September 16, 2019 (the “Termination
Date”) unless sooner terminated in accordance with the provisions of Section 5 hereof (the “Initial Term”),
with such employment to continue for successive one-year periods in accordance with the terms of this Agreement (subject to termination
as aforesaid) unless either Party notifies the other Party of non-renewal in writing prior to three months before the expiration
of the initial term and each annual renewal, as applicable. (The period during which the Executive is employed hereunder being
hereinafter referred to as the “Term”).
2.
Duties. During the Term, the Executive shall be employed by the Company as its Chief Executive Officer. The Executive
shall devote his entire working time, energy, attention, skill and best efforts to the affairs of the Company and to the faithful
performance of the duties of said offices and shall faithfully perform such other duties of an executive, managerial or administrative
nature as shall be specified and designated from time to time by the Company’s Board of Directors.
3.
Place of Performance. Employee shall be based in the State of Georgia except for travel required for Company
business.
4.
Compensation.
(a)
Base Salary. The Company shall pay the Executive during the Term a salary at a minimum rate of Two Hundred Fifty
Thousand Dollars ($250,000) per annum for the period beginning on the Effective Date through the Initial Term (the “Base
Salary”), in accordance with the customary payroll practices of the Company applicable to senior executives. Following
the completion of an offering of the Company’s Series A Preferred stock, the Executive’s Base Salary shall automatically
be increased to Two Hundred Eighty Thousand ($280,000) per annum. For each year thereafter, the Company’s Board (or compensation
committee of the Company’s Board, or, at the discretion of the Company’s Board, by a committee composed of two or more
members of the Company’s Board (for purposes of this Agreement, the “Committee”) shall review the Executive’s
Base Salary and may provide for such increases therein as it may, in its discretion, deem appropriate. (Any such increased salary
shall constitute the “Base Salary” as of the time of the increase.)
(b)
Bonus. During the Term, in addition to the Base Salary, for each fiscal year of the Company ending during the Term,
the Executive shall have the opportunity to receive an annual bonus in an amount and on such terms to be determined by the Company’s
Board, or, at the discretion of the Company’s Board, the Committee (“Performance Bonus”). The Company’s
Board, or, at the discretion of the Company’s Board, the Committee, shall further have the discretion to grant Executive
annual bonuses in such amounts and on such terms as it shall determine in its sole discretion. Nothing contained in the foregoing
shall limit the Executive’s eligibility to receive any other bonus under any other bonus plan, stock option or equity–based
plan, or other policy or program of the Company.
(c)
Equity Incentive Compensation. Executive shall be entitled to participate in any equity compensation plan of the
Company in which he is eligible to participate, and may, without limitation, be granted in accordance with any such plan options
to purchase shares of the Company’s common stock, shares of restricted stock, and other equity awards in the discretion of
the Company’s Board or the Committee.
(d)
Benefits. The Executive shall be permitted during the Term to participate in any group life, hospitalization or disability
insurance plans, health programs, retirement plans, fringe benefit programs and other benefits that may be available to other senior
executives of the Company generally, in each case to the extent that the Executive is eligible under the terms of such plans or
programs. Full medical, dental, and vision coverage will be provided and paid for by the Company.
(e)
Vacation. The Executive shall be entitled to vacation of no less than 20 business days per year, not including national
holidays, to be credited in accordance with ordinary Company policies.
(f)
Expenses. The Company shall pay or reimburse the Executive for all ordinary and reasonable out-of-pocket expenses
actually incurred (and, in the case of reimbursement, paid) by the Executive during the Term in the performance of the Executive’s
services under this Agreement, in accordance with the Company’s policies regarding such reimbursements.
5.
Termination of Employment; Change of Control.
(a)
Termination upon Death or Disability. This Agreement and Executive’s employment hereunder shall automatically
terminate on the date on which Executive dies or becomes permanently incapacitated. Executive shall be deemed to have become “permanently
incapacitated” on the date that is thirty (30) days after the Company has determined that Executive has suffered a Permanent
Incapacity (as defined below) and so notifies Executive. For purposes of this Agreement, “Permanent Incapacity”
shall mean that (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical
or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than
twelve (12) months; or (ii) Executive is, by reason of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement
benefits for a period of not less than twelve (12) months under an accident and health plan covering employees of the service provider’s
employer.
(b)
Termination by the Company for Cause. The Company may terminate this Agreement and Executive’s employment hereunder
without Cause (as defined below), effective upon delivery of written notice to Executive given at any time during the Term (without
any necessity for prior notice). For purposes of this Agreement, “Cause” shall mean the Executive’s: (i)
conviction of any felony or any other crime involving moral turpitude, (ii) fraud against the Company or any of its subsidiaries
or affiliates or theft of or maliciously intentional damage to the property of the Company or any of their subsidiaries or affiliates,
(iii) willful breach of Executive’s fiduciary duties to the Company, or (iv) breach by Executive of any provision of this
Agreement.
(c)
Termination by Company without Cause. The Company may terminate this Agreement and Executive’s employment hereunder
without Cause, effective upon delivery of written notice to Executive given at any time during the Term (without any necessity
for prior notice) provided that the Company complies with all provisions of this Agreement, including without limitation, obligations
related to severance, vesting of options and continuation of benefits as set forth herein.
(d)
Termination by the Executive for Good Reason. The Executive may terminate this Agreement and Executive’s employment
hereunder with Good Reason (as defined below). For purposes of this Agreement, “Good Reason” shall mean (i)
the material reduction of the Executive’s title, authority, duties and responsibilities or the assignment to the Executive
of duties materially inconsistent with the Executive’s position or positions with the Company; (ii) a material reduction
in Base Salary of the Executive; (iii) the Company’s material breach of this Agreement; or (iv) any change in the geographic
location at which Executive must perform the services under this Agreement, which change is reasonably material to Executive. Notwithstanding
the foregoing, (x) Good Reason shall not be deemed to exist unless notice of termination on account thereof (specifying a termination
date no later than thirty (30) days from the date of such notice) is given no later than 30 days after the time at which the event
or condition purportedly giving rise to Good Reason first occurs or arises and (y) if there exists (without regard to this clause
(y)) an event or condition that constitutes Good Reason, the Company shall have fifteen (15) days from the date notice of such
a termination is given to cure such event or condition and, if the Company does so, such event or condition shall not constitute
Good Reason hereunder.
(e)
Termination by the Executive other than for Good Reason. The Executive may terminate this Agreement and Executive’s
employment hereunder other than for Good Reason, provided that the Executive gives the Company no less than thirty (30) days prior
written notice of such termination.
(f)
Change of Control. The Executive may terminate this Agreement and Executive’s employment hereunder within the
six month period following the Transition Period (as defined below), provided that the Executive gives the Company no less than
thirty (30) days prior written notice of such termination. For purposes of this Agreement, “Transition Period” means
the period commencing on the date of the Change of Control (as defined below) and ending on the first anniversary of such Change
of Control. For purposes of this Agreement, “Change of Control” shall mean the occurrence of any of the following:
(i)
Change in Ownership. A change in ownership of the Company occurs on the date that any one person, or more than one
person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes
more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, excluding the acquisition
of additional stock by a person or more than one person acting as a group who is considered to own more than fifty percent (50%)
of the total fair market value or total voting power of the stock of the Company.
(ii)
Change in Effective Control. A change in effective control of the Company occurs on the date that either: (A) any
one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on
the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing thirty percent
(30%) or more of the total voting power of the stock of the Company; or (B) a majority of the members of the Company’s Board
is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the
members of the Company’s Board prior to the date of the appointment or election; provided, that this paragraph (2) will apply
to the Company only if no other corporation is a majority shareholder of the Company.
(iii)
Change in Ownership of Substantial Assets. A change in the ownership of a substantial portion of the Company’s
assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the
twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that
have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of the assets
of the Company immediately prior to such acquisition or acquisitions. For this purpose, “gross fair market value” means
the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities
associated with such assets.
(iv)
Intended Interpretation. It is the intent of the Parties that the definition of Change in Control under this Agreement
be construed consistent with the definition of “Change in Control” as defined in Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”) and the applicable Treasury Regulations, as amended from time to time.
6.
Payments Upon Termination.
(a)
Upon termination of this Agreement and Executive’s employment hereunder due to Executive’s death or disability
pursuant to Section 5(a) hereof, (i) the Executive (or the Executive’s estate or beneficiaries in the case of the
death of the Executive) shall be entitled to receive any Base Salary and other benefits (including any bonus for a calendar year
completed before termination) earned and accrued under this Agreement prior to the date of termination (and reimbursement under
this Agreement for expenses incurred prior to the date of termination) and (ii) the Executive (or the Executive’s estate
or beneficiaries in the case of the death of the Executive) shall have no further rights to any other compensation or benefits
hereunder, or any other rights hereunder (but, for the avoidance of doubt, shall receive such disability and death benefits as
may be provided under the Company’s plans and arrangements in accordance with their terms).
(b)
Upon termination of this Agreement and Executive’s employment hereunder (i) by the Company for Cause pursuant
to Section 5(b) hereof or by Executive other than for Good Reason pursuant to Section 5(e) hereof, (i) the Company
shall pay to Executive an amount equal to Executive’s then Base Salary and other benefits (including any bonus for a calendar
year completed before termination) earned and accrued under this Agreement prior to the date of termination (and reimbursement
under this Agreement for expenses incurred prior to the date of termination) and (ii) the Executive shall have no further rights
to any other compensation or benefits under this Agreement on or after the termination of employment.
(c)
Upon termination of this Agreement and Executive’s employment hereunder (i) by the Company without Cause pursuant
to Section 5(c) hereof, (ii) by Executive for Good Reason pursuant to Section 5(d) hereof or (iii) by Executive
following a Change in Control of the Company pursuant to Section 5(f) hereof, (x) the Company shall pay to Executive
(I) an amount equal to the Executive’s then Base Salary for a period of (a) three years or (b) through the Termination Date,
whichever is greater, and other benefits (including any bonus for a calendar year completed before termination) earned and accrued
under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the
date of termination); and (II) an amount equal to 3.0 times (a) the average of the Base Salary amounts paid to Executive over the
three calendar years prior to the date of Termination, (b) if less than three years have elapsed between the date of this Agreement
and the date of termination, the highest Base Salary paid to Executive in any calendar year prior to the date of Termination, or
(c) if less than 12 months have elapsed from the date of this Agreement to the date of termination, the highest Base Salary received
in any month times 12; and (y) the Executive shall have no further rights to any other compensation or benefits under this Agreement
on or after the termination of employment.
(d)
Nothing contained in this Section 6 shall affect the terms of any employee stock options, stock grants, or other
equity-based compensation that may have been issued by the Company to Executive, which in the event of termination of Executive’s
employment with the Company shall continue to be governed by their own terms and conditions.
(e)
Unless the payment is required to be delayed pursuant to Code Section 409A (as defined below), the cash amounts payable
to the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) under this Section
6 shall be paid to the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive)
in a single-sum payment within 60 days following the effective date of termination of this Agreement and Executive’s employment
hereunder.
7.
Parachutes. If any amount payable to or other benefit receivable by the Executive pursuant to this Agreement would
be deemed to constitute a Parachute Payment (as defined below), alone or when added to any other amount payable or paid to or other
benefit receivable or received by the Executive which is deemed to constitute a Parachute Payment (whether or not under an existing
plan, arrangement or other agreement), and would result in the imposition on the Executive of an excise tax under Section 4999
of the Code, then the Parachute Payments shall be reduced (but not below zero) so that the maximum amount of the Parachute Payments
(after reduction) shall be one dollar ($1.00) less than the amount which would cause the Parachute Payments to be subject to the
excise tax imposed by Section 4999 of the Code. Any such reduction shall be made by first reducing severance benefits (if any).
Notwithstanding the foregoing, if the reduction of Parachute Payments under this Section 7 would be equal to or greater
than $50,000, then there shall be no such reduction and the full amount of the Parachute Payment shall be payable. “Parachute
Payment” shall mean a “parachute payment” as defined in Section 280G of the Code. The calculation under this
Section 7 shall be as determined by the Company’s accountants.
8.
Execution of Release. The Executive acknowledges that, if required by the Company prior to making the payments and
benefits set forth in Section 5 (other than accrued but unpaid Base Salary and other benefits), all such payments and benefits
are subject to his execution of a general release from liability of the Company, and their respective Officers (including his successor),
Directors/Managers and employees, and such release becoming irrevocable by its terms. If Executive fails to execute such release,
or such release does not become irrevocable, all such payments and benefits set forth in Section 6 hereof shall be forfeited.
9.
Application of Code Section 409A.
(a)
This Agreement shall be interpreted to avoid any penalty sanctions under Section 409A of the Code (“Code Section
409A”). If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions
under Code Section 409A, then such benefit or payment will be provided in full (to the extent not paid in part at earlier date)
at the earliest time thereafter when such sanctions will not be imposed. For purposes of Code Section 409A, all payments to be
made upon a termination of employment under this Agreement may only be made upon Executive’s “separation from service”
(within the meaning of such term under Code Section 409A) with the Company, each payment made under this Agreement will be treated
as a separate payment, and the right to a series of installment payments under this Agreement will be treated as a right to a series
of separate payments. In no event will Executive, directly or indirectly, designate the calendar year of payment, except as permitted
under Code Section 409A.
(b)
Notwithstanding anything herein to the contrary, if, at the time of Executive’s “separation from service”
with the Company, the Company has securities which are publicly traded on an established securities market and Executive is a “specified
employee” (as such term is defined in Code Section 409A) and it is necessary to postpone the commencement of any payments
or benefits otherwise payable under this Agreement as a result of such termination of employment to prevent any accelerated or
additional tax under Code Section 409A, then the Company will postpone the commencement of the payment of any such payments or
benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive), until the first
payroll date that occurs after the date that is six (6) months following Executive’s “separation of service”
with the Company. If any payments are postponed due to such requirements, such postponed amounts will be paid with interest at
the applicable federal rate as provided under Section 7872(f)(2)(A) of the Code in a lump sum to Executive on the first payroll
date that occurs after the date that is six (6) months following Executive’s “separation of service” with the
Company. If Executive dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on
account of Code Section 409A will be paid to the personal representative of Executive’ s estate within sixty (60) days after
the date of Executive’s death. Payments pursuant to Section 6 of this Agreement are intended to satisfy the short-term
deferral exception under Code Section 409A.
(c)
All reimbursements and in-kind benefits provided under this Agreement will be made or provided in accordance with the requirements
of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement will be for expenses incurred during
Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible
for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement,
or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made on
or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement
or in kind benefits is not subject to liquidation or exchange for another benefit.
(d)
To the extent applicable, all grants, awards, bonuses or other payments made to Executive or for which Executive is eligible
under any Company bonus, incentive, deferred compensation plan or program or any other compensation arrangement will be structured
to comply with the requirements of Code Section 409A or an exception from such requirements.
10.
Covenants of the Executive.
(a)
Confidentiality. During the Term, the Company has and will continue to provide Executive with access to, and may
confide in him, information, business methods and systems, techniques and methods of operation developed at great expense by the
Company and which are assets of the Company. Executive recognizes and acknowledges that: (i) all Confidential Information (defined
below) is the property of the Company and is unique, extremely valuable and developed and acquired by great expenditures of time,
effort and cost; (ii) the misuse, misappropriation or unauthorized disclosure by Executive of the Confidential Information would
constitute a breach of trust and would cause serious irreparable injury to the Company; and (iii) it is essential to the protection
of the Company’s goodwill and to the maintenance of the Company’s competitive position that the Confidential Information
be kept secret and that Executive not disclose the Confidential Information to others or use same to his own advantage or to the
advantage of others. Accordingly, Executive shall not, during the Term or thereafter, directly or indirectly, in any manner, utilize
or disclose to any person, firm, corporation, association or other entity, or use on his own behalf, any confidential and proprietary
information of the Company, including, but not limited to, information relating to strategic plans, sales, costs, client lists,
client preferences, client identities, investment strategies, computer programs, profits or the business affairs and financial
condition of the Company, or any of its clients, or any of the Company’s business methods, systems, marketing materials,
clients or techniques (collectively “Confidential Information”), except for (i) such disclosures where required
by law, but only after written notice to the Company detailing the circumstances and legal requirement for the disclosure; or (ii)
as authorized during the performance of Executive’s duties for such use or purpose as are reasonably believed by Executive
to be in the best interests of the Company. At any time, upon request, Executive shall deliver to the Company all of its property
including, but not limited to, its Confidential Information (whether electronically stored or otherwise) which are in his possession
or under his control. Property to be returned includes, but is not limited to, notebook pages, documents, records, prototypes,
client files, drawings, electronically stored data, computer media or any other materials or property in Executive’s possession.
(b)
Noninterference. During the Term and for a period of one (1) year following the end of the Term (the “Restricted
Period”), for whatever reason, he will not, directly or indirectly, for himself or on behalf of any third party, at any
time or in any manner:
(i)
persuade, induce, solicit, influence or attempt to influence, or cause any person who is an employee of the Company to terminate
his or her relationship with the Company or refer any such employee to anyone, without prior written approval from the Company;
(ii)
request or cause any of the Company’s clients or potential clients to cancel, modify or terminate any existing or
continuing or, to Executive’s knowledge, prospective business relationship with the Company;
(iii)
engage in or participate in any effort or act to induce, or in any way cause, any client or, to Executive’s knowledge,
prospective client of the Company, to deal with Executive or any other person or entity except in a capacity as representative
of the Company, or otherwise take any action which might reasonably be expected to be disadvantageous to the Company;
(iv)
persuade, induce, solicit, influence or attempt to influence, or cause any client or, to Executive’s knowledge, prospective
client of the Company to cease or refrain from doing business, or to decline to do business, or to change or alter any existing
or prospective business relationship, with the Company;
(v)
accept business from, or perform or provide any services for, any client, or to Executive’s knowledge, prospective
client of the Company;
(vi)
contract with or communicate with, in either case in connection with services, any client or, to Executive’s knowledge,
prospective client of the Company; or
(vii)
provide any third party with any information concerning any client, or to Executive’s knowledge, prospective client
of the Company, including but not limited to, the disclosure of any client name or data, in whatever form, to such third party.
(c)
Noncompetition. During the Term and Restricted Period, Executive shall not, directly or indirectly, engage or participate
in, or become employed by, or affiliated with, or enter into or maintain a contractual relationship
with, or render advisory or any other services to, any person or business entity or organization, of whatever form, that
competes with the Company in the United States or any other location in which the Company
conducts business prior to your termination date.
(d)
Injunctive Relief. Executive acknowledges that his compliance with the covenants in Sections 9(a), 9(b)
and 9(c) hereof (the “Restrictive Covenants”) is necessary to protect the good will, Confidential Information
and other proprietary interests of the Company, that such covenants are supported by adequate and sufficient consideration, and
that, in the event of any violation or threatened violation by Executive of any such provision, the Company will sustain serious,
irreparable and substantial harm to its business, the extent of which will be difficult to determine and impossible to remedy by
an action at law for money damages. Accordingly, Executive agrees that, in the event of such violation or threatened violation
by him, the Company shall be entitled to an injunction before trial from any court of competent jurisdiction as a matter of course
and upon the posting of not more than a nominal bond, in addition to all such other legal and equitable remedies as may be available
to the Company. Executive further acknowledges that he has carefully considered the nature and extent of the restrictions contained
herein and the rights and remedies conferred upon the Company under this Agreement, and hereby acknowledges and agrees that the
same are reasonable, are designed to protect the legitimate business interests of the Company, and do not confer benefits upon
the Company disproportionate to the detriment upon him. In the event that Executive violates any of the covenants in this Agreement
and the Company commences legal action for injunctive or other relief, the Company shall have the benefit of the full period of
the covenants, computed from the date Executive ceased violation of the covenants, either by order of the court or otherwise. Executive
acknowledges that any claim or cause of action he may have against the Company shall not constitute a defense to the enforcement
by the Company of his covenants in Article 5 of this Agreement (e.g., these covenants are independent of any other provision in
this Agreement and of any other promise made to Executive). Executive also acknowledges that his experience and capabilities are
such that he can obtain suitable employment otherwise than in violation of the covenants in this Agreement and that the enforcement
of these covenants will not prevent the earning of a livelihood nor cause undue hardship. Without limiting the foregoing, in the
event of a breach by Executive of any Restrictive Covenant, the Company’s obligations under this Agreement shall immediately
terminate, Executive shall not be entitled to any additional monetary payments or benefits of any kind whatsoever and Executive
shall reimburse the Company for all of its attorneys fees and costs associated with any legal or equitable proceedings or litigation
seeking to enforce the terms of this Agreement.
(e)
Remedies Cumulative and Concurrent. The rights and remedies of the Company as provided in this Section 10
shall be cumulative and concurrent and may be pursued separately, successively or together, at the sole discretion of the Company,
and may be exercised as often as occasion therefor shall arise. The failure to exercise any right or remedy shall in no event be
construed as a waiver or release thereof.
(f)
Executive’s Authorization. Executive authorizes the Company to inform any third parties, including future employers,
prospective employers and the Company’s clients or prospective clients, of the existence of this Agreement and his obligations
under it.
(g)
Survivability. The provisions of this Section 10 shall survive the cessation of Employee’s employment
for any reason, as well as the expiration of this Agreement at the end of its Term or at any time prior thereto.
(h)
Definition of Company. For purposes of this Section 10, the term “Company” shall include the Company
and any of its parents, subsidiaries, affiliates or any related companies including their respective successors and assigns.
11.
Other Provisions.
(a)
Severability. The Executive acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel
in connection with this Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all
other respects. If it is determined that any of the provisions of this Agreement or any part thereof, including, without limitation,
any of the Restrictive Covenants, is held invalid or unenforceable by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part
or degree will remain in full force and effect to the extent not held invalid or unenforceable.
(b)
Duration and Scope of Covenants. If any court or other decision-maker of competent jurisdiction determines that any
of the Restrictive Covenants contained in this Agreement, including, without limitation, any of the Restrictive Covenants, or any
part thereof, is unenforceable because of the duration or geographical scope of such provision, then, after such determination
has become final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision
becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
(c)
Arbitration.
(i)
Subject to the limitations of this Section 11(c), if any dispute arises between the Parties under or concerning this
Agreement or the terms hereof, or regarding the manner in which Executive was treated while employed by the Company, the termination
of his employment, or any alleged violation by the Company of Executive’s rights under any common law theory, or any applicable
federal, state, or local law, statute, regulation, or ordinance (including without limitation 42 U.S.C. § 1981, Title VII
of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and any other local,
state, or federal legislation that pertains to employee rights or discrimination in employment), the Parties agree to submit such
issue to final and binding arbitration in accordance with the then existing National Rules for the Resolution of Employment Disputes
of the American Arbitration Association. Nothing in this Section 11(c), however, will preclude the Company from seeking
the judicial relief set forth under Section 10 of this Agreement.
(ii)
The Parties agree that the interpretation and enforcement of the arbitration provisions in this Agreement will be governed
exclusively by the Federal Arbitration Act (the “FAA”), 9 U.S.C. § 1 et seq., provided that they are enforceable
under the FAA, and will otherwise be governed by the law of the State of Delaware.
(iii)
The Parties agree and understand that one of the objectives of this arbitration agreement is to resolve disputes expeditiously,
as well as fairly, and to those ends it is the obligation of all Parties to raise any disputes subject to arbitration hereunder
in an expeditious manner. Accordingly, the Parties agree that, as to any dispute that can be brought hereunder, a demand for arbitration
must be postmarked or delivered in person to the other Party no later than six (6) months after the date the demanding Party knows
or should have known of the event or events giving rise to the claim. Failure to demand arbitration on a claim within these time
limits is intended to, and will to the furthest extent permitted by law, be a waiver and release with respect to such claims. If,
and only if, the waiver and release of claims referenced in the immediately preceding sentence is found by a court of competent
jurisdiction to be unenforceable as against Executive or the Company under this Agreement, then the Parties will nevertheless submit
such claims to arbitration pursuant to this Section 11(c) within the time permitted by law.
(iv)
The Company will pay the arbitrator’s fees.
(v)
Unless otherwise agreed by the Parties, arbitration will take place in Seattle, WA.
(vi)
In rendering an award, the arbitrator will determine the rights and obligations of the Parties according to federal law
and the substantive law of the State of Washington without regard to any principles governing conflicts of laws and the arbitrator’s
decision will be governed by state and federal substantive law, including state and federal discrimination laws referenced in Section
11(c)(i) hereof, as though the matter were before a court of law.
(vii)
Any arbitration award will be accompanied by a written statement containing a summary of the issues in controversy, a description
of the award, and an explanation of the reasons for the award. The decision of the arbitrator will be made within thirty (30) days
following the close of the hearing. The Parties agree that the award will be enforceable exclusively by any state or federal court
of competent jurisdiction within Seattle, WA.
(viii)
It is understood and agreed by the Parties that their agreement herein concerning arbitration does not contain, and cannot
be relied upon Executive to contain, any promises or representations concerning the duration of the employment relationship, or
the circumstances under or procedures by which the employment relationship may be modified or terminated.
(ix)
If any part of this arbitration procedure is in conflict with any mandatory requirement or applicable law, the law will
govern, and that part of this arbitration procedure will be reformed and construed to the maximum extent possible in conformance
with the applicable law. The arbitration procedure will remain otherwise unaffected and enforceable.
(d)
Notices. All notices, demands, consents, requests, instructions and other communications to be given or delivered
or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby
shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered,
on the business day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or
registered mail return receipt requested, two (2) business days after being mailed, (iii) if delivered by overnight courier (with
all charges having been prepaid), on the business day of such delivery (as evidenced by the receipt of the overnight courier service
of recognized standing), or (iv) if delivered by facsimile transmission or other electronic means, including email, on the business
day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding
business day. If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed
address of which no notice was given (in accordance with this Section 11(d), or the refusal to accept same, the notice,
demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is
sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions and other communications
will be sent to the following addresses or facsimile numbers as applicable:
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If to the Company, to: |
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3496 Fairwiew Way
West Linn, OR 97068
Attention: Steve Hubbard
Telephone No.: 206-427-4100
Facsimile No.: 503-635-7097 |
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With copies to: |
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Szaferman Lakind Blumstein & Blader, PC
101 Grovers Mill Road
Second Floor
Lawrenceville, NJ 08648
Attention: Gregg Jaclin, Esq.
Telephone No.: 609-275-0400
Facsimile No.: 609-275-4511 |
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If to the Executive, to: |
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Ron Throgmartin
3685 Thomson Middle Road
Bufford, GA 30519
Attention: Ron Throgmartin
Telephone No.:678-5468598
Facsimile No.: 425-282-1508 |
Any such person may by notice given
in accordance with this Section 11(d) to the other Parties hereto designate another address or person for receipt by such
person of notices hereunder.
(e)
Section Headings. The headings of Sections in this Agreement are provided for convenience only and will not affect
its construction or interpretation. All references to or “Section” or “Sections” refer to the corresponding
Article or Section or Sections of this Agreement, unless the context indicates otherwise.
(f)
Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires otherwise. Unless otherwise expressly provided,
the word “including” shall mean including without limitation. The Parties intend that each representation, warranty,
and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract
from or mitigate the fact that the Party is in breach of such representation, warranty, or covenant. All words used in this Agreement
will be construed to be of such gender or number as the circumstances require.
(h)
Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original
copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event
that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with
the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
(i)
Entire Agreement. This Agreement contains the entire agreement between the Parties with respect to the subject matter
hereof and supersedes all prior agreements, written or oral, with respect thereto.
(j)
Waivers and Amendments. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof
may be waived, only by a written instrument signed by the Parties or, in the case of a waiver, by the Party waiving compliance.
No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any Party of any such right, power or privilege nor any single or partial exercise of any such
right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.
(k)
Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors,
heirs (in the case of the Executive) and assigns. No rights or obligations of the Company under this Agreement may be assigned
or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation
in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the
Company; provided, however, that the assignee or transferee is the successor to all or substantially all of the assets of the Company
and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement,
either contractually or as a matter of law.
(l)
Withholding. The Company shall be entitled to withhold from any payments or deemed payments any amount of tax withholding
it determines to be required by law.
(m)
Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective
successors, permitted assigns, heirs, executors and legal representatives.
(n)
Survival. Anything contained in this Agreement to the contrary notwithstanding, the provisions of Section 10
and any other provisions of this Agreement expressly imposing obligations that survive termination of Executive’s employment
hereunder, and the other provisions of this Section 11 to the extent necessary to effectuate the survival of such provisions,
shall survive termination of this Agreement and any termination of the Executive’s employment hereunder.
(o)
Existing Agreements. The Executive represents to the Company that he is not subject or a Party to any employment
or consulting agreement, non-competition covenant or other agreement, covenant or understanding which might prohibit him from executing
this Agreement or limit his ability to fulfill his responsibilities hereunder.
(p)
Legal Fees: The Parties hereto agree that the Company shall pay the legal fees relating to any dispute, claim, action
or proceeding between the Parties hereto arising out of or relating to the terms and conditions of this Agreement or any provision
thereof.
(q)
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN
THE STATE OF DELAWARE.
(r)
Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WANES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[Signatures
follow on next page]
IN WITNESS WHEREOF, the Company and
the Executive have caused their respective signature pages to this Agreement to be duly executed as of the date first written
above.
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COMPANY: |
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DIEGO PELICER WORLDWIDE, INC. |
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By: |
/s/ Alan D. Valdes
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Name: |
Alan D. Valdes |
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Title: |
Chairman |
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EXECUTIVE: |
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/s/ Ron Throgmartin |
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Name: |
Ron Throgmartin
Chief Executive Officer |
15
Exhibit 10.2
EMPLOYMENT AGREEMENT
This EMPLOYMENT
AGREEMENT (“Agreement”), dated as of September 17, 2014, is made by and between Diego Pellicer Worldwide,
Inc., a Corporation organized under the laws of Delaware (the “Company”) and Douglas C. Anderson
(the “Executive”). Each of the Company and the Executive are referred to herein individually as a “Party”
and collectively as the “Parties.”
RECITALS:
WHEREAS, the Company
wishes to employ the Executive as its Vice Chairman & Senior Vice President of Strategy & Vision and the Executive
wishes to accept such employment, on the terms set forth below, effective as of September 16, 2014 (the “Effective Date”);
NOW, THEREFORE, in
consideration of the foregoing premises, and the covenants, representations and warranties set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the Parties, intending to
be legally bound, hereby agree as follows:
1.
Term. The Company hereby employs the Executive, and the Executive hereby accepts such employment, for an initial
term commencing as of the Effective Date and continuing for a term of five years, through September 16, 2019 (the “Termination
Date”) unless sooner terminated in accordance with the provisions of Section 5 hereof (the “Initial Term”),
with such employment to continue for successive one-year periods in accordance with the terms of this Agreement (subject to termination
as aforesaid) unless either Party notifies the other Party of non-renewal in writing prior to three months before the expiration
of the initial term and each annual renewal, as applicable. (The period during which the Executive is employed hereunder being
hereinafter referred to as the “Term”).
2.
Duties. During the Term, the Executive shall be employed by the Company as its Vice Chairman, Sr. Vice President of Strategy
& Vision. The Executive shall devote his entire working time, energy, attention, skill and best efforts to the affairs of
the Company and to the faithful performance of the duties of said offices and shall faithfully perform such other duties of an
executive, managerial or administrative nature as shall be specified and designated from time to time by the Company’s Board
of Directors.
3.
Place of Performance. Employee shall be based in Washington State except for travel required for Company business.
4.
Compensation.
(a)
Base Salary. The Company shall pay the Executive during the Term a salary at a minimum rate of Two Hundred Fifty
Thousand Dollars ($250,000) per annum for the period beginning on the Effective Date through the Initial Term (the “Base
Salary”), in accordance with the customary payroll practices of the Company applicable to senior executives. Following
the completion of an offering of the Company’s Series A Preferred stock, the Executive’s Base Salary shall automatically
be increased to Two Hundred Eighty Thousand ($280,000) per annum. For each year thereafter, the Company’s Board (or compensation
committee of the Company’s Board, or, at the discretion of the Company’s Board, by a committee composed of two or more
members of the Company’s Board (for purposes of this Agreement, the “Committee”) shall review the Executive’s
Base Salary and may provide for such increases therein as it may, in its discretion, deem appropriate. (Any such increased salary
shall constitute the “Base Salary” as of the time of the increase.)
(b)
Bonus. During the Term, in addition to the Base Salary, for each fiscal year of the Company ending during the Term,
the Executive shall have the opportunity to receive an annual bonus in an amount and on such terms to be determined by the Company’s
Board, or, at the discretion of the Company’s Board, the Committee (“Performance Bonus”). The Company’s
Board, or, at the discretion of the Company’s Board, the Committee, shall further have the discretion to grant Executive
annual bonuses in such amounts and on such terms as it shall determine in its sole discretion. Nothing contained in the foregoing
shall limit the Executive’s eligibility to receive any other bonus under any other bonus plan, stock option or equity–based
plan, or other policy or program of the Company.
(c)
Equity Incentive Compensation. Executive shall be entitled to participate in any equity compensation plan of the
Company in which he is eligible to participate, and may, without limitation, be granted in accordance with any such plan options
to purchase shares of the Company’s common stock, shares of restricted stock, and other equity awards in the discretion of
the Company’s Board or the Committee.
(d)
Benefits. The Executive shall be permitted during the Term to participate in any group life, hospitalization or disability
insurance plans, health programs, retirement plans, fringe benefit programs and other benefits that may be available to other senior
executives of the Company generally, in each case to the extent that the Executive is eligible under the terms of such plans or
programs. Full medical, dental, and vision coverage will be provided and paid for by the Company.
(e)
Vacation. The Executive shall be entitled to vacation of no less than 20 business days per year, not including national
holidays, to be credited in accordance with ordinary Company policies.
(f)
Expenses. The Company shall pay or reimburse the Executive for all ordinary and reasonable out-of-pocket expenses
actually incurred (and, in the case of reimbursement, paid) by the Executive during the Term in the performance of the Executive’s
services under this Agreement, in accordance with the Company’s policies regarding such reimbursements.
5.
Termination of Employment; Change of Control.
(a)
Termination upon Death or Disability. This Agreement and Executive’s employment hereunder shall automatically
terminate on the date on which Executive dies or becomes permanently incapacitated. Executive shall be deemed to have become “permanently
incapacitated” on the date that is thirty (30) days after the Company has determined that Executive has suffered a Permanent
Incapacity (as defined below) and so notifies Executive. For purposes of this Agreement, “Permanent Incapacity”
shall mean that (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical
or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than
twelve (12) months; or (ii) Executive is, by reason of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement
benefits for a period of not less than twelve (12) months under an accident and health plan covering employees of the service provider’s
employer.
(b)
Termination by the Company for Cause. The Company may terminate this Agreement and Executive’s employment hereunder
without Cause (as defined below), effective upon delivery of written notice to Executive given at any time during the Term (without
any necessity for prior notice). For purposes of this Agreement, “Cause” shall mean the Executive’s: (i)
conviction of any felony or any other crime involving moral turpitude, (ii) fraud against the Company or any of its subsidiaries
or affiliates or theft of or maliciously intentional damage to the property of the Company or any of their subsidiaries or affiliates,
(iii) willful breach of Executive’s fiduciary duties to the Company, or (iv) breach by Executive of any provision of this
Agreement.
(c)
Termination by Company without Cause. The Company may terminate this Agreement and Executive’s employment hereunder
without Cause, effective upon delivery of written notice to Executive given at any time during the Term (without any necessity
for prior notice) provided that the Company complies with all provisions of this Agreement, including without limitation, obligations
related to severance, vesting of options and continuation of benefits as set forth herein.
(d)
Termination by the Executive for Good Reason. The Executive may terminate this Agreement and Executive’s employment
hereunder with Good Reason (as defined below). For purposes of this Agreement, “Good Reason” shall mean (i)
the material reduction of the Executive’s title, authority, duties and responsibilities or the assignment to the Executive
of duties materially inconsistent with the Executive’s position or positions with the Company; (ii) a material reduction
in Base Salary of the Executive; (iii) the Company’s material breach of this Agreement; or (iv) any change in the geographic
location at which Executive must perform the services under this Agreement, which change is reasonably material to Executive. Notwithstanding
the foregoing, (x) Good Reason shall not be deemed to exist unless notice of termination on account thereof (specifying a termination
date no later than thirty (30) days from the date of such notice) is given no later than 30 days after the time at which the event
or condition purportedly giving rise to Good Reason first occurs or arises and (y) if there exists (without regard to this clause
(y)) an event or condition that constitutes Good Reason, the Company shall have fifteen (15) days from the date notice of such
a termination is given to cure such event or condition and, if the Company does so, such event or condition shall not constitute
Good Reason hereunder.
(e)
Termination by the Executive other than for Good Reason. The Executive may terminate this Agreement and Executive’s
employment hereunder other than for Good Reason, provided that the Executive gives the Company no less than thirty (30) days prior
written notice of such termination.
(f)
Change of Control. The Executive may terminate this Agreement and Executive’s employment hereunder within the
six month period following the Transition Period (as defined below), provided that the Executive gives the Company no less than
thirty (30) days prior written notice of such termination. For purposes of this Agreement, “Transition Period” means
the period commencing on the date of the Change of Control (as defined below) and ending on the first anniversary of such Change
of Control. For purposes of this Agreement, “Change of Control” shall mean the occurrence of any of the following:
(i)
Change in Ownership. A change in ownership of the Company occurs on the date that any one person, or more than one
person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes
more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, excluding the acquisition
of additional stock by a person or more than one person acting as a group who is considered to own more than fifty percent (50%)
of the total fair market value or total voting power of the stock of the Company.
(ii)
Change in Effective Control. A change in effective control of the Company occurs on the date that either: (A) any
one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on
the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing thirty percent
(30%) or more of the total voting power of the stock of the Company; or (B) a majority of the members of the Company’s Board
is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the
members of the Company’s Board prior to the date of the appointment or election; provided, that this paragraph (2) will apply
to the Company only if no other corporation is a majority shareholder of the Company.
(iii)
Change in Ownership of Substantial Assets. A change in the ownership of a substantial portion of the Company’s
assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the
twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that
have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of the assets
of the Company immediately prior to such acquisition or acquisitions. For this purpose, “gross fair market value” means
the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities
associated with such assets.
(iv)
Intended Interpretation. It is the intent of the Parties that the definition of Change in Control under this Agreement
be construed consistent with the definition of “Change in Control” as defined in Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”) and the applicable Treasury Regulations, as amended from time to time.
6.
Payments Upon Termination.
(a)
Upon termination of this Agreement and Executive’s employment hereunder due to Executive’s death or disability
pursuant to Section 5(a) hereof, (i) the Executive (or the Executive’s estate or beneficiaries in the case of the
death of the Executive) shall be entitled to receive any Base Salary and other benefits (including any bonus for a calendar year
completed before termination) earned and accrued under this Agreement prior to the date of termination (and reimbursement under
this Agreement for expenses incurred prior to the date of termination) and (ii) the Executive (or the Executive’s estate
or beneficiaries in the case of the death of the Executive) shall have no further rights to any other compensation or benefits
hereunder, or any other rights hereunder (but, for the avoidance of doubt, shall receive such disability and death benefits as
may be provided under the Company’s plans and arrangements in accordance with their terms).
(b)
Upon termination of this Agreement and Executive’s employment hereunder (i) by the Company for Cause pursuant
to Section 5(b) hereof or by Executive other than for Good Reason pursuant to Section 5(e) hereof, (i) the Company
shall pay to Executive an amount equal to Executive’s then Base Salary and other benefits (including any bonus for a calendar
year completed before termination) earned and accrued under this Agreement prior to the date of termination (and reimbursement
under this Agreement for expenses incurred prior to the date of termination) and (ii) the Executive shall have no further rights
to any other compensation or benefits under this Agreement on or after the termination of employment.
(c)
Upon termination of this Agreement and Executive’s employment hereunder (i) by the Company without Cause pursuant
to Section 5(c) hereof, (ii) by Executive for Good Reason pursuant to Section 5(d) hereof or (iii) by Executive
following a Change in Control of the Company pursuant to Section 5(f) hereof, (x) the Company shall pay to Executive
(I) an amount equal to the Executive’s then Base Salary for a period of (a) three years or (b) through the Termination Date,
whichever is greater, and other benefits (including any bonus for a calendar year completed before termination) earned and accrued
under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the
date of termination); and (II) an amount equal to 3.0 times (a) the average of the Base Salary amounts paid to Executive over the
three calendar years prior to the date of Termination, (b) if less than three years have elapsed between the date of this Agreement
and the date of termination, the highest Base Salary paid to Executive in any calendar year prior to the date of Termination, or
(c) if less than 12 months have elapsed from the date of this Agreement to the date of termination, the highest Base Salary received
in any month times 12; and (y) the Executive shall have no further rights to any other compensation or benefits under this Agreement
on or after the termination of employment.
(d)
Nothing contained in this Section 6 shall affect the terms of any employee stock options, stock grants, or other
equity-based compensation that may have been issued by the Company to Executive, which in the event of termination of Executive’s
employment with the Company shall continue to be governed by their own terms and conditions.
(e)
Unless the payment is required to be delayed pursuant to Code Section 409A (as defined below), the cash amounts payable
to the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) under this Section
6 shall be paid to the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive)
in a single-sum payment within 60 days following the effective date of termination of this Agreement and Executive’s employment
hereunder.
7.
Parachutes. If any amount payable to or other benefit receivable by the Executive pursuant to this Agreement would
be deemed to constitute a Parachute Payment (as defined below), alone or when added to any other amount payable or paid to or other
benefit receivable or received by the Executive which is deemed to constitute a Parachute Payment (whether or not under an existing
plan, arrangement or other agreement), and would result in the imposition on the Executive of an excise tax under Section 4999
of the Code, then the Parachute Payments shall be reduced (but not below zero) so that the maximum amount of the Parachute Payments
(after reduction) shall be one dollar ($1.00) less than the amount which would cause the Parachute Payments to be subject to the
excise tax imposed by Section 4999 of the Code. Any such reduction shall be made by first reducing severance benefits (if any).
Notwithstanding the foregoing, if the reduction of Parachute Payments under this Section 7 would be equal to or greater
than $50,000, then there shall be no such reduction and the full amount of the Parachute Payment shall be payable. “Parachute
Payment” shall mean a “parachute payment” as defined in Section 280G of the Code. The calculation under this
Section 7 shall be as determined by the Company’s accountants.
8.
Execution of Release. The Executive acknowledges that, if required by the Company prior to making the payments and
benefits set forth in Section 5 (other than accrued but unpaid Base Salary and other benefits), all such payments and benefits
are subject to his execution of a general release from liability of the Company, and their respective Officers (including his successor),
Directors/Managers and employees, and such release becoming irrevocable by its terms. If Executive fails to execute such release,
or such release does not become irrevocable, all such payments and benefits set forth in Section 6 hereof shall be forfeited.
9.
Application of Code Section 409A.
(a)
This Agreement shall be interpreted to avoid any penalty sanctions under Section 409A of the Code (“Code Section
409A”). If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions
under Code Section 409A, then such benefit or payment will be provided in full (to the extent not paid in part at earlier date)
at the earliest time thereafter when such sanctions will not be imposed. For purposes of Code Section 409A, all payments to be
made upon a termination of employment under this Agreement may only be made upon Executive’s “separation from service”
(within the meaning of such term under Code Section 409A) with the Company, each payment made under this Agreement will be treated
as a separate payment, and the right to a series of installment payments under this Agreement will be treated as a right to a series
of separate payments. In no event will Executive, directly or indirectly, designate the calendar year of payment, except as permitted
under Code Section 409A.
(b)
Notwithstanding anything herein to the contrary, if, at the time of Executive’s “separation from service”
with the Company, the Company has securities which are publicly traded on an established securities market and Executive is a “specified
employee” (as such term is defined in Code Section 409A) and it is necessary to postpone the commencement of any payments
or benefits otherwise payable under this Agreement as a result of such termination of employment to prevent any accelerated or
additional tax under Code Section 409A, then the Company will postpone the commencement of the payment of any such payments or
benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive), until the first
payroll date that occurs after the date that is six (6) months following Executive’s “separation of service”
with the Company. If any payments are postponed due to such requirements, such postponed amounts will be paid with interest at
the applicable federal rate as provided under Section 7872(f)(2)(A) of the Code in a lump sum to Executive on the first payroll
date that occurs after the date that is six (6) months following Executive’s “separation of service” with the
Company. If Executive dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on
account of Code Section 409A will be paid to the personal representative of Executive’ s estate within sixty (60) days after
the date of Executive’s death. Payments pursuant to Section 6 of this Agreement are intended to satisfy the short-term
deferral exception under Code Section 409A.
(c)
All reimbursements and in-kind benefits provided under this Agreement will be made or provided in accordance with the requirements
of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement will be for expenses incurred during
Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible
for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement,
or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made on
or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement
or in kind benefits is not subject to liquidation or exchange for another benefit.
(d)
To the extent applicable, all grants, awards, bonuses or other payments made to Executive or for which Executive is eligible
under any Company bonus, incentive, deferred compensation plan or program or any other compensation arrangement will be structured
to comply with the requirements of Code Section 409A or an exception from such requirements.
10.
Covenants of the Executive.
(a)
Confidentiality. During the Term, the Company has and will continue to provide Executive with access to, and may
confide in him, information, business methods and systems, techniques and methods of operation developed at great expense by the
Company and which are assets of the Company. Executive recognizes and acknowledges that: (i) all Confidential Information (defined
below) is the property of the Company and is unique, extremely valuable and developed and acquired by great expenditures of time,
effort and cost; (ii) the misuse, misappropriation or unauthorized disclosure by Executive of the Confidential Information would
constitute a breach of trust and would cause serious irreparable injury to the Company; and (iii) it is essential to the protection
of the Company’s goodwill and to the maintenance of the Company’s competitive position that the Confidential Information
be kept secret and that Executive not disclose the Confidential Information to others or use same to his own advantage or to the
advantage of others. Accordingly, Executive shall not, during the Term or thereafter, directly or indirectly, in any manner, utilize
or disclose to any person, firm, corporation, association or other entity, or use on his own behalf, any confidential and proprietary
information of the Company, including, but not limited to, information relating to strategic plans, sales, costs, client lists,
client preferences, client identities, investment strategies, computer programs, profits or the business affairs and financial
condition of the Company, or any of its clients, or any of the Company’s business methods, systems, marketing materials,
clients or techniques (collectively “Confidential Information”), except for (i) such disclosures where required
by law, but only after written notice to the Company detailing the circumstances and legal requirement for the disclosure; or (ii)
as authorized during the performance of Executive’s duties for such use or purpose as are reasonably believed by Executive
to be in the best interests of the Company. At any time, upon request, Executive shall deliver to the Company all of its property
including, but not limited to, its Confidential Information (whether electronically stored or otherwise) which are in his possession
or under his control. Property to be returned includes, but is not limited to, notebook pages, documents, records, prototypes,
client files, drawings, electronically stored data, computer media or any other materials or property in Executive’s possession.
(b)
Noninterference. During the Term and for a period of one (1) year following the end of the Term (the “Restricted
Period”), for whatever reason, he will not, directly or indirectly, for himself or on behalf of any third party, at any
time or in any manner:
(i)
persuade, induce, solicit, influence or attempt to influence, or cause any person who is an employee of the Company to terminate
his or her relationship with the Company or refer any such employee to anyone, without prior written approval from the Company;
(ii)
request or cause any of the Company’s clients or potential clients to cancel, modify or terminate any existing or
continuing or, to Executive’s knowledge, prospective business relationship with the Company;
(iii)
engage in or participate in any effort or act to induce, or in any way cause, any client or, to Executive’s knowledge,
prospective client of the Company, to deal with Executive or any other person or entity except in a capacity as representative
of the Company, or otherwise take any action which might reasonably be expected to be disadvantageous to the Company;
(iv)
persuade, induce, solicit, influence or attempt to influence, or cause any client or, to Executive’s knowledge, prospective
client of the Company to cease or refrain from doing business, or to decline to do business, or to change or alter any existing
or prospective business relationship, with the Company;
(v)
accept business from, or perform or provide any services for, any client, or to Executive’s knowledge, prospective
client of the Company;
(vi)
contract with or communicate with, in either case in connection with services, any client or, to Executive’s knowledge,
prospective client of the Company; or
(vii)
provide any third party with any information concerning any client, or to Executive’s knowledge, prospective client
of the Company, including but not limited to, the disclosure of any client name or data, in whatever form, to such third party.
(c)
Noncompetition. During the Term and Restricted Period, Executive shall not, directly or indirectly, engage or participate
in, or become employed by, or affiliated with, or enter into or maintain a contractual relationship
with, or render advisory or any other services to, any person or business entity or organization, of whatever form, that
competes with the Company in the United States or any other location in which the Company
conducts business prior to your termination date.
(d)
Injunctive Relief. Executive acknowledges that his compliance with the covenants in Sections 9(a), 9(b)
and 9(c) hereof (the “Restrictive Covenants”) is necessary to protect the good will, Confidential Information
and other proprietary interests of the Company, that such covenants are supported by adequate and sufficient consideration, and
that, in the event of any violation or threatened violation by Executive of any such provision, the Company will sustain serious,
irreparable and substantial harm to its business, the extent of which will be difficult to determine and impossible to remedy by
an action at law for money damages. Accordingly, Executive agrees that, in the event of such violation or threatened violation
by him, the Company shall be entitled to an injunction before trial from any court of competent jurisdiction as a matter of course
and upon the posting of not more than a nominal bond, in addition to all such other legal and equitable remedies as may be available
to the Company. Executive further acknowledges that he has carefully considered the nature and extent of the restrictions contained
herein and the rights and remedies conferred upon the Company under this Agreement, and hereby acknowledges and agrees that the
same are reasonable, are designed to protect the legitimate business interests of the Company, and do not confer benefits upon
the Company disproportionate to the detriment upon him. In the event that Executive violates any of the covenants in this Agreement
and the Company commences legal action for injunctive or other relief, the Company shall have the benefit of the full period of
the covenants, computed from the date Executive ceased violation of the covenants, either by order of the court or otherwise. Executive
acknowledges that any claim or cause of action he may have against the Company shall not constitute a defense to the enforcement
by the Company of his covenants in Article 5 of this Agreement (e.g., these covenants are independent of any other provision in
this Agreement and of any other promise made to Executive). Executive also acknowledges that his experience and capabilities are
such that he can obtain suitable employment otherwise than in violation of the covenants in this Agreement and that the enforcement
of these covenants will not prevent the earning of a livelihood nor cause undue hardship. Without limiting the foregoing, in the
event of a breach by Executive of any Restrictive Covenant, the Company’s obligations under this Agreement shall immediately
terminate, Executive shall not be entitled to any additional monetary payments or benefits of any kind whatsoever and Executive
shall reimburse the Company for all of its attorneys fees and costs associated with any legal or equitable proceedings or litigation
seeking to enforce the terms of this Agreement.
(e)
Remedies Cumulative and Concurrent. The rights and remedies of the Company as provided in this Section 10
shall be cumulative and concurrent and may be pursued separately, successively or together, at the sole discretion of the Company,
and may be exercised as often as occasion therefor shall arise. The failure to exercise any right or remedy shall in no event be
construed as a waiver or release thereof.
(f)
Executive’s Authorization. Executive authorizes the Company to inform any third parties, including future employers,
prospective employers and the Company’s clients or prospective clients, of the existence of this Agreement and his obligations
under it.
(g)
Survivability. The provisions of this Section 10 shall survive the cessation of Employee’s employment
for any reason, as well as the expiration of this Agreement at the end of its Term or at any time prior thereto.
(h)
Definition of Company. For purposes of this Section 10, the term “Company” shall include the Company
and any of its parents, subsidiaries, affiliates or any related companies including their respective successors and assigns.
11.
Other Provisions.
(a)
Severability. The Executive acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel
in connection with this Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all
other respects. If it is determined that any of the provisions of this Agreement or any part thereof, including, without limitation,
any of the Restrictive Covenants, is held invalid or unenforceable by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part
or degree will remain in full force and effect to the extent not held invalid or unenforceable.
(b)
Duration and Scope of Covenants. If any court or other decision-maker of competent jurisdiction determines that any
of the Restrictive Covenants contained in this Agreement, including, without limitation, any of the Restrictive Covenants, or any
part thereof, is unenforceable because of the duration or geographical scope of such provision, then, after such determination
has become final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision
becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
(c)
Arbitration.
(i)
Subject to the limitations of this Section 11(c), if any dispute arises between the Parties under or concerning this
Agreement or the terms hereof, or regarding the manner in which Executive was treated while employed by the Company, the termination
of his employment, or any alleged violation by the Company of Executive’s rights under any common law theory, or any applicable
federal, state, or local law, statute, regulation, or ordinance (including without limitation 42 U.S.C. § 1981, Title VII
of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and any other local,
state, or federal legislation that pertains to employee rights or discrimination in employment), the Parties agree to submit such
issue to final and binding arbitration in accordance with the then existing National Rules for the Resolution of Employment Disputes
of the American Arbitration Association. Nothing in this Section 11(c), however, will preclude the Company from seeking
the judicial relief set forth under Section 10 of this Agreement.
(ii)
The Parties agree that the interpretation and enforcement of the arbitration provisions in this Agreement will be governed
exclusively by the Federal Arbitration Act (the “FAA”), 9 U.S.C. § 1 et seq., provided that they are enforceable
under the FAA, and will otherwise be governed by the law of the State of Delaware.
(iii)
The Parties agree and understand that one of the objectives of this arbitration agreement is to resolve disputes expeditiously,
as well as fairly, and to those ends it is the obligation of all Parties to raise any disputes subject to arbitration hereunder
in an expeditious manner. Accordingly, the Parties agree that, as to any dispute that can be brought hereunder, a demand for arbitration
must be postmarked or delivered in person to the other Party no later than six (6) months after the date the demanding Party knows
or should have known of the event or events giving rise to the claim. Failure to demand arbitration on a claim within these time
limits is intended to, and will to the furthest extent permitted by law, be a waiver and release with respect to such claims. If,
and only if, the waiver and release of claims referenced in the immediately preceding sentence is found by a court of competent
jurisdiction to be unenforceable as against Executive or the Company under this Agreement, then the Parties will nevertheless submit
such claims to arbitration pursuant to this Section 11(c) within the time permitted by law.
(iv)
The Company will pay the arbitrator’s fees.
(v)
Unless otherwise agreed by the Parties, arbitration will take place in Seattle, WA.
(vi)
In rendering an award, the arbitrator will determine the rights and obligations of the Parties according to federal law
and the substantive law of the State of Washington without regard to any principles governing conflicts of laws and the arbitrator’s
decision will be governed by state and federal substantive law, including state and federal discrimination laws referenced in Section
11(c)(i) hereof, as though the matter were before a court of law.
(vii)
Any arbitration award will be accompanied by a written statement containing a summary of the issues in controversy, a description
of the award, and an explanation of the reasons for the award. The decision of the arbitrator will be made within thirty (30) days
following the close of the hearing. The Parties agree that the award will be enforceable exclusively by any state or federal court
of competent jurisdiction within Seattle, WA.
(viii)
It is understood and agreed by the Parties that their agreement herein concerning arbitration does not contain, and cannot
be relied upon Executive to contain, any promises or representations concerning the duration of the employment relationship, or
the circumstances under or procedures by which the employment relationship may be modified or terminated.
(ix)
If any part of this arbitration procedure is in conflict with any mandatory requirement or applicable law, the law will
govern, and that part of this arbitration procedure will be reformed and construed to the maximum extent possible in conformance
with the applicable law. The arbitration procedure will remain otherwise unaffected and enforceable.
(d)
Notices. All notices, demands, consents, requests, instructions and other communications to be given or delivered
or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby
shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered,
on the business day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or
registered mail return receipt requested, two (2) business days after being mailed, (iii) if delivered by overnight courier (with
all charges having been prepaid), on the business day of such delivery (as evidenced by the receipt of the overnight courier service
of recognized standing), or (iv) if delivered by facsimile transmission or other electronic means, including email, on the business
day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding
business day. If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed
address of which no notice was given (in accordance with this Section 11(d), or the refusal to accept same, the notice,
demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is
sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions and other communications
will be sent to the following addresses or facsimile numbers as applicable:
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If to the Company, to: |
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3496 Fairwiew Way
West Linn, OR 97068
Attention: Steve Hubbard
Telephone No.: 206-427-4100
Facsimile No.: 503-635-7097 |
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With copies to: |
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Szaferman Lakind Blumstein & Blader, PC
101 Grovers Mill Road
Second Floor
Lawrenceville, NJ 08648
Attention: Gregg Jaclin, Esq.
Telephone No.: 609-275-0400
Facsimile No.: 609-275-4511 |
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If to the Executive, to: |
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Douglas C. Anderson
5327 140th Avenue NE
Bellevue, WA 98005
Attention: Douglas Anderson
Telephone No.:206-679-6677
Facsimile No.: 425-282-1508 |
Any such person may by notice given
in accordance with this Section 11(d) to the other Parties hereto designate another address or person for receipt by such
person of notices hereunder.
(e)
Section Headings. The headings of Sections in this Agreement are provided for convenience only and will not affect
its construction or interpretation. All references to or “Section” or “Sections” refer to the corresponding
Article or Section or Sections of this Agreement, unless the context indicates otherwise.
(f)
Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires otherwise. Unless otherwise expressly provided,
the word “including” shall mean including without limitation. The Parties intend that each representation, warranty,
and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract
from or mitigate the fact that the Party is in breach of such representation, warranty, or covenant. All words used in this Agreement
will be construed to be of such gender or number as the circumstances require.
(h)
Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original
copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event
that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with
the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
(i)
Entire Agreement. This Agreement contains the entire agreement between the Parties with respect to the subject matter
hereof and supersedes all prior agreements, written or oral, with respect thereto.
(j)
Waivers and Amendments. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof
may be waived, only by a written instrument signed by the Parties or, in the case of a waiver, by the Party waiving compliance.
No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any Party of any such right, power or privilege nor any single or partial exercise of any such
right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.
(k)
Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors,
heirs (in the case of the Executive) and assigns. No rights or obligations of the Company under this Agreement may be assigned
or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation
in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the
Company; provided, however, that the assignee or transferee is the successor to all or substantially all of the assets of the Company
and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement,
either contractually or as a matter of law.
(l)
Withholding. The Company shall be entitled to withhold from any payments or deemed payments any amount of tax withholding
it determines to be required by law.
(m)
Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective
successors, permitted assigns, heirs, executors and legal representatives.
(n)
Survival. Anything contained in this Agreement to the contrary notwithstanding, the provisions of Section 10
and any other provisions of this Agreement expressly imposing obligations that survive termination of Executive’s employment
hereunder, and the other provisions of this Section 11 to the extent necessary to effectuate the survival of such provisions,
shall survive termination of this Agreement and any termination of the Executive’s employment hereunder.
(o)
Existing Agreements. The Executive represents to the Company that he is not subject or a Party to any employment
or consulting agreement, non-competition covenant or other agreement, covenant or understanding which might prohibit him from executing
this Agreement or limit his ability to fulfill his responsibilities hereunder.
(p)
Legal Fees: The Parties hereto agree that the Company shall pay the legal fees relating to any dispute, claim, action
or proceeding between the Parties hereto arising out of or relating to the terms and conditions of this Agreement or any provision
thereof.
(q)
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN
THE STATE OF DELAWARE.
(r)
Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WANES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[Signatures
follow on next page]
IN WITNESS WHEREOF, the Company and
the Executive have caused their respective signature pages to this Agreement to be duly executed as of the date first written
above.
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COMPANY: |
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DIEGO PELICER WORLDWIDE, INC. |
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By: |
/s/ Ron Throgmartin |
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Name: |
Ron Throgmartin |
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Title: |
Chief Executive Officer |
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EXECUTIVE: |
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/s/ Douglas C. Anderson |
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Name: |
Douglas C. Anderson
Vice Chairman, Sr. VP |
15
Exhibit 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT
AGREEMENT (“Agreement”), dated as of September 17, 2014, is made by and between Diego Pellicer Worldwide,
Inc., a Corporation organized under the laws of Delaware (the “Company”) and Alan D. Valdes
(the “Executive”). Each of the Company and the Executive are referred to herein individually as a “Party”
and collectively as the “Parties.”
RECITALS:
WHEREAS, the Company
wishes to employ the Executive as its Chairman and the Executive wishes to accept such employment, on the terms
set forth below, effective as of September 16, 2014 (the “Effective Date”);
NOW, THEREFORE, in
consideration of the foregoing premises, and the covenants, representations and warranties set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the Parties, intending to
be legally bound, hereby agree as follows:
1.
Term. The Company hereby employs the Executive, and the Executive hereby accepts such employment, for an initial
term commencing as of the Effective Date and continuing for a term of five years, through September 16, 2019 (the “Termination
Date”) unless sooner terminated in accordance with the provisions of Section 5 hereof (the “Initial Term”),
with such employment to continue for successive one-year periods in accordance with the terms of this Agreement (subject to termination
as aforesaid) unless either Party notifies the other Party of non-renewal in writing prior to three months before the expiration
of the initial term and each annual renewal, as applicable. (The period during which the Executive is employed hereunder being
hereinafter referred to as the “Term”).
2.
Duties. During the Term, the Executive shall be employed by the Company as its Chairman. The Executive
shall devote his entire working time, energy, attention, skill and best efforts to the affairs of the Company and to the faithful
performance of the duties of said offices and shall faithfully perform such other duties of an executive, managerial or administrative
nature as shall be specified and designated from time to time by the Company’s Board of Directors.
3.
Place of Performance. Employee shall be based in the State of New York except for travel required for Company business.
4.
Compensation.
(a)
Base Salary. The Company shall pay the Executive during the Term a salary at a minimum rate of Two Hundred Fifty
Thousand ($250,000) per annum for the period beginning on the Effective Date through the Initial Term (the “Base
Salary”), in accordance with the customary payroll practices of the Company applicable to senior executives. Following
the completion of an offering of the Company’s Series A Preferred stock, the Executive’s Base Salary shall automatically
be increased to Two Hundred Eighty Thousand ($280,000) per annum. For each year thereafter, the Company’s Board (or compensation
committee of the Company’s Board, or, at the discretion of the Company’s Board, by a committee composed of two or more
members of the Company’s Board (for purposes of this Agreement, the “Committee”) shall review the Executive’s
Base Salary and may provide for such increases therein as it may, in its discretion, deem appropriate. (Any such increased salary
shall constitute the “Base Salary” as of the time of the increase.)
(b)
Bonus. During the Term, in addition to the Base Salary, for each fiscal year of the Company ending during the Term,
the Executive shall have the opportunity to receive an annual bonus in an amount and on such terms to be determined by the Company’s
Board, or, at the discretion of the Company’s Board, the Committee (“Performance Bonus”). The Company’s
Board, or, at the discretion of the Company’s Board, the Committee, shall further have the discretion to grant Executive
annual bonuses in such amounts and on such terms as it shall determine in its sole discretion. Nothing contained in the foregoing
shall limit the Executive’s eligibility to receive any other bonus under any other bonus plan, stock option or equity–based
plan, or other policy or program of the Company.
(c)
Equity Incentive Compensation. Executive shall be entitled to participate in any equity compensation plan of the
Company in which he is eligible to participate, and may, without limitation, be granted in accordance with any such plan options
to purchase shares of the Company’s common stock, shares of restricted stock, and other equity awards in the discretion of
the Company’s Board or the Committee.
(d)
Benefits. The Executive shall be permitted during the Term to participate in any group life, hospitalization or disability
insurance plans, health programs, retirement plans, fringe benefit programs and other benefits that may be available to other senior
executives of the Company generally, in each case to the extent that the Executive is eligible under the terms of such plans or
programs. Full medical, dental, and vision coverage will be provided and paid for by the Company.
(e) Vacation.
The Executive shall be entitled to vacation of no less than then 20 business days per year, not including national holidays,
to be credited in accordance with ordinary Company policies.
(f)
Expenses. The Company shall pay or reimburse the Executive for all ordinary and reasonable out-of-pocket expenses
actually incurred (and, in the case of reimbursement, paid) by the Executive during the Term in the performance of the Executive’s
services under this Agreement, in accordance with the Company’s policies regarding such reimbursements.
5.
Termination of Employment; Change of Control.
(a)
Termination upon Death or Disability. This Agreement and Executive’s employment hereunder shall automatically
terminate on the date on which Executive dies or becomes permanently incapacitated. Executive shall be deemed to have become “permanently
incapacitated” on the date that is thirty (30) days after the Company has determined that Executive has suffered a Permanent
Incapacity (as defined below) and so notifies Executive. For purposes of this Agreement, “Permanent Incapacity”
shall mean that (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical
or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than
twelve (12) months; or (ii) Executive is, by reason of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement
benefits for a period of not less than twelve (12) months under an accident and health plan covering employees of the service provider’s
employer.
(b)
Termination by the Company for Cause. The Company may terminate this Agreement and Executive’s employment hereunder
without Cause (as defined below), effective upon delivery of written notice to Executive given at any time during the Term (without
any necessity for prior notice). For purposes of this Agreement, “Cause” shall mean the Executive’s: (i)
conviction of any felony or any other crime involving moral turpitude, (ii) fraud against the Company or any of its subsidiaries
or affiliates or theft of or maliciously intentional damage to the property of the Company or any of their subsidiaries or affiliates,
(iii) willful breach of Executive’s fiduciary duties to the Company, or (iv) breach by Executive of any provision of this
Agreement.
(c)
Termination by Company without Cause. The Company may terminate this Agreement and Executive’s employment hereunder
without Cause, effective upon delivery of written notice to Executive given at any time during the Term (without any necessity
for prior notice) provided that the Company complies with all provisions of this Agreement, including without limitation, obligations
related to severance, vesting of options and continuation of benefits as set forth herein.
(d)
Termination by the Executive for Good Reason. The Executive may terminate this Agreement and Executive’s employment
hereunder with Good Reason (as defined below). For purposes of this Agreement, “Good Reason” shall mean (i)
the material reduction of the Executive’s title, authority, duties and responsibilities or the assignment to the Executive
of duties materially inconsistent with the Executive’s position or positions with the Company; (ii) a material reduction
in Base Salary of the Executive; (iii) the Company’s material breach of this Agreement; or (iv) any change in the geographic
location at which Executive must perform the services under this Agreement, which change is reasonably material to Executive. Notwithstanding
the foregoing, (x) Good Reason shall not be deemed to exist unless notice of termination on account thereof (specifying a termination
date no later than thirty (30) days from the date of such notice) is given no later than 30 days after the time at which the event
or condition purportedly giving rise to Good Reason first occurs or arises and (y) if there exists (without regard to this clause
(y)) an event or condition that constitutes Good Reason, the Company shall have fifteen (15) days from the date notice of such
a termination is given to cure such event or condition and, if the Company does so, such event or condition shall not constitute
Good Reason hereunder.
(e)
Termination by the Executive other than for Good Reason. The Executive may terminate this Agreement and Executive’s
employment hereunder other than for Good Reason, provided that the Executive gives the Company no less than thirty (30) days prior
written notice of such termination.
(f)
Change of Control. The Executive may terminate this Agreement and Executive’s employment hereunder within the
six month period following the Transition Period (as defined below), provided that the Executive gives the Company no less than
thirty (30) days prior written notice of such termination. For purposes of this Agreement, “Transition Period” means
the period commencing on the date of the Change of Control (as defined below) and ending on the first anniversary of such Change
of Control. For purposes of this Agreement, “Change of Control” shall mean the occurrence of any of the following:
(i)
Change in Ownership. A change in ownership of the Company occurs on the date that any one person, or more than one
person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes
more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, excluding the acquisition
of additional stock by a person or more than one person acting as a group who is considered to own more than fifty percent (50%)
of the total fair market value or total voting power of the stock of the Company.
(ii)
Change in Effective Control. A change in effective control of the Company occurs on the date that either: (A) any
one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on
the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing thirty percent
(30%) or more of the total voting power of the stock of the Company; or (B) a majority of the members of the Company’s Board
is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the
members of the Company’s Board prior to the date of the appointment or election; provided, that this paragraph (2) will apply
to the Company only if no other corporation is a majority shareholder of the Company.
(iii)
Change in Ownership of Substantial Assets. A change in the ownership of a substantial portion of the Company’s
assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the
twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that
have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of the assets
of the Company immediately prior to such acquisition or acquisitions. For this purpose, “gross fair market value” means
the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities
associated with such assets.
(iv)
Intended Interpretation. It is the intent of the Parties that the definition of Change in Control under this Agreement
be construed consistent with the definition of “Change in Control” as defined in Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”) and the applicable Treasury Regulations, as amended from time to time.
6.
Payments Upon Termination.
(a)
Upon termination of this Agreement and Executive’s employment hereunder due to Executive’s death or disability
pursuant to Section 5(a) hereof, (i) the Executive (or the Executive’s estate or beneficiaries in the case of the
death of the Executive) shall be entitled to receive any Base Salary and other benefits (including any bonus for a calendar year
completed before termination) earned and accrued under this Agreement prior to the date of termination (and reimbursement under
this Agreement for expenses incurred prior to the date of termination) and (ii) the Executive (or the Executive’s estate
or beneficiaries in the case of the death of the Executive) shall have no further rights to any other compensation or benefits
hereunder, or any other rights hereunder (but, for the avoidance of doubt, shall receive such disability and death benefits as
may be provided under the Company’s plans and arrangements in accordance with their terms).
(b)
Upon termination of this Agreement and Executive’s employment hereunder (i) by the Company for Cause pursuant
to Section 5(b) hereof or by Executive other than for Good Reason pursuant to Section 5(e) hereof, (i) the Company
shall pay to Executive an amount equal to Executive’s then Base Salary and other benefits (including any bonus for a calendar
year completed before termination) earned and accrued under this Agreement prior to the date of termination (and reimbursement
under this Agreement for expenses incurred prior to the date of termination) and (ii) the Executive shall have no further rights
to any other compensation or benefits under this Agreement on or after the termination of employment.
(c)
Upon termination of this Agreement and Executive’s employment hereunder (i) by the Company without Cause pursuant
to Section 5(c) hereof, (ii) by Executive for Good Reason pursuant to Section 5(d) hereof or (iii) by Executive
following a Change in Control of the Company pursuant to Section 5(f) hereof, (x) the Company shall pay to Executive
(I) an amount equal to the Executive’s then Base Salary for a period of (a) three years or (b) through the Termination Date,
whichever is greater, and other benefits (including any bonus for a calendar year completed before termination) earned and accrued
under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the
date of termination); and (II) an amount equal to 3.0 times (a) the average of the Base Salary amounts paid to Executive over the
three calendar years prior to the date of Termination, (b) if less than three years have elapsed between the date of this Agreement
and the date of termination, the highest Base Salary paid to Executive in any calendar year prior to the date of Termination, or
(c) if less than 12 months have elapsed from the date of this Agreement to the date of termination, the highest Base Salary received
in any month times 12; and (y) the Executive shall have no further rights to any other compensation or benefits under this Agreement
on or after the termination of employment.
(d)
Nothing contained in this Section 6 shall affect the terms of any employee stock options, stock grants, or other
equity-based compensation that may have been issued by the Company to Executive, which in the event of termination of Executive’s
employment with the Company shall continue to be governed by their own terms and conditions.
(e)
Unless the payment is required to be delayed pursuant to Code Section 409A (as defined below), the cash amounts payable
to the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) under this Section
6 shall be paid to the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive)
in a single-sum payment within 60 days following the effective date of termination of this Agreement and Executive’s employment
hereunder.
7.
Parachutes. If any amount payable to or other benefit receivable by the Executive pursuant to this Agreement would
be deemed to constitute a Parachute Payment (as defined below), alone or when added to any other amount payable or paid to or other
benefit receivable or received by the Executive which is deemed to constitute a Parachute Payment (whether or not under an existing
plan, arrangement or other agreement), and would result in the imposition on the Executive of an excise tax under Section 4999
of the Code, then the Parachute Payments shall be reduced (but not below zero) so that the maximum amount of the Parachute Payments
(after reduction) shall be one dollar ($1.00) less than the amount which would cause the Parachute Payments to be subject to the
excise tax imposed by Section 4999 of the Code. Any such reduction shall be made by first reducing severance benefits (if any).
Notwithstanding the foregoing, if the reduction of Parachute Payments under this Section 7 would be equal to or greater
than $50,000, then there shall be no such reduction and the full amount of the Parachute Payment shall be payable. “Parachute
Payment” shall mean a “parachute payment” as defined in Section 280G of the Code. The calculation under this
Section 7 shall be as determined by the Company’s accountants.
8.
Execution of Release. The Executive acknowledges that, if required by the Company prior to making the payments and
benefits set forth in Section 5 (other than accrued but unpaid Base Salary and other benefits), all such payments and benefits
are subject to his execution of a general release from liability of the Company, and their respective Officers (including his successor),
Directors/Managers and employees, and such release becoming irrevocable by its terms. If Executive fails to execute such release,
or such release does not become irrevocable, all such payments and benefits set forth in Section 6 hereof shall be forfeited.
9.
Application of Code Section 409A.
(a)
This Agreement shall be interpreted to avoid any penalty sanctions under Section 409A of the Code (“Code Section
409A”). If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions
under Code Section 409A, then such benefit or payment will be provided in full (to the extent not paid in part at earlier date)
at the earliest time thereafter when such sanctions will not be imposed. For purposes of Code Section 409A, all payments to be
made upon a termination of employment under this Agreement may only be made upon Executive’s “separation from service”
(within the meaning of such term under Code Section 409A) with the Company, each payment made under this Agreement will be treated
as a separate payment, and the right to a series of installment payments under this Agreement will be treated as a right to a series
of separate payments. In no event will Executive, directly or indirectly, designate the calendar year of payment, except as permitted
under Code Section 409A.
(b)
Notwithstanding anything herein to the contrary, if, at the time of Executive’s “separation from service”
with the Company, the Company has securities which are publicly traded on an established securities market and Executive is a “specified
employee” (as such term is defined in Code Section 409A) and it is necessary to postpone the commencement of any payments
or benefits otherwise payable under this Agreement as a result of such termination of employment to prevent any accelerated or
additional tax under Code Section 409A, then the Company will postpone the commencement of the payment of any such payments or
benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive), until the first
payroll date that occurs after the date that is six (6) months following Executive’s “separation of service”
with the Company. If any payments are postponed due to such requirements, such postponed amounts will be paid with interest at
the applicable federal rate as provided under Section 7872(f)(2)(A) of the Code in a lump sum to Executive on the first payroll
date that occurs after the date that is six (6) months following Executive’s “separation of service” with the
Company. If Executive dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on
account of Code Section 409A will be paid to the personal representative of Executive’ s estate within sixty (60) days after
the date of Executive’s death. Payments pursuant to Section 6 of this Agreement are intended to satisfy the short-term
deferral exception under Code Section 409A.
(c)
All reimbursements and in-kind benefits provided under this Agreement will be made or provided in accordance with the requirements
of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement will be for expenses incurred during
Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible
for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement,
or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made on
or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement
or in kind benefits is not subject to liquidation or exchange for another benefit.
(d)
To the extent applicable, all grants, awards, bonuses or other payments made to Executive or for which Executive is eligible
under any Company bonus, incentive, deferred compensation plan or program or any other compensation arrangement will be structured
to comply with the requirements of Code Section 409A or an exception from such requirements.
10.
Covenants of the Executive.
(a)
Confidentiality. During the Term, the Company has and will continue to provide Executive with access to, and may
confide in him, information, business methods and systems, techniques and methods of operation developed at great expense by the
Company and which are assets of the Company. Executive recognizes and acknowledges that: (i) all Confidential Information (defined
below) is the property of the Company and is unique, extremely valuable and developed and acquired by great expenditures of time,
effort and cost; (ii) the misuse, misappropriation or unauthorized disclosure by Executive of the Confidential Information would
constitute a breach of trust and would cause serious irreparable injury to the Company; and (iii) it is essential to the protection
of the Company’s goodwill and to the maintenance of the Company’s competitive position that the Confidential Information
be kept secret and that Executive not disclose the Confidential Information to others or use same to his own advantage or to the
advantage of others. Accordingly, Executive shall not, during the Term or thereafter, directly or indirectly, in any manner, utilize
or disclose to any person, firm, corporation, association or other entity, or use on his own behalf, any confidential and proprietary
information of the Company, including, but not limited to, information relating to strategic plans, sales, costs, client lists,
client preferences, client identities, investment strategies, computer programs, profits or the business affairs and financial
condition of the Company, or any of its clients, or any of the Company’s business methods, systems, marketing materials,
clients or techniques (collectively “Confidential Information”), except for (i) such disclosures where required
by law, but only after written notice to the Company detailing the circumstances and legal requirement for the disclosure; or (ii)
as authorized during the performance of Executive’s duties for such use or purpose as are reasonably believed by Executive
to be in the best interests of the Company. At any time, upon request, Executive shall deliver to the Company all of its property
including, but not limited to, its Confidential Information (whether electronically stored or otherwise) which are in his possession
or under his control. Property to be returned includes, but is not limited to, notebook pages, documents, records, prototypes,
client files, drawings, electronically stored data, computer media or any other materials or property in Executive’s possession.
(b)
Noninterference. During the Term and for a period of one (1) year following the end of the Term (the “Restricted
Period”), for whatever reason, he will not, directly or indirectly, for himself or on behalf of any third party, at any
time or in any manner:
(i)
persuade, induce, solicit, influence or attempt to influence, or cause any person who is an employee of the Company to terminate
his or her relationship with the Company or refer any such employee to anyone, without prior written approval from the Company;
(ii)
request or cause any of the Company’s clients or potential clients to cancel, modify or terminate any existing or
continuing or, to Executive’s knowledge, prospective business relationship with the Company;
(iii)
engage in or participate in any effort or act to induce, or in any way cause, any client or, to Executive’s knowledge,
prospective client of the Company, to deal with Executive or any other person or entity except in a capacity as representative
of the Company, or otherwise take any action which might reasonably be expected to be disadvantageous to the Company;
(iv)
persuade, induce, solicit, influence or attempt to influence, or cause any client or, to Executive’s knowledge, prospective
client of the Company to cease or refrain from doing business, or to decline to do business, or to change or alter any existing
or prospective business relationship, with the Company;
(v)
accept business from, or perform or provide any services for, any client, or to Executive’s knowledge, prospective
client of the Company;
(vi)
contract with or communicate with, in either case in connection with services, any client or, to Executive’s knowledge,
prospective client of the Company; or
(vii)
provide any third party with any information concerning any client, or to Executive’s knowledge, prospective client
of the Company, including but not limited to, the disclosure of any client name or data, in whatever form, to such third party.
(c)
Noncompetition. During the Term and Restricted Period, Executive shall not, directly or indirectly, engage or participate
in, or become employed by, or affiliated with, or enter into or maintain a contractual relationship
with, or render advisory or any other services to, any person or business entity or organization, of whatever form, that
competes with the Company in the United States or any other location in which the Company
conducts business prior to your termination date.
(d)
Injunctive Relief. Executive acknowledges that his compliance with the covenants in Sections 9(a), 9(b)
and 9(c) hereof (the “Restrictive Covenants”) is necessary to protect the good will, Confidential Information
and other proprietary interests of the Company, that such covenants are supported by adequate and sufficient consideration, and
that, in the event of any violation or threatened violation by Executive of any such provision, the Company will sustain serious,
irreparable and substantial harm to its business, the extent of which will be difficult to determine and impossible to remedy by
an action at law for money damages. Accordingly, Executive agrees that, in the event of such violation or threatened violation
by him, the Company shall be entitled to an injunction before trial from any court of competent jurisdiction as a matter of course
and upon the posting of not more than a nominal bond, in addition to all such other legal and equitable remedies as may be available
to the Company. Executive further acknowledges that he has carefully considered the nature and extent of the restrictions contained
herein and the rights and remedies conferred upon the Company under this Agreement, and hereby acknowledges and agrees that the
same are reasonable, are designed to protect the legitimate business interests of the Company, and do not confer benefits upon
the Company disproportionate to the detriment upon him. In the event that Executive violates any of the covenants in this Agreement
and the Company commences legal action for injunctive or other relief, the Company shall have the benefit of the full period of
the covenants, computed from the date Executive ceased violation of the covenants, either by order of the court or otherwise. Executive
acknowledges that any claim or cause of action he may have against the Company shall not constitute a defense to the enforcement
by the Company of his covenants in Article 5 of this Agreement (e.g., these covenants are independent of any other provision in
this Agreement and of any other promise made to Executive). Executive also acknowledges that his experience and capabilities are
such that he can obtain suitable employment otherwise than in violation of the covenants in this Agreement and that the enforcement
of these covenants will not prevent the earning of a livelihood nor cause undue hardship. Without limiting the foregoing, in the
event of a breach by Executive of any Restrictive Covenant, the Company’s obligations under this Agreement shall immediately
terminate, Executive shall not be entitled to any additional monetary payments or benefits of any kind whatsoever and Executive
shall reimburse the Company for all of its attorneys fees and costs associated with any legal or equitable proceedings or litigation
seeking to enforce the terms of this Agreement.
(e)
Remedies Cumulative and Concurrent. The rights and remedies of the Company as provided in this Section 10
shall be cumulative and concurrent and may be pursued separately, successively or together, at the sole discretion of the Company,
and may be exercised as often as occasion therefor shall arise. The failure to exercise any right or remedy shall in no event be
construed as a waiver or release thereof.
(f)
Executive’s Authorization. Executive authorizes the Company to inform any third parties, including future employers,
prospective employers and the Company’s clients or prospective clients, of the existence of this Agreement and his obligations
under it.
(g)
Survivability. The provisions of this Section 10 shall survive the cessation of Employee’s employment
for any reason, as well as the expiration of this Agreement at the end of its Term or at any time prior thereto.
(h)
Definition of Company. For purposes of this Section 10, the term “Company” shall include the Company
and any of its parents, subsidiaries, affiliates or any related companies including their respective successors and assigns.
11.
Other Provisions.
(a)
Severability. The Executive acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel
in connection with this Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all
other respects. If it is determined that any of the provisions of this Agreement or any part thereof, including, without limitation,
any of the Restrictive Covenants, is held invalid or unenforceable by any court of competent jurisdiction, the other provisions
of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part
or degree will remain in full force and effect to the extent not held invalid or unenforceable.
(b)
Duration and Scope of Covenants. If any court or other decision-maker of competent jurisdiction determines that any
of the Restrictive Covenants contained in this Agreement, including, without limitation, any of the Restrictive Covenants, or any
part thereof, is unenforceable because of the duration or geographical scope of such provision, then, after such determination
has become final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision
becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
(c)
Arbitration.
(i)
Subject to the limitations of this Section 11(c), if any dispute arises between the Parties under or concerning this
Agreement or the terms hereof, or regarding the manner in which Executive was treated while employed by the Company, the termination
of his employment, or any alleged violation by the Company of Executive’s rights under any common law theory, or any applicable
federal, state, or local law, statute, regulation, or ordinance (including without limitation 42 U.S.C. § 1981, Title VII
of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and any other local,
state, or federal legislation that pertains to employee rights or discrimination in employment), the Parties agree to submit such
issue to final and binding arbitration in accordance with the then existing National Rules for the Resolution of Employment Disputes
of the American Arbitration Association. Nothing in this Section 11(c), however, will preclude the Company from seeking
the judicial relief set forth under Section 10 of this Agreement.
(ii)
The Parties agree that the interpretation and enforcement of the arbitration provisions in this Agreement will be governed
exclusively by the Federal Arbitration Act (the “FAA”), 9 U.S.C. § 1 et seq., provided that they are enforceable
under the FAA, and will otherwise be governed by the law of the State of Delaware.
(iii)
The Parties agree and understand that one of the objectives of this arbitration agreement is to resolve disputes expeditiously,
as well as fairly, and to those ends it is the obligation of all Parties to raise any disputes subject to arbitration hereunder
in an expeditious manner. Accordingly, the Parties agree that, as to any dispute that can be brought hereunder, a demand for arbitration
must be postmarked or delivered in person to the other Party no later than six (6) months after the date the demanding Party knows
or should have known of the event or events giving rise to the claim. Failure to demand arbitration on a claim within these time
limits is intended to, and will to the furthest extent permitted by law, be a waiver and release with respect to such claims. If,
and only if, the waiver and release of claims referenced in the immediately preceding sentence is found by a court of competent
jurisdiction to be unenforceable as against Executive or the Company under this Agreement, then the Parties will nevertheless submit
such claims to arbitration pursuant to this Section 11(c) within the time permitted by law.
(iv)
The Company will pay the arbitrator’s fees.
(v)
Unless otherwise agreed by the Parties, arbitration will take place in Seattle, WA.
(vi)
In rendering an award, the arbitrator will determine the rights and obligations of the Parties according to federal law
and the substantive law of the State of Washington without regard to any principles governing conflicts of laws and the arbitrator’s
decision will be governed by state and federal substantive law, including state and federal discrimination laws referenced in Section
11(c)(i) hereof, as though the matter were before a court of law.
(vii)
Any arbitration award will be accompanied by a written statement containing a summary of the issues in controversy, a description
of the award, and an explanation of the reasons for the award. The decision of the arbitrator will be made within thirty (30) days
following the close of the hearing. The Parties agree that the award will be enforceable exclusively by any state or federal court
of competent jurisdiction within Seattle, WA.
(viii)
It is understood and agreed by the Parties that their agreement herein concerning arbitration does not contain, and cannot
be relied upon Executive to contain, any promises or representations concerning the duration of the employment relationship, or
the circumstances under or procedures by which the employment relationship may be modified or terminated.
(ix)
If any part of this arbitration procedure is in conflict with any mandatory requirement or applicable law, the law will
govern, and that part of this arbitration procedure will be reformed and construed to the maximum extent possible in conformance
with the applicable law. The arbitration procedure will remain otherwise unaffected and enforceable.
(d)
Notices. All notices, demands, consents, requests, instructions and other communications to be given or delivered
or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby
shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered,
on the business day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or
registered mail return receipt requested, two (2) business days after being mailed, (iii) if delivered by overnight courier (with
all charges having been prepaid), on the business day of such delivery (as evidenced by the receipt of the overnight courier service
of recognized standing), or (iv) if delivered by facsimile transmission or other electronic means, including email, on the business
day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding
business day. If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed
address of which no notice was given (in accordance with this Section 11(d), or the refusal to accept same, the notice,
demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is
sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions and other communications
will be sent to the following addresses or facsimile numbers as applicable:
|
If to the Company, to: |
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3496 Fairwiew Way
West Linn, OR 97068
Attention: Steve Hubbard
Telephone No.: 206-427-4100
Facsimile No.: 503-635-7097 |
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|
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With copies to: |
|
Szaferman Lakind Blumstein & Blader, PC
101 Grovers Mill Road
Second Floor
Lawrenceville, NJ 08648
Attention: Gregg Jaclin, Esq.
Telephone No.: 609-275-0400
Facsimile No.: 609-275-4511 |
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If to the Executive, to: |
|
Alan D. Valdes
165 River Road
Mill Rift, PA 18340
Attention: Alan Valdes
Telephone No.: 917-880-3862
Facsimile No.: 425-282-1508 |
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Any such person may by notice given
in accordance with this Section 11(d) to the other Parties hereto designate another address or person for receipt by such
person of notices hereunder.
(e)
Section Headings. The headings of Sections in this Agreement are provided for convenience only and will not affect
its construction or interpretation. All references to or “Section” or “Sections” refer to the corresponding
Article or Section or Sections of this Agreement, unless the context indicates otherwise.
(f)
Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires otherwise. Unless otherwise expressly provided,
the word “including” shall mean including without limitation. The Parties intend that each representation, warranty,
and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract
from or mitigate the fact that the Party is in breach of such representation, warranty, or covenant. All words used in this Agreement
will be construed to be of such gender or number as the circumstances require.
(h)
Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original
copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event
that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with
the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
(i)
Entire Agreement. This Agreement contains the entire agreement between the Parties with respect to the subject matter
hereof and supersedes all prior agreements, written or oral, with respect thereto.
(j)
Waivers and Amendments. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof
may be waived, only by a written instrument signed by the Parties or, in the case of a waiver, by the Party waiving compliance.
No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any Party of any such right, power or privilege nor any single or partial exercise of any such
right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.
(k)
Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors,
heirs (in the case of the Executive) and assigns. No rights or obligations of the Company under this Agreement may be assigned
or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation
in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the
Company; provided, however, that the assignee or transferee is the successor to all or substantially all of the assets of the Company
and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement,
either contractually or as a matter of law.
(l)
Withholding. The Company shall be entitled to withhold from any payments or deemed payments any amount of tax withholding
it determines to be required by law.
(m)
Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective
successors, permitted assigns, heirs, executors and legal representatives.
(n)
Survival. Anything contained in this Agreement to the contrary notwithstanding, the provisions of Section 10
and any other provisions of this Agreement expressly imposing obligations that survive termination of Executive’s employment
hereunder, and the other provisions of this Section 11 to the extent necessary to effectuate the survival of such provisions,
shall survive termination of this Agreement and any termination of the Executive’s employment hereunder.
(o)
Existing Agreements. The Executive represents to the Company that he is not subject or a Party to any employment
or consulting agreement, non-competition covenant or other agreement, covenant or understanding which might prohibit him from executing
this Agreement or limit his ability to fulfill his responsibilities hereunder.
(p)
Legal Fees: The Parties hereto agree that the Company shall pay the legal fees relating to any dispute, claim, action
or proceeding between the Parties hereto arising out of or relating to the terms and conditions of this Agreement or any provision
thereof.
(q)
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN
THE STATE OF DELAWARE.
(r)
Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WANES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[Signatures
follow on next page]
IN WITNESS WHEREOF, the Company and
the Executive have caused their respective signature pages to this Agreement to be duly executed as of the date first written
above.
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COMPANY: |
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DIEGO PELICER WORLDWIDE, INC. |
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By: |
/s/ Ron Throgmartin |
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Name: |
Ron Throgmartin |
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Title: |
Chief Executive Officer |
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EXECUTIVE: |
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/s/ Alan D. Valdes |
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Name: |
Alan D. Valdes
Chairman |
15
Exhibit
10.4
COMMERCIAL AGREEMENT
BETWEEN
DIEGO PELLICER WORLDWIDE INC.
AND
DIEGO
PELLICER, INC.
This
COMMERCIAL AGREEMENT (this “Agreement”) is entered into as of April , 2014 by and between
Diego Pellicer Worldwide Inc., a Delaware corporation (“Diego Delaware”) and Diego Pellicer,
Inc., a Washington corporation (“Diego Washington”). Diego Delaware and Diego Washington
are sometimes referred to herein as the “Parties.”
RECITALS
WHEREAS,
Diego Washington has applied for a recreational cannabis retail license from the Washington State Liquor Control Board (the “WSLCB”).
WHEREAS,
the regulations promulgated by the WSLCB under Initiative 502 (“1-502”) have placed significant
restrictions on how applicants for recreational cannabis licenses may raise funds to operate their business.
WHEREAS,
Diego Delaware services licensed cannabis producers, processors and retailers by, among other things, acquiring and building-out
compliant producing, processing, and retailing properties and leasing or subleasing these properties to licensed cannabis producers,
processors and retailers.
WHEREAS,
Diego Delaware and Diego Washington have entered into that certain Agreement and Plan of Merger dated as of January 23, 2014 (02487959).
(the “Merger Agreement”).
WHEREAS,
Diego Delaware has learned from certain of its partners, investors, and financial advisors that the Merger Agreement, in its current
form, is untenable.
WHEREAS,
Diego Delaware and Diego Washington desire to amend the Merger Agreement and enter into the transactions set forth herein.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual promises made herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree as follows:
1. Receipt
of Operating Capital. Diego Washington hereby agrees that it will make commercially reasonable efforts to secure operating
capital in an amount not less than $350,000 for use as operating capital from its current investors, or other 1-502 compliant
sources (the “Capital Contribution”).
2. Merger
Agreement; Offer. The Parties agree that they will amend and restate the Merger Agreement pursuant to the terms of that certain
Amended and Restated Agreement and Plan of Merger of even date herewith. Diego Delaware hereby agrees that it will offer to the
current holders of Series A Preferred Stock of Diego Washington (the “Diego Washington Preferred), and
to current holders of convertible promissory notes convertible for shares of Diego Washington Preferred (the “Notes”),
in each case who are also accredited investors and other cash investors in Diego Washington, the right, for 20 days, after Diego
Washington has raised not less than $350,000 to convert their investment in Diego Washington Preferred and/or Notes for that number
of shares of Series A Preferred Stock of Diego Delaware (the “Diego Delaware Preferred”) as listed on
Exhibit A (the “Offer”).
3. Capital
Investments. Subject to the completion of: (i) Diego Washington obtaining the Capital Contribution; and (ii) the Merger Agreement
being amended pursuant to the terms of Section 2 above, Diego Delaware hereby agrees that it will:
(i) Enter
into a sublease with Diego Washington, for the sublease of retail space located at 2215 4th Ave. South at a monthly
rent to be mutually agreed to by the Parties (the “Flagship Store”);
(ii) Enter
into a sublease with Diego Washington, conditioned upon its receipt of additional 1-502 retail licenses, for up to two additional
I-502 compliant retail locations mutually agreeable to the Parties, at a monthly rent for each additional location to be mutually
agreed upon by the Parties (each, an “Ancillary Store”);
(iii) Fund the build-out of the Flagship Store to specifications mutually agreed upon by the Parties, in an amount of up to $700,000
if Diego Washington has received an 1-502 retail license for that location and up to $400,000 otherwise (the “Flagship
Store Build-Out”), which Flagship Store Build-Out shall be completed as soon as commercially feasible.;
(iv) Fund
the build-out of each Ancillary Store to specifications mutually agreed upon by the Parties, in an amount of up to $400,000 for
each Ancillary Store (each, an “Ancillary Store Build-Out”). Each Ancillary Store Build-Out
shall be complete as soon as commercially feasible for each Ancillary Store, however Diego Delaware shall not be required to build
out more than one store at a time.
4. Notices
and Demands. All notice, demands or other communications required or permitted hereunder shall be in writing and shall be
(a) sent by U.S. registered or certified mail, return receipt requested, with postage prepaid, (b) sent by personal delivery
by a nationally recognized courier service for same-day or next-day delivery, or (c) sent by email or facsimile (with
confirmation of receipt), addressed to the applicable party at the addresses set forth below or at such other addresses as
such parties may designate by notice to the other parties:
If to Diego Washington: |
Diego
Pellicer, Inc. |
|
2606
Second Avenue #535 |
|
Seattle,
Washington 98121 |
|
Attention:
Peter Norris
Email: petem.diego@gmail.com |
|
|
If to Diego Delaware: |
Diego
Pellicer Worldwide Inc. |
|
3496
Fairview Way |
|
West
Linn, Oregon 97068 |
|
Attn:
Steve Hubbard |
|
Email:
sshubbard@earthlink.net |
All
notices, demands and requests shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered
by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight
prepaid, specifying next-business-day delivery, one business day after deposit with the courier), or (ii) if sent via mail, at
the earlier of its receipt or 72 hours after the same has been deposited in a regularly-maintained receptacle for the deposit
of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer
or, if sent via electronic mail, when directed to the relevant electronic mail address, if sent during normal business hours of
the recipient, or if not sent during normal business hours of the recipient, then on the recipient's next business day.
5. Amendment.
This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each Party.
6. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Washington,
without regard to the conflicts of law provisions thereof, or of any other state.
7. Jurisdiction; Venue. The Parties, by their execution of this Agreement, hereby irrevocably submit to the exclusive jurisdiction
of the U.S. federal and state courts located in King County, Washington, for the purpose of any suit, action or other proceeding
arising out of, or based upon, this Agreement, and waive any objection to the laying of venue with respect to such courts or that
any such court constitutes an inconvenient forum.
8. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM FILED BY ANY PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY
TO THIS AGREEMENT OR ANY ACTS OR OMISSIONS OF ANY PARTY IN CONNECTION THEREWITH.
9. Successors
and Assigns. The rights and obligations of the Parties shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the Parties.
10. Assignment.
The rights, interests or obligations hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by
any Party without the prior written consent of the other Parties.
11. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original
copy and all of which shall constitute one and the same agreement.
12.
Telecopy Execution and Delivery. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or
more of the Parties and delivered by such Party by facsimile or any similar electronic transmission device pursuant to which the
signature of or on behalf of such party can be seen. Such execution and delivery shall be considered valid, binding and effective
for all purposes. At the request of any party hereto, all parties hereto agree to execute and deliver an original of this Agreement
as well as any facsimile, telecopy or other reproduction hereof.
13. Entire Agreement. This Agreement constitutes the entire agreement among the Parties pertaining to the subject matter hereof,
and except with respect to the Merger Agreement, as the same may be amended from time to time, supersedes in their entirety any
and all written or oral agreements previously existing among the Parties with respect to such subject matter.
14. Severability.
If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this
Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the
illegal, void or unenforceable provision. The balance of this Agreement shall be enforceable in accordance with its
terms.
15. Titles
and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and
exhibits shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.
16. Attorneys'
Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party
in such dispute shall be entitled to recover from the losing party such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and expenses of appeals.
17.
Independent Counsel Each of the parties hereto have had the opportunity to engage independent counsel and affirm that they
have satisfied themselves as to the fairness of this agreement and hold the firm Carincross and Hempleman harmless as to their
involvement with the crafting of this agreement.
(signature
page follows)
IN
WITNESS WHEREOF, the Parties have executed this Agreement on the first date set forth above.
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DIEGO PELLICER WORLDWIDE INC., |
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a Delaware corporation |
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By: |
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Ron Throgmartin, President |
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DIEGO PELLICER, INC., |
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a Washington corporation |
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By: |
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Peter Norris, President |
Exhibit A
“WW Series A Shares” offered in exchange for a
reduction in the number of share to be issued to Diego Pellicer Inc. shareholders at the tome of merger totaling 1,066,661
if all were accepted.
6
Exhibit
10.5
AMENDED
AND RESTATED AGREEMENT AND PLAN OF MERGER OF
DIEGO PELLICER, INC.,
A
WASHINGTON CORPORATION,
and
DIEGO
PELLICER WORLDWIDE INC.,
A
DELAWARE CORPORATION
This
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of April 19, 2014 is
made by and between Diego Pellicer, Inc., a Washington corporation (“Diego Washington”), and
Diego Pellicer Worldwide Inc., a Delaware corporation (“Diego Washington”). Diego Delaware
and Diego Washington are sometimes referred to in this Agreement as the “Constituent Companies." This Agreement
amends, restates, replaces and supersedes in its entirety that certain Agreement and Plan of Merger between the Constituent Companies
dated as of January 23, 2014 (the “Prior Agreement").
RECITALS
A. The
Constituent Companies hereby agree that it is in their mutual best interests to amend and restate the Prior Agreement, and to
replace it with this Agreement. The Constituent Companies hereby agree that the Prior Agreement shall be of no further force or
effect.
B. Diego
Delaware is a corporation, duly organized and validly existing under the laws of the State of Delaware. As of the date of this
Agreement, pursuant to Diego Delaware's Certificate of Incorporation, as amended (the “Certificate of Incorporation”),
Diego Delaware has authorized: (i) 87,000,000 shares of Common Stock, par value $0.0001 per share, of which 13,520,000 are issued
and outstanding, and 2,480,000 are reserved for issuance under Diego Delaware's 2013 Equity Incentive Plan; and (ii) 13,000,000
shares of Preferred Stock, par value $0.0001 per share, which is designated Series A Preferred Stock, and 776,106 of which are
issued and outstanding.
C. Diego
Washington is a corporation, duly organized and validly existing under the laws of the State of Washington. As of the date of
this Agreement, pursuant to Diego Washington's Articles of Incorporation, as amended (the "Articles of Incorporation"),
Diego Washington has authorized: (1) 33,700,000 shares of Common Stock, of which 7,300,000 are issued and outstanding,
and 2,800,000 are reserved for issuance under Diego Washington's 2013 Equity Incentive Plan; and (ii) 6,300,000 shares of Series
A Preferred Stock authorized, and 133,333 of which are issued and outstanding.
D. The
stockholders Diego Delaware have entered into certain agreements binding themselves to vote in favor of the Merger with certain
exceptions.
E. The
board of directors of each of Diego Delaware and Diego Washington have approved this Agreement and have directed that this Agreement
be executed by the undersigned officers.
AGREEMENT
In
consideration of the mutual agreements and covenants set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Diego Delaware and Diego Washington hereby agree as follows:
1. Merger
1.1 Merger.
Subject to the fulfillment of the conditions set forth in Section 1.2
below, and in accordance with the provisions of this Agreement, the Delaware General Corporation Law (the “DGCL”)
and the Washington Business Corporation Act (the “WBCA”), at Diego Delaware's sole discretion,
Diego Washington shall be merged with and into Diego Delaware (the "Merger"), and the separate existence
of Diego Washington shall cease and Diego Delaware shall be the surviving Company.
1.2 Conditions
Precedent. In no event shall Diego Delaware take any action to consummate the Merger until either: (i) the production, processing
and retailing of cannabis for recreational use in the United States becomes legally permissible for privately owned entities under
United States federal law; or (ii) Diego Washington or Diego Delaware receives the written consent of the Washington State Liquor
Control Board providing that Diego Washington, or its corporate successor, may continue to be a licensed cannabis retailer and/or
own cannabis retail entities in the State of Washington while also maintaining shareholders, directors, officers, and employees
who are residents of states other than the State of Washington (the “Condition Precedent”). Neither
party shall be obligated to take any action to consummate the Merger if the other party is in violation of any of the covenants
set forth in this Agreement. If Diego Delaware desires to consummate the Merger following the fulfillment of the Condition Precedent,
then Diego Delaware shall notify Diego Washington in writing not less than 60 days prior to the date that Diego Delaware files
the Certificate of Merger in connection with the consummation of the Merger (the “Consummation Notice”).
Notwithstanding the prior fulfillment of the Condition Precedent and delivery of the Consummation Notice, neither party
shall take any action to consummate the Merger if either party demonstrates, through reasonable and substantial evidence, to the
other party not later than 45 days following Diego Washington's receipt of the Consummation Notice that either party to this Agreement
or any of their respective directors, officers, employees or stockholders is more likely to become subject to federal criminal
charges as a result of the consummation of the Merger than they would be if the Merger was not consummated. If the consummation
of the Merger is rejected by Diego Washington pursuant to the terms of this Section 1.2 or Section 1.3 below, Diego Delaware may
submit a new Consummation Notice to Diego Washington at any time not less than 90 days after the date of rejection of the previous
Consummation Notice.
1.3 Disqualifying
Events. In no event shall Diego Washington be required to consummate or approve the Merger if; on the date of delivery of
any Consummation Notice:
(a) Diego
Delaware is unable, or admits in writing its inability, to pay its debts generally as they mature;
(b) Diego
Delaware has been dissolved or liquidated;
(c) Diego
Delaware has commenced a voluntary or involuntary case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other similar law nor or hereafter in effect or consented
to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other
proceeding commenced against it; or
(d) Diego
Delaware is subject to any outstanding injunction, order, decree, ruling, or charge, or is a party, or is threatened to be made
a party, to any such action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any arbitrator that is likely to have a Material Adverse
Effect (as defined below) on the business of Diego Delaware. For purposes of this section, "Material Adverse Effect"
shall mean the amount in controversy is greater than 10% of Diego Delaware's total assets.
1.4 Filing
and Effectiveness. Unless earlier abandoned pursuant to Sections 1.2 or 4.5 of this Agreement, or rejected pursuant to Section
1.3 of this Agreement, the Merger shall become effective upon completion of the following actions:
(a) Diego
Washington's receipt of the Consummation Notice from Diego Delaware;
(b) Adoption
and approval of this Agreement and the Merger by the respective shareholders of each of the Constituent Companies in accordance
with the applicable requirements of the DGCL, the WBCA and the bylaws of Diego Delaware and Diego Washington;
(c) The
satisfaction or waiver of the Condition Precedent, the other terms of Section 1.2, and all of the conditions precedent to the
consummation of the Merger as specified in this Agreement;
(d) The
Constituent Companies' receipt of all third party consents necessary for the legal consummation of the Merger as reasonably determined
by their respective boards of directors;
(e) The
filing with the Secretary of State of Delaware of an executed Certificate of Merger meeting the requirements of the DGCL (the
“Certificate of Merger”); and
(f) The
filing with the Secretary of State of Washington of executed Articles
of Merger meeting the requirements of the WBCA (the “Articles of Merger”).
The
date and time when the Merger becomes effective is referred to in this Agreement as the “Effective Time of the Merger.”
Copies of the Certificate of Merger and the Articles of Merger shall be held by each of the Constituent Companies and may be filed
by either of them upon the satisfaction of the terms and conditions of this Section 1.4.
1.5 Effect
of the Merger. At the Effective Time of the Merger, the separate existence of Diego Washington shall cease and Diego Delaware,
as the surviving company, (a) shall continue to possess all of its assets, rights, powers and property as constituted immediately
prior to the Effective Time of the Merger, (b) shall be subject to all actions previously taken by its board of directors on its
behalf and Diego Washington's board of directors, (c) shall succeed, without other transfer, to all of the assets, rights, powers
and property of Diego Washington in the mariner more fully set forth in Title 8 Section 259 of the DGCL and Sections 23B.11.060
and 23B.11.100 of the WBCA, (d) shall continue to be subject to all of the debts, liabilities and obligations of Diego Delaware
as constituted immediately prior to the Effective Time of the Merger, (e) shall succeed, without other transfer, to all of the
debts, liabilities and obligations of Diego Washington in the same manner as if Diego Delaware had itself incurred them, all as
more fully provided under the applicable provisions of Title 8 Section 259 of the DGCL and Sections 23B.11.060 and 23B.11.100
of the WBCA, and (f) the Surviving Bylaws (as defined below) shall be effective for Diego Delaware as the surviving company, and
the Bylaws of Diego Washington shall have no further force or effect.
1.6 Assignment
and Assumption of Tax Liabilities. Upon the Effective Time of the Merger, in addition
to the effects on the assets, rights, powers and property, and the debts, liabilities and obligations of the parties hereto occurring
by operation of law as set forth in Section 1.5 above, Diego Washington hereby assigns, and Diego Delaware hereby assumes, all
of Diego Washington's on-going tax liabilities incurred prior to the Effective Time of the Merger.
2. Charter
Documents, Directors and Officers
2.1 Certificate
of Incorporation. The Certificate of Incorporation of Diego Delaware as in effect immediately
prior to the Effective Time of the Merger shall continue in full force and effect as the Certificate of Incorporation of Diego
Delaware (the “Surviving Certificate of Incorporation”) until duly amended in accordance
with the provisions thereof and applicable law.
2.2 Bylaws.
The Bylaws of Diego Delaware as in effect immediately prior to the Effective Time of the Merger shall continue in full force
and effect as the Bylaws of Diego Delaware (the “Surviving Bylaws”) until duly amended
in accordance with the provisions thereof and applicable law.
2.3 Directors
and Officers. The members of the board of directors of Diego Delaware as of immediately
prior to the Effective Time of the Merger shall be the members of the board of directors of Diego Delaware, and members of the
board of directors shall serve until their successors shall have been duly elected and qualified or as otherwise provided by applicable
law, the Certificate of Incorporation or the Surviving Bylaws. The Chief Executive Officer of Diego Delaware as of immediately
prior to the Effective Time of the Merger shall be the Chief Executive Officer of Diego Delaware, and the Secretary of Diego Delaware
as of immediately prior to the Effective Time of the Merger shall be the Secretary of Diego Delaware, each of whom shall serve
until their successors shall have been duly appointed or as otherwise provided by applicable law or the Surviving Bylaws.
3. Manner
of Conversion of Securities
3.1 Conversion
of Shares.
In exchange for all outstanding shares of Diego Washington,
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a) |
At
the Effective Time of the Merger, Diego Delaware shall deliver to Diego Washington 1,386,667 shares of Diego Delaware common
stock. |
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b) |
In
addition to a) above, in exchange for reduced consideration in the eventual Merger, Diego Delaware shall offer up to 1,066,661
shares of Diego Delaware Series A stock to the current cash investors, note holders and Series A investors in amounts as listed
on Exhibit A to this Agreement. Any shares not issued to those listed on Exhibit A will be added to the 1,386,667 shares in
a) above. |
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c) |
Except
as required by 3.6 below, in no event will Diego Delaware issue more than 2,453,328 shares, the "Merger Shares"
to effect the purposes of this Agreement. |
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d) |
If
after eight (8) years from the effective date of this Agreement, Diego Delaware has not consummated the Merger, the then remaining
Diego Washington shareholders will have the right, but not the obligation, upon surrender of their Diego Washington equity
interests, to exchange their pro rata, as if fully converted as in 3.3 below, equity interest in Diego Washington into their
pro rata share of the remaining Merger Shares held by Diego Delaware that have not previously been issued under the terms
of this paragraph 3.1. |
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e) |
If
the language of a), b), c) and d) above does not properly effectuate or is somehow contrary to a conversion of shares and
merger of the companies then each company shall execute an addendum to, or replacement for, this agreement that will accomplish
the purpose of these paragraphs and at the same time allow for the intended merger. |
No
fractional shares of Diego Delaware shall be issued upon the Conversion. In lieu of Diego Delaware issuing any fractional shares
upon the Conversion, Diego Delaware shall pay to any holders of Diego Washington Stock who would otherwise receive a fraction
of a share of Diego Delaware an amount equal to the product obtained by multiplying the value of one share of Diego Washington
Stock (determined by the quotient of the Diego Washington Enterprise Value divided by the number of shares of Diego Washington
Stock issued and outstanding) by the fraction of a share not issued pursuant to the previous sentence.
3.2 Dissenting
Shareholders. Any issued and outstanding shares of Diego Washington Stock held by persons who object to the Merger and comply
with Sections 23B.13.010 and 23B.13.020 and any other applicable provision of the WBCA as in effect at the Effective Time of the
Merger concerning the right of shareholders of Diego Washington to dissent from the Merger and demand payment of the fair value
of their Diego Washington Stock (the "Dissenting Shareholders") shall not be converted as described above,
but shall have the right to receive such consideration as may be determined to be due to such Dissenting Shareholders pursuant
to Sections 23B.13.210 through 23B.13.250 and any other applicable provision of the WBCA.
3.3 Convertible
Securities. At the Effective Time of the Merger, each outstanding
warrant, option, or other security issued by Diego Washington that is exercisable for or convertible into shares of Diego Washington
Stock shall be converted into and exchanged for a substantially similar security entitling the holder thereof to acquire that
number of Diego Delaware's Common Stock that such security would have been exercisable for or convertible into had it been exercised,
exchanged, or converted immediately prior to the Merger. For purposes of clarity, this Section 3.3 shall not apply to the Diego
Washington Stock converted into and exchanged for Diego Delaware's Series A stock in the Merger pursuant to Section 33 above.
3.4 Certificates
of the Surviving Company. At the Effective Time of the Merger,
each certificate representing Diego Washington Stock or other securities of Diego Washington shall be deemed to evidence Diego
Delaware's Common Stock or other securities of Diego Delaware for which such Diego Washington Stock or other securities were converted,
subject to new or additional legends that Diego Delaware may require with respect to such certificates following the Effective
Time of the Merger. Each holder of an outstanding certificate representing shares of Diego Washington Stock or other securities
of Diego Washington may, at such holder's option, surrender the same for cancellation to Diego Delaware, and each such holder
shall be entitled to receive in exchange therefor a certificate or certificates representing the number of Diego Delaware's Common
Stock or other securities of Diego Delaware into which such holders' Diego Washington Stock or other securities were converted
as herein provided. The registered owner on the books and records of Diego Delaware of any shares of Diego Washington Stock or
other securities represented by such outstanding certificate shall, until such certificate shall have been surrendered for transfer
or conversion or otherwise accounted for to Diego Delaware, have and be entitled to exercise any voting and other rights with
respect to and to receive the distributions upon Diego Delaware's Common Stock or other securities represented by such outstanding
certificate as provided above.
3.5 Legends.
Each certificate representing shares of Diego Delaware's Common
Stock so issued in the Merger shall bear the same legends, if any, with respect to the restrictions on transferability as the
certificates of shares of Diego Washington Stock so converted and given in exchange therefor, unless otherwise determined by the
board of directors of Diego Delaware in compliance with applicable laws.
3.6 Adjustments
for Subdivisions or Combinations of Common Stock. In the event
the outstanding shares of capital stock of Diego Delaware shall be subdivided (by stock split, by payment of a stock dividend
or otherwise) into a greater number of shares of capital stock of Diego Delaware, the numbers of shares in 3.1 above shall, concurrently
with the effectiveness of such subdivision, be proportionately increased or decreased.
4. General
4.1 Covenants
of Diego Delaware.
(a) Diego
Delaware covenants and agrees that it will reserve, and at all times prior to the Effective Time of the Merger, keep in reserve,
enough shares of Diego Delaware's Common Stock to effectuate the Merger.
(b) Diego
Delaware covenants and agrees that, immediately following the Effective Time of the Merger, it will:
(i) Qualify
to do business as a foreign corporation in the State of Washington and appoint an agent for service of process; and
(ii) Take
such other actions as may be required by the Revised Code of Washington.
4.2 Covenants
of Constituent Companies.
(a) The
Constituent Companies each covenant and agree that all issuances of shares of capital stock or any equity equivalents will be
for fair market value (as reasonably determined by such issuing company's board of directors), and that they will not waste any
corporate assets.
(b) The
Constituent Companies each covenant and agree that, prior to the Effective Time of the Merger, each Constituent Company's respective
board of directors will not authorize or approve any cash dividends or distributions with respect to such Constituent Company's
capital stock or equity securities.
(c) The
Constituent Companies each covenant and agree to use commercially reasonable efforts to have all holders of their equity securities
become bound by a drag-along provision substantially similar to that set forth in that certain Diego Pellicer Worldwide Inc. Voting
Agreement dated effective as of September 27, 2013, as the same may be amended from time to time.
4.3 Further
Assurances. From time to time, as and when required by Diego Delaware or by its successors or assigns, there shall be executed
and delivered on behalf of Diego Washington such deeds and other instruments, and there shall be taken or caused to be taken by
it such further and other actions as shall be appropriate or necessary in order to vest or perfect in or conform of record or
otherwise by Diego Delaware the title to and possession of all the property, interests, assets, rights, privileges, immunities,
powers, franchises and authority of Diego Washington and otherwise to carry out the purposes of this Agreement, and the officers
and directors of Diego Delaware are fully authorized in the name and on behalf of Diego Washington or otherwise to take any and
all such action and to execute and deliver any and all such deeds and other instruments.
4.4 Amendment.
Neither this Agreement nor any term hereof may be amended, waived, discharged, or terminated other than by a written instrument
referencing this Agreement and signed by each of the Constituent Companies.
4.5 Termination.
This Agreement shall terminate on the date that is 5 years after the date of submission of the first Consummation Notice that
is not rejected on the grounds that either party to this Agreement or any of their respective directors, officers, employees or
stockholders is more likely to become subject to federal criminal charges, or be more likely to lose one or more of their licenses
required to conduct business as a result of the consummation of the Merger than they would be if the Merger was not consummated.
4.6 Registered
Office. The address of Diego Delaware's registered office in the State of Delaware is
2711 Centerville Road, Suite 400, Wilmington, Delaware 19904, County of New Castle. The name of its registered agent at such address
is Corporation Service Company.
4.7 Agreement.
Executed copies of this Agreement will be on file at the principal place of business of Diego Delaware at 3496 Fairview Way,
West Linn, OR 97068 and copies thereof will be furnished to any member of either Constituent Company, upon request and without
cost.
4.8 Governing
Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall
be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles
of conflicts of law.
4.9 Independent
Counsel. Each of the parties hereto have had the opportunity to engage independent counsel and affirm that they have satisfied
themselves as to the fairness of this agreement and hold the firm Carincross and Hempleman harmless as to their involvement with
the crafting of this agreement.
(signature
page follows)
The
undersigned authorized representatives of each of the Constituent Companies have executed and acknowledged this Agreement as of
the date first set forth above.
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DIEGO PELLICER WORLDWIDE INC.,
a Delaware corporation |
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By: |
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Name:
Ron Throgmartin |
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Title:
Chief Executive Officer |
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DIEGO PELLICER, INC.,
a Washington corporation |
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By: |
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Name:
Peter Norris |
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Title:
Chief Executive Officer |
-9-
Exhibit 10.6
Execution Version
CANCELLATION AGREEMENT
This CANCELLATION AGREEMENT
(this “Agreement”), dated _____ ___, 2015 (the “Effective Date”), by and among
DIEGO PELLICER WORLDWIDE, INC. (f/k/a Type I Media, Inc.) (the “Company”), a Delaware corporation, and
JONATHAN WHITE, individually (the “Shareholder”). Company and Shareholder are also hereinafter individually
and jointly referred to as “P(p)arty” and/or “P(p)arties”.
RECITALS
WHEREAS, as of the
date hereof, the Shareholder is the owner of 55,000,000 shares of the Company’s commons stock, par value $0.000001 per share
(the “Common Stock”); and
WHEREAS, concurrently
herewith, Company and the Shareholder are entering into an ‘Merger Agreement’ (“Merger Agreement”)
with Diego Pellicer World-wide, Inc., a Delaware corporation (“Diego”), pursuant to which Company and the Shareholder
will cancel 55,000,000 shares of Common Stock Cancellation Shares (“Cancellation Shares”) Cancellation Shares
in exchange for the consummation of the Merger Agreement and $169,000 (“Cancellation Payment”); and
WHEREAS, it is a
condition precedent to the consummation of the Merger Agreement that the Shareholder will enter into this Agreement, which will
effectuate the cancellation of the Cancellation Shares; and
WHEREAS, the Shareholder
is entering into this Agreement to, amongst other things, induce Diego to enter into the Merger Agreement and the Shareholder
acknowledges that Diego would not consummate the transactions contemplated by the Merger Agreement unless the transactions contemplated
hereby are effectuated in accordance herewith.
AGREEMENT
In consideration of the
mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereto agree as follows:
1. Cancellation of
Cancellation Shares. On the Effective Date, the Shareholder will deliver to Company the necessary documentation for the cancellation
of the stock certificates representing the Cancellation Shares, along with duly executed medallion guaranteed stock powers covering
the Cancellation Shares (or such other documents acceptable to the Company’s transfer agent) and hereby irrevocably
instructs the Company and the Company’s transfer agent to cancel the Cancellation Shares such that the Cancellation Shares
will no longer be outstanding on the stock ledger of the Company and such that the Shareholder shall no longer have any interest
in the Cancellation Shares whatsoever. The Company shall immediately deliver to the Company’s transfer agent irrevocable
instructions providing for the cancellation of the Cancellation Shares.
Execution Version
2. Effective Date.
This Agreement shall become effective upon the execution of this Agreement. The transactions to occur at such place and time with
respect to this Agreement are referred to herein as the “Closing”.
3. Waiver. At
and subsequent to the Closing, the Shareholder hereby waives any and all rights and interests he has, had or may have with respect
to the Cancellation Shares.
4. Representations
by the Shareholder. (a) The Shareholder owns the Cancellation Shares of record and beneficially free and clear of all liens,
claims, charges, security interests, and/or encumbrances of any kind whatsoever. The Shareholder has sole control over the Cancellation
Shares and/or sole discretionary authority over any account in which they are held. Except for this Agreement, no person/entity
has any option or right to purchase or otherwise acquire the Cancellation Shares, whether by contract of sale or otherwise, nor
is there a “short position” as to the Cancellation Shares.
(b) The Shareholder
has full right, power and authority to execute, deliver and perform this Agreement and to carry out the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the Shareholder and constitutes a valid, binding obligation
of the Shareholder, enforceable against it in accordance with its terms (except as such enforceability may be limited by laws
affecting creditor's rights generally).
(c) The Shareholder
represents and warrants that it has the requisite authority and capacity to enter into this Agreement, as well as carry out the
terms/conditions referenced herein. Additionally, Shareholder represents and warrants that its compliance with the terms and conditions
of this Agreement and will not violate any instrument relating to the conduct of its business, or any other agreement which it
may be a party, or any Federal and State rules or regulations applicable to either Party.
6. Further Assurances.
Each Party to this Agreement will use its best efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this Agreement (including the execution and delivery
of such other documents and agreements as may be necessary to effectuate the cancellation of the Cancellation Shares).
7. Entire Agreement;
Amendments. This Agreement contains the entire understanding of the Parties with respect to the matters covered herein and
therein and, except as specifically set forth herein, neither the Company nor the Shareholder makes any representation, warranty,
covenant or undertaking with respect to such matters. No amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and
signed by both Parties. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose
for which it was given.
8. Survival of Agreements,
Representations and Warranties, etc. All representations and warranties contained herein shall survive the execution and delivery
of this Agreement.
9. Successors and
Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the Parties and their respective successors
and assigns.
Execution Version
10. Governing
Law. This Agreement and the obligations, rights and remedies of the Parties hereto are to be construed in accordance with
and governed by the laws of the State of Delaware, with any action/dispute concerning this Agreement to be commenced exclusively
in the state and federal courts sitting in the City of New York.
11. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
12. Miscellaneous.
This Agreement embodies the entire agreement and understanding between the Parties hereto and supersedes all prior agreements
and understandings relating to the subject matter hereof. If any provision of this Agreement shall be held invalid or unenforceable
for whatever reason, the remainder of this Agreement shall not be affected thereby and every remaining provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law. This Agreement may be executed in any number of counterparts
and by the Parties hereto on separate counterparts but all such counterparts shall together constitute but one and the same instrument.
Execution Version
IN WITNESS
WHEREOF, the Parties hereto have executed this Cancellation Agreement as of the date first above written.
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DIEGO PELLICER WORLDWIDE, INC.
(f/k/a Type I Media, Inc.) |
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By: |
/s/ Jonathan White |
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Name: |
Jonathan White |
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Title: |
President |
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By: |
/s/ Jonathan White |
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Jonathan White, Individually |
4
Exhibit 10.7
LEASE
AGREEMENT
THIS
LEASE AGREEMENT is made and entered into by and between: Shamira. LLC whose address is 8051 NW 159th Terrace.
Miami Lakes. FL 33016 as Landlord, and Diego Pellicer Worldwide, Inc a Delaware Corporation, as Tenant, which is liable
for all provisions, covenants and obligations hereunder.
Landlord
wishes to lease to Tenant and Tenant wishes to lease from Landlord, certain real property, further identified and defined herein.
(Landlord and Tenant, together, herein sometimes referred to as the "Parties").
NOW
THEREFORE, for good and valuable consideration, the sufficiency of which is hereby acknowledged, and under the warranties, representations,
conditions and covenants herein, the Parties agree to the following:
W
I T N E S S E T H:
Leased
Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, upon the terms and conditions as hereinafter
set forth, premises described as follows:
L
1 TO 10 INC & FRACTL L 11 LYG NLY UP ROW BLK 66 1ST ADD TO SWANSEA
Also
known as
4242 Elizabeth Street Denver CO 80216
Together
with all rights privileges, easements, appurtenances and Amenities to or in any way pertaining to the premises and together
with the buildings and other improvements situated upon said premises (said real property, buildings and improvements hereinafter
referred to as the "premises"). Equipment will be included in this Lease agreement which will be listed and attached
as Exhibit A.
Base
Term. To have and to hold the same for a term of (5) years commencing on the First day of July, 2014 until June 30, 2019 with
a Five (5) year extension which must be exercised no less than 60 days prior to the end of the first lease period.
Base Rent.
Tenant hereby agrees to pay to Landlord. Rent as Follows:
Base
Rent: D0,000.00 per month for 18,566 sqft plus NNN. The NNN Shall be $ 1771.00 per month approximate. The base rent shall
increase by 3% per year throughout the initial 5 year term August 2014 and September 2014 shall be Rent Free.
Lease
period |
Monthly
rent |
Annual
Rent |
Year
1 |
$30,000.00
+ NNN |
$360,000
+ NNN |
Year
2 |
$30,900.00
+ NNN |
$370,800
+ NNN |
Year
3 |
$31,827.00
+ NNN |
$381,924
+ NNN |
Year
4 |
$32,781.81
+ NNN |
$393,382
+ NN |
Year
5 |
$33,765.26
+ NNN |
$405,183
+ NNN |
The
Payment, Plus "NNN" expenses shall be payable in equal monthly installments as listed in the schedule above, in advance
without notice on the first day of each month during said term, at the offices of Landlord located at_____________________________________________
(or at such other place as Landlord may designate in writing from time to time) without any set-off or deduction whatsoever ("Base
Rent").
Said
payments shall be in legal tender and lawful money of the United States. If the term herein commences on a day other than the
first day of a calendar month, then Tenant shall pay to Landlord the rent for the number of days that exist prior to the first
of the succeeding month, with a similar adjustment being made at the termination of this Lease, if necessary. If Tenant exercises
its option to renew for an additional Five (5) year term, the Base Rent and estimated NNN expenses shall increase three (3%) annually
over the last year rate of the initial term.
Tenant
shall tender to Landlord a payment of First Month's Payment: | |
$ | 30,000.00 | |
Last
2 Month’s: | |
$ | 60,000.00 | |
Security
Deposit: | |
$ | 60,000.00 | |
Total
of Initial payment | |
$ | 150,000.00 | |
The
initial payment consists of first month's payment, two month’s rent for security deposit and .last month's. Landlord shall
not be obligated to pay interest on the security deposit. Tenant shall begin payments on July 1, 2014. Landlord shall have the
right to commingle such security deposit with other funds of Landlord. The portion of the deposit not held back for damage done
to the space shall be refunded within 30 days of the end of Tenant's lease.
Additional
Rent. All rent not defined. as base rent shall he considered "Additional Rent". In addition to the Base Rent specified
above, Tenant shall pay to the Landlord an amount which Landlord shall Estimate for the cost of all personal property and real
property (real estate) taxes and assessments attributable to the building and the operation thereof, all insurance as specified
in this Lease and all maintenance of the building in order to keep it in good operational condition, this rent is also called
NNN. The sum of the expenses shall be estimated by Landlord each year and divided by 12 then divided by three (3 units) and Tenant
shall pay such rent along with his base rent. Landlord shall also be entitled to such other sums due in excess of the base rent
which shall also be titled Additional Rent as specified in the Lease. As of the signing of this lease annual real estate taxes
are to be determined at the beginning of each calendar year.
NNN
Items. Included in the NNN items are all expenses related to the operation of the building, including ail taxes levied against
the building, insurance and maintenance, legal and professional fees, charges by any city authority, sidewalk improvements, and
any other expense not considered a capital expense incurred by Landlord in operating the property. In addition, in the event the
actual NNN Expenses exceed the budgeted NNN Expense payments, Tenant shall pay the difference within thirty (30) days of written
notice by Landlord. Landlord will give the appropriate credit if the budgeted NNN Expense exceeds the actual.
In
addition, Tenant shall be responsible for obtaining and maintaining insurance sufficient to protect Landlord as outlined below. In the event the NNN charges have been underestimated by Landlord, he may present a bill to Tenant and Tenant shall pay such bill
within 10 days.
Exclusions
from NNN items. None
Maintenance
Portion of NNN Items included.
Tenant,
shall perform maintenance on the building and therefore avoid payment of the maintenance portion of the NNN directly to Landlord.
To the extent Tenant fails to perform the maintenance of the property Landlord may perform such maintenance and bill Tenant for
the cost of same.
Tenant
shall keep in good order, condition and repair the Premises and every part thereof, (regardless of whether the damaged
portion of the Premises or the means of repairing the same are accessible to Lessee) including, without limiting the
generality of the foregoing, all plumbing, heating, air conditioning, ventilating, electrical and lighting facilities and
equipment within or about the Premises, fixtures, interior walls and interior surfaces of exterior walls. ceilings, windows,
doors, plate glass, showcases, skylights, entrances and vestibules located within or about the Premises and all sidewalks,
including prompt snow removal as required by the City and County of Denver, and signs located on the building. In the event
of 00 any fine or charge assessed by the City and County of Deliver or it's subdivisions for failure to maintain the building
or sidewalks, Tenant shall promptly pay the same.
If
Lessee fails to perform Lessee's obligations under this section Lessor or his agents or contractors may at Lessor's option enter
upon the Premises, after ten (10) days' prior written notice to Lessee. and put the same in good order, condition and repair.
and the cost thereof together with interest thereon at the rate of 18% per annum shall be due and payable as additional rent to
Lessor together with Lessee's next rental installment. Landlord shall be entitled to a fee of 20% of the cost of any repairs or
maintenance performed by Landlord.
Insurance
Portion of NNN Items.
All-Risk
Insurance. In the name of the Landlord, Tenant shall keep all improvements located on or appurtenant to the Premises insured against
loss or damage by fire and such other perils as are now or hereafter included in the standard "All-Risk" policy in common
use for commercial structures, including vandalism and malicious mischief. The amount of the All-Risk insurance shall be equal
to one hundred percent (100%) of the then actual replacement cost of existing improvements, estimated at $370,000.00, including
the value of any leasehold improvements or betterments but excluding costs of replacing excavations and foundations, but without
deductions for depreciation. Landlord may, on each anniversary date of this Lease, request the carrier of the insurance (or the
agent for the carrier) to determine the amount of insurance required by the provisions of this paragraph, and the resulting determination
shall be conclusive between the parties. Upon Landlord's request, Tenant shall include the holder of any mortgage encumbering
the Premises by virtue of a standard mortgagee's clause to the extent of that mortgagee's interest. In addition to the insurance
set forth above, Tenant shall provide Rental Income Insurance (loss of rents insurance) in the name of Landlord in an amount sufficient
to cover the full Base Rent as well as all other payments which are the responsibility of Tenant under the terms and conditions
of this Lease. Further, if there is a boiler or similar equipment on the Premises, Tenant shall provide a separate policy covering
boiler explosion, together with rental income insurance resulting from a boiler explosion. In lieu of Tenant acquiring the insurance
as above set forth, Landlord shall have the exclusive right to purchase the insurance required by the provisions of this subsection
6(a) in Landlord's name and to forward Tenant a bill for the premium for such insurance. Tenant shall pay said bill within ten
(10) calendar days after receipt of the same. Landlord, at his option, may arrange for insurance acceptable to Landlord covering
the structure and include same in the NNN expenses.
Liability
Insurance. Tenant shall at all times keep in force a comprehensive general combined liability insurance policy providing protection
of at least $2,000,000 against claims and liability for personal injury, bodily injury, death and property damage arising from
the use, ownership, maintenance, disuse or condition of the Premises, any improvements located on or appurtenant to the Premises,
improvements or adjoining areas or ways. Landlord shall be named and protected under the terms and conditions of said policy as
Landlord of the Premises.
Personal
Property. Tenant shall be responsible for insuring any and all personal property that may be owned by Tenant. Any insurance that
may be purchased pursuant to this section 6 or any proceeds that may be payable as a result of a loss under any such insurance
shall in no way reduce, alter, diminish or modify any provisions of this Lease and specifically the indemnity provisions of section
11 hereof.
Forfeiture
and Seizure. Tenant shall carry insurance which protects and covers Landlord in the event the building is seized, or subject to
asset forfeiture. All insurance required by virtue of this section 6 shall be written with an insurance company licensed to do
business in the State of Colorado and approved by Landlord (which approval shall not be unreasonably withheld), with such policies
to be non-assessable. Tenant shall provide Landlord with the original insurance policies or a Certificate of Insurance (with proof
of payment thereon), which shall provide that the insuring company shall give notice in writing to Landlord thirty (30) calendar
days prior to cancellation, termination or, in the event of a material change in such insurance, for any reason whatsoever. An
endorsement shall provide that any proceeds (except liability insurance proceeds) of any loss shall be payable to Landlord and
Tenant as their respective interests may appear, except that in the event Landlord purchases the All-Risk Insurance, then any
loss shall be payable to Landlord.
Surrender.
On the last day of the term hereof, or on any sooner termination, Lessee shall surrender the Premises to Lessor in the same condition
as received, broom clean, ordinary wear and tear excepted. Lessee shall repair any damage to the Premises occasioned by the removal
of its trade fixtures, furnishings and equipment.
Hold
Over. Any rule or law to the contrary notwithstanding, in the event Tenant remains in possession of the Premises or any part thereof
subsequent to the expiration of the term of this Lease or any extension thereof and such holding over shall be with the consent
of Landlord, it shall be conclusively deemed that such possession and occupancy shall be a tenancy from month-to-month only. at
a rental which was existing at the end of the term of this Lease or any extension thereof, unless increased by Landlord upon not
less than 30 days' prior written notice, and, further, such possession shall be subject to all of the other terms and conditions
(except any option to renew or option to purchase) contained in this Lease. In the event Tenant otherwise Holds Over. Tenant shall
pay to Landlord the sum of 150% of the rent.
Inspection
and Acceptance of Premises. Tenant acknowledges that it has inspected or has had opportunity to inspect and accepts the premises
in its condition as suitable for the purpose for which the premises are leased to the Tenant. Taking of possession by Tenant shall
be deemed conclusively to establish that said premises are in good and satisfactory condition as of when possession was taken.
Tenant further acknowledges that no representations as to the repair of the premises. nor promises to alter. remodel or improve
the premises have been made by Landlord, unless such are expressly set forth in the lease. If this lease is executed before the
premises become vacant or otherwise available and ready for occupancy. or if any present tenant or occupant of the premises holds
over, and Landlord cannot acquire possession of the premises prior to the date above recited as the commencement date of this
lease, Landlord shall not be deemed to be in default hereunder, and Tenant agrees to accept possession of the premises at such
time as Landlord is able to tender the same, which date shall thenceforth be deemed the "commencement date"; and Landlord
hereby waives payment of rents covering any period prior to the tendering of possession to Tenant hereunder. After the commencement
date Tenant shall, upon demand, execute and deliver a letter of acceptance of delivery of the premises. Tenant specifically accepts
the premises as follows: Leased premises shall be as is where is. Tenant shall he responsible for their own electric bill and
shall be due monthly.
Use
of Premises. Tenant shall have the right to use and occupy the Premises for the following purposes and no other which is a
marijuana operation, legal under the constitution of the State of Colorado or permitted by Colorado law. Tenant asserts he
will not sell any product in the property which is illegal for sale. Tenant shall not use any portion of the premises outside
of the building structures to sell products, including the yard, patios, driveways and sidewalks. Tenant shall grow marijuana
under the approved laws of the state of Colorado. Tenant shall not, on September, open a retail store to public for the
sale of medical or recreational marijuana or dispensary of any kind.
Expansion
of Use. In the event Tenant seeks to expand the use of the Premises, Tenant shall advise Landlord and Landlord and Tenant shall
negotiate such additional sums which may be due for such expansion of Tenant's business, if any.
Tenant's
Additional Obligations. Tenant covenants, throughout the term of this Lease and at Tenant's sole cost and expense, to promptly
comply with all laws and ordinances and the orders, rules, regulations and requirements of all state and municipal governments,
special districts and all appropriate departments, commissions, boards and officers thereof.
Assignment
and Subleasing, Neither this Lease nor any interest herein may be assigned by Tenant, voluntarily or involuntarily, by operation
of law or otherwise, and neither all nor any part of the Premises shall be subleased by Tenant without the written consent of
Landlord first had and obtained. Any consent to assignment or sublease given by Landlord shall not constitute a waiver of necessity
for such consent to a subsequent assignment or sublease. In the event, upon application by Tenant and sub-lessor, Landlord approves
the Sub-lessor, Tenant shall remain fully liable under the terms and conditions of this Lease and shall not be released from performing
any of the terms, covenants and conditions hereof. In addition to Tenant, any sub lessee or assignee shall be personally liable
for all payments, conditions, covenants and agreements in this Lease. Any subleasing or assignment in violation of this paragraph
shall be null and void. Landlord shall be entitled to a reasonable fee for his time and effort in reviewing the new tenant's credit
and use of the property upon application for subleasing. Landlord shall not unreasonably withhold approval of a sublease, and
may take into consideration the Sub-lessor's prospective use of the property. his business experience, his capital resources and
his credit rating.
The
Landlord authorizes the Premises to be sublet to licensed medical and/or recreational marijuana growers, processors and/or retailers,
including DPCO. Inc (the "Subtenant"), and those affiliates of subtenant controlled by or under direct common
control of subtenant. Tenant shall have the right to replace the Subtenant with Landlord's approval, which approval shall not
be unreasonably withheld; however Tenant shall remain responsible for all terms and conditions of this Lease. Notice shall include
name and contact information of the new Subtenant and proof of licensing approval from the MMED and City of Denver. New Subtenants
must meet all other requirements of this Lease.
Utilities.
Tenant shall promptly pay all charges for water, sewer, heat, gas, light, electricity, and any and all other utilities used on
or in connection with the operation and maintenance of the Premises.
Indemnity
Provisions. Tenant agrees to exonerate, save harmless, protect and indemnify Landlord, or any owner of the Premises, from and
against any and all losses, damages, claims, suits or actions, judgments and costs which may arise during the term hereof for
personal injury, loss of life or damaged property sustained in or about the Premises or the improvements and appurtenances thereto
or upon the adjacent sidewalks and streets and from and against all costs, attorney fees, expenses and liabilities incurred in,
as a result of and about any such claims, the investigation thereof or the defense of any action or proceeding brought thereon,
and from and against any judgments, orders, decrees or liens resultant there from and any fines levied by any authority for violation
of any law, regulation or ordinance by virtue of the use of the improvements and appurtenances thereto situated upon the Premises.
This indemnity shall include any loss from the filing of mechanic's and/or material men's liens.
Occupational
Safety and Health Act. Tenant shall fully comply with the Occupational Safety and Health Act of 1970 (as amended) (Chapter XVII,
Title XIX of the United States Code) (OSHA) or applicable state statute adopted pursuant to OSHA. It shall be Tenant's obligation
to fully comply with the provisions and standards as contained in said Act (or as the same may be amended) and Tenant shall hold
Landlord harmless from any obligations or responsibilities, if any, created under said OSHA or other applicable federal or state
statute. Further, Tenant shall be responsible to make any and ail repairs and alterations to the structural and non-structural
components of the Premises, or to any appurtenances situated upon the Premises that may be required of Landlord as provided in
any OSHA or any other statute, law or ordinance in effect at the time of the execution of this Lease or which may hereafter be
enacted.
Care
of the Premises. Tenant shall not commit or allow any waste or damage to be committed on any portion of the Premises. At the termination
of this Lease, by lapse of time or otherwise, Tenant shall deliver up the Premises to Landlord in as good condition as at date
of possession by Tenant ordinary wear and tear excepted; and Tenant shall remove all of Tenant's trade fixtures, furniture and
other effects. All movable furniture and other effects not so removed shall conclusively he deemed to have been abandoned and
may be appropriated, sold, stored, destroyed or otherwise disposed of by Landlord without notice to Tenant or any other person
and without obligation to account therefore, and Tenant shall pay Landlord all expenses incurred in connection with such property.
Tenant's obligation to observe or perform this covenant shall survive the termination of this Lease.
Tenant
shall pay before delinquency all taxes, assessments, license taxes and other charges levied. assessed or imposed upon Tenant's
operation, occupancy or conduct of business at the Premises or upon Tenant's equipment, furniture, trade fixtures, leasehold improvements
and other personal property of any kind installed or located on the Premises. which become payable during the term of this Lease.
Alterations
to Premises. Tenant shall have the right. at is sole cost and expense, to make changes or alterations to the Premises upon written
approval of Landlord. Tenant may, without written approval, change the flooring in the Premises at Tenant's expense, may paint
the interior and remove or change the dividers currently on the floor. In the event Tenant removes the existing tile on the floor,
he shall place new floor coverings such that, in the event of removal of any dividers, the floor remains intact and as one floor,
without holes or vacant spots where the dividers are placed.
Tenant
shall make no alterations in or additions or repairs to the Premises without first obtaining the written consent of Landlord,
which consent shall not be unreasonably withheld; and Tenant shall notify Landlord at least ten (I0) business days in advance
of any alterations in or repairs or additions to the Premises which Tenant proposes to make. Tenant shall post notice pursuant
to the Colorado Mechanics Lien Act so that any lien recorded against the property of which the Premises are a part does
not attach to Landlord's interest.
All
such alterations, additions or improvements shall be made at Tenant's sole cost and expense and, except for furniture and trade
fixtures, shall become the property of Landlord and shall be surrendered with the Premises, as a part thereof, at the end of the
term hereof. Landlord may require Tenant to remove all such improvements installed by the Tenant and to repair any damage to the
Premises from such removal. Tenant shall construct such improvements, alterations or repairs in conformance with any and all applicable
rules and regulations of any Federal. State, or Municipal or special authority code or ordinance. At least ten (10) days before
the commencement of any such work, Tenant agrees to provide Landlord with lien waivers from all persons performing such work and
material men providing materials used in connection therewith. In the event Tenant orders any construction, alterations, decorating
or repair work directly from Landlord, the charges for such work shall be payable to Landlord upon satisfactory completion of
such work. If not paid when invoiced, such nonpayment shall be deemed an event of default hereunder. In the event any lien shall
be filed for labor performed or materials supplied, Tenant shall cause such lien to be released within thirty (30) days. Failure
to do so will be considered a material breach of this Lease Agreement.
In
all cases any changes or alterations shall conform to all building and zoning regulations, and shall be performed in a workman
like manner, with all building permits which may be required by the city or state being obtained by the Tenant, and the follow
up inspections completed including final inspections by the appropriate authorities. Further, Tenant shall be responsible for
any costs pertaining to the City and County of Denver's mandatory frontage paint and or color requirements. Tenant shall be responsible
for their own signage which must adhere to the City and County of Denver's Signage control policy.
Condemnation.
Complete Taking. lf, during the term of this Lease, or any extension hereof, the whole or substantially all of the Premises shall
be taken as a result of the exercise of the power of eminent domain or transferred under threat of condemnation, this Lease shall
terminate as of the date of vesting of title of the Premises or delivery of possession, whichever event shall first occur, pursuant
to such proceeding or transfer. For the purpose of this section 15. "substantially all of the Premises" shall be deemed
to have been taken if a taking under any such proceeding shall involve such an area, whether the area be improved with building
or be utilized for a parking area or for other use, that Tenant cannot reasonably operate in the remainder of the Premises the
business being conducted on the Premises at the time of such proceeding.
Partial
Taking. If, during the term of this Lease, or any extension hereof, less than substantially all of the Premises shall be
taken in any such proceeding, this Lease shall not terminate. The rent thereafter due and payable by Tenant shall be
reduced in such proportion as the nature, value and extent of the part so taken bears to the whole of the Premises. Landlord
shall, from the proceeds of the condemnation, restore the Premises for use of Tenant.
Award.
Any award granted for either partial or complete taking regarding the Premises shall he the sole property of Landlord.
Destruction
of Premises. If any building or improvement standing or erected upon the Premises shall be destroyed or damaged ("Damage")
in whole or in part by fire or other casualty, Landlord shall promptly repair. replace or rebuild ("Restoration") the
same at least to the extent of the value and as nearly as practical to the character of the Building or improvements existing
immediately prior to the Damage. During such Restoration, Tenant shall be entitled to a proportionate reduction of rent while
such Restoration work is being completed, such proportionate reduction to be based upon the extent to which such Restoration interferes
with Tenant's use of the Premises. If: (a) the Premises are encumbered by a mortgage or deed of trust ("Mortgage") and
the holder of the Mortgage requires that all or a portion of the proceeds of the insurance be paid to said holder, or (b) the
insurance proceeds available for the Restoration are less than 90 percent of the cost of the Restoration, or (c) the Restoration
cannot be completed within 120 days, then Landlord may, at its option, declare this Lease terminated and all parties shall be
relieved from further obligation hereunder from the Date of the Damage. If the Restoration cannot be completed within 120 days
from the date of the Damage, then Tenant shall likewise have the right, at its option, to declare this Lease terminated and all
parties shall be relieved from further obligation hereunder from the date of the Damage. In the event that either Landlord or
Tenant is entitled to declare this Lease terminated as set forth above, than such notice shall be given within thirty (30) calendar
days from the date of determination that the Restoration cannot be completed within 120 days by the party declaring such to the
other party.
Anything
in this section 17 to the contrary notwithstanding, if the improvements contained on the Premises are substantially damaged or
destroyed from any cause whatsoever during the last eighteen (18) month period of this Lease, Landlord may, at its option, declare
this Lease terminated and all parties shall be relieved from further obligation hereunder from that date of said damage. However,
if an option to extend the term of this Lease is granted herein, then if Tenant exercises said option within twenty (20) calendar
days from the date of Damage and if the remaining term plus the option period is for a period of time longer than eighteen (18)
months, Restoration and the parties' obligations and rights shall be as set forth in the preceding paragraph. All insurance proceeds
paid as a result of a casualty shall be the sole and exclusive property of the Landlord.
Default.
The occurrence of any one or more of the following events shall constitute a default and breach of this Lease by Tenant:
Tenant
failing to pay Base Rent or Additional Rent within Ten days of its due date;
Tenant
failing to make any other payments required to be made by Tenant when due, where such failure shall continue for a period of seven
(7) calendar days following notice from Landlord to Tenant;
Tenant
failing to perform or keep any of the other terms, covenants and conditions herein contained for which it is responsible, and
such failure continuing and not being cured for a period of thirty (30) calendar days after notice from Landlord or if such default
is a default which cannot be cured within a 30 calendar day period, then Tenant's failing to commence to correct the same within
said 30 calendar day period and thereafter failing to prosecute the same to completion with reasonable diligence: If the default
occurs due to order or citation by the governing authority having jurisdiction over the premises, whether such default or order
is issued to the Landlord or to the Tenant, the time for cure shall conform to the time granted by such governing authority, including
any time granted by any tribunal.
Tenant
abandoning the Premises.
Tenant
being adjudicated as bankrupt or insolvent or filing in any court a petition in bankruptcy or for reorganization or for the adoption
of an arrangement under the Bankruptcy Act (as now or in the future amended) or the filing of an involuntary bankruptcy against
Tenant unless said involuntary bankruptcy is terminated within thirty (30) calendar days from the date of said filing, or Tenant
filing in any court for the appointment of a receiver or trustee of all or a portion of Tenant's property or there being appointed
a receiver or trustee for ail or a portion of Tenant's property, unless said receiver or trustee is terminated within thirty (30)
calendar days from the date of said appointment; Tenant making any general assignment or general arrangement of its property for
the benefit of its creditors.
In
the event of an occurrence of default as set forth above, Landlord shall have the right to: Terminate this Lease and end the term
hereof by giving to Tenant written notice of such termination, in which event Landlord shall be entitled to recover from Tenant
at the time of such termination the present value of the excess, if any, of the amount of rent reserved in this Lease for the
then balance, not to exceed 6 months, hereof over the then reasonable rental value of the Premises for the same period. The present
value shall be determined by discounting all future excess rent amounts at the rate of eight percent (8%) per annum. It is understood
and agreed that the "reasonable rental value" shall be the amount of rental which Landlord can obtain as rent for the
remainder of the initial term or renewal term, whichever is applicable; or without resuming possession of the Premises or terminating
this Lease, to sue monthly for and recover all rents, other required payments due under this Lease, not to exceed 6 months, and
other sums including damages and legal fees at any time from time to time accruing hereunder; or without terminating this Lease,
re-enter and take possession of the Premises or any part thereof and repossess the same as of Landlord's former estate or expel
Tenant and those claiming through or under Tenant and remove the effects of both or either (forcibly, if necessary) without being,
deemed guilty in any manner of trespass and without prejudice to any remedies for rent delinquencies or preceding lease defaults,
in which event Landlord may from time to time without terminating this Lease re-let the Premises or any part thereof for such
term or terms and at such rental or rentals and upon such other terms and conditions as Landlord may, in its sole discretion,
deem advisable. with the right to make alterations and repairs to the Premises, and neither the serving of a demand for possession
nor the re-entry or taking of possession of the Premises by Landlord shall be construed as an election on Landlord's part to terminate
this Lease unless a written notice of termination be given to Tenant. In the event of Landlord's election to proceed under this
subsection (c), then such repossession shall not relieve Tenant of its obligation and liability under this Lease, ail of which
shall survive such repossession, and Tenant shall pay to Landlord as current damages the basic rental and other sums hereinabove
provided which would be payable hereunder if such repossession had not occurred, less the net proceeds (if any) of any re letting
of the Premises after deducting all of Landlord's expenses in connection therewith, including but without limitation all repossession
costs, brokerage commissions, legal expenses, attorneys' fees, expenses of employees, alteration costs and expenses of preparation
of such re letting. Tenant shall pay such current damages to landlord on the days on which the basic rent would have been payable
hereunder and as if possession had not been retaken, and Landlord shall be entitled to receive the same from Tenant on each such
day. Any Late Payment shall bear a penalty of $200.00.
Subordination
and Estoppel. This Lease is subject and subordinate to all mortgages and deeds of trust which now or hereafter may affect the
Premises, and Tenant shall execute and deliver upon demand of Landlord any and all instruments desired by Landlord subordinating
this Lease in the manner requested by Landlord to any new or existing mortgage or deed of trust. Should Tenant fail to execute
and deliver any such documents or instruments within ten (10) calendar days after receipt of such demand, Tenant irrevocably constitutes
and appoints Landlord as Tenant's special attorney-in-fact for the purpose solely of executing and delivering any such documents
or instruments pursuant to this paragraph. Any holder of a mortgage or deed of trust may rely upon the terms and conditions of
this paragraph. Further, Tenant shall at any time and from time to time, upon not less than five (5) calendar days' prior written
notice from Landlord, execute, acknowledge and deliver to Landlord a statement in writing certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such modification and certifying, that this Lease as
so modified is in full force and effect) and the dates to which rental and other charges are paid in advance, if any, and acknowledging
that there are not, to Tenant's knowledge, any uncured defaults on the part of the Landlord, or specifying such defaults, if any
are claimed. Tenant shall attorney to any purchaser at any foreclosure sale or to any grantee or transferee designated in any
deed given in lieu of foreclosure. Any subordination agreement to be executed by Tenant shall provide that as long as Tenant is
current and not in default under the terms and conditions of this Lease, the holder of the mortgage shall not disturb the tenancy
of Tenant.
Hazardous
Use. Tenant shall not occupy or use. or permit any portion of the Premises to be occupied or used for any business or purpose
which is unlawful, disreputable or deemed to be extra hazardous, or permit anything to be done which would in any way increase
the rate of casualty or liability insurance coverage on the Premises or the Building and/or its contents. Tenant will not store,
create or use any Hazardous Materials (as they are defined in section 21, below) on or about the Premises without the prior written
consent of Landlord, which approval may be withheld at Landlord's discretion. With respect to any such storage, creation or use
of Hazardous Materials, Tenant agrees to use, store, and dispose of same as required by applicable local, state and federal laws;
to provide immediate notice of any releases; to provide in advance the identity of specific Hazardous Materials which will be
stored, created or used on the Premises; and to maintain the Premises free of contamination and return the property to its pre-lease
condition.
Indemnification.
Tenant and all other signatories and guarantors hereof jointly and severally agree to indemnify, protect and save Landlord harmless
against and from any and all damages, losses, liabilities, obligations, penalties, claims, litigation, demands. defenses, judgments,
suits. proceedings, costs, disbursements or expenses of any kind or of any nature whatsoever (including, without limitation, attorneys'
and experts' fees and disbursements) which may at any time be imposed upon, incurred by or asserted or awarded against Landlord,
and arising from or out of any Hazardous Materials, as hereinafter defined, hereafter located upon or within all or any portion
of the Premises as a result of Tenant's actions, including without limitation (i) the cost of removal of all such Hazardous Materials
from all or any portion of the Premises, (ii) additional costs required to take necessary precautions to protect against the release
of Hazardous Materials on, in, under or affecting the Premises, into the air, any body of water, any other public domain or any
surrounding areas, and (iii) costs incurred to comply, in connection with all or any part of the Premises, with all applicable
laws, orders, judgments and regulations with respect to Hazardous Materials.
For
the purposes of this Lease, the term "Hazardous Materials" shall mean any hazardous or toxic materials, wastes and substances
including any substance identified in CERCLA, RCRA, or other federal, state or local legislation, regulations or ordinances whether
now existing or hereafter enacted or promulgated or any judicial or administrative interpretation of such laws, rules or regulations.
This
Indemnification shall be a continuing indemnity for 6 months and shall remain in full force and effect until released and cancelled
by Landlord or its successors and assigns.
Subrogation.
Landlord shall cause each insurance policy carried or to be carried by Landlord insuring the Premises against loss, and Tenant
shall cause each insurance policy carried or to be carried by Tenant on or relating to the Premises, its fixtures and contents,
to be written in a manner so as to provide that the insurance company waives all right to recovery by way of subrogation against
damage covered by any such policies (but only with respect to claims against the other party.) Neither party, its agents, officers
and employees shall be liable to the other for any loss or damage caused (regardless of cause or origin, including the negligence
of any party hereto, its agents, officers or employees) by fire or any other risk or risks against which any such policy insures,
provided such waiver was obtainable. If the release of either Landlord or Tenant as set forth herein shall contravene any law
with respect to exculpatory agreements, the liability of the party in question shall be deemed not released but shall be secondary
to that of the other party's insurer. Notwithstanding anything contained herein to the contrary, any insurance policies maintained
by Tenant (Public Liability and Personal Property) shall name Landlord as an additional insured.
Surrender
of Premises. Upon expiration or termination of the term of this Lease, or any extension thereof, Tenant shall peaceably and
quietly leave and surrender the Premises in as good condition as they are now, ordinary wear and tear excepted. Tenant shall
surrender and deliver up the building and Premises broom-clean and free of Tenant's property. Provided Tenant is not in
default, it shall have the right to remove all of its trade fixtures, equipment, machinery and other personal property,
provided that upon such removal the Premises are delivered in the same condition as existed at the time of commencement of
this Lease. Further, in the event Tenant does not remove any of its fixtures, equipment or personal property or any additions
or alterations made to the Premises during the term of this Lease, Landlord may, at its option, require Tenant to remove any
such improvements, alterations, fixtures and equipment and restore the Premises to the condition that existed at the
commencement of the Lease, at Tenant's sole cost and expense. or retain the same.
Recommendation
of Legal Counsel. Landlord advises and recommends that all parties hereto obtain legal counsel to represent them in connection
with the examination of title, zoning of the Premises, the contents and execution of this Lease, tax implications of the transaction
and all other aspects relative to the transaction contemplated hereby.
Notices.
All notices, demands and requests required to he given by either party to the other shall be in writing and shall be hand delivered
or sent by certified or registered mail, return receipt requested. postage prepaid, addressed to the party at the address set
forth below or at such other addresses as the parties may designate in writing delivered pursuant to the provisions hereof. Any
notice when given as provided herein shall be deemed to have been delivered on the date personally served or two (2) banking days
subsequent to the date that said notice was deposited with the United States Postal Service. Landlord address: 535 Dover Street
Lakewood Co 80226-1149.
Time
is of the Essence. Time is of the essence hereof.
Quiet Enjoyment. Landlord represents and warrants that Landlord has the right
to enter into and make this Lease: and Tenant, upon paying the rent herein reserved and upon performing all of the terms and conditions
of this Lease on its part to be performed, shall at all times during the term herein demised peacefully and quietly have, hold
and enjoy the Premises.
Acceptance
of Premises. Tenant accepts the Premises subject to all zoning ordinances and regulations pertaining to the Premises, without
responsibility or warranty by Landlord, and further Tenant accepts the Premises subject to easements, rights-of-way, restrictive
covenants and reservations of record.
Right
to Inspect or Show Premises. Landlord, or Landlord's agent and representative. shall have the right to enter into and upon the
Premises or any part thereof at all reasonable hours for the purpose of examining the same. Landlord, or Landlord's agent and
representative, shall also have the right to show the Premises to persons wishing to purchase or lease the same at all reasonable
hours. During the 90 calendar day period prior to the expiration of this Lease, or any extension thereof, Landlord, or Landlords
agent and representative, shall have the right to place "to let" or "for sale" notices on the Premises, and
the Tenant agrees to permit the same to remain thereon. Landlord will observe and follow all marijuana laws and regulations as
defined by state and local regulations.
Severability.
If any sentence, paragraph or article of this Lease is held to be illegal or invalid, this shall not affect in any manner those
other portions of the Lease not illegal or invalid and this Lease shall continue in full force and effect as to those provisions,
Confidentiality
and Nondisclosure. Both Parties agree not to disclose the confidential information obtained from the discloser and this Lease
to anyone unless required to do so by law. In consideration of each Party's disclosure of Confidential Information to the other
Party, each Party agrees with respect to the Confidential Information received from the other Party, that it: (a) will maintain
such Confidential Information in the strictest confidence; (b) will not disclose, transfer or otherwise make available any of
such Confidential Information to any third party without the prior written consent of the other Party; and (c) will not use the
Confidential Information for any purpose other than related to this letter. Each Party shall take reasonable measures to protect
the Confidential Information of the other Party. Those measures shall not be less than the measures taken to protect the receiving
Party's own confidential information. Confidential Information of the other Party may be provided to a Party's Representatives
only on a need-to-know basis, and prior to such provision, the Party will notify each Representative to whom such disclosure is
made that such Confidential Information is received in confidence and shall be kept in confidence by such Representative. Neither
Party may disclose Confidential Information to current or previous employees without the prior consent of the other party.
If
at any time during the term of the Lease Landlord receives an offer from a third party to purchase the Premises which Landlord
wishes to accept. Landlord shall deliver to Tenant a copy of the complete proposed contract received and allow Tenant to purchase
the Premises under the same terms and conditions.
If
Federal, Colorado or Denver laws or regulations prohibit the Tenant's operation of a marijuana operation at this location during
the term of this Lease or if a governmental notice is delivered to Landlord or Tenant which requires the cessation of marijuana
cultivation or infusion on the Premises, Landlord or Tenant may terminate this Lease with no penalties and Tenant shall vacate
the Premises within 30 days, any deposits shall forthwith be returned by Landlord to Tenant.
If
Premises' location or Tenant's leases, licenses or operations is not approved, issued and/or licensed by the Marijuana. Enforcement
Division, City of Denver Zoning and/or City of Denver Excise and License Department, then this lease will become null and void
without penalty, any deposits shall forthwith be returned by Landlord to Tenant.
This
Lease may he executed in counterparts, all of which shall collectively be considered the original. A facsimile signature shall
be sufficient and shall constitute an original signature for all purposes.
This
Agreement shall be governed by and construed in accordance with laws of the State of Colorado.
IN
WITNESS WHEREOF the parties have set their hands and seals as of the day and year first written above.
Agreed and
Accepted
Landlord: |
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Shamira, LLC |
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Date: |
6-12-14 |
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Tenant: |
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Diego Pellicer
Worldwide, Inc.
it’s CFO/SECRETARY |
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Date: |
6/12/14 |
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11
Exhibit 10.8
EXHIBIT
A
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and
entered into by and between: 2949 W. Alameda, Ave, LLC whose address is 675 Kalamath Street Denver Colorado 80204, as
Landlord, and Diego Pellicer Worldwide, Inc. a Delaware Corporation, as Tenant, which is liable for all provisions,
covenants and obligations hereunder.
Landlord wishes to lease to Tenant and Tenant
wishes to lease from Landlord, certain real property, further identified and defined herein. (Landlord and Tenant, together, herein
sometimes referred to as the "Parties").
THIS LEASE
IS CONTINGENT UPON 2949 W ALAMEDA AVE LLC, PURCHASING & CLOSING ON THE PROPERTY LOCATED AT 2949 W ALAMEDA AVE, DENVER CO.
NOW THEREFORE,
for good and valuable consideration, the sufficiency of which is hereby e° acknowledged, and under the warranties,
representations, conditions and covenants herein, the Parties agree to the following:
WITNESSETH:
Leased Premises. Landlord hereby leases to Tenant
and Tenant hereby leases from Landlord, upon the
terms and conditions as hereinafter set forth, premises described as follows:
ALAMEDA HEIGHTS B16 PT OF L21 TO 24 BEG NW COR
L21 E 12FT TOTPOB S 65.02FT SELY
23.33FT E 106.43FT N 81.5FT W 135FT TO TPOB
Also known as
2949 W Alameda Ave, Denver, CO 80219
Together with all rights privileges, easements,
appurtenances and amenities belonging to or in any way pertaining to the premises and together with the buildings and other improvements
situated upon said premises. All personal property and business property located on and in the premises on commencement date shall
be considered property of the Landlords and included in the lease. Tenant shall take inventory of all items within 30 days from
the commencement date and share it with landlord. Tenant shall be responsible to insure, maintain and pay the personal property
taxes on said property. (said real property, buildings and improvements hereinafter referred to as the "premises").
Base Term. To have and to hold the same for
a term of (5) years commencing on the First day of August, 2014 until July 31, 2019 with one Five (5) year extension which must
be exercised no less than 120 days prior to the end of the first lease period. Should the Tenant exercise the 5 year option the
lease rate shall be $25,000.00 for the term.
Base Rent. Tenant hereby agrees to pay to Landlord,
Rent as Follows:
Base Rent: $20,000.00 per month for 3,303 sqft
plus NNN. The NNN Shall be $700.00 per month approximately. The base rent shall not increase throughout the term of this lease.
The Payment, Plus "NNN" expenses
shall be payable in equal monthly installments as listed in the schedule above, in advance without notice on the first day of each
month during said term, at such other place as Landlord may designate in writing from time to time, without any set-off or deduction
whatsoever ("Base Rent").
Said payments shall be in legal tender and
lawful money of the United States. If the term herein commences on a day other than the first day of a calendar month, then Tenant
shall pay to Landlord the rent for the number of days that exist prior to the first of the succeeding month, with a similar adjustment
being made at the termination of this Lease, if necessary.
Tenant shall tender to Landlord a payment of | |
First Month's Payment: | |
$ | 20,000.00 | |
| |
Last 2 Month's: | |
$ | 40,000.00 | |
| |
Security Deposit: | |
$ | 40.000.00 | |
Total of Initial payment | |
| |
$ | 100,000.00 | |
The initial payment consists of first month's
payment, two months' rent for security deposit and the two last months. Landlord shall not be obligated to pay interest on the
security deposit. Tenant shall take immediate possession and lease commencement date is August 1, 2014. Landlord shall have the
right to commingle such security deposit with other funds of Landlord. The portion of the deposit not held back
Additional Rent. All rent not defined, as base
rent shall be considered "Additional Rent". In addition to the Base Rent specified above, Tenant shall pay to the Landlord
an amount which Landlord shall Estimate for the cost of all personal property and real property (real estate) taxes, assessments
and waste water attributable to the building and the operation thereof, all insurance as specified in this Lease and all maintenance
of the building in order to keep it in good operational condition, this rent is also called NNN. The sum of the expenses shall
be estimated by Landlord each year and divided by 12 and Tenant shall pay such rent along with his base rent. Landlord shall also
be entitled to such other sums due in excess of the base rent which shall also be titled Additional Rent as specified in the Lease.
As of the signing of this lease annual real estate taxes are to be determined at the beginning of each calendar year.
NNN Items.
Included in the NNN items are all expenses related to the operation of the building, including all taxes levied against the building,
insurance. Legal and professional fees and charges by any city authority, sidewalk improvements, and any other expense not considered
a capital expense incurred by Landlord in operating the property. In addition, in the event the actual NNN Expenses exceed the
budgeted NNN Expense payments, Tenant shall pay the difference within thirty (30) days of written notice by Landlord. Landlord
will give the appropriate credit if the budgeted NNN Expense exceeds the actual.
In addition, Tenant shall be responsible for
obtaining and maintaining insurance sufficient to protect Landlord as outlined below. In the event the NNN charges have been underestimated
by Landlord, he may present a bill to Tenant and Tenant shall pay such bill within 10 days.
Exclusions from. NNN items. None
Tenant, shall perform maintenance on the building
and therefore avoid payment of the maintenance portion of the NNN directly to Landlord. To the extent Tenant fails to perform the
maintenance of the property Landlord may perform such maintenance and bill Tenant for the cost of same.
Tenant shall keep in good order, condition
and repair the Premises and every part thereof, (regardless of whether the damaged portion of the Premises or the means of repairing
the same are accessible to Lessee) including, without limiting the generality of the foregoing, all plumbing, heating, air conditioning,
ventilating, electrical and lighting facilities and equipment within or about the Premises, fixtures, interior walls and interior
surfaces of exterior walls, ceilings, windows, doors, plate glass, showcases, skylights, entrances and vestibules located within
or about the Premises and all sidewalks, including prompt snow removal as required by the City and County of Denver, and signs
located on the building . In the event of any fine or charge assessed by the City and County of Denver or it's subdivisions for
failure to maintain the building or sidewalks, Tenant shall promptly pay the same. If Lessee fails to perform Lessee's obligations
under this section Lessor or his agents or contractors may at Lessor's option enter upon the Premises, after ten (10) days' prior
written notice to Lessee, and put the same in good order, condition and epair, and the cost thereof together with interest thereon
at the rate of 18% per annum shall be due and payable as additional rent to Lessor together with Lessee's next rental installment.
Landlord shall be entitled to a fee of 20% of the cost of any repairs or maintenance performed by Landlord.
Insurance Portion of NNN Items.
All-Risk
Insurance. In the name of the Landlord, Tenant shall keep all improvements located on or appurtenant to the Premises insured against
loss or damage by fire and such other perils as are now or hereafter included in the standard "All-Risk" policy in common
use for commercial structures, including vandalism and malicious mischief The amount of the Ail-Risk insurance shall be equal to
one hundred percent (100%) of the then actual replacement cost of existing improvements, including the value of any leasehold improvements
or betterments, but without deductions for depreciation. Landlord may, on each anniversary date of this Lease, request the carrier
of the insurance (or the agent for the carrier) to determine the amount of insurance required by the provisions of this paragraph,
and the resulting determination shall be conclusive between the parties. Upon Landlord's request, Tenant shall include the holder
of any mortgage encumbering the Premises by virtue of a standard mortgagee's clause to the extent of that mortgagee's interest.
In addition to the insurance set forth above, Tenant shall provide Rental Income Insurance (loss of rents insurance) in the name
of Landlord in an amount sufficient to cover the full Base Rent as well as all other payments which are the responsibility of Tenant
under the terms and conditions of this Lease. Further, if there is a boiler or similar equipment on the Premises, Tenant shall
provide a separate policy covering boiler explosion, together with rental income insurance resulting from a boiler explosion. In
lieu of Tenant acquiring the insurance as above set forth, Landlord shall have the exclusive right to purchase the insurance required
by the provisions of this subsection 6(a) in Landlord's name and to forward Tenant a bill for the premium for such insurance. Tenant
shall pay said bill as part of Landlord's NNN expenses through Tenant.
Liability Insurance. Tenant shall at all times
keep in force a comprehensive general combined liability insurance policy providing protection of at least $2,000,000 against claims
and liability for personal injury, bodily injury, death and property damage arising from the use, ownership, maintenance, disuse
or condition of the Premises, any improvements located on or appurtenant to the Premises, improvements or adjoining areas or ways.
Landlord shall be named and protected under the terms and conditions of said policy as Landlord of the Premises.
Personal Property. Tenant shall be responsible
for insuring any and all personal property that may be owned by Landlord and Tenant. Any insurance that may be purchased pursuant
to this section 6 or any proceeds that may be payable as a result of a loss under any such insurance shall in no way reduce, alter,
diminish or modify any provisions of this Lease and specifically the indemnity provisions of section 11 hereof. Further Tenant
shall complete an inventory of all property located
Surrender. On the last day of the term hereof,
or on any sooner termination, Lessee shall surrender the Premises to Lessor in the same condition as received, broom clean, ordinary
wear and tear excepted. Lessee shall repair any damage to the Premises occasioned by the removal of its trade fixtures, furnishings
and equipment.
Hold Over. Any
rule or law to the contrary notwithstanding, in the event Tenant remains in possession of the Premises or any part thereof subsequent
to the expiration of the term of this Lease or any extension thereof and such holding over shall be with the consent of Landlord,
it shall be conclusively deemed that such possession and occupancy shall be a tenancy from month-to-month only, at a rental which
was existing at the end of the term of this Lease or any extension thereof, unless increased by Landlord upon not less than 30
days' prior written notice, and, further, such possession shall be subject to all of the other terms and conditions (except any
option to renew or option to purchase) contained in this Lease. In the event Tenant otherwise Holds Over, Tenant shall pay to
Landlord the surn of 150% of the rent.
Inspection
and Acceptance of Premises. Tenant acknowledges that it has inspected or has had opportunity to inspect and accepts the premises
in its condition as suitable for the purpose for which the premises are leased to the Tenant. Taking of possession by Tenant shall
be deemed conclusively to establish that said premises are in good and satisfactory condition as of when possession was taken.
Tenant further acknowledges that no representations as to the repair of the premises, nor promises to alter, remodel or improve
the premises have been made by Landlord, unless such are expressly set forth in the lease. If this lease is executed before the
premises become vacant or otherwise available and ready for occupancy, or if any present tenant or occupant of the premises holds
over, and Landlord cannot acquire possession of the premises prior to the date above recited as the commencement date of this lease,
Landlord shall not be deemed to be in default hereunder, and Tenant agrees to accept possession of the premises at such time as
Landlord is able to tender the same, which date shall thenceforth be deemed the "commencement date"; and Landlord hereby
waives payment of rents covering any period prior to the tendering of possession to Tenant hereunder. After the commencement date
Tenant shall, upon demand, execute and deliver a letter of acceptance of delivery of the premises. Tenant specifically accepts
the premises as follows: Leased premises shall be as is where is. Tenant shall be responsible for their own electric bill and shall
be due monthly.
Use of Premises. Tenant shall have the right
to use and occupy the Premises for the following purposes and no other which is a medical and/or retail marijuana operation, legal
under the constitution of the State of Colorado or permitted by Colorado law. Tenant asserts he will not sell any product in the
property which is illegal for sale. Tenant shall not use any portion of the premises outside of the building structures to sell
products, including the yard, patios, driveways and sidewalks.
Expansion of Use. In the event Tenant seeks
to expand the use of the Premises, Tenant shall advise Landlord and Landlord and Tenant shall negotiate such additional sums which
may be due for such expansion of Tenant's business, if any.
Tenant's Additional Obligations. Tenant covenants,
throughout the term of this Lease and at Tenant's sole cost and expense, to promptly comply with all laws and ordinances and the
orders, rules, regulations and requirements of all state and municipal governments, special districts and all appropriate departments,
commissions, boards and officers thereof.
Assignment
and Subleasing. Neither this Lease nor any interest herein may be assigned by Tenant, voluntarily or involuntarily, by operation
of law or otherwise. Any consent to assignment given by Landlord shall not constitute a waiver of necessity for such consent to
a subsequent assignment_ Any assignment in violation of this paragraph shall be null and void. Landlord shall be entitled to a
reasonable fee for his time and effort in reviewing the new tenant's credit and use of the property upon application for assignment.
The Landlord
hereby authorizes and consents for the Premises to be sublet by Tenant to licensed medical and/or recreational marijuana growers,
processors and/or retailers, including DPCO, Inc (the "Subtenant"), and those affiliates of subtenant controlled
by or under direct common control of subtenant. Tenant shall have the
right to replace the Subtenant with Landlord's approval, which approval shall not be unreasonably withheld; however Tenant shall
remain responsible for all terms and conditions of this Lease. Notice shall include name and contact information of the new Subtenant
and proof of licensing approval from the MMED and City of Denver. New Subtenants must meet all other requirements of this Lease.
In addition to Tenant, any sub lessee or assignee shall be personally liable for all payments, conditions, covenants and agreements
in this Lease. Landlord shall not unreasonably withhold approval of
a sublease, and may take into consideration the Sub-lessor's prospective use of the property, his business experience, his capital
resources and his credit rating.
Utilities. Tenant shall promptly pay all charges
for water, sewer, heat, gas, light, electricity, and any and all other utilities used on or in connection with the operation and
maintenance of the Premises.
Indemnity Provisions. Tenant agrees to exonerate,
save harmless, protect and indemnify Landlord, or any owner of the Premises, from and against any and all losses, damages, claims,
suits or actions, judgments and costs which may arise during the term hereof for personal injury, loss of life or damaged property
sustained in or about the Premises or the improvements and appurtenances thereto or upon the adjacent sidewalks and streets and
from and against all costs, attorney fees, expenses and liabilities incurred in, as a result of and about any such claims, the
investigation thereof or the defense of any action or proceeding brought thereon, and from and against any judgments, orders, decrees
or liens resultant there from and any fines levied by any authority for violation of any law, regulation or ordinance by virtue
of the use of the improvements and appurtenances thereto situated upon the Premises. This indemnity shall include any loss from
the filing of mechanic's and/or material men's liens.
Occupational
Safety and Health Act. Tenant shall fully comply with the Occupational Safety and Health Act of 1970 (as amended) (Chapter XVII,
Title XIX of the United States Code) (OSHA) or applicable state statute adopted pursuant to OSHA. It shall be Tenant's obligation
to fully comply with the provisions and standards as contained in said Act (or as the same may be amended) and Tenant shall hold
Landlord harmless from any obligations or responsibilities, if any, created under said OSHA or other applicable federal or state
statute. Further, Tenant shall be responsible to make any and all repairs and alterations to the structural and non-structural
components of the Premises, or to any appurtenances situated upon the Premises that may be required of Landlord as provided in
any OSHA or any other statute, law or ordinance in effect at the time of the execution of this Lease or which may hereafter be
enacted.
Care of the Premises. Tenant shall not commit
or allow any waste or damage to be committed on any portion of the Premises_ At the termination of this Lease, by lapse of time
or otherwise, Tenant shall deliver up the Premises to Landlord in as good condition as at date of possession by Tenant, ordinary
wear and tear excepted; and Tenant shall remove all of Tenant's trade fixtures, furniture and other effects. All movable furniture
and other effects not so removed shall conclusively be deemed to have been abandoned and may be appropriated, sold, stored, destroyed
or otherwise disposed of by Landlord without notice to Tenant or any other person and without obligation to account therefore,
and Tenant shall pay Landlord all expenses incurred in connection with such property. Tenant's obligation to observe or perform
this covenant shall survive the termination of this Lease.
Tenant shall pay before delinquency all taxes,
assessments, license taxes and other charges levied, assessed or imposed upon Tenant's operation, occupancy or conduct of business
at the Premises or upon Tenant's equipment, furniture, trade fixtures, leasehold improvements and other personal property of any
kind installed or located on the Premises, which become payable during the term of this Lease.
Alterations to Premises. Tenant shall have
the right, at is sole cost and expense, to make changes or alterations to the Premises upon written approval of Landlord. Tenant
may, without written approval, change the flooring in the Premises at Tenant's expense, may paint the interior and remove or change
the dividers currently on the floor. In the event Tenant removes the existing tile on the floor, he shall place new floor coverings
such that, in the event of removal of any dividers, the floor remains intact and as one floor, without holes or vacant spots where
the dividers are placed.
Tenant
shall make no alterations in or additions or repairs to the Premises without first obtaining the written consent of Landlord,
which consent shall not be unreasonably withheld; and Tenant shall notify Landlord at least ten (10) business days in advance of
any alterations in or repairs or additions to the Premises which Tenant proposes to make. Tenant shall post notice pursuant to
the Colorado Mechanics Lien Act so that any lien recorded against the property of which the Premises are a part does not attach
to Landlord's interest.
Ail such
alterations, additions or improvements shall be made at Tenant's sole cost and expense and, except for furniture and trade fixtures,
shall become the property of Landlord and shall be surrendered with the Premises, as a part thereof, at the end of the term hereof_
Landlord may require Tenant to remove all such improvements installed by the Tenant and to repair any damage to the Premises from
such removal. Tenant shall construct such improvements, alterations or repairs in conformance with any and all applicable rules
and regulations of any Federal, State, or Municipal or special authority code or ordinance. At least ten (10) days before the commencement
of any such work, Tenant agrees to provide Landlord with lien waivers from all persons performing such work and material men providing
materials used in connection therewith. In the event Tenant orders any construction, alterations, decorating or repair work directly
from Landlord, the charges for such work shall be payable to Landlord upon satisfactory completion of such work. If not paid when
invoiced, such nonpayment shall be deemed an event of default hereunder. In the event any lien shall be filed for labor performed
or materials supplied, Tenant shall cause such lien to be released within thirty (30) days. Failure to do so will be considered
a material breach of this Lease Agreement.
In all cases any changes or alterations shall
conform to all building and zoning regulations, and shall be performed in a workman like manner, with all building permits which
may be required by the city or state being obtained by the Tenant, and the follow up inspections completed including final inspections
by the appropriate authorities. Further, Tenant shall be responsible for any costs pertaining to the City and County of Denver's
mandatory frontage paint and or color requirements. Tenant shall be responsible for their own signage which must adhere to the
City and County of Denver's Signage control policy.
Condemnation.
Complete Taking. If, during the term of this Lease, or any extension hereof, the whole or substantially all of the Premises shall
be taken as a result of the exercise of the power of eminent domain or transferred under threat of condemnation, this Lease shall
terminate as of the date of vesting of title of the Premises or delivery of possession, whichever event shall first occur, pursuant
to such proceeding or transfer. For the purpose of this section 15, "substantially all of the Premises" shall be deemed
to have been taken if a taking under any such proceeding shall involve such an area, whether the area be improved with building
or be utilized for a parking area or for other use, that Tenant cannot reasonably operate in the remainder of the Premises the
business being conducted on the Premises at the time of such proceeding.
Partial Taking_ If, during the term of this
Lease, or any extension hereof, less than substantially all of the Premises shall be taken in any such proceeding, this Lease shall
not terminate. The rent thereafter due and payable by Tenant shall be reduced in such proportion as the nature, value and extent
of the part so taken bears to the whole of the Premises. Landlord shall, from the proceeds of the condemnation, restore the Premises
for use of Tenant
Award. Any award granted for either partial
or complete taking regarding the Premises shall be the sole property of Landlord.
Destruction of Premises. If any building or
improvement standing or erected upon the Premises shall be destroyed or damaged ("Damage") in whole or in part by fire
or other casualty, Landlord shall promptly repair, replace or rebuild ("Restoration") the same at least to the extent
of the value and as nearly as practical to the character of the Building or improvements existing immediately prior to the Damage.
During
such Restoration, Tenant shall be entitled to a proportionate reduction of rent while such Restoration work is being completed,
such proportionate reduction to be based upon the extent to which such Restoration interferes with Tenant's use of the Premises.
If: (a) the Premises are encumbered by a mortgage or deed of trust ("Mortgage") and the holder of the Mortgage requires
that all or a portion of the proceeds of the insurance be paid to said holder, or (b) the insurance procOeeds available for the
Restoration are less than 90 percent of the cost of the Restoration, or (c) the Restoration cannot be completed within 120 days,
then Landlord may, at its option, declare this Lease terminated and all parties shall be relieved from further obligation hereunder
from the Date of the Damage. If the Restoration cannot be completed within 120 days from the date of the Damage, then Tenant shall
likewise have the right, at its option, to declare this Lease terminated and all parties shall be relieved from further obligation
hereunder from the date of the Damage. In the event that either Landlord or Tenant is entitled to declare this Lease terminated
as set forth above, then such notice shall be given within thirty (30) calendar days from the date of determination that the Restoration
cannot be completed within 120 days by the party declaring such to the other party.
Anything
in this section 17 to the contrary notwithstanding, if the improvements contained on the Premises are substantially damaged or
destroyed from any cause whatsoever during the last eighteen (18) month period of this Lease, Landlord may, at its option, declare
this Lease terminated and all parties shall be relieved from further obligation hereunder from that date of said damage. However,
if an option to extend the term of this Lease is granted herein, then if Tenant exercises said option within twenty (20) calendar
days from the date of Damage and if the remaining term plus the option period is for a period of time longer than eighteen (18)
months, Restoration and the parties' obligations and rights shall be as set forth in the preceding paragraph, All insurance proceeds
paid as a result of a casualty shall be the sole and exclusive property of the Landlord.
Default. The occurrence of any one or more
of the following events shall constitute a default and breach of this Lease by Tenant:
Tenant failing to pay Base
Rent or Additional Rent within Ten days of its due date;
Tenant failing to make any other
payments required to be made by Tenant when due, where such failure shall continue for a period of seven (7) calendar days following
notice from Landlord to Tenant.;
Tenant failing to perform or
keep any of the other terms, covenants and conditions herein contained for which it is responsible, and such failure
continuing and not being cured for a period of thirty (30) calendar days after notice from Landlord or if such default is a
default which cannot be cured within a 30 calendar day period, then Tenant's failing to commence to correct the same within
said 30 calendar day period and thereafter failing to prosecute the same to completion with reasonable diligence; If the
default occurs due to order or citation by the governing authority having jurisdiction over the premises, whether such
default or order is issued to the Landlord or to the Tenant, the time for cure shall conform to the time granted by such
governing authority, including any time granted by any tribunal.
Tenant abandoning the Premises.
Tenant
being adjudicated as bankrupt or insolvent or filing in any court a petition in bankruptcy or for reorganization or for the adoption
of an arrangement under the Bankruptcy Act (as now or in the future amended) or the filing of an involuntary bankruptcy against
Tenant unless said involuntary bankruptcy is terminated within thirty (30) calendar days from the date of said filing, or Tenant
filing in any court for the appointment of a receiver or trustee of all or a portion of
Tenant's property or there being appointed a receiver or trustee for all or a portion of Tenant's property, unless said receiver
or trustee is terminated within thirty (30) calendar days from the date of said appointment; Tenant making any general assignment
or general arrangement of its property for the benefit of its creditors.
In the event of an occurrence of default as
set forth above, Landlord shall have the right to: Terminate this Lease and end the term hereof by giving to Tenant written notice
of such termination, in which event Landlord shall be entitled to recover from Tenant at the time of such termination the present
value of the excess, if any, of the amount of rent reserved in this Lease for the then balance, not to exceed 6 months, hereof
over the then reasonable rental value of the Premises for the same period. The present value shall be determined by discounting
all future excess rent amounts at the rate of eight percent (8%) per annum, It is understood and agreed that the "reasonable
rental value" shall be the amount of rental which Landlord can obtain as rent for the remainder of the initial term or renewal
term, whichever is applicable; or without resuming possession of the Premises or terminating
this Lease, to sue monthly for and recover all rents, other required payments due under this Lease, not to exceed 6 months, and
other sums including damages and legal fees at any time from time to time accruing hereunder; or without terminating this Lease,
re-enter and take possession of the Premises or any part thereof and repossess the same as of Landlord's former estate or expel
Tenant and those claiming through or under Tenant and remove the effects of both or either (forcibly, if necessary) without being
deemed guilty in any manner of trespass and without prejudice to any remedies for rent delinquencies or preceding lease defaults,
in which event Landlord may from time to time without terminating this Lease re-let the Premises or any part thereof for such term
or terms and at such rental or rentals and upon such other terms and conditions as Landlord may, in its sole discretion, deem advisable,
with the right to make alterations and repairs to the Premises, and neither the serving of a demand for possession nor the re-entry
or taking of possession of the Premises by Landlord shall be construed as an election on Landlord's part to terminate this Lease
unless a written notice of termination be given to Tenant. In the event of Landlord's election to proceed under this subsection
(c), then such repossession shall not relieve Tenant of its obligation and liability under this Lease, all of which shall survive
such repossession, and Tenant shall pay to Landlord as current damages the basic rental and other sums hereinabove provided which
would be payable hereunder if such repossession had not occurred, less the net proceeds (if any) of any re letting of the Premises
after deducting all of Landlord's expenses in connection therewith, including but without limitation all repossession costs, brokerage
commissions, legal expenses, attorneys' fees, expenses of employees, alteration costs and expenses of preparation of such re letting.
Tenant shall pay such current damages to Landlord on the days on which the basic rent would have been payable hereunder and as
if possession had not been retaken, and Landlord shall be entitled to receive the same from Tenant on each such day. Any Late Payment
shall bear a penalty of $200.00.
Subordination
and Estoppel. This Lease is subject and subordinate to all mortgages and deeds of trust which now or hereafter may affect the Premises,
and Tenant shall execute and deliver upon demand of Landlord any and all instruments desired by Landlord subordinating this Lease
in the manner requested by Landlord to any new or existing mortgage or deed of trust. Should Tenant fail to execute and deliver
any such documents or instruments within ten (10) calendar days after receipt of such demand, Tenant irrevocably constitutes and
appoints Landlord as Tenant's special attorney-in-fact for the purpose solely of executing and delivering any such documents or
instruments pursuant to this paragraph. Any holder of a mortgage or deed of trust may rely upon the terms and conditions of this
paragraph. Further, Tenant shall at any time and from time to time, upon not less than five (5) calendar days' prior written notice
from Landlord, execute, acknowledge and deliver to Landlord a statement in writing certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified
is in full force and effect) and the dates to which rental and other charges are paid in advance, if any, and acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of the Landlord, or specifying such defaults, if any are
claimed. Tenant shall attorney to any purchaser at any foreclosure sale or to any grantee or transferee designated in any deed
given in lieu of foreclosure. Any subordination agreement to be executed by Tenant shall provide that as long as Tenant is current
and not in default under the terms and conditions of this Lease, the holder of the mortgage shall not disturb the tenancy of Tenant.
Hazardous
Use. Tenant shall not occupy or use, or permit any portion of the Premises to be occupied or used for any business or purpose which
is unlawful, disreputable or deemed to be extra hazardous, or permit anything to be done which would in any way increase the rate
of casualty or liability insurance coverage on the Premises or the Building and/or its contents. Tenant will not store, create
or use any Hazardous Materials (as they are defined in section 21, below) on or about the Premises without the prior written consent
of Landlord, which approval may be withheld at Landlord's discretion. With respect to any such storage, creation or use of Hazardous
Materials, Tenant agrees to use, store, and dispose of same as required by applicable local, state and federal laws; to provide
immediate notice of any releases; to provide in advance the identity of specific Hazardous Materials which will be stored, created
or used on the Premises; and to maintain the Premises free of contamination and return the property to its pre-lease condition.
Indemnification.
Tenant and all other signatories and guarantors hereof jointly and severally agree to indemnify, protect and save Landlord harmless
against and from any and all damages, losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, judgments,
suits, proceedings, costs, disbursements or expenses of any kind or of any nature whatsoever (including, without limitation, attorneys'
and experts' fees and disbursements) which may at any time be imposed upon, incurred by or asserted or awarded against Landlord,
and arising from or out of any Hazardous Materials, as hereinafter defined, hereafter located upon or within all or any portion
of the Premises as a result of Tenant's actions, including without limitation (i) the cost of removal of all such Hazardous Materials
from all or any portion of the Premises, (ii) additional costs required to take necessary precautions to protect against the release
of Hazardous Materials on, in, under or affecting the Premises, into the air, any body of water, any other public domain or any
surrounding areas, and (iii) costs incurred to comply, in connection with all or any part of the Premises, with all applicable
laws, orders, judgments and regulations with respect to Hazardous Materials.
For the purposes of this Lease, the term "Hazardous
Materials" shall mean any hazardous or toxic materials, wastes and substances including any substance identified in CERCLA,
RCRA, or other federal, state or local legislation, regulations or ordinances whether now existing or hereafter enacted or promulgated
or any judicial or administrative interpretation of such laws, rules or regulations.
This Indemnification shall be a continuing
indemnity for 6 months and shall remain in full force and effect until released and cancelled by Landlord or its successors and
assigns.
Subrogation.
Landlord shall cause each insurance policy carried or to be carried by Landlord insuring the Premises against loss, and Tenant
shall cause each insurance policy carried or to be carried by Tenant on or relating to the Premises, its fixtures and contents,
to be written in a manner so as to provide that the insurance company waives all right to recovery by way of subrogation against
damage covered by any such policies (but only with respect to claims against the other party.) Neither party, its agents, officers
and employees shall be liable to the other for any loss or damage caused (regardless of cause or origin, including the negligence
of any party hereto, its agents, officers or employees) by fire or any other risk or risks against which any such policy insures,
provided such waiver was obtainable. If the release of either Landlord or Tenant as set forth herein shall contravene any law with
respect to exculpatory agreements, the liability of the party in question shall be deemed not released but shall be secondary to
that of the other party's insurer. Notwithstanding anything contained herein to the contrary, any insurance policies maintained
by Tenant (Public Liability and Personal Property) shall name Landlord as an additional insured.
Surrender of Premises. Upon expiration or termination
of the term of this Lease, or any extension thereof, Tenant shall peaceably and quietly leave and surrender the Premises in as
good condition as they are now, ordinary wear and tear excepted. Tenant shall surrender and deliver up the building and Premises
broom-clean and free of Tenant's property. Provided Tenant is not in default, it shall have the right to remove all of its trade
fixtures, equipment, machinery and other personal property, provided that upon such removal the Premises are delivered in the same
condition as existed at the time of commencement of this Lease. Further, in the event Tenant does not remove any of its fixtures,
equipment or personal property or any additions or alterations made to the Premises during the term of this Lease, Landlord may,
at its option, require Tenant to remove any such improvements, alterations, fixtures and equipment and restore the Premises to
the condition that existed at the commencement of the Lease, at Tenants sole cost and expense, or retain the same.
Recommendation of Legal Counsel. Landlord advises
and recommends that all parties hereto obtain legal counsel to represent them in connection with the examination of title, zoning
of the Premises, the contents and execution of this Lease, tax implications of the transaction and all other aspects relative to
the transaction contemplated hereby.
Notices. All notices, demands and requests
required to be given by either party to the other shall be in writing and shall be hand delivered or sent by certified or registered
mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below or at such other addresses
as the parties may designate in writing delivered pursuant to the provisions hereof. Any notice when given as provided herein shall
be deemed to have been delivered on the date personally served or two (2) banking days subsequent to the date that said notice
was deposited with the United States Postal Service.
Time is
of the Essence. Time is of the essence hereof
Quiet Enjoyment. Landlord represents and warrants
that Landlord has the right to enter into and make this Lease; and Tenant, upon paying the rent herein reserved and upon performing
all of the terms and conditions of this Lease on its part to be performed, shalt at all times during the term herein demised peacefully
and quietly have, hold and enjoy the Premises.
Acceptance of Premises. Tenant accepts the
Premises subject to all zoning ordinances and regulations pertaining to the Premises, without responsibility or warranty by Landlord,
and further Tenant accepts the Premises subject to easements, rights-of-way, restrictive covenants and reservations of record.
Right to Inspect or Show Premises. Landlord,
or Landlord's agent and representative, shall have the right to enter into and upon the Premises or any part thereof at all reasonable
hours for the purpose of examining the same. Landlord, or Landlord's agent and representative, shall also have the right to show
the Premises to persons wishing to purchase or lease the same at all reasonable hours. During the 90 calendar day period prior
to the expiration of this Lease, or any extension thereof, Landlord, or Landlord's agent and representative, shall have the right
to place "to let" or "for sale" notices on the Premises, and the Tenant agrees to permit the same to remain
thereon. Landlord will observe and follow all marijuana laws and regulations as defined by state and local regulations.
Severability. If any sentence, paragraph or
article of this Lease is held to be illegal or invalid, this shall not affect in any manner those other portions of the Lease not
illegal or invalid and this Lease shall continue in full force and effect as to those provisions
Confidentiality
and Nondisclosure. Both Parties agree not to disclose the confidential information obtained
from the discloser and this Lease to anyone unless required to do so by law. In consideration of each Party's disclosure of Confidential
Information to the other Party, each Party agrees with respect to the Confidential Information received from the other Party, that
it: (a) will maintain such Confidential Information in the strictest confidence; (b) will not disclose, transfer or otherwise make
available any of such Confidential Information to any third party without the prior written consent of the other Party; and (c)
will not use the Confidential Information for any purpose other than related to this letter. Each Party shall take reasonable measures
to protect the Confidential Information of the other Party. Those measures shall not be less than the measures taken to protect
the receiving Party's own confidential information. Confidential Information of the other Party may be provided to a Party's Representatives
only on a need-to-know basis, and prior to such provision, the Party will notify each Representative to whom such disclosure is
made that such Confidential Information is received in confidence and shall be kept in confidence by such Representative, Neither
Party may disclose Confidential Information to current or previous employees without the prior consent of the other party. Landlord
hereby consents to Tenant publicly communicating that this Lease has been executed and the general terms of the Lease and operation,
but will withhold private information including premises address and landlord information.
If at any time daring the term of the Lease
Landlord receives an offer from a third party to purchase the Premises which Landlord wishes to accept, Landlord shall deliver
to Tenant a copy of the complete proposed contract received and allow Tenant to purchase the Premises under the same terms and
conditions.
If Federal, Colorado or Denver laws or regulations
prohibit a Subtenant's operation of a marijuana operation at this location during the term of this Lease or if a governmental notice
is delivered to Landlord or Tenant which requires the cessation of marijuana cultivation or infusion on the Premises, Landlord
or Tenant may terminate this Lease with no penalties and Tenant shall vacate the Premises within 30 days, any deposits shall forthwith
be returned by Landlord to Tenant.
If Premises' location or sub-tenant's leases,
licenses or operations is not approved, issued and/or licensed by the Marijuana Enforcement Division, City of Denver Zoning and/or
City of Denver Excise and License Department, tenant may terminate this lease and this lease will become null and void without
penalty, any deposits shall forthwith be returned by Landlord to Tenant.
This Lease may be executed in counterparts,
all of which shall collectively be considered the original. A facsimile signature shall be sufficient and shall constitute an original
signature for all purposes.
This Agreement shall be governed by and construed
in accordance with laws of the State of Colorado.
Landlord's
Representation. Landlord represents to Tenant that, (i) neither Landlord nor any of its officers,
directors or partners nor any person or entity that to its current actual knowledge, directly owns beneficial interest in
it, as described in the Schedule 14A Information Required in the Proxy Statement of Crescent Real Estate Equities Company dated
as of May 28, 2004, is a Prohibited Person with whom U.S. persons or entities are restricted from doing business under regulations
of OFAC or under the Executive Order, or other governmental action, and (ii) that throughout the term of this Lease, Landlord shall
comply with the Executive Order and with the Money Laundering Act, if, when and to the extent Landlord may become subject to the
Money Laundering Act.
| (a) | Prohibited Persons and Transactions. Landlord represents
and warrants to Tenant that Landlord is currently in compliance with and shall at all times during the Term (including any
extension thereof) remain in compliance with the regulations of the OFAC of the Department of the Treasury (including those named
on OFAC's Specially Designated and Blocked Persons List) and any statute, executive order
(including the September 24, 2001, Executive Order Blocking Property and Prohibiting
Transactions with Person Who Commit, Threaten to Commit or Support Terrorism), or other governmental action relating thereto. |
| (b) | Landlord warrants and represents Landlord (i) is not under investigation by any governmental authority
for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist-related activities, any crimes which
in the United States would be predicate crimes to money laundering, or any violation of any Anti- Money Laundering Laws; (ii) has
not been assessed civil or criminal penalties under any Anti-Money Laundering Laws; (ii) has not been assessed civil or criminal
penalties under any Anti-Money Laundering Laws; or (iii) has not had any of its funds seized or forfeited in any action under any
Anti-Money Laundering Laws. |
| (c) | "Anti-Money Laundering Laws" means those laws, rules,
regulations, orders and sanctions, state and federal, criminal and civil, that (a) limit the use of and/or seek the forfeiture
of proceeds from illegal transactions; (b) limit commercial transactions with designated countries or individuals believed to be
terrorists, narcotic dealers or otherwise engaged in activities contrary to the interests of the United States; c) require identification
and documentation of the parties with whom a financial institution conducts business; or (d) are designed to disrupt the flow of
funds to terrorist organizations. Such laws, regulations and sanctions shall be deemed to include the Executive Order Number 13224
on Terrorism Financing (September 23, 2001), the Patriot Act, the Bank Secrecy Act, Pub.L. No. 91-508, 84 Stet. 1305 (1970), the
Trading with the Enemy Act, 50 U.S.C. Appx. Section 1 et seq., the International Emergency Economics Powers Act, 50 U.S.C. Section
1701 et seq., and the sanction regulations promulgated pursuant thereto by OFAC, as well as laws relating to prevention and detection
of money laundering in 18 U.S.C. Sections 1956 and 1957, as amended. |
| (d) | "Patriot Act" means the USA PATRIOT Act of 2001, Pub_ L. No. 107-56, together with all
laws, rules, regulations and orders issued in connection therewith. |
[Signature Page Follows]
IN WITNESS WHEREOF the parties have set their
hands and seals as of the day and year first written above,
Agreed
and Accepted
LANDLORD:
Signature: |
/s/ Marcela U. Cristancho |
|
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|
|
Print Name: |
Marcela U. Cristancho |
|
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2949 W Alameda, LLC. |
|
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Company: |
2949 W Alameda Ave. Denver Co 80219. |
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Date: |
7/14/14 |
|
TENANT
Signature: |
/s/ Steven
S. Hubbard |
|
|
|
|
Print Name: |
Steven
S. Hubbard |
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|
|
Company: |
DIEGO PELLICER WORLDWIDE INC.
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Date: |
7/15/2014 |
|
13
Exhibit 10.9
COMMERCIAL
SUBLEASE AGREEMENT
THIS
COMMERCIAL SUBLEASE AGREEMENT (the "Commercial Sublease Agreement" or "Sublease"), made on this 13th
day of August, 2014 by and between M&S, LLC having an address at 4910 West Colfax Avenue, Denver, Colorado, 80204 ("Sublessor")
and Diego Pellicer Worldwide, Inc., having an address at 3496 Fairview Way, West Linn, Oregon, 97068 ("Sublessee").
WHEREAS,
on the 13th day of August, 2014, Sublessor has entered into a commercial lease agreement with the Lessor for a period
starting from August 13th , 2014 and ending on June 30, 2018 (the "Master Lease"). A copy of the Master Lease
Agreement is attached hereto; and
WHEREAS,
Sublessee and Sublessor wish to enter into this Commercial sublease Agreement, where under the Sublessor will sublease
the Premises to Sublessee.
Premises
Subject
to the terms and conditions of this Agreement, Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from Sublessor,
the following Premises:
building
and property addressed as 755 South Jason Street, Denver, Colorado, 80223 and described as a +/- 15,000 square foot warehouse-type
structure, (the "Premises").
Term
The
term of this Commercial sublease shall commence on the 13th day of August, 2014 and shall continue until the 30th of
June, 2018.
Sublease
This
Commercial Sublease Agreement will be subject to the remaining terms and conditions contained in the Lease. In such an event,
the terms of this Commercial sublease Agreement shall control over the Lease. The Sublessee hereby fully agrees acknowledges and
agrees to perform all of the Sublessor's duties and obligations under the Master Lease.
Rent*
For
the term of this Agreement, the Sublessee shall pay to Sublessor the base rental of $25,000 per month. The monthly payment shall
be due in advance on the first day of each calendar month at the following address 4910 West Colfax Avenue, Denver, Colorado,
80204, or at such other place designated by written notice from Sublessor.
*Additional
Rent: Property and personal property taxes, building casualty and personal property insurance, and wastewater taxes are due each
month as additional rent to Sublessor.
Late
Charges
Any
rent payment not made by the fifth day of the month shall be considered overdue and in addition to Sublessor's other remedies,
Sublessor may levy a late payment charge equal to five percent (5%) per month on any overdue amount.
Rent
Payments and Security Deposit
Prior
to taking possession of the Premises, Sublessee shall pay first month's rent, the last two months' rent, and
a two month security deposit in the amount of $125,000.00 (One Hundred and Twenty Five Thousand Dollars) for the full and faithful
performance by the Sublessee of all the terms of this Commercial Sublease. The security deposit will be refunded to Sublessee
after the expiration of this sublease, provided the Sublessee has fully and faithfully carried out all of its obligations under
this Agreement.
The
Master Lease's rent shall be paid directly to Landlord and the difference between the Sublease and the Master Lease will be paid
directly to Sublessor.
Sublessor
agrees to notify Sublessee in writing on any notices received by Sublessor from landlord, including but not limited to a breach
of Master Lease. Sublessor agrees that Sublessee has the right to cure said breach, and offset the cost of said cure from payments
due Sublessor.
Utilities
Sublessee
shall pay directly for all utilities, services and charges provided to the premises, including any and all deposits required.
Parking
Space
Sublessee
is assigned parking as follows: all on Property Use.
If
consistent with City of Denver zoning requirements, Sublessee shall use the premises for licensed medical/retail marijuana growing,
medical/retail processing (MIPS) and medical/retail center purposes only, and for no other purpose without Sublessor's prior written
consent. Notwithstanding the forgoing, Sublessee shall not use the Premises for the purposes of storing, manufacturing or selling
any explosives, flammables or other inherently dangerous substance, chemical, thing or device.
Quiet
Enjoyment
Sublessor
covenants and warrants that upon performance by Sublessee of its obligations hereunder, Sublessor will keep and maintain Lessee
in exclusive, quiet, peaceable and undisturbed and uninterrupted possession of the Premises during the term of this sublease.
Repairs
Sublessee
shall at its own expenses make all necessary repairs to the Premises. Such repairs shall include routine repairs of floors, walls,
ceilings, and other parts of the Premises damaged or worn through normal occupancy, except for major mechanical systems or the
roof, subject to the obligations of the parties otherwise set forth in this Sublease.
Termination
Upon
the expiration or earlier termination of this Agreement, Sublessee shall return the Premises to Sublessor in good repair, condition
and working order, ordinary wear and tear resulting from proper use thereof alone excepted.
Indemnity
Sublessee
shall indemnify Sublessor against, and hold Sublessor harmless from, any and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities, including reasonable attorney's fees and costs, arising
out of, connected with, or resulting from Sublessees use of the Premises, including without limitation the manufacture, selection,
delivery, possession, use, operation, or return of the Premises.
Assignment and Subletting
Sublessee
shall have the right to sublet the premises or assign this Agreement with the prior written consent of the Sublessor, as long
as Sublessee remains financially responsible to Sublessor.
The
Sublessor hereby authorizes and consents for the Premises to be sublet by Sublessee to licensed medical and/or recreational marijuana
growers, processors and/or retailers, including DPCO, Inc, DPCO Denver, LLC, DPCO Jason, LLC, DPCO Brighton, LLC and/or
DPCO Colfax, LLC (the "Second Sublessee"). Sublessee shall have the right to replace the Second Sublessee with Sublessor's
approval, which approval shall not be unreasonably withheld; however Sublessee shall remain responsible for all terms and conditions
of this Sublease. Sublessee must also receive approval from Lessor. New Second Sublessees must meet all other requirements of
this Sublease. Any Second Sublessee or assignee shall be liable for all payments, conditions, covenants and agreements in the
Master Lease.
Severability
If
any part or parts of this Agreement shall be held unenforceable for any reason, the remainder of this Agreement shall continue
in full force and effect. If any provision of this Agreement is deemed invalid or unenforceable by any court of competent jurisdiction,
and if limiting such provision would make the provision valid, then such provision shall be deemed to be construed as so limited.
Entire
Agreement
This
Agreement constitutes the entire agreement between the parties and supersedes any prior understanding or representation of any
kind preceding the date of this Agreement. There are no other promises, conditions, understandings or other agreements, whether
oral or written, relating to the subject matter of this Agreement. This Agreement may be modified in writing and must be signed
by both parties.
Governing
Law
This
Agreement shall be governed by and construed in accordance with the laws of the state of Colorado. Notices
Any
Notice and other communications which either party desires to give the other, may be given either personally or by post through
certified mail, to the following address:
Sublessor: |
Sublessee: |
M&S, LLC |
Diego Pellicer
Worldwide, Inc. |
4910 West Colfax
Avenue |
3496 Fairview
Way |
Denver, Colorado
80214 |
West Linn, Oregon,
97068 |
Waiver
The
failure of either party to enforce any provisions of this Agreement shall not be deemed a waiver or limitation of that party's
right to subsequently enforce and compel strict compliance with every provision of this Agreement. The acceptance of rent by Sublessor
does not waive Sublessor's right to enforce any provisions of this Agreement.
If
Colorado or Denver laws or regulations, or Federal notices or prosecution, prohibit a Subtenant's operation of a marijuana
operation at this location during the term of this Sublease or if a governmental notice is delivered to Landlord, Sublessor
or Sublessee which requires the cessation of marijuana cultivation or infusion on the Premises, Landlord, Sublessor or
Sublessee may terminate this Sublease with no penalties and Sublessee shall vacate the Premises within 30 days, if it cannot
be cured, and any deposits and prepaid rent shall forthwith be returned by Sublessor to Sublessee.
If
Premises' location or subtenant's subleases, licenses or operations is not approved, issued and/or licensed by the Marijuana Enforcement
Division, City of Denver Zoning and/or City of Denver Excise and License Department, Sublessee may terminate this Sublease and
this Sublease will become null and void without penalty, any deposits, prepaid rent payments shall forthwith be returned by Sublessor
to Sublessee. Any rents already paid will be retained by Sublessor.
Landlord
& Sublessor's Representation: Landlord and Sublessor represents to Sublessee that all funds associated with the negotiation
and subsequent rental of the Master Lease were and are in no way associated with money laundering and is currently in compliance
with, and shall at all times during the Term (including any extension thereof) remain in compliance with the Executive Order and
with the Money Laundering Act, if, when and to the extent Landlord may become subject to the Money Laundering Act.
This
Sublease may be executed in counterparts, all of which shall collectively be considered the original. A facsimile signature shall
be sufficient and shall constitute an original signature for all purposes.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Consent as of the day and year first written above.
AGREED
TO this 15th day of August, in 2014, by:
SUBLESSOR |
|
SUBLESSEE |
M&S, LLC |
|
Diego Pellicer Worldwide,
Inc. |
|
|
|
/s/ Shaw Aryan |
|
/s/ Ronald Throgmartin |
Shaw Aryan |
|
Ronald Throgmartin |
|
|
|
LANDLORD |
|
|
William P Vassil |
|
|
|
|
|
/s/ William P Vassil |
|
|
|
|
|
Landlord: James J.
Domenico |
|
|
|
|
|
/s/ James J. Domenico |
|
|
Exhibit 10.10
Office 206-427-4100
Cell 503-635-7097
Email sshubbard@earthlink.net
REAL ESTATE LEASE AGREEMENT
GROSS - WITH OPTION
THIS LEASE AGREEMENT is made and entered
into this 15 day of September 2014, by and between Oakway Golf Course, Inc., hereinafter called the Lessor, and Diego Pellicer
Worldwide, Inc. hereinafter called the Lessee. In consideration of the covenants, agreements, and stipulations herein contained
on the part of the Lessee to be paid, kept and faithfully performed, the Lessor does hereby lease, demise and let unto the said
Lessee those certain premises, as is, situated in the City of Springfield, County of Lane and State of Oregon, at: 800 North 42"
Street and further described as: 16,060 square feet upon the following TERMS and CONDITIONS: See Exhibit "B”.
SECTION 1. OCCUPANCY
1.1 | Original
Term. The term of this lease shall commence on September 1, 2014, and continue
through August 31, 2019. |
| |
1.2 | Possession.
Lessee's rights to possession and obligations under this lease shall commence on
September 1, 2014. |
| |
1.3 | Renewal
Option. If the Lessee is not in default in regard to the terms and provisions
of this Real Estate Lease Agreement at the time the option is exercised or at the time
the renewal term is to commence, Lessee shall have the option to renew this Real Estate
Lease Agreement subject to all the terms and provisions as follows: |
| |
| (a)
For TWO (2) Successive term(s) of FIVE (5) year(s) each with each renewal term commencing
on the day following the expiration of the preceding term. |
| |
| (b)
The first renewal term shall commence on the 1st day of September 2019. The option regarding
a renewal term shall be exercised by written notice sent by Lessee to Lessor not less
than one hundred twenty (120) days prior to September 1, 2019 in regard to the first
renewal term. The giving of such notice shall be sufficient to make the Lease binding
for the renewal term provided that each of the parties shall promptly execute prior to
the last day of the preceding term a further written amendment to the Lease in which
the parties agree to extend the lease term, provided that under all circumstances the
rent for any renewal term shall continue to increase at the rate of 2% per year commencing
on the lst of September of each year of each renewal term; and therefore, the base monthly
rent for the first year of the first renewal term shall be $7 955.00 per month. |
| |
| (d)
In the event Lessee exercises either or both of its conditional options to renew the
Real Estate Lease Agreement for one or two additional renewal terms, then as a condition
thereto, the Personal Guaranties of Lessee(s), if any shall be attached hereto as continuing
Guaranties and said Guaranties shall not terminate until such time as Lessee has fully
performed all of its duties and obligations, and made all payments to Lessor pursuant
to the terms and conditions of this Real Estate Lease Agreement without exception. |
| |
1.4 | Lessor,
or Lessor's agent, shall have the right to place "For Lease", "For Sale"
or similar such signs on the subject leased property at any time within the last one
hundred and twenty (120) days of the lease term. The location of such signs shall be
at the sole discretion of the Lessor (see also 18.7). |
SECTION 2. RENT (Also see Section 2.5 for
Additional Rents)
2.1 | Base
Rent. Lessee shall pay to Lessor on the 1st day of each month in advance at such
place as may be designated by the Lessor with base rent being per rent schedule below: |
|
Year |
|
Date |
|
Base Monthly Rent |
|
|
1 |
|
September 1, 2014 — December 31, 2014 |
|
$5,000.00 |
|
|
|
|
January 1, 2015 — August 31, 2015 |
|
$7,227.00 based on $0.45 x 16,060 square feet |
|
|
2 |
|
September 1, 2015 — August 31, 2016 |
|
$7,375.00 |
|
|
3 |
|
September 1, 2016 — August 31, 2017 |
|
$7,525.00 |
|
|
4 |
|
September 1, 2017 — August 31, 2018 |
|
$7,680.00 |
|
|
5 |
|
September 1, 2018 — August 31, 2019 |
|
$7,835.00 |
|
|
6 |
|
September 1, 2019 — August 31, 2020 |
|
$7,995.00 |
|
|
7 |
|
September 1, 2020 — August 31, 2021 |
|
$8,160.00 |
|
|
8 |
|
September 1, 2021 — August 31, 2022 |
|
$8,325.00 |
|
|
9 |
|
September 1, 2022 — August 31, 2023 |
|
$8,495.00 |
|
|
10 |
|
September 1, 2023 — August 31, 2024 |
|
$8,670.00 |
|
NOTE: Base Monthly Rent does not include
amount due for Additional Rents. The amount of base rent payable by the Lessee is not in any way dependent upon or related
to the number of square feet in the Premises being leased by the Lessee from the Lessor pursuant to the terms of this Agreement.
2.2 |
Method of Payment. Lessor may, at Lessor's discretion and after providing a written notice to Lessee, require Lessee
to remit any and all payment(s) due under the terms of this Agreement with cash or a cashier's check. |
2.3 |
Late Payment Charges. If Lessee fails to pay, within TEN (10) days after the due date thereof, any rent, Lessor
advance, or other charge payable by Lessee under this Lease, then Lessee shall be obligated to pay to Lessor (in addition to the
overdue principal amount of the rent, advance, or other charge) a late payment charge of $200.00 with said late payment charge
being compounded monthly, for each month or fraction of a month during which the overdue principal amount remains unpaid. Payment
date shall be that date on which Lessor receives said payment. |
2.4 |
Security Deposit. Lessor retains a Security Deposit in the sum of $3,000.00 which is a refundable security deposit
pursuant to the following terms and conditions: The deposit shall be a debt from Lessor to Lessee, refundable within THIRTY (30)
days following expiration of the lease term or other termination not caused by Lessee's default. Lessor shall have the right to
offset against the deposit any sums owing from Lessee to Lessor and not paid when due, any damages caused by Lessee's default,
the cost of curing any default by Lessee should Lessor elect to do so, and the cost of performing any repair or cleanup that is
Lessee's responsibility under this lease. Offset against the deposit shall not be an exclusive remedy in any of the above cases,
but may be invoked by Lessor, as its option, in addition to any other remedy provided by law or this lease for Lessee's nonperformance.
Lessor shall give notice to Lessee each time an offset is claimed against the deposit, and, unless the lease is terminated, Lessee
shall within TEN (10) days following such notice deposit with Lessor a sum equal to the amount of the offset so that the total
deposit amount, net of offset, shall remain constant throughout the lease term. |
Note: $3,000.00 security deposit
is being transferred from lease dated August 21, 2014 for approximately 10,890 square feet.
SECTION 3. REPAIRS AND MAINTENANCE
3.1 |
Lessor's Obligations. The following shall be the responsibility of Lessor: |
(a) Lessor warrants that all electrical
and plumbing systems are in reasonable operating order at date of Lessee's possession.
(b) Repairs and maintenance of the roof
and gutters, exterior wails (including painting), bearing walls, structural members, and foundations.
(c) Repair of sidewalks, driveways, curbs,
parking areas, and areas used in common by Lessee and Lessor or Lessees of other portions of the same building.
(d) Repair and maintenance of exterior
water, sewage, gas and electrical services up to the point of entry to the leased premises.
3.2 |
Lessee's Obligation. The following shall be the responsibility of Lessee: |
(a) Maintenance, repair or replacement
of interior walls, ceilings, floor coverings, counters, cabinets, doors and windows and related hardware, light fixtures, switches,
and wiring and plumbing from the point of entry to the premises. Lessee covenants and agrees to replace any and all of the plate
glass broken, vandalized, or scratched on the leased premises during the term of this lease. Repair of the heating and air conditioning
system to include ordinary maintenance.
(b) Any Repairs necessitated by the negligence
of Lessee, its invitees, customers, agents, employees, vendors, contractors, subcontractors, patrons, common carriers or suppliers,
except as provided in Paragraph 7.1 dealing with waivers of subrogation.
(c) Lessee is responsible for ordinary
maintenance and repairs of the heating and air conditioning systems and is responsible for any extraordinary repair or replacement
expenses regarding the heating and air conditioning systems.
(d) Any repairs or alterations required
under Lessee's obligation to comply with laws and regulations as set forth in Paragraph 4.2 (a) below.
(e) All other repairs to the premises which
Lessor is not required to make under Paragraph 3.1 above.
(f) Compliance with all reasonable rules
and regulations respecting the use of the Leased Premises issued by Lessor from time to time and communicated to Lessee in writing.
(g) Not commit waste, not suffer or permit
waste to be committed, and not cause or permit any nuisance on or in the Leased Premises.
(h) All office desks with chairs must have
chair mats under each chair to protect the carpet.
3.3 |
Lessor's Interference with Lessee. Any repairs, replacements, alterations, or other work performed on or around
the leased premises by Lessor shall be done in such a way as to interfere as little as reasonably possible with the use of the
premises by Lessee. Lessee shall have no right to an abatement of rent nor any claim against Lessor for any inconvenience or disturbance
resulting from Lessor's activities performed in conformance with the requirements of this provision. |
3.4 |
Reimbursement for Repairs Assumed. If either party fails or refuses to make repairs which are required by this Section
3, the other party may make the repairs, and charge the actual costs of repairs to the first party. Such expenditures by Lessor
shall be reimbursed by Lessee on demand, together with interest at the rate of TWELVE (12%) percent per annum from the date of
expenditure by Lessor. Such expenditures by Lessee may be deducted from rent and other payments subsequently becoming due, or,
at Lessee's election, collected directly from Lessor. Except in an emergency creating an immediate risk of personal injury or
property damage, neither party may perform repairs which are the obligation of the other party, and charge the other party for
the resulting expenses unless at least THIRTY (30) days before work is commenced, the defaulting party is given notice in writing
outlining with reasonable particularity the repairs required, and such party fails within that time to initiate such repairs in
good faith. |
3.5 |
Inspection of Premises. Lessor shall have the right to inspect the premises at any reasonable time or times, during
normal business hours and without undue interference to Lessee's business operations, to determine the necessity of repairs. Whether
or not such inspection is made, the duty of Lessor to make repairs shall not mature until a reasonable time after Lessor has received
from Lessee notice in writing of the repairs that are required. |
SECTION 4. USE OF THE PREMISES
4.1 |
Permitted Use. The premises shall be used for the processing of marijuana as regulated by the State of Oregon
and for no other purpose without the written consent of Lessor which written consent of Lessor can be withheld for any reason
or no reason at the discretion of Lessor. Lessor makes no representations as to the suitability of the premises for Lessees anticipated
use(s), and Lessee acknowledges that Lessee has through its own due diligence determined suitability and, except as may be specially
provided otherwise herein, hereby accepts the premises in the current "AS IS" condition. |
4.2 |
Restrictions on Use. In connection with use of the premises Lessee shall: |
(a) Conform
to all applicable laws and regulations of any public authority affecting the premises, and the use, including any requirements
of any governmental agency relating to the use, storage, or spillage of any hazardous waste or materials. and correct at Lessee's
own expense any failure of compliance created through Lessee's fault or by reason of Lessee's use, but Lessee shall not be required
to make any structural changes to effect such compliance unless such changes are required because of Lessee's specific use. Lessee
shall indemnify and hold Lessor harmless from any and all liability, including Lessor's reasonable attorney's fees, which Lessor
may incur by reason of any default of Lessee in compliance with this paragraph.
(b) Refrain from any activity which would
make it impossible to insure the premises against casualty, would increase the insurance rate, or would prevent Lessor from taking
advantage of any ruling of the Oregon Insurance Rating Bureau or its successor allowing Lessor to obtain reduced premium rates
for long-term fire insurance policies, unless Lessee pays the additional cost of the insurance.
(c) Refrain from any use which would be
reasonably offensive to other Lessees or owners or users of neighboring premises or which would tend to create a nuisance or damage
the reputation of the premises.
(d) Refrain from loading the floors beyond
the point considered safe by a competent engineer or architect selected by Lessor.
4.3 |
Signs. Lessee is strictly forbidden from making any marks on or attaching any signs, antenna, aerial, or other device
to the exterior or interior walls, windows, or roof of the premises without the prior written consent of Lessor. Should Lessor
give consent for installation of any sign by Lessee, said consent would be subject to Lessor's approval of the proposed sign placement,
method of installation, design, size, color, wording and evidence of approval by the prevailing local governmental authority.
The entire cost related to any approved sign, design, construction and installation shall be the sole obligation of the Lessee.
Immediately upon termination of Lessee's tenancy all signs previously installed by Lessee shall be removed by Lessee, at Lessee's
expense, and the area where the sign was installed or attached, repaired to its original condition. |
4.4 |
Parking. Lessee agrees to promptly comply with all parking instructions and restrictions as Lessor may, from time
to time, impose for purposes of achieving the orderly and reasonable allocation of available on site parking amongst the Lessee
and other occupants, customers, employees and agents of the subject property. |
SECTION 5. HAZARDOUS MATERIALS.
Lessee shall not cause or permit any Hazardous
Material (as defined in Section 5.3) to be brought upon, kept or used in or about the Leased Premises without the express prior
written consent of Lessor (which Lessor shall not unreasonably withhold, provided that Lessee demonstrates to Lessor's reasonable
satisfaction that such Hazardous Material is necessary or useful to Lessee's business, and that such Hazardous Material will be
used, kept and stored in a manner that complies with all laws, rates, ordinances and regulations relating to the storage and use
of the Hazardous Material). Lessor's consent shall not be deemed to be a waiver by Lessor of its rights to indemnification by
Lessee as stated in Section 5.1. If Lessee breaches the obligations stated herein, or if the presence of Hazardous Material on
the Leased Premises caused or permitted by Lessee at any time after execution of this Agreement, results in any contamination
of the Leased Premises or any other private or public property, including, without limitation, sewers or streets, or if contamination
of the Leased Premises by Hazardous Material otherwise occurs for which Lessee is legally liable to Lessor or to any third party
for damages resulting there from, then:
5.1 |
Lessee shall indemnify, defend and hold Lessor harmless from and against any and all claims, judgments, damages, penalties, fines,
costs, expenses, liabilities and losses (including, without limitation, diminution in value of the Leased Premises, damages for
the loss or restriction on use of the Leased Premises, and sums paid in settlement of claims, attorneys' fees, consultant fees
and expert fees) that arise during or after the term of this Lease, as a result of or in connection with such contamination. The
foregoing indemnification of Lessor by Lessee includes, without limitation, costs incurred in connection with any investigation
of site conditions or any clean-up, remedial, removal or restoration work required or recommended by any federal, state or local
governmental agency or political subdivision because of Hazardous Material present in the soil or groundwater on or under the
Leased Premises or any public facilities. |
5.2 |
Lessee shall promptly take any and all actions, at its sole cost and expense, as are necessary or appropriate to return the Leased
Premises or other private or public facilities to the condition existing prior to the introduction of any Hazardous Material to
the Leased Premises; provided that Lessor's approval of such actions shall first be obtained, which approval shall not be unreasonably
withheld if such actions would not potentially have any material adverse effect on the Leased Premises or other private or public
facilities. All contractors, laboratories and engineering firms (hereinafter "Consultants") chosen by Lessee to undertake
any remedial action that may be necessary or appropriate on or about the Leased Premises or other private or public facilities
shall be approved by Lessor prior to their employment by Lessee, which approval will not be unreasonably withhold. Consultants
shall be licensed and bonded in accordance with all applicable laws. Duplicate copies of all reports and findings made by Consultants
with regard to the condition of the Leased Premises or other private or public facilities shall be delivered to Lessor concurrently
with their delivery to Lessee. Lessee shall have the work done by the Consultants at Lessee's sole risk, and the Lessee shall
indemnify and hold Lessor and Lessor's agents and employees harmless from and against any and all loss, costs, liability, damage
and expense relating to or arising from (1) any damage or injuries to Lessee, the Consultants, or the agents or assignees of either
the Lessee or the Consultants, (2) for any third-party liability incurred by Lessee or the Consultants, and (3) for any damages
or injuries suffered by Lessor, or Lessor's agents or employees by reason of any work done by the Lessee or the Consultants or
their agents or employees. |
5.3 |
As used herein, the term "Hazardous Material" means any hazardous or toxic substance, material or waste that is or becomes
regulated by any local governmental authority, the State of Oregon, or the United States Government. The term "Hazardous
Material" includes, without limitation, any material or substance which is designated as a hazardous substance pursuant to
the Water Pollution Control Act (33 USC Section 1317); or defined as hazardous waste pursuant to the Resource Conservation and
Recovery Act (42 USC Section 6901 et seq.); or defined as a hazardous substance pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 USC Section 9601 et seq.); or defined as a hazardous material pursuant
to Article 90 of the Uniform Fire Code, as adopted by the City or County in which the subject property is located and, as amended
from time to time. |
SECTION 6. ALTERATIONS
6.1 |
Alterations Prohibited. Lessee shall make no improvements or alterations to the leased premises of any kind without
first obtaining Lessor's written consent. |
6.2 |
Alterations Required. The improvements delineated on the work sheet, if any, attached hereto and made part of this
lease shall be performed by the party designated and within the time stated on the work sheet. |
6.3 |
Ownership of Alterations. All improvements and alterations performed on the leased premises by either Lessor or
Lessee shall be the property of Lessor when installed unless the applicable Lessor's consent specifically provides otherwise. |
SECTION 7. INSURANCE
7.1 |
Insurance Required. Lessor shall be responsible for insuring the premises, and Lessee for insuring its personal
property and trade fixtures located on the premises. Neither party shall be liable to the other for any loss or damage caused
by water damage, sprinkler leakage, or any of the risks covered by a standard fire insurance policy with an extended coverage
endorsement, and there shall be no subrogated claim by one party's insurance carrier against the other arising out of any such
loss. |
7.2 |
Liability Insurance. Before taking possession of the premises, Lessee shall procure and thereafter during the term
of the lease shall continue to carry the following insurance at Lessee's costs: Public liability, including bodily injury, and
property damage insurance in an acceptably rated company with limits of not less than $1,000,000.00 dollars for injury to one
person, $ 2,000,000.00 dollars in aggregate. The aforementioned required insurance shall (1) cover all risks arising directly
or indirectly, from or relating to, or out of Lessee's activities on or in regard to any condition of the leased premises, (2)
shall protect Lessee against the claims of Lessor on account of the obligations assumed by Lessee under or pursuant to Paragraph
7.1 of the Lease Agreement, and (3) shall protect Lessor and Lessee against claims of all third persons. Certificates evidencing
such insurance, and bearing endorsements requiring TEN (10) days' written notice to Lessor prior to any change or cancellation
shall be furnished to Lessor prior to Lessee's occupancy of the property. |
SECTION 8. UTILITIES AND SERVICES
8.1 |
Utility and Service Chartres. Utilities and services shall be paid as follows: |
Utility and Service |
|
Lessor |
|
Lessee |
|
REMARKS |
|
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|
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|
Telephone |
|
☐ |
|
☒ |
|
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Electric Service |
|
☐ |
|
☒ |
|
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|
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|
Natural Gas Service |
|
☐ |
|
☒ |
|
|
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|
|
|
|
|
|
Municipal Water Service |
|
☐ |
|
☒ |
|
Shared cost |
|
|
|
|
|
|
|
|
|
Sewer Service |
|
☐ |
|
☒ |
|
Shared cost |
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|
|
|
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Refuse Collection |
|
☐ |
|
☒ |
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Interior Janitorial Service |
|
☐ |
|
☒ |
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Storm Water Charges |
|
☐ |
|
☒ |
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Shared cost |
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Landscape Care & Maintenance |
|
☐ |
|
☒ |
|
Of Lessee area |
|
|
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|
|
|
|
|
|
Other |
|
☐ |
|
☐ |
|
|
|
8.2 |
Telephone Service. Lessee hereby takes possession of said leased premises with telephone service in an "as-is"
condition. Lessee acknowledges inspection of telephone service and accepts service as adequate. |
SECTION 9. TAXES
9.1 |
Personal Property Taxes. Lessee shall pay all property taxes assessed against Lessee's inventory, equipment, appliances
and other personal property located on the subject leased premises. |
9.2 |
Real Property Taxes. Lessee shall pay twenty percent (20%) of real property taxes assessed against Lessor's real
property. Lessee shall pay real property taxes at the rate of $295.00 per month in addition to the monthly base rent, and the
aforementioned monthly tax payment shall be included each month with the payment of monthly base rent. Additional Rents shall
be reconciled annually and adjusted accordingly_ Upon annual presentation of Lane County Real Property Tax Statement, Lessee
shall remit to Lessor any accumulated underpayment of real property tax within 10 days of receipt of notice of amount due. Lessor
shall also notify Lessee of any accumulated overpayment and said overpayment shall be credited against Lessee's monthly payment
of rent and additional rents. |
SECTION 10. DAMAGE AND DESTRUCTION
10.1 |
Partial Damage. If the leased premises are partly damaged, and Paragraph 10.2 below does not apply, the property
shall be repaired by Lessor at Lessor's expense. Repairs shall be accomplished with all reasonable dispatch subject to interruptions
and delays from labor disputes, and matters beyond the control of Lessor, and shall be performed in accordance with the provisions
of Paragraph 3.3 above. |
10.2 |
Destruction. If the leased premises are destroyed or damaged such that the cost of repair exceeds FIFTY (50%) percent
of the value of the structure before the damage, either party may elect to terminate the lease as of the date of the damage or
destruction by notice given to the other in writing not more than FORTY-FIVE (45) days following the date of damage. In such event
all rights and obligations of the parties shall cease as of the date of termination, and Lessee shall be entitled to any prepaid
amounts previously paid by Lessee, and attributable to the anticipated term. If neither party elects to terminate, Lessor shall
proceed to restore the leased premises to substantially the same form as prior to the damage or destruction. Work shall be commenced
as soon as reasonably possible, and thereafter shall proceed without interruption except for work stoppages on account of labor
disputes, and matters beyond the control of the Lessor. In the event that Lessor and Lessee are unable to agree as to (1) whether
the costs of repair exceed fifty percent (50%) of the value of the structure before any damage to the structure, or (2) the amount
of the rent reduction, if any, if the premises are partially damaged pursuant to Section 10.1 of (3) whether the rent should be
abated during a portion of, or all of the period of time during which the structure or the premises are being repaired, pursuant
to Section 10.2, or (4) whether the damage occurred or was caused as a result of the fault of the Lessee's invitees, customers,
agents, employees, vendors, contractors, subcontractors, patrons, common carriers or suppliers, then any such dispute shall
be resolved by arbitration in the manner provided in Section 20. |
10.3 |
Rent Abatement. Rent shall be abated during the repair of any damage to the extent the premises are un-leasable,
except that there shall be no rent abatement where the damage occurred as the result of the fault of Lessee, their agents, employees
or invitees. |
10.4 |
Damage Late in Term. If damage or destruction to which Paragraph 10.2 would apply occurs within ONE (1) year prior
to the end of the then current lease term, Lessee may elect to terminate the lease by notice in writing to Lessor given within
THIRTY (30) days after the date of the damage. |
SECTION 11. EMINENT DOMAIN
11.1 |
Partial Taking. If a portion of the leased premises is condemned, and Paragraph 11.2 does not apply, the lease shall
continue on the following terms: |
(a) Lessor shall be entitled to all of
the proceeds of condemnation, and Lessee shall have no claim against Lessor as a result of the condemnation.
(b) Lessor shall proceed as soon as reasonably
possible to make such repairs and alterations to the premises as are necessary to restore the remaining premises to a condition
as comparable as reasonably practicable to that existing at the time of the condemnation.
(c) After the date on which title vests
in the condemning authority or an earlier date on which alterations or repairs are commenced by Lessor to restore the balance
of the property in anticipating of taking, the rent shall be reduced in proportion to the reduction in value of the leased premises
as an economic unit on account of the partial taking. If the Lessor and Lessee are unable to agree upon the amount of the reduction
of rent regarding a partial taking, the amount of the reduction of the rent shall be determined by arbitration in the manner as
is provided in Section 20.
(d) If a portion of Lessor's property not
included in the leased premises is taken, and severance damages are awarded on account of the leased premises, or an award is
made for detriment to the leased premises as a result of activity by a public body not involving a physical taking of any portion
of the premises, this shall be regarded as a partial condemnation to which subparagraphs 11.1 (a) and (c) apply, and the rent
shall be reduced to the extent of reduction in rental value of the premises as though a portion had been physically taken.
11.2 |
Total Taking. If a condemning authority takes all of the leased premises or a portion sufficient to render the remaining
premises reasonably unsuitable for the use which Lessee was then making of the premises, the lease shall terminate as of the date
the title vests in the condemning authorities. Such termination shall have the same effect as termination under Paragraph 11.1
(a) above. Lessor shall be entitled to all of the proceeds of condemnation, and Lessee shall have no claim against Lessor as a
result of the condemnation. |
11.3 |
Sale in Lieu of Condemnation. Sale of all or part of the leased premises to a purchaser with the power of eminent
domain in the face of a threat or probability of the exercises of the power shall be treated for the purposes of this Section
11 as a taking by condemnation. |
SECTION 12. LIABILITY AND INDEMNITY
(a) Except with respect to activities for
which Lessor is responsible, Lessee shall pay as due all claims for work done on and for services rendered or material furnished
to the leased premises, and shall keep the premises free from any liens. If Lessee fails to pay any such claims or to discharge
any lien, Lessor may do so, and collect the cost as additional rent. Any amount so added shall bear interest at the rate of TWELVE
(12%) percent per annum from the date expended by Lessor, and shall be payable on demand. Such action by Lessor shall not constitute
a waiver of any right or remedy which Lessor may have on account of Lessee's default.
(b) Lessee may withhold payment of any
claim in connection with a good-faith dispute over the obligation to pay, so long as Lessor's property interests are not jeopardized.
If a lien is filed as a result of nonpayment, Lessee shall, within TEN (10) days deposit with Lessor cash or sufficient corporate
surety bond or other surety satisfactory to Lessor in an amount sufficient to discharge the lien, plus any costs, attorney's fees,
and other charges that could accrue as a result of a foreclosure or sale under the lien.
12.2 |
Indemnification. Lessee shall indemnify and hold Lessor harmless and free from any and all costs, expenses and liabilities,
including reasonable attorney's fees, arising by reason of any damage or injury to any person or property which may arise from
or be due to (1) the occupancy or use of the premises by the Lessee or Lessee's invitees, customers, agents, employees, vendors,
contractors, subcontractors, suppliers, patrons, or common carriers, and (2) any negligence or intentional misconduct of the Lessee
or the Lessee's invitees, customers, agents, employees, vendors, contractors, subcontractors, suppliers, patrons, or common carriers,
except to the extent that any such costs, expense or liability suffered by the Lessor was due solely to the negligence or intentional
misconduct of the Lessor. |
SECTION 13. QUIET ENJOYMENT; MORTGAGE PRIORITY
13.1 |
Lessor's Warranty. Lessor warrants that it is the owner of the leased premises, and has the right to lease them.
Lessor will defend Lessee's right to quiet enjoyment of the leased premises from the lawful claims of all persons during
the lease term. |
13.2 |
Mortgage Priority. This lease is and shall be prior to any mortgage or deed of trust ("Encumbrance") recorded
after the date of this lease and affecting the premises. However, if any lender holding such an Encumbrance requires that this
lease be subordinate to the Encumbrance, then Lessee agrees that the lease shall be subordinate to the Encumbrance if the holder
thereof agrees in writing with Lessee that so long as Lessee performs its obligations under this lease no foreclosure, deed given
in lieu of foreclosure, or sale, pursuant to the terms of the Encumbrance, or other steps or procedures taken under the Encumbrance
shall affect Lessee's rights under this lease. If the foregoing condition is met, Lessee shall execute the written agreement,
and any other documents required by the holder of the Encumbrance to accomplish the purposes of this paragraph. If the premises
are sold as a result of foreclosure of any Encumbrance thereon, or otherwise transferred by Lessor or any successor, Lessee shall
attorn to the purchaser or transferee. |
13.3 |
Estoppel Certificate. Either party will within TWENTY (20) days after notice from the other, execute and deliver
to the other party a certificate stating whether or not this lease has been modified, and is in full force and effect, and specifying
any modifications or alleged breaches by the other party. The Certificate shall also state the amount of monthly base rent, the
dates to which rent has been paid in advance, and the amount of any security deposit or prepaid rent. Failure to deliver the certificate
within the specified time shall be conclusive upon the party of whom the certificate was requested, that the lease is in full
force and effect, and has not been modified except as may be represented by the party requesting the certificate. |
SECTION 14. ASSIGNMENT AND SUBLEASE
No part of the leased property may be assigned,
mortgaged, or subleased, nor may a right of use of any portion of the property be conferred on any third person by any other means
by the Lessee, without the prior written consent of Lessor, which consent of the Lessor can be withheld for any reason or no reason.
If Lessee is a limited liability company or a corporation or any other type of legal entity, then no shareholder, partner, member
or any other person controlling any interest in any such corporation, limited liability company, partnership or other legal entity
shall have the right to transfer any interest in any such legal entity without the prior consent of Lessor, which consent shall
not be unreasonably withheld. In the event that Lessor incurs attorney's fees, accountant fees or other professional fees in evaluating
any proposed transfer of any (1) interest by any person of any ownership interest in the Lessee, or (2) any assignment or sublease
regarding the premises, Lessee shall within ten (10) days of the receipt of any statement for any such professional fees and expenses,
forthwith pay to Lessor all such fees of any professionals charged to Lessor by such professionals to evaluate any such proposed
transfer of any interest in any legal entity or any proposed assignment or sublease regarding the premises whether or not the
Lessor shall subsequently approve or disapprove any such proposed transfer of any ownership interest in the Lessee or any assignment
or sublease regarding the premises or the Lease Agreement.
SECTION 15. DEFAULT - THE FOLLOWING SHALL
BE EVENTS OF DEFAULT:
15.1 |
Default in Rent. Failure of Lessee to pay any rent or other charge within TEN (1O) days after it is due. At no time
is Lessor required to give any written notice to Lessee in the event that Lessee shall fail to pay when due any amount of base
rent, monthly real property tax payment or monthly insurance premium payment. |
15.2 |
Default in Other Covenants. Failure of Lessee to comply with any term or condition, or fulfill any obligation of
the lease (other than the payment of rent or other charges) within TWENTY (20) days after written notice sent by Lessor or Lessor's
agent pursuant to Section 18.3 specifying the nature of the default with reasonable particularity. If the default is of such a
nature that it cannot be completely remedied within the TWENTY (20) day period, this provision shall be complied with if Lessee
begins correction of the default within the TWENTY (20) day period, and thereafter proceeds with reasonable diligence, and in
good faith to effect the remedy as soon as practicable. |
15.3 |
Insolvency. Insolvency of Lessee; an assignment by Lessee for the benefit of creditors; the filing by Lessee of
a voluntary petition in bankruptcy; an adjudication that Lessee is bankrupt or the appointment of a receiver of the properties
of Lessee; the filing of any involuntary petition or bankruptcy, and failure of Lessee to secure a dismissal of the petition
within THIRTY (30) days after filing; attachment of or the levying of execution of the leasehold interest, and failure of Lessee
to secure discharge of the attachment or release of the levy of execution within TEN (10) days. If Lessee consists of two
or more individuals or business entities, the events of default specified in this Paragraph 15.3 shall apply to each individual
or business entities, unless within TEN (10) days after an event of default occurs, the remaining individuals produce evidence
satisfactory to Lessor that they have unconditionally acquired the interest of the one causing the default. If the lease has been
assigned, the events of default so specified shall apply only with respect to the one then exercising the rights of Lessee under
the lease. |
15.4 |
Abandonment. Failure of Lessee for TEN (10) days or more to occupy the property for one or more of the purposes
permitted under this lease unless such failure is excused under other provisions of this lease shall be an abandonment of the
property. |
SECTION 16. REMEDIES ON DEFAULT
16.1 |
Termination. In the event of a default the lease may be terminated at the option of the Lessor by written notice
to Lessee. Whether or not the lease is terminated by the election of Lessor or otherwise, Lessor shall be entitled to recover
damages from Lessee in regard to the Lessee's defaults, and Lessor may re-enter, take possession of the premises and the property
and all parts thereof, and remove any persons or property by legal action or by self-help with the use of reasonable force, and
without liability for damages, and without having accepted a surrender. |
16.2 |
Reletting. Following re-entry or abandonment, Lessor may relet the premises, and in that connection may make any
suitable alterations or refurbish the premises, or both, or change the character or use of the premises, but Lessor shall not
be required to relet for any use or purpose other than that specified in the lease or which Lessor may reasonably consider injurious
to the premises, or to any Lessee which Lessor may reasonably consider objectionable. Lessor may relet all or part of the premises,
alone or in conjunction with other properties, for a term longer or shorter than the term of this lease, upon any reasonable terms
and conditions, including the granting of some rent-free occupancy or other rent concession. |
16.3 |
Damages. In the event of termination of the Real Estate Lease Agreement or of the lease, or the retaking of possession
of the premises or the property following default, Lessor shall be entitled to recover immediately, without waiting until the
due date of any future base rent or other amount, or until the date fixed for expiration of the lease term, the following amounts
as damages: |
(a) The loss of reasonable rental value,
including but not limited to, all unpaid base rent, reimbursement of insurance premiums and expenses, reimbursement for repairs
assumed by Lessor, all insurance costs, all real property taxes, utility charges and all other additional rent and damages of
every type and kind owed by Lessee to Lessor from the date of Lessee's default until a new Lessee is, or with the exercise of
reasonable efforts by Lessor could have been, secured and paying out to Lessor.
(b) The reasonable costs of re-entry and
reletting, including without limitation the cost of any clean up, refurbishing, removal of Lessee's property and fixtures, or
any other expense occasioned by Lessee's failure to quit the premises upon termination, and to leave them in the required conditioning,
any remodeling costs, attorney's fees, court costs, Agent commissions, and advertising costs.
(c) Any excess of the value of the rent
and all of Lessee's other obligations under this lease over the reasonable expected return from the premises for the period commencing
on the earlier of the date of trial or the date the premises are relet and continuing through the end of the term. The present
value of future amounts will be computed using a discount rate equal to the prime loan rate of major Oregon banks in effect on
the date of trial.
16.4 |
Right to Sue More Than Once. Lessor may sue periodically to recover damages during the period corresponding to the
remainder of the lease term, and no action for damages shall bar a later action for damages subsequently accruing. |
16.5 |
Remedies Cumulative. The foregoing remedies shall be in addition to, and shall not exclude any other remedy available
to Lessor under applicable law. |
16.6 |
Lessor's Right to Cure Defaults. If Lessee fails to perform any obligation pursuant to this Agreement, Lessor shall
have the option, but not a duty, to perform any such Lessee obligation after thirty (30) days prior written notice to Lessee.
All of Lessor's expenditures to correct Lessee's default shall be reimbursed by Lessee on demand with interest at the rate of
twelve percent (12%) simple interest per year from the date of the expenditure by Lessor. Such payment or action by Lessor shall
in no way waive any other remedies available to Lessor because of any Tenant default. |
SECTION 17. SURRENDER AT EXPIRATION
17.1 |
Condition of Premises. Upon expiration of the lease term or earlier termination on account of default, Lessee shall
deliver all keys to Lessor, and surrender the leased premises in good order and repair, reasonable wear and tear excepted, and
broom clean. Alterations constructed by Lessee with permission from Lessor shall not be removed or restored to original condition,
unless the terms of permission for the alteration so require. Lessee's obligations under this paragraph shall be subordinate to
the provisions of Section 10 related to destruction. |
(a) All fixtures, improvements or additions
placed upon the leased premises during the lease term, other than Lessee's trade fixtures, shall, at Lessor's option, become the
property of Lessor. If Lessor so elects, Lessee shall remove any or all fixtures which would otherwise remain the property of
Lessor, and shall repair any physical damage resulting from the removal. If Lessee fails to remove such fixtures, Lessor may do
so, and charge the cost to Lessee, with interest at the rate of twelve (12%) percent per annum, from the date of expenditure.
(b) Prior to expiration or termination
of the lease term, Lessee shall remove all furnishings, furniture, and trade fixtures which remain its property. If Lessee fails
to do so, this shall be an abandonment of the property, and Lessor may retain the property, and all rights of Lessee with respect
to it shall cease, or, by notice in writing given to Lessee within TWENTY (20) days after removal was required, Lessor may elect
to hold Lessee to its obligation or removal. If Lessor elects to require Lessee to remove, Lessor may effect a removal, and place
the property in public storage for Lessee's account. Lessee shall be liable to Lessor for the cost of removal, transportation
to storage, and storage costs, plus interest at the rate of twelve (12%) percent per annum, on all such expenses from the date
of expenditure by Lessor.
(a) If Lessee does not vacate the leased
premises at the time required, Lessor shall have the option to treat Lessee as a Lessee from month-to-month, subject to all of
the provisions of this lease except the provisions for term and renewal. Failure of Lessee to remove fixtures, furniture, furnishing
or trade fixtures which under this lease shall constitute a failure to vacate to which this paragraph shall apply if the property
not removed will substantially interfere with occupancy of the premises by another Lessee or with occupancy by Lessor for any
purpose, including preparation for a new Lessee. Lessee's monthly rent shall automatically increase to an amount equal to 150%
of the last month's rental rate during the specified lease term, for any holdover period.
(b) If a month-to-month tenancy results
from a holdover by Lessee under this Paragraph 17.3, the tenancy shall be terminable at the end of any monthly rental period on
written notice from Lessor, given not less than TEN (10) days prior to the termination date which shall be specified in the notice.
Lessee waives any notice which would otherwise be provided by law with respect to a month-to-month tenancy.
SECTION 18. MISCELLANEOUS
18.1 |
Nonwaiver. Waiver by either party of strict performance of any provision of this lease shall not be a waiver of
or prejudice the party's right to require strict performance of the same provision in the future or of any other provision. |
18.2 |
Attorney Fees In the Event of Civil Action. If any civil claim or any legal action of any kind is instituted in
connection with any controversy arising out of or regarding this Real Estate Lease Agreement or any part thereof, the prevailing
party shall be entitled to recover in addition to costs such sum as the court may adjudge as the prevailing party's reasonable
attorney's fees at trial, on appeal or in regard to a Petition for Review. In addition, the prevailing party shall be entitled
to recover it's attorney's fees at trial or on appeal in regard to any and all matters or proceedings in any Federal Bankruptcy
Court or in regard to any Federal Bankruptcy law matter, Eminent Domain Matter or under any probate proceedings or in connection
with any State or Federal Tax Liens. In addition, the prevailing party shall be entitled to an award of reasonable attorney's
fees in regard to any Bankruptcy proceedings in which any such prevailing party obtains relief from an automatic stay or judicial
stay or to enforce any right or obligation owed to the prevailing party. In addition, the prevailing party shall be entitled to
an additional award of attorney's fees in any trial court, appellate court or any Bankruptcy Court reasonably estimated by the
prevailing party and approved by any such court in regard to the enforcement of any judgment rendered in favor of the prevailing
party. |
18.3 |
Attorney fees In the Event of Lessor's Use of Attorney to Enforce Lease Terms Outside of Civil Action. In any legal
action, other than civil action as per term 18.2 above, to enforce the terms of this lease, such as, for example, for collection
of rent owed by lessee to lessor, or for reimbursement of costs due to damages to the premises cause by lessee, the Owner or agent
shall be entitled to all reasonable costs incurred in connection with such action, including a reasonable attorney's fee, unless
reversed, set aside, or modified pursuant to a subsequent civil action, subsequent settlement, or subsequent agreement. |
18.4 |
Notices. Any notice required or permitted under this lease shall be given when actually delivered or FORTY-EIGHT
(48) hours after deposited in United States mail as certified mail addressed to the address first given in this lease, or to such
other address as may be specified from time to time by either of the parties in writing. |
18.5 |
Succession. Subject to the above-stated limitations on transfer of Lessee's interest, this lease shall be binding
upon and inure to the benefit of the parties, their respective successors, and assigns. |
18.6 |
Recordation. This lease shall not be recorded without the prior written consent of the Lessor. |
18.7 |
Entry for Inspection. Lessor, or Lessor's agent, shall have the right to enter upon the premises, during normal
business hours, in a manner that does not interfere with Lessee's business or Lessee's customers, to determine Lessee's compliance
with this lease, to make necessary repairs to the building or to the premises, or to show the premises to any prospective Lessee
or purchase, and, in addition, shall have the right, at any time during the last four months of the term of this lease, to place
and maintain upon the premises notices for leasing or selling the premises. |
18.8 |
Interest on Rent or Other Charges. Any rent or other payment required of Lessee by this lease shall, if not paid
within TEN (10) days after it is due, bear interest at the rate of twelve (12%) percent per annum from the due date until paid. |
18.9 |
Proration of Rent. In the event of commencement or termination of this lease at a time other than the beginning
or end of one of the specified rental periods, then the rent shall be prorated as of the date of commencement or termination,
and in the event of termination for reasons other than default, all prepaid rent shall be refunded to Lessee or paid on its account. |
SECTION 19. OTHER AGREEMENTS BETWEEN LESSEE
AND LESSOR
● |
Lessee is permitted to add second floor subject to city of Springfield permit. See Exhibit "A" for layout. |
● |
Property has one meter for electricity and one meter for natural gas. Lessor will determine pro-rata share of utility costs to
be allocated for tenant's usage. Lessor will periodically review utility billing and make adjustments to allocations as necessary.
Lessor shall notify Lessee of any change to the amount of Lessee's utility allocation in writing 10 days prior to the effective
date of change. Lessor shall settle any disputes that may arise regarding utility allocation. Lessee is to install its own sub-electrical
meter, the same as the other sub- meter in the facilities. |
Lessee has the option to lease 7,560 square
feet (54x140), see Exhibit "B", with a term of five (5) years from January 1, 2015 through December 31, 2019 at the
rate of $0.45 per square foot. Rental payment shall commence on January 1, 2015.
Lessee is to notify Lessor by written notice
no later than November 15, 2014 to confirm Lessee leasing said area. After November 15, 2014 the option is terminated.
Lessee is to pay Lessor $15,000.00 for option
at lease signing. If option is exercised by November 15, 2014 the $15,000.00 option price is credited toward rent. If option is
not exercised then option fee is forfeited to Lessor.
The rental rate for lease will control the
rate for optioned area 7,560 per square feet at two percent (2%) per annum increase.
Lessee to provide corridor area, without charge,
on Lessee's south wall for Lessor to construct a secure corridor for east tenant's employee's access to bathrooms. (See Exhibit
B for location)
Lessor, or neighboring tenant, would have
access to electrical panels during normal working hours in Lessee's area.
SECTION 20. ARBITRATION
If any dispute arises between Lessor and Lessee
regarding matters pertaining to partial destruction, partial damage or partial taking, or rent abatement or rent reduction in
regard thereto, such disputes shall be determined by arbitration. The arbitration of any disputes regarding this lease shall be
restricted to the disputes described in Sections 10.1, 10.2, 10.3, 10.4 and 11.1 of this Lease Agreement unless the parties mutually
agree in writing to resolve any other disputes pursuant to arbitration. Either Lessor or Lessee may request arbitration in the
event that Lessor and Lessee are unable to resolve any dispute which is subject to resolution pursuant to arbitration as set forth
in this Lease Agreement. For a period of ten (10) business days, not including Saturdays, Sundays and legal holidays, after a
written request for arbitration is sent by either the Lessor or Lessee to the other party pursuant to Section 18.3, the parties
shall attempt to agree upon the identity of the arbitrator who shall be an independent real estate appraiser or leasing agent,
or other knowledgeable real estate professional with at least ten (10) years of experience. The parties shall thereafter promptly
request in writing that the agreed upon professional real estate person agree to serve as an arbitrator in regard to any such
disputed matter. If the parties are unable to agree on the identity of an arbitrator, each party shall select an arbitrator with
the above described professional qualifications and the two arbitrators shall select a third arbitrator, unless the parties agree
(1) to submit a list of qualified arbitrators to the presiding judge of the Circuit Court of the State of Oregon for Lane County,
and (2) that the selection by said presiding judge of a single arbitrator shall be binding on the parties as to the identity of
the arbitrator. The arbitrator or arbitrators shall proceed according to the Oregon Statutes governing arbitration, and the Oregon
Rules of Civil Procedure and the local Lane County Court Rules if appropriate, shall apply in regard to the arbitration process,
procedures and pleadings, if any. The award of the arbitrator or arbitrators shall have the effect as described in the Oregon
Statues pertaining to arbitration. The arbitration shall in any event take place in Lane County, Oregon. The costs and fees of
all arbitrators shall be shared and paid equally by Lessor and Lessee. Lessor and Lessee shall each pay their own attorney's fees
and costs incurred in connection with the arbitration, regardless of the ruling, outcome or contents of any order or judgment
entered in regard to the aforementioned arbitration.
SECTION 21. ADDENDUM
21.1 |
An addendum signed by both the Lessor and the Lessee is attached, is not attached hereto, and if attached becomes a part of this
Lease Agreement. |
THIS IS A LEGALLY BINDING AGREEMENT. IF
NOT UNDERSTOOD BY ANY PARTIES HERETO, THEY SHOULD SEEK COMPETENT LEGAL AND/OR ACCOUNTING ADVICE PRIOR TO SIGNING.
DATED this ____ day of
______________, ______
LESSOR: |
|
LESSEE: |
|
|
|
Oakway Golf Course, Inc. |
|
Diego Pellicer Worldwide, Inc. |
|
|
|
|
|
|
|
|
|
|
|
/s/ Steve Hubbard |
John P. Hammer, President |
|
Steve Hubbard, CFO, Secretary |
ADDRESS: |
PO BOX 2266 |
|
ADDRESS: |
3496 Fairview Way |
|
|
|
|
|
CITY/STATE: |
Eugene, OR ZIP:97402 |
|
CITY/STATE: |
West Linn, OR: ZIP:97068 |
|
|
|
|
|
PHONE: |
541-683-1166 |
|
PHONE: |
206-427-4100 |
|
|
|
|
|
FAX: |
541-683-2449 |
|
CELL: |
503-635-7097 |
|
|
|
|
|
EMAIL: |
jphammer@nu-world.com |
|
EMAIL: |
sshubbard@earthlink.net |
|
|
|
|
|
|
|
|
TAX ID #: |
46-3547924 |
|
|
|
|
|
|
|
|
S.S. 4: |
549-78-5651 |
|
|
|
|
|
|
|
|
O.D.L.: |
4287672 |
|
|
|
|
|
|
|
|
Alternate Contact: Ron Throgmartin 678-546-8598
|
ADDENDUM
A
FOR LEASE DATED SEPTEMBER 15, 2014
Lessor and Lessee acknowledge that lease dated
August 26, 2014 is terminated between Lessor and Lessee as of the signing of that lease dated September 15, 2014.
The deposit of $18,000.00, $3,000.00 for security
deposit, $5,000.00 for paid rent for August, September, and October, 2014, is transferred to lease dated September 15, 2014 as
paid rent and deposit.
Lessor and Lessee acknowledge if Lessee exercises
lease option for another 7,560 square feet by November 15, 2014, all terms of the September 15, 2014 lease apply to include lease
options, rental rate per square feet, and all terms and conditions apply.
LESSOR: |
|
LESSEE: |
|
|
|
Oakway Golf Course, Inc. |
|
Diego Pellicer Worldwide, Inc. |
|
|
|
|
|
BY: |
/s/ John P. Hammer |
|
BY: |
/s/ Steve Hubbard |
|
John P. Hammer, President |
|
|
Steve Hubbard, CFO, Secretary |
|
|
|
|
|
DATE: |
9-24-14 |
|
DATE: |
9/24/14 |
Exhibit 10.11
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
1 of 20 |
|
SUBLEASE
AGREEMENT
THIS
SUBLEASE AGREEMENT (the "Sublease”) is entered into and effective this 1st day of March, 2014, between Diego
Pellicer Worldwide Inc (“Tenant”), and Diego Pellicer, Inc. ("Subtenant”). Tenant entered into a lease
(the “Master Lease") with M-P Properties as landlord ("Landlord”), dated September 19, 2013, leasing the
premises legally described on the attached Exhibit 1 (“Master Premises”). A copy of the Master Lease, including all
amendments, is attached as Exhibit 2. Tenant and Subtenant agree as follows:
| a. | Subleased
Premises. Tenant leases to Subtenant and Subtenant leases from Tenant that portion
of the Master Premises consisting of an agreed area of 3,700 rentable square feet of
area on the 1st & 2nd floor(s) of the Master Premises, outlined on the floor plan
attached as Exhibit 3 (the “Subleased Premises"), and commonly known as Entire
Building. |
| b. | Sublease
Commencement Date. The Sublease shall be for a period of 58 months and shall commence
on March 1, 2014 or such earlier or later date as provided in Section 3 (the “Sublease
Commencement Date"). |
| c. | Sublease
Termination Date. The Sublease shall terminate at midnight on September 30, 2018 or
one day prior to the termination date of the Master Lease, whichever is earlier, unless
sooner terminated in accordance with the terms of this Sublease (the "Sublease Termination
Date”). |
| d. | Base
Rent. Subtenant shall pay to Tenant base monthly rent (check one): ☐ $_________,
or þ according to the Rent Rider attached hereto (“Base
Rent”), Rent shall be payable at Tenant's address shown in Section 1(h) below,
or such other place designated in writing by Tenant. |
| e. | Prepaid
Rent. Upon execution of this Sublease, Subtenant shall deliver to Tenant the sum
of $0.00 as prepaid rent, to be applied to the Rent due for months __________ through
____________ of the Sublease. |
| f. | Security
Deposit. Upon execution of this Sublease, Subtenant shall deliver to Tenant the sum
of $0.00 to be held as a security deposit pursuant to Section 5 below. The security deposit
shall be in the form of (check one): ☐ cash, ☐ letter of credit according to the Letter
of Credit Rider (CBA Form LCR), attached hereto, ☐ check. |
| g. | Permitted
Use. The Subleased Premises shall be used only for Sale & production of cannabis
and related products, per Washington State law, and for no other purpose without the
prior written consent of Tenant (The "Permitted Use”). |
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
2 of 20 |
|
SUBLEASE
AGREEMENT
|
h. |
Notice and Payment Addresses |
Tenant:
Diego Pellicer Worldwide Inc
21300 Victory
Blvd, Suite 740
Woodland
Hills CA 91367
Fax No.:
________________
Email: __________________
Subtenant:
Diego Pellicer, Inc
2215 4th
Avenue S,
Seattle,
WA 98134
Fax No.:
________________
Email: __________________
|
i. |
Subtenant's Sublease Share. Subtenant’s Sublease Share of
any operating costs, additional rent, or other amounts payable by Tenant under the Master Lease is 100% of such amounts, based
upon the ratio of the agreed rentable area of the Subleased Premises to the agreed rentable area of the Master Premises |
| a. | Lease
of Premises. Tenant leases to Subtenant, and Subtenant leases Tenant the Subleased
Premises upon the terms specified in this Sublease. |
| b. | Acceptance
of Premises. Except as specified elsewhere in this Sublease, Tenant makes no representations
or warranties to Subtenant regarding the Subleased Premises, including the structural
condition of the Subleased Premises or the condition of all mechanical, electrical, and
other systems on the Subleased Premises. Except for any Subtenant improvements described
on attached Exhibit 4 to be completed by Tenant (“Tenant's Work”), Subtenant
shall be responsible for performing any work necessary to bring the Subleased Premises
into a condition satisfactory to Subtenant. By signing this Sublease, Subtenant acknowledges
that it has had adequate opportunity investigate the Subleased Premises, acknowledges
responsibility for making any corrections, alterations and repairs to the Subleased Premises
(other than the Tenant's Work in Exhibit 4), and acknowledges that the time needed to
complete any such items shall not delay the Sublease Commencement Date. |
| c. | Subtenant
Improvements. Attached Exhibit 4 sets forth all of Tenant's Work, if any, and all
Subtenant improvements to be completed by Subtenant (the “Subtenant's Work”),
that will be performed on the Subleased Premises. Responsibility for design, payment
and performance of all such work shall be as set forth on attached Exhibit 4. |
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
3 of 20 |
|
SUBLEASE
AGREEMENT
| 3. | TERM.
Subtenant acknowledges that Tenant may need to receive Landlord's consent to this Sublease as provided in Sections 21 and
24 of this Sublease prior to Subtenant occupying the Subleased Premises, and Subtenant shall not occupy the Subleased Premises
without the prior written consent of Tenant. If Subtenant occupies the Subleased Premises before the Sublease Commencement Date
specified in Section 1, then such date of occupancy shall be the Sublease Commencement Date. If Tenant acts diligently to make
the Subleased Premises available to Subtenant, neither Tenant nor any agent or employee of Tenant shall be liable for any damage
or Toss due to Tenant's inability or failure to deliver possession of the Premises to Subtenant as provided on this Sublease.
In such case, the Rent shall abate until delivery of possession, but the Sublease Termination Date shall not be extended by such
delay. Notwithstanding the foregoing, if Tenant has not delivered possession to Subtenant within 60 days (sixty (60) days if not
filled in) after the date specified in Section 1, Subtenant may elect to cancel this Sublease by giving written notice to Tenant
within ten (10) days after such time period ends, if Subtenant gives such notice, this Sublease shall be cancelled, all prepaid
rent and security deposits shall be refunded to Subtenant, and neither Tenant nor Subtenant shall have any further obligations
to the other. |
| a. | Payment
of Rent. Subtenant shall pay Tenant without notice, demand, deduction or offset, in lawful money of the United States,
the monthly Base Rental stated in Section 1 in advance on or before the first day of each month during the Sublease Term
beginning on (check one): þ
the Sublease Commencement Date, or ☐ _____________________ (if no date specified, then on the Sublease Commencement
Date), and any otter additional payments due to Tenant (“Additional Rent”) (collectively the "Rent”)
when required under this Sublease. Payments for any partial month at the beginning or end of the Sublease term shall be
prorated. All payments due to Tenant under this Sublease, including late fees and interest, shall also constitute Additional
Rent, and upon failure of Subtenant to pay any such costs, charges or expenses, Tenant shall have the same rights and
remedies as otherwise provided in this Sublease for the failure of Subtenant to pay rent. |
| b. | Late
Charges; Default Interest. If any sums payable by Subtenant to Tenant under this
Sublease are not received within five (5) days of their due date, Subtenant shall pay
Tenant an amount equal to the sum which would be payable by Tenant to the Landlord for
an equivalent default under the master Lease or five percent (5%) of the delinquent amount
for the cost of collecting and handling such late payment in addition to the amount due
and as Additional Rent, whichever is greater All delinquent sums not paid by Subtenant
within five (5) business days of the due date shall, at Tenant's option, be interest
at the rate the Tenant would pay the Landlord under the Master Lease for an equivalent
default or the highest rate of interest allowable by law, whichever is less. Interest
on all delinquent amounts shall be calculated from the original due dale to the date
of payment. |
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
4 of 20 |
|
SUBLEASE
AGREEMENT
| c. | Less
Than Full Payment. Tenant's acceptance of less than the full amount of any payment
due from Subtenant shall not be deemed an accord and satisfaction or compromise of such
payment unless Tenant specifically consents in writing to payment of such lesser sum
as an accord and satisfaction or compromise of the amount which Tenant claims. Any portion
that remains to be paid by Tenant shall be subject to the late charges and default interest
provisions of this Section. |
|
5. |
SECURITY
DEPOSIT. Upon execution of this Sublease, Subtenant shall deliver to Tenant the security deposit specified in Section
1 above. Tenant’s obligations with respect to the security deposit are those of a debtor and not of a trustee, and Tenant
may commingle the security deposit with its other funds. If Subtenant breaches any covenant or condition of this Sublease,
including but not limited to the payment of Rent, Tenant may apply all or any part of the security deposit to the payment
of any sum in default and any damage suffered by Tenant as a result of Subtenant's breach. Subtenant acknowledges, however,
that the security deposit shall not be considered as a measure of Subtenant’s damages in case of default by Subtenant
and any payment to Tenant from the security deposit shall not be construed as a payment of liquidated damages for Subtenant's
default. If Tenant applies the security deposit as contemplated by this Section, Subtenant shall, within five (5) days after
written demand therefore by Tenant, deposit with Tenant the amount so applied. If Subtenant complies with all of the covenants
and conditions of this Sublease throughout the Sublease term, the security deposit shall be repaid to Subtenant without interest
within thirty (30) days after the surrender of the Subleased Premises by Subtenant in the condition required by Section 9
of this Lease. |
|
6. |
MASTER LEASE. Tenant represents to Subtenant: (a) that Tenant has
delivered to Subtenant a full and complete copy of the Master Lease and all other agreements between Landlord and Tenant relating
to the leasing, use, and occupancy of the Subleased Premises (which may contain redacted business terms) and (b) that Tenant has
received no uncured default notice from Landlord under the Master Lease. Tenant shall not agree to an amendment to the Master
Lease which would have an adverse effect on Subtenant's occupancy of the Subleased Premises or its use of the Subleased Premises
for their intended purpose, without obtaining Subtenant's prior written approval, which shall not be unreasonably withheld, conditioned,
or delayed. Subtenant represents that it has read and is familiar with the terms of the Master Lease. |
This
Sublease is subject and subordinate to the Master Lease. If the Master Lease terminates, this Sublease shall terminate. Tenant
and Subtenant shall not, by their omission or act, do or permit anything to be done which would cause a default under the Master
Lease. If the Master Lease terminates or is forfeited as a result of a default or breach by Tenant or Subtenant under this Sublease
and/or the Master Lease, then the defaulting party shall be liable to the non-defaulting party for the damage suffered as a result
of such termination or forfeiture. Tenant shall exercise due diligence in attempting to cause Landlord to perform its obligations
under the Master Lease for the benefit of the Subtenant.
All
the terms, covenants and conditions contained in the Master Lease are incorporated into and made a part of this Sublease as if
Tenant were the landlord under the Master Lease, the Subtenant were the tenant under the Master Lease, and the Subleased Premises
were the Master Premises except as may be inconsistent with the terms contained in this Sublease and the following: Sublessor
may cancel sublease, in Sublessors sole & absolute discretion, by giving Subtlessee 90 days written notice (none if not specified).
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
5 of 20 |
|
SUBLEASE
AGREEMENT
| 7. | ADDITIONAL
CHARGES. If Tenant shall be charged for additional rent or other sums pursuant to
the provisions of the Masker Lease, Subtenant shall be liable for its Sublease Share,
stated in Section 1 above, of such additional rent or sums, including without limitation,
payments for taxes, common area charges, utilities and services, or operating costs.
If any such rent or sums shall be due to excessive use by Subtenant of utilities or services
provided to the Subleased Premises, as reasonably determined by Tenant, such excess shall
be paid in its entirety by Subtenant. If Subtenant shall procure any additional service
for the Subleased Premises, including but not limited to after-hour HVAC services, Subtenant
shall pay for same at the rates charged by Landlord and shall make such payment to Tenant
or Landlord, as Tenant shall direct. Tenant shall have no duty to perform any obligations
which are, by their nature, the obligation of an owner or manager of real property. Any
rent or other sums payable by Subtenant under this Section shall be Additional Rent and
paid to Tenant no later than five (5) days before they are due from Tenant to Landlord.
If Tenant shall receive any refund for Additional Rent or sums paid under the Master
Lease, Subtenant shall be entitled to the return of so much thereof as shall be attributable
to prior payments by Subtenant. Tenant shall, upon request by Subtenant furnish Subtenant
with copies of all statements submitted by Landlord of actual or estimated Additional
Rent or sums. |
Notwithstanding
anything herein, contained, the only services or utilities to which Subtenant is entitled under this Sublease are those to which
Tenant is entitled under the Master Lease.
| 8. | ALTERATIONS.
Subtenant may make alterations, additions or improvements to the Subleased Premise,
including any of Subtenant's Work identified on attached Exhibit 4 (the “Alterations”),
with the prior written consent of Tenant. The term “Alterations" shall not
include the installation of shelves, movable partitions, Subtenant’s equipment,
and trade fixtures which may be performed without damaging existing improvements or the
structural integrity of the Subleased Premises, and Tenant's consent shall not be required
for Subtenant's installation of those items except to the extent Tenant must obtain the
consent of Landlord under the Master Lease for such installations. Subtenant shall perform
all work within the Subleased Premises at Subtenant's expense in compliance with all
applicable laws and shall complete all Alterations in accordance with plans and specifications
approved by Tenant, using contractors approved by Tenant, and in a manner so as to not
unreasonably interfere with other tenants. Subtenant shall pay, when due, all claims
for labor or materials furnished to or for Subtenant at or for use in the Subleased Premises,
which claims are or may be secured by any mechanics' or materialmens’ liens against
the Subleased Premises or any interest therein. Subtenant shall remove all Alterations
at the end of the Sublease term unless Tenant conditioned its consent upon Subtenant
leaving a specified Alteration at the Subleased Premises, in which ease Subtenant shall
not remove such Alteration and it shall become Landlord's property. Subtenant shall in
repair any damage to the Subleased Premises caused by removal of Alterations. |
| 9. | REPAIRS
AND MAINTENANCE; SURRENDER. Subtenant shall, at its sole expense, maintain the Subleased
Premises in good condition and promptly make all repairs and replacements, whether structural
or non-structural, necessary to keep the Subleased Premises safe and in good condition,
including all utilities and other systems serving the Subleased Premises. Subtenant shall
not damage any demising wall or disturb the structural integrity of the Subleased Premises
and shall promptly repair any damage or injury done to any such demising walls or structural
elements caused by Subtenant or its employees, officers, agents, servants, contractors,
customers, clients, visitors, guests, or other licensees or invitees. If Subtenant fails
to maintain or repair the Subleased Premises, Tenant may enter the Subleased Premises
and perform such repair or maintenance on behalf of Subtenant In such case, Subtenant
shall be obligated to pay to Tenant immediately upon receipt of demand for payment as
additional Rent all costs incurred by Tenant, Subtenant shall only be obligated to repair
or maintain those portions of the Subleased Premises as provided in the Master Lease.
Tenant shall not be required to perform changes to the Subleased Premises because of
the enactment of any law, ordinance, regulation or code during the Sublease term. Notwithstanding
anything in this Section to the contrary, Subtenant shall not be responsible for any
repairs to the Subleased Premises made necessary by the acts of Tenant, Landlord or their
employees, officers, agents, servants, contractors, customers, clients, visitors, guests,
or other licensees or invitees. |
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
6 of 20 |
|
SUBLEASE
AGREEMENT
Upon
expiration of the Subleased Lease term, whether by lapse of time or otherwise, Subtenant shall promptly and peacefully surrender
the Subleased Premises, together with all keys, to Tenant in as good condition as when received by Subtenant or as thereafter
improved, reasonable wear and tear and insured casualty excepted.
|
10. |
ACCESS AND RIGHT OF ENTRY. After reasonable notice from Tenant (except
in cases of emergency, where no notice is required), Subtenant shalt permit Tenant and/or Landlord and their agents, employees
and contractors to enter the Subleased Premises at all reasonable times to make repairs, alterations, improvements or inspections.
This Section shall not impose any repair or other obligation upon Tenant not expressly stated elsewhere in this Sublease After
reasonable notice to Subtenant, Tenant or Landlord shall have the right to enter the Subleased Premises for the purpose of (a)
showing the Subleased Premises to prospective purchasers or lenders at any time, and to prospective tenants within one hundred
eighty (180) days prior to the expiration or sooner termination of the Sublease term; and (b) for posting “for lease"
signs within one hundred eighty (180) days prior to the expiration or sooner termination of the Sublease term. |
| 11. | DESTRUCTION
OR CONDEMNATION. |
| a. | Damage
and Repair. If Landlord or Tenant terminate the Master Lease based on casualty to
the property in accordance with the Master Lease, this Sublease shall terminate on the
same date. If the Subleased Premises or the portion of the property necessary for Subtenants
occupancy are damaged, destroyed or rendered untenantable, by fire or other casualty,
Tenant may, at its option: (a) terminate this Sublease, or (b) restore (or cause Tenant
to restore) the Subleased Premises and the portion of the property necessary for Subtenant’s
occupancy to their previous condition. Provided, however, if such casualty event occurs
during the last six (6) months of the Sublease term (after considering any option to
extend the term timely exercised by Subtenant) then either Subtenant or Tenant may elect
to terminate this Sublease. If, within sixty (60) days after receipt by Tenant from Subtenant
of written notice that Subtenant deems the Subleased Premises or the portion of the property
necessary for Tenant's occupancy untenantable. Tenant fails to notify Subtenant of its
election to restore those areas, or if Tenant is unable to restore those areas within
six (6) months of the date of the casualty event, then Subtenant may elect to terminate
this Sublease |
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
7 of 20 |
|
SUBLEASE
AGREEMENT
If
Tenant restores the Subleased Premises or the property under this Section, Tenant shall proceed with reasonable diligence to complete
the work, and the base lent shall be abated in the same proportion as the untenantable portion of the Subleased Premises bears
to the whole Subleased Premises, provided that there shall be a rent abatement only if the damage Of destruction of the Subleased
Premises or the property did not result from, or was not contributed to directly or indirectly by the act, fault or neglect of
Subtenant or Subtenant's employees, officers, agents, servants, contactors, customers, clients, visitors, guests, or other licensees
or invitees. Provided, if Tenant complies with its obligations under this Section, no damages, compensation or claim shall be
payable by Tenant for inconvenience, loss of business or annoyance directly, incidentally or consequentially arising from any
repair or restoration of any portion of the Subleased Premises or the property. Tenant shall have no obligation to carry insurance
of any kind for the protection of Subtenant Or any alterations or improvements paid for by Subtenant; any Subtenants Work identified
in Exhibit 4 (regardless of who may have contemplated them); Subtenants furniture; or on any fixtures, equipment improvements
or appurtenances of Subtenant under this Lease. and Tenant shall not be obligated to repair any damage thereto or replace the
same unless the damage is caused by Tenant's negligence.
| b. | Condemnation.
If the Landlord or Tenant terminate the Master Lease based on a provision in the
Master Lease relating to eminent domain or conveyance under threat of condemnation, this
Sublease shall terminate on the same date if the Sub teased Premises, the portion of
the property necessary far Subtenants occupancy, or 50% or more of the rentable area
of the property are made untenantable by eminent domain, or conveyed under a threat of
condemnation, this Sublease shall terminate at the option of Tenant or Subtenant as of
the earlier of the date title vests in the condemning authority or the condemning authority
first has possession of the portion of the property taken by the condemning authority.
All Rent and other payments shall be paid to that date. |
If
the condemning authority takes a portion of the Subleased Premises or the portion of the property necessary for Subtenant's
occupancy That does not render them untenantable, then this Sublease shall continue in full force and effect and the base
Rent shall be equitably reduced based on the proportion by which the floor area of any structures is reduced. The reduction
in Rent shall be effective on the earlier of the date the condemning authority first has possession of Such portion or title
vests in the condemning authority. The Subleased Premises or the portion of the property necessary for Subtenant's
occupancy shall riot be deemed untenantable if 25% or less of each of those areas IS condemned, As between Tenant and
Subtenant, Tenant shall be entitled to the entire award from the condemning authority attributable to the value of the
Subleased Premises or the property and Tenant shall make no claim for the value of its leasehold. Subtenant shall be
permitted to make a separate claim against the condemning authority for moving expenses or damages resulting from
interruption in its business if Subtenant may terminate this Sublease under this Section, provided that in no event shall
Subtenant's claim reduce Landlord's or Tenant's award.
| 12. | INSURANCE.
Subtenant shall procure and maintain, at its own cost and expense, such liability
insurance as is required to be carried by Tenant under the Master Lease, naming Tenant
as well as Landlord, as additional insureds, in the mariner required therein, and property
ir8urance as is required to be carried by Tenant under the Master Lease to the extent
property insurance pertains to the Subleased Premises. If the Master Lease requires Tenant
to insure leasehold improvements or alterations, then Subtenant shall insure the leasehold
improvements which are located in the Subleased Premises, as well as alterations in the
Subleased Premises made by Subtenant, Subtenant shall furnish to Tenant a certificate
of Subtenant's insurance required hereunder not later than ten (10) days prior to Subtenant's
taking possession of the Subleased Premises. Tenant shall carry insurance as required
by the Master Lease and shall not be obligated to carry fire or other insurance if Landlord
is obligated to carry it under the Pilaster Lease. |
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
8 of 20 |
|
SUBLEASE
AGREEMENT
Tenant
and Subtenant hereby release each other and any other tenant, their employees, officers, agents, servants, contractors, customers,
chants, visitors, guests, or other licensees or invitees, from responsibility for and waive their entire claim of recovery for
any loss or damage arising from any cause covered by property insurance required to be carried by each of then Each party shall
provide notice to the property insurance carrier or carriers of this mutual waiver of subrogation, and shall cause its respective
property insurance carriers to waive all rights of subrogation against the other. This waiver shall not apply to the extent of
the deductible amounts to any such policies or lo the extent of liability exceeding the limits of such policies. Tenant agrees
to use reasonable efforts to obtain from Landlord the same waives of claims for any loss or damage arising from any cause covered
by property insurance required to be serried by Landlord under the Master Lease and, if and to the extent of such waiver by Landlord,
Subtenant agrees to the same waiver.
| 13. | ASSIGNMENT
AND SUBLETTING. Subtenant shall not assign, sublet encumber or otherwise transfer any interest in this Sublease or any part
of the Subleased Premises (collectively referred to as a "Transfer), without first obtaining the written consent of Tenant,
which shall not be unreasonably withheld or delayed Tenant may condition its consent on (a) obtaining any required consent from
Landlord; and (b) Subtenant satisfying any conditions OR the Transfer imposed by Landlord; and (c) such other reasonable conditions
that. Tenant may impose. No Transfer shall relieve Subtenant of any liability under this Sublease notwithstanding Tenant's consent
lo such Transfer Consent to any Transfer shall not operate as a waiver of the necessity for Tenant's consent to any subsequent
Transfer. In connection with each request for consent to a Transfer, Subtenant shall pay the reasonable cost of processing same,
including attorneys' fees and any cost charged by Landlord for granting its consent under the Master Lease, upon demand of Tenant. |
If
Subtenant is a partnership, limited liability company, corporation, or Other entity, any transfer of this Sublease by merger,
consolidation, redemption or liquidation, or any change in the ownership of. or power to vote, which singularly or collectively
represents a majority of the beneficial interest in Subtenant, snail Coils-Mute a Transfer.
As
a condition to the Landlord's and Tenant's approval, if given, any potential assignee of sublease otherwise approved shall assume
all obligations of Subtenant under this Sublease and shalt be jointly and severally liable with Subtenant and any guarantor, if
required, for the payment of Rent and other charges due hereunder and performance of all terms of this Sublease. In connection
with any Transfer, Subtenant shall provide Landlord and Tenant with copies of all assignments, subleases and assumption agreements
and documents.
| 14. | MORTGAGE
SUBORDINATION AND ATTORNMENT. This Sublease shall automatically be subordinate to
any mortgage or deed of trust created by Landlord to the extent the Master Lease is subordinate
la the same mortgage or deed of trust, arid Subtenant shall attorn on the same terms
and conditions as the Tenant in the Master Lease, provided Subtenant shall enjoy the
terms and conditions relating to such subordination and attornment to the same extent
Tenant does under the terms of the Master Lease. |
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
9 of 20 |
|
SUBLEASE
AGREEMENT
| 15. | HOLDOVER.
If Subtenant shall, without the written consent of Tenant, remain in possession of
the Subleased Premises and fail to return the Premises to Landlord after the expiration
or teerndnabon of the Sublease, the tenancy shall be a holdover tenancy and shall be
on a miTirrth-lb-month basis, which may be terminated accoitfing to Washington law. Unless
a different rate is agreed upon by Tenant, Subtenant agrees to pay to Tenant 150% of
the rate of Rent last payable under this Sublease or the holdover rental rate provided
in the Master Lease, whichever is greater during any holdover tenancy, AM other terms
of the Sublease sham remain in effect. |
| 16. | NOTICES.
All notices under this Sublease shall be in 'writing and effective (I) when delivered
in person or via overnight courier to the other party, (ii) three (3) days after being
sent by registered or certified mail to the other party at the addresses set forth in
Section 1; or upon confirmed transmission by facsimile to the other party at the facsimile
numbers set forth in Section 1. The addresses for notices and payment of Rent set forth
in Section 1 may be modified by either party only by written notice delivered in conformance
with this Section. |
| 17. | ESTOPPEL
CERTIFICATES. Upon the written request of Tenant, Subtenant shall deliver to Tenant
endear Landlord or heir designee a written estoppel certificate on the same terms and
conditions as required by Tenant under the Master Lease. |
| a. | Heirs
and Assigns. This Sublease shall apply to and be binding upon Tenant and Subtenat
and their respective heirs, executors, administrators, successors and assigns. |
| b. | Brokers'
Fees. Subtenant represents and warrants to Tenant that except for Subtenant's
Broker, if any, described and disclosed in Section 20 of this Lease, it has not engaged
any firm, finder or other person who would be entitled to any commission or fees for
the negotiation, execution or delivery of this Sublease and shall indemnify and hold
harmless Tenant against any loss, cost, liability or expense incurred by Tenant as a
result of any claim asserted by any such firm, finder or other person on the basis of
any arrangements or agreements made or alleged to have been made by or on behalf of Subtenant.
Tenant represents and warrants to Subtenant that except for Landlord's Broker, if
any, described and disclosed in Section 20, it has not engaged any firm, finder or
other person who would be entitled to any commission or fees for the negotiation, execution
or delivery of this Sublease and shall indemnify and hold harmless Subtenant against
any loss, cost, liability or expense incurred by Subtenant as a result of any claim asserted
by any such firm, finder or other person on the basis of any arrangement or agreements
made or alleged in have been made by or on behalf of Tenant. |
| c. | Entire
Agreement. This Sublease, which incorporates portions of the Master Lease, contains
all of the covenants and agreements between Tenant and Subtenant relating to the Subleased
Premises. No prior or contemporaneous agreements or understandings pertaining to the
Sublease shall be valid or of any force or effect and the covenants and agreements of
this Sublease shall not be altered, modified, or amended to except in writing signed
by Tenant and Subtenant. |
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
10 of 20 |
|
SUBLEASE
AGREEMENT
| e. | Governing
Law. This Sublease shall be governed by and construed in accordance with the laws
of the State of Washington. |
| f. | Memorandum
of Sublease. Except for the pages containing the Commission Agreement, the Legal
descriptions, and the signatures of the Tenant and Subtenant (all of which may be recorded
by Tenants Broker), this Sublease shall not be recorded. However, if permitted by the
Master Lease, Tenant and Subtenant shall, at the other's request, execute and record
a memorandum of Sublease in recordable form that identifies Tenant and Subtenant, ire
commencement and termination dates of the Sublease, and the legal description of the
Master Premises and Subleased Premises. |
| g. | Submission
of Sublease Form Not an Offer. One party's submission of this Sublease to the other for review shall not constitute an offer to sublease the Subleased Premises.
This Sublease shall not become effective and binding upon Tenant and Subtenant until
It has been fully signed by both Tenant and Subtenant, and consented to by Landlord (if
required by the Master Lease). |
| h. | Authority
of Parties. Each party signing this Sublease represents and warrants to the other that it has the authority to enter into this Sublease, that the execution and delivery
of this Sublease has been duly authorized, and that upon such execution and delivery
this Lease shall be binding upon and enforceable against the party on signing. |
| 19. | EXHIBITS
AND RIDERS. The following exhibits and riders are made a pat of this Sublease: |
Exhibit
1: Legal Description of the Master Premises
Exhibit
2: Master Lease
Exhibit
3: Outline of Subleased Presnises
Exhibit
4: Tenant Improvement Schedule
Other:
Rent Rider
| 20. | AGENCY
DISCLOSURE. At the signing of this Lease, |
Tenant
is represented by N/A (insert name of Broker and Firm as licensed) (the “Tenant's Broker”);
and
Subtenant is represented by N/A (insert name of Broker and Firm as licensed) (the "Subtenant's
Broker”).
This
Agency Disclosure creates an agency relationship between Subtenant, Subtenants Broker (if any such person is disclosed), and any
managing brokers who supervise Subtenant's Broker's performance (collectively the "Supervising Brokers"). In addition,
this Agency Disclosure creates an agency relationship between Tenant, Tenant's Broker (if any such person is disclosed), and any
managing brokers who supervise Tenant's Broker’s performance (also collectively the 'Supervising Brokers"). If Tenants
Broker and Subtenant's Broker are different real estate licensees affiliated with the same Firm, then both Tenant and Subtenant
confirm their consent to that Firm and bah Tenant's and Subtenant's Supervising Brokers acting as dual agents. If Tenant's Broker
and Subtenant's Broker are the same real estate licensee who represents both parties, then both Subtenant and Tenant acknowledge
that the Broker, his or her Supervising Brokers, and his or her Firm are acting as dual agents and hereby consent to such dual
agency, If Tenant's Broker, Subtenants Broker, their Supervising Brokers, or their Firm are dual agents Subtenant and Tenant consent
to Tenant's Broker, Subtenant's Broker, and their Firm being compensated based on a percentage of the rent or as otherwise disclosed
on an attached addendum. Neither Tenant's Broker, Subtenant's Broker nor either of their Firms are receiving compensation from
mete than one party to this transaction unless otherwise disclosed on an attached addendum, in which case Subtenant and Tenant
consent to such compensation Subtenant and Tenant confirm receipt of the pamphlet entitled “The Law of Real Estate Agency.”
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
11 of 20 |
|
SUBLEASE
AGREEMENT
| 21. | CONSENT
BY LANDLORD. This Sublease shall be of no force or effect unless consented to by
Landlord within 10 days of execution, if such consent is required under the Master Lease.
Tenant and Subtenant agree for the benefit of Landlord, that this Sublease and Landlord's
consent shall not (a) create privity of contract between Landlord and Subtenant; (b)
be deemed to have amended the Master Lease in any regard (unless Landlord shall have
expressly agreed in writing to such amendment); or (c) be construed as a consent by Landlord
to any future assignment or subletting Landlord's consent shaft, however. be deemed evidence
of Landlord's agreement that Subtenant may use the Subleased Premises for the purpose
set forth in Section 1(g) and that Subtenant shall be entitled to the waiver of claims
and of the right of subrogation as provided in Section 12, Insurance, above. |
| 22. | COMMISSION
AGREEMENT. If Tenant has not entered into a Irsbng agreement (or other compensation
agreement with Tenants Firm). Tenant agrees to pay a commission to Tenants Firm (as identified
in the Agency Disclosure Section above) as follows: |
☐ $N/A
☐ N/A%
of the gross rent payable pursuant to this Sublease
☐ $N/A per square foot of the Subleased Premises
☐ Other
N/A
Tenant's
Broker ☐ shall ☐ shall not (shall not if not filled in) be entitled to a commission upon the extension by
Subtenant of the Sublease term pursuant to any right reserved to Subtenant under the Sublease calculated ☐ as provided
above or ☐ as follows___________________ (if no box is checked, as provided above). Tenant's Broker ☐ shall
☐ shall not (shall not if not filled in) be entitled to a commission upon any expansion of the Subleased Premises
pursuant to any right reserved to Subtenant under the Sublease, calculated ☐ as provided above or ☐ as
follows ____________________ (if no box is checked, as provided above).
Any
commission shall be earned upon execution of this Sublease and paid one-half upon execution of the Sublease and one-half upon
occupancy of the Subleased Premises by Subtenant Tenant's Broker shall pay to Subtenant's Broker (as identified in the Agency
Disclosure section above), the amount stated in a separate agreement between them or, if there is no agreement $N/A of% (complete
only one) of any commission paid to Tenants Broker, within live (5) days after receipt by Tenants Broker.
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
12 of 20 |
|
SUBLEASE
AGREEMENT
If
any other lease or sale is entered into between Tenant and Subtenant pursuant to a right reserved to Subtenant under
the Sublease, Tenant ☐ shall ☐ shall not (shall not if not filled in) pay an additional commission according to
any commission agreement or, in the absence of one, according to Tenant's Broker's commission schedule in effect as of
the execution of this Sublease Tenant's successor shall be obligated to pay any unpaid commissions upon any, transfer of
this Sublease and any such transfer shall not release the transferor from liability to pay such commissions.
TENANTS
BROKER AND SUBTENANT'S BROKER HAVE MADE NO REPRESENTATIONS OR WARRANTIES CONCERNING THE SUBLEASED PREMISES; THE MEANING OF THE
TERMS AND CONDITIONS OF THIS SUBLEASE; LANDLORD'S, TENANTS OR SUBTENANT'S FINANCIAL STANDING; ZONING; COMPLIANCE OF THE SUBLEASED
PREMISES WITH APPLICABLE LAWS; SERVICE OR CAPACITY OF UTILITIES, OPERATING COSTS; OR HAZARDOUS MATERIALS. LANDLORD, TENANT AND
SUBTENANT ARE EACH ADVISED TO SEEK INDEPENDENT LEGAL ADVICE ON THESE AND OTHER MATTERS ARISING TINDER THIS SUBLEASE.
|
![](ex10xi_003.jpg) |
|
|
|
TENANT: |
|
SUBTENANT: |
|
|
|
|
|
Diego
Pellicer Worldwide Inc |
|
Diego
Pellicer, Inc. |
|
TENANT: |
|
SUBTENANT: |
|
|
|
|
|
Ron
Throgmartin |
|
Peter
Norris |
|
By: |
|
By: |
|
|
|
|
|
Chief
Executive Officer |
|
Chief
Executive Officer |
|
Its: |
|
Its: |
Landlord
consents to the foregoing Sublease without wavier of any restriction in the Master Lease concerning further assignment, subletting
or transfer. Landlord represents that the Master Lease constitutes the entire agreement of Landlord and Tenant concerning the
leasing of the Master Premises and has not been amended or modified except as expressly set forth in Exhibit 2. Landlord further
represents that, to Landlord's knowledge, Tenant is currently in full compliance with its obligations under the Master Lease.
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
13 of 20 |
|
SUBLEASE AGREEMENT
|
|
|
|
LANDLORD: |
|
|
|
|
|
|
|
|
LANDLORD: |
|
|
|
|
|
|
|
|
By: |
|
|
|
|
|
|
|
|
Its: |
|
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
14 of 20 |
|
SUBLEASE AGREEMENT
|
) |
|
STATE OF WASHINGTON |
) |
SS. |
COUNTY OF________________________ |
) |
|
I certify that I know or have
satisfactory evidence that __________________________________ is the person who appeared before me and said person
acknowledged that____________________________ signed this instrument, on oath stated that _______________________ was
authorized to execute the instrument and acknowledged it as the________________________________________________ of ____________________________to be
the free and voluntary act of such party for the uses and purposes mentioned in the instrument.
Dated this___________________________ day
of___________________________, 20_____,
|
|
|
(Signature of Notary) |
|
|
|
(Legibly Print or Stamp Name of
Notary) |
|
Notary public in and for the state
of Washington, |
|
residing at___________________________ |
|
My appointment expires______________________ |
|
) |
|
STATE OF WASHINGTON |
) |
SS. |
COUNTY OF________________________ |
) |
|
I certify that I know or have
satisfactory evidence that __________________________________ is the person who appeared before me and said person
acknowledged that _____________________________________ signed this instrument, on oath stated
that_____________________________________ was authorized to execute the instrument and acknowledged it as
the_________________________ of_______________________ to be the free and voluntary act of such party for the uses
and purposes rnentioned in the instrument
Dated this___________________________ day
of___________________________, 20_____,
|
|
|
(Signature of Notary) |
|
|
|
(Legibly Print or Stamp Name of
Notary) |
|
Notary public in and for the state
of Washington, |
|
residing at___________________________ |
|
My appointment expires______________________ |
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
15 of 20 |
|
SUBLEASE AGREEMENT
|
) |
|
STATE OF WASHINGTON |
) |
SS. |
COUNTY OF________________________ |
) |
|
I certify that I know or have
satisfactory evidence that __________________________________ is the person who appeared before me and said person
acknowledged that____________________________ signed this instrument, on oath stated that _______________________ was
authorized to execute the instrument arid acknowledged it as the________________________________________________ of ____________________________to be
the free and voluntary act of such party for the uses and purposes mentioned in the instrument.
Dated this___________________________ day
of___________________________, 20_____,
|
|
|
(Signature of Notary) |
|
|
|
(Legibly Print or Stamp Name of
Notary) |
|
Notary public in and for the state
of Washington, |
|
residing at___________________________ |
|
My appointment expires______________________ |
|
) |
|
STATE OF WASHINGTON |
) |
SS. |
COUNTY OF________________________ |
) |
|
I certify that I know or have
satisfactory evidence that __________________________________ is the person who appeared before me and said person
acknowledged that _____________________________________ signed this instrument, on oath stated
that_____________________________________ was authorized to execute the instrument and acknowledged it as
the_________________________ of_______________________ to be the free and voluntary act of such party for the uses
and purposes rnentioned in the instrument
Dated this___________________________ day
of___________________________, 20_____,
|
|
|
(Signature of Notary) |
|
|
|
(Legibly Print or Stamp Name of
Notary) |
|
Notary public in and for the state
of Washington, |
|
residing at___________________________ |
|
My appointment expires______________________ |
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
16 of 20 |
|
SUBLEASE AGREEMENT
EXHIBIT 1
[Legal Description of Master Premises]
Exhibit
1
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
17 of 20 |
|
SUBLEASE AGREEMENT
EXHIBIT 2
[Master Lease]
Exhibit
2
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
18 of 20 |
|
SUBLEASE AGREEMENT
EXHIBIT 3
[Outline of the Subleased Premises]
Exhibit 3
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
19 of 20 |
|
SUBLEASE AGREEMENT
EXHIBIT 4
[Subtenant Improvement Schedule]
1. Subtenant Improvements to be Completed
by Tenant
2. Subtenant Improvements to be Completed
by Subtenant
|
|
Regency
Group, Inc.
Commercial Real Estate
12301 NE 10th PI, Suite 301
Bellevue, WA 98005
Phone: (425) 454-4000
Fax: (425) 451-1642 |
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form SUB-LS
Sublease
Agreement
Page
20 of 20 |
|
Rent Rider
This Rent Rider ("Rider") is a part
of the lease agreement dated March 1, 2014 (the "Lease") between Diego Pellicer Worldwide Inc, ("Sublessor") and
Diego Pellicer Inc. ("Sublessee concerning the space commonly known as the "Premises", located at the property
commonly known as 2215 4th Avenue S., Seattle, WA 98134 (the "Property).
Base Monthly Rent Schedule. Sublessee
shall pay Sublessor base monthly rent during the Sublease Term according to the following schedule:
Lease Year (Stated in Years or Months) |
|
Base Monthly Rent Amount |
|
|
|
03/01/14 - 09/30/14 |
|
$0.00 |
10/01/14 - 09/30/15 |
|
$12,420.00 plus NNN |
10/01/15 - 09/30/16 |
|
$12,854.70 plus NNN |
10/01/16 - 09/30/17 |
|
$13,304.62 plus NNN |
10/01/17 - 09/30/18 |
|
$13,770.28 plus NNN |
Initials:
Sublessor
Date: 03/01/14
Sublessee
Date:
Exhibit
10.12
COMMERCIAL
SUBLEASE AGREEMENT
THIS
COMMERCIAL SUBLEASE AGREEMENT (the "Commercial Sublease Agreement" or "Sublease"), made on this 14th day of
August 2014 by and between Diego Pellicer Worldwide Inc. a Delaware Corporation, having an address at 3496 Fairview Way, West
Linn, OR 97068 ("Sublessor") and DPCO, Inc a Colorado Corporation, having an address at 1 South Harrison Street, Denver,
CO 80209 ("Sublessee").
WHEREAS,
Sublessor has entered into a commercial lease agreement with the Lessor (M&S, LLC) for a period starting from July 1st, 2014
and ending on June 30, 2019 (the "Master Lease"). A copy of the Master Lease Agreement is attached hereto; and
WHEREAS,
Sublessee and Sublessor wish to enter into this Commercial sublease Agreement, where under the Sublessor will sublease the Premises
to Sublessee.
Premises:
Subject
to the terms and conditions of this Agreement, Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from Sublessor,
the following Premises:
| ● | Building
and property addressed as 4242 Elizabeth St, Denver, Colorado, 80216 and described as a +/- 18,500 square foot
warehouse-type structure, (the "Premises"). |
Term:
The
term of this Commercial sublease shall commence on the 1st day of July, 2014 and shall continue until the 30th of June, 2019.
Sublease:
This
Commercial Sublease Agreement will be subject to the remaining terms and conditions contained in the Master Lease. In such an
event, the terms of this Commercial Sublease Agreement shall control over the Master Lease. The Sublessee hereby fully agrees
acknowledges and agrees to perform all of the Sublessor's duties and obligations under the Master Lease.
Rent*:
For
the term of this Agreement, the Sublessee shall pay to Sublessor the base rental of $39,450 per month. The monthly payment shall
be due in advance on the first day of each calendar month at the following address 3496 Fairview Way, West Linn, OR 97068, or
at such other place designated by written notice from Sublessor.
*Additional
Rent: Property and personal property taxes, building casualty and personal property insurance, and wastewater taxes are due each
month as additional rent to Sublessor.
Late
Charges:
Any
rent payment not made by the fifth day of the month shall be considered overdue and in addition to Sublessor's other remedies,
Sublessor may levy a late payment charge equal to five percent (5%) per month on any overdue amount.
Rent
Payments and Security Deposit:
Prior
to taking possession of the Premises, Sublessee shall pay first month's rent, the last two months' rent, and a two month security
deposit in the amount of $197,250 (One Hundred Ninety Seven Thousand Two Hundred and Fifty Dollars) for the full and faithful
performance by the Sublessee of all the terms of this Commercial Sublease. The security deposit will be refunded to Sublessee
after the expiration of this sublease, provided the Sublessee has fully and faithfully carried out all of its obligations under
this Agreement.
Sublessor
agrees to notify Sublessee in writing on any notices received by Sublessor from landlord, including but not limited to a breach
of Master Lease. Sublessor agrees that Sublessee has the right to cure said breach, and offset the cost of said cure from payments
due Sublessor.
Utilities:
Sublessee
shall pay directly for all utilities, services and charges provided to the premises, including any and all deposits required.
Parking
Space:
Sublessee
is assigned parking as follows; all on Property
Use:
If
consistent with City of Denver zoning requirements, Sublessee shall use the premises for licensed medical/retail marijuana growing,
medical/retail processing (MIPS) and medical/retail center purposes only, and for no other purpose without Sublessor's prior written
consent. Notwithstanding the forgoing, Sublessee shall not use the Premises for the purposes of storing, manufacturing or selling
any explosives, flammables or other inherently dangerous substance, chemical, thing or device.
Quiet
Enjoyment:
Sublessor
covenants and warrants that upon performance by Sublessee of its obligations hereunder, Sublessor will keep and maintain Lessee
in exclusive, quiet, peaceable and undisturbed and uninterrupted possession of the Premises during the term of this sublease.
Repairs:
Sublessee
shall at its own expenses make all necessary repairs to the Premises. Such repairs shall include routine repairs of floors, walls,
ceilings, and other parts of the Premises damaged or worn through normal occupancy, except for major mechanical systems or the
roof, subject to the obligations of the parties otherwise set forth in this Sublease.
Default
and Termination:
The
occurrence of any one or more of the following events shall constitute a default and breach of this Sublease by Sublessee:
| A. | Sublessee
failing to pay Base Rent or Additional Rent within Ten (10) days of its due date; |
| B. | Sublessee
failing to make any other payments required to be made by Sublessee when due, where such
failure shall continue for a period of seven (7) calendar days following notice from
Sublessor to Sublessee; |
| C. | Sublessee
failing to perform or keep any of the other terms, covenants and conditions herein contained
for which it is responsible, and such failure continuing and not being cured for a period
of thirty (30) calendar days after notice from Sublessor or if such default is a default
which cannot be cured within a 30 calendar day period, then Sublessee's failing to commence
to correct the same within said 30 calendar day period and thereafter failing to prosecute
the same to completion with reasonable diligence; If the default occurs due to order
or citation by the governing authority having jurisdiction over the premises, whether
such default or order is issued to the Sublessor or to the Sublessee, the time for cure
shall conform to the time granted by such governing authority, including any time granted
by any tribunal. |
| D. | Sublessee
being adjudicated as bankrupt or insolvent or filing in any court a petition in bankruptcy
or for reorganization or for the adoption of an arrangement under the Bankruptcy Act
(as now or in the future amended) or the filing of an involuntary bankruptcy against
Sublessee unless said involuntary bankruptcy is terminated within thirty (30) calendar
days from the date of said filing, or Sublessee filing in any court for the appointment
of a receiver or trustee of all or a portion of Sublessee's property or there being appointed
a receiver or trustee for all or a portion of Sublessee's property, unless said receiver
or trustee is terminated within thirty (30) calendar days from the date of said appointment;
Sublessee making any general assignment or general arrangement of its property for the
benefit of its creditors. |
| E. | If
there is a breach or default of any provision of the Revolving Line of Credit Promissory
Note or the Licensing Agreement, this sublease shall be in default. |
In
the event of an occurrence of default as set forth above and not being cured for a period of thirty (30) calendar days after notice
from Sublessor, Sublessor shall have the right to terminate this Sublease and end the term hereof by giving to Sublessee written
notice of such termination.
re-enter
and take possession of the Premises or any part thereof and repossess the Premises. In the event of a termination of lease as
a result of default, Sublessee shall pay to Sublessor damages including repossession costs, brokerage commissions, legal expenses,
attorneys' fees, expenses of employees, alteration costs and expenses of preparation of such re letting. Any Late Payment shall
bear a penalty of $200.00.
Upon
the expiration or earlier termination of this Agreement, Sublessee shall return the Premises to Sublessor in good repair, condition
and working order, ordinary wear and tear resulting from proper use thereof alone excepted.
Indemnity:
Sublessee
shall indemnify Sublessor against, and hold Sublessor harmless from, any and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities, including reasonable attorney's fees and costs, arising out of, connected with, or resulting from Sublessee's
use of the Premises, including without limitation the manufacture, selection, delivery, possession, use, operation, or return
of the Premises.
Assignment
and Subletting:
The
Sublessor hereby authorizes and consents for the Premises to be sublet by Sublessee DPCO Denver, LLC, DPCO Jason, LLC, DPCO Brighton,
LLC and/or DPCO Colfax, LLC (the "Third Sublessee"); however Sublessee shall remain responsible for all terms and conditions
of this Sublease. Third Sublessees must meet all other requirements of this Sublease and shall be liable for all conditions, covenants
and agreements in the Master Lease.
Sublessee
does not have the right to sublet premises to any other party, other than stated above.
The
Sublessee acknowledges it must be licensed by both the City of Denver's Department of Excise & Licenses, and the State of
Colorado's Marijuana Enforcement Division. Sublessee must keep said licenses current and remain in good standing. In the event
Sublessee receives disciplinary or violation notice, said notice must be submitted to Sublessor within 3 days of receipt. Should
Sublessee receive notice from City of Denver's Department of Excise or State of Colorado's Marijuana Enforcement Division, requiring
operations to cease, Sublessee will cease operations immediately, or Sublessee will be in default of Sublease.
Best
Business Practices:
Sublessee
acknowledges that it must adhere to the following standards for compliance and cultivation:
Compliance:
The
Sublessee must at all times comply with the following guidelines, failure to do so will be considered a default under the terms
and conditions of this Sublease.
| ● | Preventing
the distribution of marijuana to minors; |
| ● | Preventing
revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels; |
| ● | Preventing
the diversion of marijuana from states where it is legal under state law in some form
to other states; |
| ● | Preventing
state-authorized marijuana activity from being used as a cover or pretext for the trafficking
of other illegal drugs or other illegal activity; |
| ● | Preventing
violence and the use of firearms in the cultivation and distribution of marijuana; |
| ● | Preventing
drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; |
| ● | Preventing
the growing of marijuana on public lands and the attendant public safety and environmental
dangers posed by marijuana production on public lands; and |
| ● | Preventing
marijuana possession or use on federal property. |
The Sublessee must provide proof of the following information to Sublessor.
| ● | Business
is duly licensed and registered with the State. |
| ● | Provide
application (and related documentation) submitted by the business for obtaining a state
license to operate its marijuana-related business. |
| ● | Description
of the activity for the business, including the types of products to be sold and the
type of customers to be served (e.g., medical versus recreational customers) |
| ● | The
business, its owner(s), manager(s), or other related parties are not, or have not been,
subject to an enforcement action by the state or local authorities responsible for administering
or enforcing marijuana-related laws or regulations. |
| ● | The
owner(s) or manager(s) of a marijuana-related business reside in the state in which the
business is located. |
Ventilation
and Odor Control:
| ● | The
pungent odor from marijuana cultivation operations is objectionable to many people. Offensive
odors can easily migrate in and around the marijuana cultivation site and some strains
produce odors that are detectable in the surrounding neighborhood as well as adjacent
tenants. |
| ● | It
is imperative to properly design the ventilation system, taking into consideration the
square footage and number of plants. A properly sized, installed and maintained ventilation
system can help resolve two issues. Firstly, having the grow rooms properly balanced
will inhibit odors from escaping. Secondly, the addition of a dehumidifying system to
control mold and pathogen growth should be considered. Ideally, humidity to control molds
should be set under 50%. Contact a reputable HVAC contractor for assistance with these
design elements. |
| ● | Three
(3) odor control technologies have shown promise with controlling odors from grow operations. |
Activated
Carbon Filtration - This technique involves forcing the air circulating within the HVAC system through an activated carbon
filter in order to filter out odors and pathogens that may pose a public health risk. This method is highly effective and can
be used in combination with other technologies such as an electrostatic precipitator.
| ● | The
size and layout of the cultivation operation will determine the requirements for the
carbon filtration system. Larger scale operations will require the use of larger fans
and more carbon and will typically increase the requirements of existing HVAC systems.
In addition, as filters age and the activated carbon becomes clogged with impurities,
it will be necessary to replace the carbon; filters should typically be replaced per
the manufacturers recommendation. In addition, the dust collector "sock" associated
with the carbon filter should be changed out every 6-8 months for proper air flow. |
| ● | Carbon
filtration is the least energy intensive of the three technologies. In most cases, the
energy required to run the filtration system is already accounted for in the air handling
and exchange system. The excess energy necessary to force air through the filter is negligible
and, depending on the size of the discharge and intake, often only slightly alters the
speed of the exchange. The use and disposal of the filters creates the most physical
waste; however, the carbon can typically be regenerated for reuse. |
Negative
Ion Generation - These machines, sometimes called electrostatic precipitators, will use a negative charge to attract positively
charged particles in the air. The charged particles are attracted to the metal filters, which over time, will become concentrated
with particles and require cleaning with water on a regular basis. In some cases this technology has been shown to work.
| ● | The
negative ion generators can improve indoor air quality to a greater degree than some
of the other technologies. The environmental impact of this technology is also dependent
upon size and use. They are typically powered by a single wall outlet and can run 24
hours a day, 7 days a week. They will also need to be cleaned which usually requires
removing the metal panel and washing it to remove the particles. Otherwise, they require
very little maintenance and their energy consumption is typically negligible and lower
than many fans. |
Ozone
Generators - Ozone can be extremely effective at breaking down odors and other contaminants. Potential problems with ozone
originate with the molecule's destructive tendencies. Ozone is an effective sterilizer; however, excessive and/or unmonitored
use has been shown to damage or even destroy crops and can cause lung irritation.
| ● | Although
ozone degrades quickly, the output of the gas can be an indoor environmental hazard to
both the people and the plants. Release of the gas outside can also have varying local
effects depending on the time of day, concentration, and disbursement factors associated
with the location and weather. The major impact will come from energy consumption. |
Masking
Agents - There are also odor masking equipment that can be used for temporary localized odor control. This method is not recommended
to control odors alone.
| ● | A
preventative maintenance and replacement plan should be established for any of theses
systems to ensure optimum operation and continuous odor control. |
Energy
Consumption
| ● | Energy
efficient lighting such as compact fluorescent lights (CFLs), may be a great alternative
to incandescent bulbs in many applications; however, they may not provide the proper
growing spectrum for your plants. High efficiency CFLs or LEDs should be used whenever
possible in non-grow spaces, such as offices and restrooms. In addition, when installing
new electrical equipment, use products with the Energy Star seal whenever feasible. Always
have a licensed electrical contractor install electrical equipment and lighting to ensure
safe wiring and adherence to local building code requirements. |
| ● | Another
option to off-set your energy usage is to purchase Windsource from Xcel Energy or carbon
off-sets through Climate Trust or The Carbon Fund. |
Water
Quality and Conservation
| ● | Although
water covers nearly three quarters of the earth, less than one percent is clean fresh
water. Therefore, it is critical that we conserve and protect this valuable resource.
Never dispose of anything in the outside storm drains. Keep areas surrounding dumpsters
free of debris and wastes. Remember, "nothing in the storm drain but stormwater".
To help with water conservation, educate staff on turning off the water while washing
hands and equipment, installing low-flow aerators on faucets, and retrofitting toilets
to low flow models. |
Other
Standard Practices
| ● | Ensure
safe disposal of fertilizers, insecticides, plant growth regulators, and other chemicals.
Buy only what you need and store in a safe place and clean- up spills immediately. Refer
to the Material Safety Data Sheet for disposal requirements. |
| ● | Currently
there are no pesticide products that are registered or labeled for use on medical marijuana.
The application of a pesticide to a plant that is not on the pesticide label is a violation
of federal and state pesticide laws. |
| ● | Effective
July 1, 2011, section 12-43.3-12.200 of the of the Colorado Revised Statute in part requires
that medical marijuana waste must be rendered unusable prior to leaving the facility
by grinding and incorporating the material with non-consumable solid wastes such as food
waste, soil or other compostable materials. Composting unusable plant material and soils
provides a valuable opportunity to create nutrient rich soil to stimulate healthy plant
growth. MMJ Regulation.pdf |
| ● | Provide
shower facilities to employees to use before and after work to reduce the introduction
of potentially harmful molds, mildew and bacteria to the plants, workers and their families. |
Severability:
If
any part or parts of this Agreement shall be held unenforceable for any reason, the remainder of this Agreement shall continue
in full force and effect. If any provision of this agreement is deemed invalid or unenforceable by any court of competent jurisdiction,
and if limiting such provision would make the provision valid, then such provision shall be deemed to be construed as so limited.
Entire
Agreement:
This
Agreement constitutes the entire agreement between the parties and supersedes any prior understanding or representation of any
kind preceding the date of this Agreement. There are no other promises, conditions, understandings or other agreements, whether
oral or written, relating to the subject matter of this Agreement. This Agreement may be modified in writing and must be signed
by both parties.
Governing
Law:
This
Agreement shall be governed by and construed in accordance with the laws of the state of Colorado.
Notices:
Any Notice
and other communications which either party desires to give the other, may be given either personally or by post through
certified mail, to the following address:
Sublessor: |
|
Sublessee: |
Diego Pellicer
Worldwide Inc. |
|
DPCO, Inc |
3946 Fairview
Way |
|
1 S Harrison Street |
West Linn, OR 97068 |
|
Denver, CO 80209 |
Waiver:
The
failure of either party to enforce any provisions of this Agreement shall not be deemed a waiver or limitation of that party's
right to subsequently enforce and compel strict compliance with every provision of this Agreement. The acceptance of rent by Sublessor
does not waive Sublessor's right to enforce any provisions of this Agreement.
If
Colorado or Denver laws or regulations, or Federal notices or prosecution, prohibit a Subtenant's operation of a marijuana operation
at this location during the term of this Sublease or if a governmental notice is delivered to Landlord, Sublessor or Sublessee
which requires the cessation of marijuana cultivation or infusion on the Premises, Landlord, Sublessor or Sublessee may terminate
this Sublease with no penalties and Sublessee shall vacate the Premises within 30 days, if it cannot be cured, and any deposits
and prepaid rent shall forthwith be returned by Sublessor to Sublessee.
If
Premises' location or subtenant's subleases, licenses or operations is not approved, issued and/or licensed by the Marijuana Enforcement
Division, City of Denver Zoning and/or City of Denver Excise and License Department, Sublessee may terminate this Sublease and
this Sublease will become null and void without penalty, any deposits, prepaid rent payments shall forthwith be returned by Sublessor
to Sublessee. Any rents already paid will be retained by Sublessor.
This
Sublease may be executed in counterparts, all of which shall collectively be considered the original. A facsimile signature shall
be sufficient and shall constitute an original signature for all purposes.
IN
WITNESS WHEREOF, the parties hereto have executed this Consent as of the day and year first written above.
AGREED
TO this 15 day of August, in 2014, by:
Sublessor: |
|
Sublessee: |
Diego
Pellicer Worldwide Inc. |
|
DPCO,
Inc |
/s/
Ronald Throgmartin |
|
/s/
Neil Demers |
|
Ronald
Throgmartin |
|
Neil
Demers |
|
10
Exhibit
10.13
COMMERCIAL
SUBLEASE AGREEMENT
THIS
COMMERCIAL SUBLEASE AGREEMENT (the "Commercial Sublease Agreement" or "Sublease"), made on this 14th day of
August 2014 by and between Diego Pellicer Worldwide Inc. a Delaware Corporation, having an address at 3496 Fairview Way, West
Linn, OR 97068 ("Sublessor") and DPCO, Inc a Colorado Corporation, having an address at 1 South Harrison Street, Denver,
CO 80209 ("Sublessee").
WHEREAS,
on the 14th day of August, 2014, Sublessor has entered into a commercial lease agreement with the Landlord (2949 W. Alameda Ave.
LLC) for a period starting from August 1, 2014 and ending on July 31, 2019 (the "Master Lease"). A copy of the Master
Lease Agreement is attached hereto; and
WHEREAS,
Sublessee and Sublessor wish to enter into this Commercial sublease Agreement, where under the Sublessor will sublease the Premises
to Sublessee.
Premises:
Subject
to the terms and conditions of this Agreement, Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from Sublessor,
the following Premises:
| ● | Building
and property addressed as 2949 W Alameda Ave, Denver, CO 80219 and described as a +/-
3,300 square foot retail structure, (the "Premises"). |
Term:
The
term of this Commercial sublease shall commence on the 14th day of August, 2014 and shall continue until the July 31, 2019.
Sublease:
This
Commercial Sublease Agreement will be subject to the remaining terms and conditions contained in the Master Lease. In such an
event, the terms of this Commercial Sublease Agreement shall control over the Master Lease. The Sublessee hereby fully agrees
acknowledges and agrees to perform all of the Sublessor's duties and obligations under the Master Lease.
Rent*:
For
the term of this Agreement, the Sublessee shall pay to Sublessor the base rental of $26,300 per month plus NNN charges. The monthly
payment shall be due in advance on the first day of each calendar month at the following address 3496 Fairview Way, West Linn,
OR 97068, or at such other place designated by written notice from Sublessor.
*Additional
NNN Rent: Property and personal property taxes, building casualty and personal property insurance, and wastewater taxes are due
each month as additional rent to Sublessor.
Late
Charges:
Any
rent payment not made by the fifth day of the month shall be considered overdue and in addition to Sublessor's other remedies,
Sublessor may levy a late payment charge equal to five percent (5%) per month on any overdue amount.
Rent
Payments and Security Deposit:
Prior
to taking possession of the Premises, Sublessee shall pay first month's rent, the last two months' rent, and a one month security
deposit in the amount of $100,000 (One Hundred Thousand Dollars) for the full and faithful performance by the Sublessee of all
the terms of this Commercial Sublease. The security deposit will be refunded to Sublessee after the expiration of this sublease,
provided the Sublessee has fully and faithfully carried out all of its obligations under this Agreement.
Sublessor
agrees to notify Sublessee in writing on any notices received by Sublessor from landlord, including but not limited to a breach
of Master Lease. Sublessor agrees that Sublessee has the right to cure said breach, and offset the cost of said cure from payments
due Sublessor.
Utilities:
Sublessee
shall pay directly for all utilities, services and charges provided to the premises, including any and all deposits required.
Parking
Space:
Sublessee
is assigned parking as follows: all on Property
Use:
If
consistent with City of Denver zoning requirements, Sublessee shall use the premises for licensed medical/retail marijuana sales,
and for no other purpose without Sublessor's prior written consent. Notwithstanding the forgoing, Sublessee shall not use the
Premises for the purposes of storing, manufacturing or selling any explosives, flammables or other inherently dangerous substance,
chemical, thing or device.
Quiet
Enjoyment:
Sublessor
covenants and warrants that upon performance by Sublessee of its obligations hereunder, Sublessor will keep and maintain Lessee
in exclusive, quiet, peaceable and undisturbed and uninterrupted possession of the Premises during the term of this sublease.
Repairs:
Sublessee
shall at its own expenses make all necessary repairs to the Premises. Such repairs shall include routine repairs of floors, walls,
ceilings, and other parts of the Premises damaged or worn through normal occupancy, except for major mechanical systems or the
roof, subject to the obligations of the parties otherwise set forth in this Sublease.
Default
and Termination:
The
occurrence of any one or more of the following events shall constitute a default and breach of this Sublease by Sublessee:
| A. | Sublessee
failing to pay Base Rent or Additional Rent within Ten (10) days of its due date; |
| B. | Sublessee
failing to make any other payments required to be made by Sublessee when due, where such
failure shall continue for a period of seven (7) calendar days following notice from
Sublessor to Sublessee; |
| C. | Sublessee
failing to perform or keep any of the other terms, covenants and conditions herein contained
for which it is responsible, and such failure continuing and not being cured for a period
of thirty (30) calendar days after notice from Sublessor or if such default is a default
which cannot be cured within a 30 calendar day period, then Sublessee's failing to commence
to correct the same within said 30 calendar day period and thereafter failing to prosecute
the same to completion with reasonable diligence; If the default occurs due to order
or citation by the governing authority having jurisdiction over the premises, whether
such default or order is issued to the Sublessor or to the Sublessee, the time for cure
shall conform to the time granted by such governing authority, including any time granted
by any tribunal. |
| D. | Sublessee
being adjudicated as bankrupt or insolvent or filing in any court a petition in bankruptcy
or for reorganization or for the adoption of an arrangement under the Bankruptcy Act
(as now or in the future amended) or the filing of an involuntary bankruptcy against
Sublessee unless said involuntary bankruptcy is terminated within thirty (30) calendar
days from the date of said filing, or Sublessee filing in any court for the appointment
of a receiver or trustee of all or a portion of Sublessee's property or there being appointed
a receiver or trustee for all or a portion of Sublessee's property, unless said receiver
or trustee is terminated within thirty (30) calendar days from the date of said appointment;
Sublessee making any general assignment or general arrangement of its property for the
benefit of its creditors. |
| E. | If
there is a breach or default of any provision of the Revolving Line of Credit Promissory
Note or the Licensing Agreement, this sublease shall be in default. |
In
the event of an occurrence of default as set forth above and not being cured for a period of thirty (30) calendar days after notice
from Sublessor, Sublessor shall have the right to terminate this Sublease and end the term hereof by giving to Sublessee written
notice of such termination. re-enter
and take possession of the Premises or any part thereof and repossess the Premises. In the event of a termination of lease as
a result of default, Sublessee shall pay to Sublessor damages including repossession costs, brokerage commissions, legal expenses,
attorneys' fees, expenses of employees, alteration costs and expenses of preparation of such re letting. Any Late Payment shall
bear a penalty of $200.00.
Upon
the expiration or earlier termination of this Agreement, Sublessee shall return the Premises to Sublessor in good repair, condition
and working order, ordinary wear and tear resulting from proper use thereof alone excepted.
Indemnity:
Sublessee
shall indemnify Sublessor against, and hold Sublessor harmless from, any and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities, including reasonable attorney's fees and costs, arising out of, connected with, or resulting from Sublessee's
use of the Premises, including without limitation the manufacture, selection, delivery, possession, use, operation, or return
of the Premises.
Assignment
and Subletting:
The
Sublessor hereby authorizes and consents for the Premises to be sublet by Sublessee DPCO Denver, LLC, DPCO Jason, LLC, DPCO Brighton,
LLC and/or DPCO Colfax, LLC (the "Third Sublessee"); however Sublessee shall remain responsible for all terms and conditions
of this Sublease. Third Sublessees must meet all other requirements of this Sublease and shall be liable for all conditions, covenants
and agreements in the Master Lease.
Sublessee
does not have the right to sublet premises to any other party, other than stated above.
The
Sublessee acknowledges it must be licensed by both the City of Denver's Department of Excise & Licenses, and the State of
Colorado's Marijuana Enforcement Division. Sublessee must keep said licenses current and remain in good standing. In the event
Sublessee receives disciplinary or violation notice, said notice must be submitted to Sublessor within 3 days of receipt. Should
Sublessee receive notice from City of Denver's Department of Excise or State of Colorado's Marijuana Enforcement Division, requiring
operations to cease, Sublessee will cease operations immediately, or Sublessee will be in default of Sublease.
Best
Business Practices:
Sublessee
acknowledges that it must adhere to the following standards for compliance and cultivation:
Compliance:
The
Sublessee must at all times comply with the following guidelines, failure to do so will be considered a default under the terms
and conditions of this Sublease.
| ● | Preventing
the distribution of marijuana to minors; |
| ● | Preventing
revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels; |
| ● | Preventing
the diversion of marijuana from states where it is legal under state law in some form
to other states; |
| ● | Preventing
state-authorized marijuana activity from being used as a cover or pretext for the trafficking
of other illegal drugs or other illegal activity; |
| ● | Preventing
violence and the use of firearms in the cultivation and distribution of marijuana; |
| ● | Preventing
drugged driving and the exacerbation of other adverse public health consequences associated
with marijuana use; |
| ● | Preventing
the growing of marijuana on public lands and the attendant public safety and environmental
dangers posed by marijuana production on public lands; and |
| ● | Preventing
marijuana possession or use on federal property. |
The
Sublessee must provide proof of the following information to Sublessor.
| ● | Business
is duly licensed and registered with the State. |
| ● | Provide
application (and related documentation) submitted by the business for obtaining a state
license to operate its marijuana-related business. |
| ● | Description
of the activity for the business, including the types of products to be sold and the
type of customers to be served (e.g., medical versus recreational customers) |
| ● | The
business, its owner(s), manager(s), or other related parties are not, or have not been,
subject to an enforcement action by the state or local authorities responsible for administering
or enforcing marijuana-related laws or regulations. |
| ● | The
owner(s) or manager(s) of a marijuana-related business reside in the state in which the
business is located. |
Ventilation
and Odor Control:
| ● | The
pungent odor from marijuana cultivation operations is objectionable to many people. Offensive
odors can easily migrate in and around the marijuana cultivation site and some strains
produce odors that are detectable in the surrounding neighborhood as well as adjacent
tenants. |
| ● | It
is imperative to properly design the ventilation system, taking into consideration the
square footage and number of plants. A properly sized, installed and maintained ventilation
system can help resolve two issues. Firstly, having the grow rooms properly balanced
will inhibit odors from escaping. Secondly, the addition of a dehumidifying system to
control mold and pathogen growth should be considered. Ideally, humidity to control molds
should be set under 50%. Contact a reputable HVAC contractor for assistance with these
design elements. |
| ● | Three
(3) odor control technologies have shown promise with controlling odors from grow operations. |
Activated
Carbon Filtration - This technique involves forcing the air circulating within the HVAC system through an activated carbon
filter in order to filter out odors and pathogens that may pose a public health risk. This method is highly effective and can
be used in combination with other technologies such as an electrostatic precipitator.
| ● | The
size and layout of the cultivation operation will determine the requirements for the
carbon filtration system. Larger scale operations will require the use of larger fans
and more carbon and will typically increase the requirements of existing HVAC systems.
In addition, as filters age and the activated carbon becomes clogged with impurities,
it will be necessary to replace the carbon; filters should typically be replaced per
the manufacturers recommendation. In addition, the dust collector "sock" associated
with the carbon filter should be changed out every 6-8 months for proper air flow. |
| ● | Carbon
filtration is the least energy intensive of the three technologies. In most cases, the
energy required to run the filtration system is already accounted for in the air handling
and exchange system. The excess energy necessary to force air through the filter is negligible
and, depending on the size of the discharge and intake, often only slightly alters the
speed of the exchange. The use and disposal of the filters creates the most physical
waste; however, the carbon can typically be regenerated for reuse. |
Negative
Ion Generation - These machines, sometimes called electrostatic precipitators, will use a negative charge to attract positively
charged particles in the air. The charged particles are attracted to the metal filters, which over time, will become concentrated
with particles and require cleaning with water on a regular basis. In some cases this technology has been shown to work.
| ● | The
negative ion generators can improve indoor air quality to a greater degree than some
of the other technologies. The environmental impact of this technology is also dependent
upon size and use. They are typically powered by a single wall outlet and can run 24
hours a day, 7 days a week. They will also need to be cleaned which usually requires
removing the metal panel and washing it to remove the particles. Otherwise, they require
very little maintenance and their energy consumption is typically negligible and lower
than many fans. |
Ozone
Generators - Ozone can be extremely effective at breaking down odors and other contaminants. Potential problems with ozone
originate with the molecule's destructive tendencies. Ozone is an effective sterilizer; however, excessive and/or unmonitored
use has been shown to damage or even destroy crops and can cause lung irritation.
| ● | Although
ozone degrades quickly, the output of the gas can be an indoor environmental hazard to
both the people and the plants. Release of the gas outside can also have varying local
effects depending on the time of day, concentration, and disbursement factors associated
with the location and weather. The major impact will come from energy consumption. |
Masking
Agents - There are also odor masking equipment that can be used for temporary localized odor control. This method is not recommended
to control odors alone.
| ● | A
preventative maintenance and replacement plan should be established for any of theses
systems to ensure optimum operation and continuous odor control. |
Energy
Consumption
| ● | Energy
efficient lighting such as compact fluorescent lights (CFLs), may be a great alternative
to incandescent bulbs in many applications; however, they may not provide the proper
growing spectrum for your plants. High efficiency CFLs or LEDs should be used whenever
possible in non-grow spaces, such as offices and restrooms. In addition, when installing
new electrical equipment, use products with the Energy Star seal whenever feasible. Always
have a licensed electrical contractor install electrical equipment and lighting to ensure
safe wiring and adherence to local building code requirements. |
| ● | Another
option to off-set your energy usage is to purchase Windsource from Xcel Energy or carbon
off-sets through Climate Trust or The Carbon Fund. |
Water
Quality and Conservation
| ● | Although
water covers nearly three quarters of the earth, less than one percent is clean fresh
water. Therefore, it is critical that we conserve and protect this valuable resource.
Never dispose of anything in the outside storm drains. Keep areas surrounding dumpsters
free of debris and wastes. Remember, "nothing in the storm drain but stormwater".
To help with water conservation, educate staff on turning off the water while washing
hands and equipment, installing low-flow aerators on faucets, and retrofitting toilets
to low flow models. |
Other
Standard Practices
| ● | Ensure
safe disposal of fertilizers, insecticides, plant growth regulators, and other chemicals.
Buy only what you need and store in a safe place and clean- up spills immediately. Refer
to the Material Safety Data Sheet for disposal requirements. |
| ● | Currently
there are no pesticide products that are registered or labeled for use on medical marijuana.
The application of a pesticide to a plant that is not on the pesticide label is a violation
of federal and state pesticide laws. |
| ● | Effective
July 1, 2011, section 12-43.3-12.200 of the of the Colorado Revised Statute in part requires
that medical marijuana waste must be rendered unusable prior to leaving the facility
by grinding and incorporating the material with non-consumable solid wastes such as food
waste, soil or other compostable materials. Composting unusable plant material and soils
provides a valuable opportunity to create nutrient rich soil to stimulate healthy plant
growth. MMJ Regulation.pdf |
| ● | Provide
shower facilities to employees to use before and after work to reduce the introduction
of potentially harmful molds, mildew and bacteria to the plants, workers and their families. |
Severability:
If
any part or parts of this Agreement shall be held unenforceable for any reason, the remainder of this Agreement shall continue
in full force and effect. If any provision of this agreement is deemed invalid or unenforceable by any court of competent jurisdiction,
and if limiting such provision would make the provision valid, then such provision shall be deemed to be construed as so limited.
Entire
Agreement:
This
Agreement constitutes the entire agreement between the parties and supersedes any prior understanding or representation of any
kind preceding the date of this Agreement. There are no other promises, conditions, understandings or other agreements, whether
oral or written, relating to the subject matter of this Agreement. This Agreement may be modified in writing and must be signed
by both parties.
Governing
Law:
This
Agreement shall be governed by and construed in accordance with the laws of the state of Colorado.
Notices:
Any
Notice and other communications which either party desires to give the other, may be given either personally or by post through
certified mail, to the following address:
Sublessor: |
|
Sublessee: |
Diego
Pellicer Worldwide Inc. |
|
DPCO,
Inc |
3946
Fairview Way |
|
1
S Harrison Street |
West
Linn, OR 97068 |
|
Denver,
CO 80209 |
Waiver:
The
failure of either party to enforce any provisions of this Agreement shall not be deemed a waiver or limitation of that party's
right to subsequently enforce and compel strict compliance with every provision of this Agreement. The acceptance of rent by Sublessor
does not waive Sublessor's right to enforce any provisions of this Agreement.
If
Colorado or Denver laws or regulations, or Federal notices or prosecution, prohibit a Subtenant's operation of a marijuana operation
at this location during the term of this Sublease or if a governmental notice is delivered to Landlord, Sublessor or Sublessee
which requires the cessation of marijuana cultivation or infusion on the Premises, Landlord, Sublessor or Sublessee may terminate
this Sublease with no penalties and Sublessee shall vacate the Premises within 30 days, if it cannot be cured, and any deposits
and prepaid rent shall forthwith be returned by Sublessor to Sublessee.
If
Premises' location or subtenant's subleases, licenses or operations is not approved, issued and/or licensed by the Marijuana Enforcement
Division, City of Denver Zoning and/or City of Denver Excise and License Department, Sublessee may terminate this Sublease and
this Sublease will become null and void without penalty, any deposits, prepaid rent payments shall forthwith be returned by Sublessor
to Sublessee. Any rents already paid will be retained by Sublessor.
This
Sublease may be executed in counterparts, all of which shall collectively be considered the original. A facsimile signature shall
be sufficient and shall constitute an original signature for all purposes.
IN
WITNESS WHEREOF, the parties hereto have executed this Consent as of the day and year first written above.
AGREED
TO this 15 day of August, in 2014, by:
Sublessor: |
|
Sublessee: |
Diego
Pellicer Worldwide Inc. |
|
DPCO,
Inc |
/s/
Ronald Throgmartin |
|
/s/
Neil Demers |
|
Ronald
Throgmartin |
|
Neil
Demers |
|
10
Exhibit
10.14
COMMERCIAL
SUBLEASE AGREEMENT
THIS
COMMERCIAL SUBLEASE AGREEMENT (the "Commercial Sublease Agreement" or "Sublease"), made on this 14th day of
August 2014 by and between Diego Pellicer Worldwide Inc. a Delaware Corporation, having an address at 3496 Fairview Way, West
Linn, OR 97068 ("Sublessor") and DPCO, Inc a Colorado Corporation, having an address at 1 South Harrison Street, Denver,
CO 80209 ("Sublessee").
WHEREAS,
on the 14th day of August, 2014, Sublessor has entered into a commercial lease agreement with the Lessor (M&S, LLC) for a
period starting from August 14th, 2014 and ending on June 30, 2018 (the "Master Lease"). A copy of the Master Lease
Agreement is attached hereto; and
WHEREAS,
Sublessee and Sublessor wish to enter into this Commercial sublease Agreement, where under the Sublessor will sublease the Premises
to Sublessee.
Premises:
Subject
to the terms and conditions of this Agreement, Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from Sublessor,
the following Premises:
● |
Building and property addressed as 755 South Jason Street, Denver, Colorado,
80223 and described as a +/- 15,000 square foot warehouse-type structure, (the "Premises"). |
Term:
The
term of this Commercial sublease shall commence on the 14th day of August, 2014 and shall continue until the 30th of June, 2018.
Sublease:
This
Commercial Sublease Agreement will be subject to the remaining terms and conditions contained in the Master Lease. In such an
event, the terms of this Commercial Sublease Agreement shall control over the Master Lease. The Sublessee hereby fully agrees
acknowledges and agrees to perform all of the Sublessor's duties and obligations under the Master Lease.
Rent*:
For
the term of this Agreement, the Sublessee shall pay to Sublessor the base rental of $32,875 per month. The monthly payment shall
be due in advance on the first day of each calendar month at the following address 3496 Fairview Way, West Linn, OR 97068, or
at such other place designated by written notice from Sublessor.
*Additional
Rent: Property and personal property taxes, building casualty and persona] property insurance, and wastewater taxes are due each
month as additional rent to Sublessor.
Late
Charges:
Any
rent payment not made by the fifth day of the month shall be considered overdue and in addition to Sublessor's other remedies,
Sublessor may levy a late payment charge equal to five percent (5%) per month on any overdue amount.
Rent
Payments and Security Deposit:
Prior
to taking possession of the Premises, Sublessee shall pay first month's rent, the last two months' rent, and a two month security
deposit in the amount of $164,375 (One Hundred Sixty Four Thousand Three Hundred and Seventy Five Dollars) for the full and faithful
performance by the Sublessee of all the terms of this Commercial Sublease. The security deposit will be refunded to Sublessee
after the expiration of this sublease, provided the Sublessee has fully and faithfully carried out all of its obligations under
this Agreement.
Sublessor
agrees to notify Sublessee in writing on any notices received by Sublessor from landlord, including but not limited to a breach
of Master Lease. Sublessor agrees that Sublessee has the right to cure said breach, and offset the cost of said cure from payments
due Sublessor.
Utilities:
Sublessee
shall pay directly for all utilities, services and charges provided to the premises, including any and all deposits required.
Parking
Space:
Sublessee
is assigned parking as follows: all on Property.
Use:
If
consistent with City of Denver zoning requirements, Sublessee shall use the premises for licensed medical/retail marijuana growing,
medical/retail processing (MIPS) and medical/retail center purposes only, and for no other purpose without Sublessor's prior written
consent. Notwithstanding the forgoing, Sublessee shall not use the Premises for the purposes of storing, manufacturing or selling
any explosives, flammables or other inherently dangerous substance, chemical, thing or device.
Quiet
Enjoyment:
Sublessor
covenants and warrants that upon performance by Sublessee of its obligations hereunder, Sublessor will keep and maintain Lessee
in exclusive, quiet, peaceable and undisturbed and uninterrupted possession of the Premises during the term of this sublease.
Repairs:
Sublessee
shall at its own expenses make all necessary repairs to the Premises. Such repairs shall include routine repairs of floors, walls,
ceilings, and other parts of the Premises damaged or worn through normal occupancy, except for major mechanical systems or the
roof, subject to the obligations of the parties otherwise set forth in this Sublease.
Default
and Termination:
The
occurrence of any one or more of the following events shall constitute a default and breach of this Sublease by Sublessee:
|
A. | Sublessee failing to pay
Base Rent or Additional Rent within Ten (10) days of its due date; |
|
| |
|
B. | Sublessee failing to make
any other payments required to be made by Sublessee when due, where such failure shall continue for a period of seven (7) calendar
days following notice from Sublessor to Sublessee; |
|
| |
|
C. | Sublessee
failing to perform or keep any of the other terms, covenants and conditions herein contained
for which it is responsible, and such failure continuing and not being cured for
a period of thirty (30) calendar days after notice from Sublessor or if such default
is a default which cannot be cured within a 30 calendar day period, then Sublessee's
failing to commence to correct the same within said 30 calendar day period and thereafter
failing to prosecute the same to completion with reasonable diligence; If the default
occurs due to order or citation by the governing authority having jurisdiction over the
premises, whether such default or order is issued to the Sublessor or to the Sublessee,
the time for cure shall conform to the time granted by such governing authority, including
any time granted by any tribunal. |
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| |
|
D. | Sublessee being adjudicated
as bankrupt or insolvent or filing in any court a petition in bankruptcy or for reorganization or for the adoption of an arrangement
under the Bankruptcy Act (as now or in the future amended) or the filing of an involuntary bankruptcy against Sublessee unless
said involuntary bankruptcy is terminated within thirty (30) calendar days from the date of said filing, or Sublessee filing in
any court for the appointment of a receiver or trustee of all or a portion of Sublessee's property or there being appointed a
receiver or trustee for all or a portion of Sublessee's property, unless said receiver or trustee is terminated within thirty
(30) calendar days from the date of said appointment; Sublessee making any general assignment or general arrangement of its property
for the benefit of its creditors. |
|
| |
|
E. | If there is a breach or default
of any provision of the Revolving Line of Credit Promissory Note or the Licensing Agreement, this sublease shall be in default. |
In
the event of an occurrence of default as set forth above and not being cured for a period of thirty (30) calendar days after notice
from Sublessor, Sublessor shall have the right to terminate this Sublease and end the term hereof by giving to Sublessee written
notice of such termination.
Quiet
Enjoyment:
Sublessor
covenants and warrants that upon performance by Sublessee of its obligations hereunder, Sublessor will keep and maintain Lessee
in exclusive, quiet, peaceable and undisturbed and uninterrupted possession of the Premises during the term of this sublease.
Re-enter and take possession of
the Premises or any part thereof and repossess the Premises. In the event of a termination of lease as a result of default, Sublessee
shall pay to Sublessor damages including repossession costs, brokerage commissions, legal expenses, attorneys' fees, expenses
of employees, alteration costs and expenses of preparation of such re letting. Any Late Payment shall bear a penalty of $200.00.
Upon
the expiration or earlier termination of this Agreement, Sublessee shall return the Premises to Sublessor in good repair, condition
and working order, ordinary wear and tear resulting from proper use thereof alone excepted.
Indemnity:
Sublessee
shall indemnify Sublessor against, and hold Sublessor harmless from, any and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities, including reasonable attorney's fees and costs, arising out of, connected with, or resulting from Sublessee's
use of the Premises, including without limitation the manufacture, selection, delivery, possession, use, operation, or return
of the Premises.
Assignment
and Subletting:
The
Sublessor hereby authorizes and consents for the Premises to be sublet by Sublessee DPCO Denver, LLC, DPCO Jason, LLC, DPCO Brighton,
LLC and/or DPCO Colfax, LLC (the "Third Sublessee"); however Sublessee shall remain responsible for all terms and conditions
of this Sublease. Third Sublessees must meet all other requirements of this Sublease and shall be liable for all conditions, covenants
and agreements in the Master Lease.
Sublessee
does not have the right to sublet premises to any other party, other than stated above.
The
Sublessee acknowledges it must be licensed by both the City of Denver's Department of Excise & Licenses, and the State of
Colorado's Marijuana Enforcement Division. Sublessee must keep said licenses current and remain in good standing. In the event
Sublessee receives disciplinary or violation notice, said notice must be submitted to Sublessor within 3 days of receipt. Should
Sublessee receive notice from City of Denver's Department of Excise or State of Colorado's Marijuana Enforcement Division, requiring
operations to cease, Sublessee will cease operations immediately, or Sublessee will be in default of Sublease.
Best
Business Practices:
Sublessee
acknowledges that it must adhere to the following standards for compliance and cultivation:
Compliance:
The
Sublessee must at all times comply with the following guidelines, failure to do so will be considered a default under the terms
and conditions of this Sublease.
|
● |
Preventing the distribution of marijuana to minors; |
|
● |
Preventing revenue from the sale of marijuana from going to criminal
enterprises, gangs, and cartels; |
|
● |
Preventing the diversion of marijuana from states where it is legal under
state law in some form to other states; |
|
● |
Preventing state-authorized marijuana activity from being used as a cover
or pretext for the trafficking of other illegal drugs or other illegal activity; |
|
● |
Preventing violence and the use of firearms in the cultivation and distribution
of marijuana; |
|
● |
Preventing drugged driving and the exacerbation of other adverse public
health consequences associated with marijuana use; |
|
● |
Preventing the growing of marijuana on public lands and the attendant
public safety and environmental dangers posed by marijuana production on public lands; and |
|
● |
Preventing marijuana possession or use on federal property. |
The
Sublessee must provide proof of the following information to Sublessor.
|
● |
Business is duly licensed and registered with the State. |
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● |
Provide application (and related documentation) submitted by the business
for obtaining a state license to operate its marijuana-related business. |
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● |
Description of the activity for the business, including the types of
products to be sold and the type of customers to be served (e.g., medical versus recreational customers) |
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● |
The business, its owner(s), manager(s), or other related parties are
not, or have not been, subject to an enforcement action by the state or local authorities responsible for administering or enforcing
marijuana-related laws or regulations. |
|
● |
The owner(s) or manager(s) of a marijuana-related business
reside in the state in which the business is located. |
Ventilation
and Odor Control:
|
● |
The pungent odor from marijuana cultivation operations is objectionable
to many people. Offensive odors can easily migrate in and around the marijuana cultivation site and some strains produce odors
that are detectable in the surrounding neighborhood as well as adjacent tenants, |
|
● |
It is imperative to properly design the ventilation system,
taking into consideration the square footage and number of plants. A properly sized, installed and maintained ventilation system
can help resolve two issues. Firstly, having the grow rooms properly balanced will inhibit odors from escaping. Secondly, the
addition of a dehumidifying system to control mold and pathogen growth should be considered. Ideally, humidity to control molds
should be set under 50%. Contact a reputable HVAC contractor for assistance with these design elements. |
|
● |
Three (3) odor control technologies have shown promise
with controlling odors from grow operations. |
Activated
Carbon Filtration - This technique involves forcing the air circulating within the HVAC system through an activated
carbon filter in order to filter out odors and pathogens that may pose a public health risk. This method is highly effective
and can be used in combination with other technologies such as an electrostatic precipitator.
|
● |
The size and layout of the cultivation operation will determine
the requirements for the carbon filtration system. Larger scale operations will require the use of larger fans and more carbon
and will typically increase the requirements of existing HVAC systems. In addition, as filters age and the activated carbon becomes
clogged with impurities, it will be necessary to replace the carbon; filters should typically be replaced per the manufacturers
recommendation. In addition, the dust collector "sock" associated with the carbon filter should be changed out every
6-8 months for proper air flow. |
|
● |
Carbon filtration is the least energy intensive of the
three technologies. In most cases, the energy required to run the filtration system is already accounted for in the air handling
and exchange system. The excess energy necessary to force air through the filter is negligible and, depending on the size of the
discharge and intake, often only slightly alters the speed of the exchange. The use and disposal of the filters creates the most
physical waste; however, the carbon can typically be regenerated for reuse. |
Negative
Ion Generation - These machines, sometimes called electrostatic precipitators, will use a negative charge to attract positively
charged particles in the air. The charged particles are attracted to the metal filters, which over time, will become concentrated
with particles and require cleaning with water on a regular basis. In some cases this technology has been shown to work.
|
● |
The negative ion generators can improve indoor air quality
to a greater degree than some of the other technologies. The environmental impact of this technology is also dependent upon size
and use. They are typically powered by a single wall outlet and can run 24 hours a day, 7 days a week. They will also need to
be cleaned which usually requires removing the metal panel and washing it to remove the particles. Otherwise, they require very
little maintenance and their energy consumption is typically negligible and lower than many fans. |
Ozone
Generators - Ozone can be extremely effective at breaking down odors and other contaminants. Potential problems with ozone
originate with the molecule's destructive tendencies. Ozone is an effective sterilizer; however, excessive and/or unmonitored
use has been shown to damage or even destroy crops and can cause lung irritation.
|
● |
Although ozone degrades quickly, the output of the gas can be an indoor
environmental hazard to both the people and the plants. Release of the gas outside can also have varying local effects depending
on the time of day, concentration, and disbursement factors associated with the location and weather. The major impact will come
from energy consumption. |
Masking
Agents - There are also odor masking equipment that can be used for temporary localized odor control. This method is not recommended
to control odors alone.
|
● |
A preventative maintenance and replacement plan should be established
for any of theses systems to ensure optimum operation and continuous odor control. |
Energy
Consumption
|
● |
Energy efficient lighting such as compact fluorescent lights (CFLs),
may be a great alternative to incandescent bulbs in many applications; however, they may not provide the proper growing spectrum
for your plants. High efficiency CFLs or LEDs should be used whenever possible in non-grow spaces, such as offices and restrooms.
In addition, when installing new electrical equipment, use products with the Energy Star seal whenever feasible. Always have a
licensed electrical contractor install electrical equipment and lighting to ensure safe wiring and adherence to local building
code requirements. |
|
● |
Another option to off-set your energy usage is to purchase Windsource
from Xcel Energy or carbon off-sets through Climate Trust or The Carbon Fund. |
Water
Quality and Conservation
|
● |
Although water covers nearly three quarters of the earth,
less than one percent is clean fresh water. Therefore, it is critical that we conserve and protect this valuable resource. Never
dispose of anything in the outside storm drains. Keep areas surrounding dumpsters free of debris and wastes. Remember, "nothing
in the storm drain but stormwater". To help with water conservation, educate staff on turning off the water while washing
hands and equipment, installing low-flow aerators on faucets,
and retrofitting toilets to low flow models. |
Other
Standard Practices
|
● |
Ensure safe disposal of fertilizers, insecticides, plant growth regulators,
and other chemicals. Buy only what you need and store in a safe place and clean- up spills immediately. Refer to the Material
Safety Data Sheet for disposal requirements. |
|
● |
Currently there are no pesticide products that are registered or labeled
for use on medical marijuana. The application of a pesticide to a plant that is not on the pesticide label is a violation of federal
and state pesticide laws. |
|
● |
Effective July 1, 2011, section 12-43.342.200 of the of the Colorado
Revised Statute in part requires that medical marijuana waste must be rendered unusable prior to leaving the facility by grinding
and incorporating the material with non-consumable solid wastes such as food waste, soil or other compostable materials. Composting
unusable plant material and soils provides a valuable opportunity to create nutrient rich soil to stimulate healthy plant growth.
MMJ Regulation.pdf |
|
● |
Provide shower facilities to employees to use before and after work to
reduce the introduction of potentially harmful molds, mildew and bacteria to the plants, workers and their families. |
Severability:
If
any part or parts of this Agreement shall be held unenforceable for any reason, the remainder of this Agreement shall continue
in full force and effect. If any provision of this agreement is deemed invalid or unenforceable by any court of competent jurisdiction,
and if limiting such provision would make the provision valid, then such provision shall be deemed to be construed as so limited.
Entire
Agreement:
This
Agreement constitutes the entire agreement between the parties and supersedes any prior understanding or representation of any
kind preceding the date of this Agreement. There are no other promises, conditions, understandings or other agreements, whether
oral or written, relating to the subject matter of this Agreement. This Agreement may be modified in writing and must be signed
by both parties.
Governing
Law:
This
Agreement shall be governed by and construed in accordance with the laws of the state of Colorado.
Notices:
Any
Notice and other communications which either party desires to give the other, may be given either personally or by post through
certified mail, to the following address:
Sublessor: |
Sublessee: |
Diego Pellicer
Worldwide lnc. |
DPCO, Inc |
3946 Fairview
Way |
1 S Harrison
Street |
West Linn, OR
97068 |
Denver, CO 80209 |
Waiver:
The
failure of either party to enforce any provisions of this Agreement shall not be deemed a waiver or limitation of that party's
right to subsequently enforce and compel strict compliance with every provision of this Agreement. The acceptance of rent by Sublessor
does not waive Sublessor's right to enforce any provisions of this Agreement.
If
Colorado or Denver laws or regulations, or Federal notices or prosecution, prohibit a Subtenant's operation of a marijuana operation
at this location during the term of this
Sublease
or if a governmental notice is delivered to Landlord, Sublessor or Sublessee which requires the cessation of marijuana cultivation
or infusion on the Premises,
Landlord,
Sublessor or Sublessee may terminate this Sublease with no penalties and Sublessee shall vacate the Premises within 30 days, if
it cannot be cured, and any deposits and prepaid rent shall forthwith be returned by Sublessor to Sublessee.
If
Premises' location or subtenant's subleases, licenses or operations is not approved, issued and/or licensed by the Marijuana Enforcement
Division, City of Denver Zoning and/or City of Denver Excise and License Department, Sublessee may terminate this Sublease and
this Sublease will become null and void without penalty, any deposits, prepaid rent payments shall forthwith be returned by Sublessor
to Sublessee. Any rents already paid will be retained by Sublessor.
This
Sublease may be executed in counterparts, all of which shall collectively be considered the original. A facsimile signature shall
be sufficient and shall constitute an original signature for all purposes.
IN
WITNESS WHEREOF, the parties hereto have executed this Consent as of the day and year first written above.
AGREED
TO this 15th day of August, in 2014, by:
Sublessor: |
|
Sublessee: |
Diego Pellicer Worldwide Inc. |
|
DPCO, Inc |
|
|
|
/s/ Ronald Throgmartin |
|
/s/ Neil Demers |
Ronald Throgmartin |
|
Neil Demers |
10
Exhibit
10.15
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
1 of 24 |
|
LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
THIS
LEASE AGREEMENT (the "Lease") is entered into and effective as of this 19th day of September, 2013, between
M-P Properties ("Landlord"), and Diego Pellicer Worldwide, Inc., a Delaware corporation ("Tenant").
Landlord and Tenant agree as follows:
1. LEASE
SUMMARY.
a.
Leased Premises. The leased commercial real estate (the "Premises") consist of the real property legally described
on attached Exhibit A, and all improvements thereon, and commonly described as 2215 4th Ave S., Seattle, WA 98134.
b.
Lease Commencement Date. The term of this Lease shall be for a period of sixty (60) months and shall commence on October
1, 2013 or such earlier or later date as provided in Section 3 (the "Commencement Date").
c.
Lease Termination Date. The term of this Lease shall terminate at midnight on September 30, 2018 or such earlier or
later date as provided in Section 3 (the "Termination Date"). Tenant shall have no right or option to extend this Lease,
unless otherwise set forth in a rider attached to this Lease (e.g., Option to Extend Rider, CBA Form OR).
d.
Base Rent. The base monthly rent shall be (check one): ☐ $ ,
or ☒ according to the Rent Rider attached hereto ("Base Rent"). Rent shall be payable at Landlord's address shown
in Section 1(h) below, or such other place designated in writing by Landlord.
e.
Prepaid Rent. Upon execution of this Lease, Tenant shall deliver to Landlord the sum of $15.648.32 as prepaid REAL ESTATE
TAXES & INSURANCE FOR OCTOBER 2013. THIS PREPAID RENT SHALL ALSO BE APPLIED TO BASE RENT, REAL ESTATE TAXES AND INSURANCE
FOR NOVEMBER 2013 AND SEPTEMBER 2018 (2 MONTHS) of the Lease. REAL ESTATE TAXES AND INSURANCE ARE ESTIMATES AND MAY BE ADJUSTED
ACCORDINGLY.
f.
Security Deposit. Upon execution of this Lease, Tenant shall deliver to Landlord the sum of $20.000.00 to be held as
a security deposit pursuant to Section 5 below. The security deposit shall be in the form of (check one): ☒ cash, or ☒
letter of credit according to the Letter of Credit Rider (CBA Form LCR) attached hereto.
g.
Permitted Use. The Premises shall be used only for lawful production and sale of cannabis and other related products
and for no other purpose without the prior written consent of Landlord (the "Permitted Use").
h.
Notice and Payment Addresses.
Landlord:
M-P Properties PO Box 306
Carnation,
WA 98014
Fax
No.:
Email:
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
2 of 24 |
|
LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
Tenant:
Diego Pellicer Worldwide, Inc.
2215
4th Ave S.
Seattle,
WA 98134
Fax
No.:
Email:
2. PREMISES.
a.
Lease of Premises. Landlord leases to Tenant, and Tenant leases from Landlord the Premises upon the terms specified in this
Lease.
b.
Acceptance of Premises. Except as specified elsewhere in this Lease, Landlord makes no representations or warranties to Tenant
regarding the Premises, including the structural condition of the Premises or the condition of all mechanical, electrical, and
other systems on the Premises. Except for any tenant improvements to be completed by Landlord as described on attached Exhibit
B (the "Landlord's Work"), Tenant shall be responsible for performing any work necessary to bring the Premises into
a condition satisfactory to Tenant. By signing this Lease, Tenant acknowledges that it has had an adequate opportunity to investigate
the Premises; acknowledges responsibility for making any corrections, alterations and repairs to the Premises (other than the
Landlord's Work); and acknowledges that the time needed to complete any such items shall not delay the Commencement Date.
c.
Tenant Improvements. Attached Exhibit B sets forth all Tenant's Work, if any, and all tenant improvements to be completed
by Tenant (the "Tenant's Work"), if any, that will be performed on the Premises. Responsibility for design, payment
and performance of all such work shall be as set forth on attached Exhibit B. If Tenant fails to notify Landlord of any defects
in the Landlord's Work within thirty (30) days of delivery of possession to Tenant, Tenant shall be deemed to have accepted the
Premises in their then condition. If Tenant discovers any major defects in the Landlord's Work during this 30-day period that
would prevent Tenant from using the Premises for the Permitted Use, Tenant shall notify Landlord in writing and the Commencement
Date shall be delayed until after Landlord has notified Tenant that Landlord has corrected the major defects and Tenant has had
five (5) days to inspect and approve the Premises. The Commencement Date shall not be delayed if Tenant's inspection reveals minor
defects in the Landlord's Work that will not prevent Tenant from using the Premises for the Permitted Use. Tenant shall prepare
a punch list of all minor defects in Landlord's Work and provide the punch list to Landlord, which Landlord shall promptly correct.
3. TERM.
The term of this Lease shall commence on the Commencement Date specified in Section 1, or on such earlier or later date as
may be specified by notice delivered by Landlord to Tenant advising Tenant that the Premises are ready for possession and specifying
the Commencement Date, which shall not be less than days
(thirty (30) days if not filled in) following the date of such notice. TENANT MAY TAKE EARLY POSSESSION OF THE PREMISES FOLLOWING
FULL EXECUTION OF THE LEASE. TENANT SHALL TRANSFER UTILITIES INTO ITS NAME UPON THE EARLIER OF POSSESSION OR ON THE COMMENCEMENT
DATE.
a. Early
Possession. If Landlord permits Tenant to possess or occupy the Premises prior to the Commencement Date specified in Section
1, then such early occupancy shall not advance the Commencement Date or the Termination Date set forth in Section 1, but otherwise
all terms and conditions of this Lease shall nevertheless apply during the period of early occupancy before the Commencement Date.
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
3 of 24 |
|
LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
b. Delayed
Possession. Landlord shall act diligently to make the Premises available to Tenant; provided, however, neither Landlord
nor any agent or employee of Landlord shall be liable for any damage or loss due to Landlord's inability or failure to
deliver possession of the Premises to Tenant as provided in this Lease. If possession is delayed, the Commencement Date set
forth in Section 1 shall also be delayed. In addition, the Termination Date set forth in Section 1 shall be modified so that
the length of the Lease term remains the same. If Landlord does not deliver possession of the Premises to Tenant within
_________ days (sixty (60) days if not filled
in) after the Commencement Date specified in Section 1, Tenant may elect to cancel this Lease by giving written notice to
Landlord within ten (10) days after such time period ends. If Tenant gives such notice of cancellation, the Lease shall be
cancelled, all prepaid rent and security deposits shall be refunded to Tenant, and neither Landlord nor Tenant shall have any
further obligations to the other. The first "Lease year" shall commence on the Commencement Date and shall end on
the date which is twelve (12) months from the end of the month in which the Commencement Date occurs. Each successive Lease
year during the initial term and any extension terms shall be twelve (12) months, commencing on the first day following the
end of the preceding Lease year. To the extent that the tenant improvements are not completed in time for the Tenant to
occupy or take possession of the Premises on the Commencement Date due to the failure of Tenant to fulfill any of its
obligations under this Lease, the Lease shall nevertheless commence on the Commencement Date set forth in Section
1.
4. RENT.
a.
Payment of Rent. Tenant shall pay Landlord without notice, demand, deduction, or ffset, in lawful money of the United
States, the monthly Base Rent stated in Section 1 in advance on or before the first day of each month during the Lease term
beginning on (check one): ☐ the Commencement Date, or ☐ _________ (if no date specified, then on the Commencement
Date), and shall also pay any other additional payments due to Landlord ("Additional Rent"), including Operating
Costs (collectively the "Rent") when required under this Lease. Payments for any partial month at the beginning or
end of the Lease shall be prorated. All payments due to Landlord under this Lease, including late fees and interest, shall
also constitute Additional Rent, and upon failure of Tenant to pay any such costs, charges or expenses, Landlord shall have
the same rights and remedies as otherwise provided in this Lease for the failure of Tenant to pay rent.
b.
Triple Net Lease. This Lease is what is commonly called a "Net, Net, Net" or "triple-net" Lease, which means
that, except as otherwise expressly provided herein, Landlord shall receive all Base Rent free and clear of any and all other
impositions, taxes, liens, charges or expenses of any nature whatsoever in connection with the ownership and operation of the
Premises. In addition to Base Rent, Tenant shall pay to the parties respectively entitled thereto, or satisfy directly, all Additional
Rent and other impositions, insurance premiums, repair and maintenance charges, and any other charges, costs, obligations, liabilities,
requirements, and expenses„ which arise with regard to the Premises or may be contemplated under any other provision of
the Lease during its term, except for costs and expenses expressly made the obligation of Landlord in this Lease.
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
4 of 24 |
|
LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
c.
Late Charges; Default Interest. If any sums payable by Tenant to Landlord under this Lease are not received within five (5)
business days after their due date, Tenant shall pay Landlord an amount equal to the greater of $100 or five percent (5%) of
the delinquent amount for the cost of collecting and handling such late payment in addition to the amount due and as
Additional Rent. All delinquent sums payable by Tenant to Landlord and not paid within five (5) business days after their due
date shall, at Landlord's option, bear interest at the rate of fifteen percent (15%) per annum, or the highest rate of
interest allowable by law, whichever is less (the "Default Rate"). Interest on all delinquent amounts shall be
calculated from the original due date to the date of payment.
d.
Less Than Full Payment. Landlord's acceptance of less than the full amount of any payment due from Tenant shall not be deemed
an accord and satisfaction or compromise of such payment unless Landlord specifically consents in writing to payment of such
lesser sum as an accord and satisfaction or compromise of the amount which Landlord claims. Any portion that remains to be
paid by Tenant shall be subject to the late charges and default interest provisions of this Section 4.
5.
SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall deliver to Landlord the security deposit specified in
Section 1 above. Landlord's obligations with respect to the security deposit are those of a debtor and not of a trustee, and
Landlord may commingle the security deposit with its other funds. If Tenant breaches any covenant or condition of this Lease,
including but not limited to the payment of Rent, Landlord may apply all or any part of the security deposit to the payment
of any sum in default and any damage suffered by Landlord as a result of Tenant's breach. Tenant acknowledges, however, that
the security deposit shall not be considered as a measure of Tenant's damages in case of default by Tenant, and any payment
to Landlord from the security deposit shall not be construed as a payment of liquidated damages for Tenant's default. If
Landlord applies the security deposit as contemplated by this Section, Tenant shall, within five (5) days after written
demand therefore by Landlord, deposit with Landlord the amount so applied. If Tenant complies with all of the covenants and
conditions of this Lease throughout the Lease term, the security deposit shall be repaid to Tenant without interest within
thirty (30) days after the surrender of the Premises by Tenant in the condition required hereunder by Section 11 of this
Lease.
6.
USES. The Premises shall be used only for the Permitted Use specified in Section 1 above, and for no other business or
purpose without the prior written consent of Landlord. No act shall be done on or around the Premises that is unlawful IN
THE STATE OF WASHINGTON or that will increase the existing rate of insurance on the Premises, or cause the cancellation
of any insurance on the Premises. Tenant shall not commit or allow to be committed any waste upon the Premises, or any public
or private nuisance. Tenant shall not do or permit anything to be done on the Premises which will obstruct or interfere with
the rights of other tenants or occupants of the Premises, or their employees, officers, agents, servants, contractors,
customers, clients, visitors, guests, or other licensees or invitees or to injure or annoy such persons.
7.
COMPLIANCE WITH LAWS. Tenant shall not cause or permit the Premises to be used in any way which violates any WASHINGTON
STATE law, ordinance, or governmental regulation or order. Landlord represents to Tenant that, as of the Commencement Date,
to Landlord's knowledge, but without duty of investigation, and with the exception of any Tenant's Work, the Premises comply with
all applicable laws, rules, regulations, or orders, including without limitation, the Americans With Disabilities Act, if applicable,
and Landlord shall be responsible to promptly cure at its sole cost any noncompliance which existed on the Commencement Date.
Tenant shall be responsible for complying with all laws applicable to the Premises as a result of the Permitted Use, and Tenant
shall be responsible for making any changes or alterations as may be required by law, rule, regulation, or order for Tenant's
Permitted Use at its sole cost and expense. Otherwise, if changes or alterations are required by rule, law, regulation, or order
unrelated to the Permitted Use, Landlord shall make changes and alterations at its expense.
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
5 of 24 |
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LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
8.
UTILITIES. Landlord shall not be responsible for providing any utilities to the Premises and shall not be liable for any
loss, injury or damage to person or property caused by or resulting from any variation, interruption, or failure of utilities
due to any cause whatsoever, and rent shall not abate as a result thereof, except to the extent due to the intentional
misconduct or gross negligence of Landlord. Tenant shall be responsible for determining whether available utilities and their
capacities will meet Tenant's needs. Tenant shall install and connect, if necessary, and directly pay for all water, sewer,
gas, janitorial, electricity, garbage removal, heat, telephone, and other utilities and services used by Tenant on
the Premises during the term, whether or not such services are billed directly to Tenant. Tenant will also procure, or cause
to be procured, without cost to Landlord, all necessary permits, licenses or other authorizations required for the lawful and
proper installation, maintenance, replacement, and removal on or from the Premises of wires, pipes, conduits, tubes, and
other equipment and appliances for use in supplying all utilities or services to the Premises. Landlord, upon request of
Tenant, and at the sole expense and liability of Tenant, shall join with Tenant in any reasonable applications required for
obtaining or continuing such utilities or services.
9.
TAXES. Tenant shall pay all Taxes (defined below) applicable to the Premises during the Lease term. All payments for
Taxes shall be made at least ten (10) days prior to their due date. Tenant shall promptly furnish Landlord with satisfactory
evidence that Taxes have been paid. If any Taxes paid by Tenant cover any period of time before or after the expiration of
the term, Tenant's share of those Taxes paid will be prorated to cover only the period of time within the tax fiscal year
during which this Lease was in effect, and Landlord shall promptly reimburse or credit Tenant to the extent required.
If Tenant fails to timely pay any Taxes, Landlord may pay them, and Tenant shall repay such amount to Landlord upon demand.
Landlord may also elect to pay all such Taxes directly to the appropriate taxing authority/ies and receive reimbursement
thereof from Tenant within ten (10) days after invoice, either of the full amount paid or at Landlord's election in equal
monthly installments.
The
term "Taxes" shall mean: (i) any form of tax or assessment imposed on the Premises by any authority, including any city,
county, state or federal government, or any improvement district, as against any legal or equitable interest of Landlord or Tenant
in the Premises or in the real property of which the Premises are a part, or against rent paid for leasing the Premises; and (ii)
any form of personal property tax or assessment imposed on any personal property, fixtures, furniture, tenant improvements, equipment,
inventory, or other items, and all replacements, improvements, and additions to them, located on the Premises, whether owned by
Landlord or Tenant. "Taxes" shall exclude any net income tax imposed on Landlord for income that Landlord receives under
this Lease.
Tenant
may, upon reasonable prior notice to Landlord, contest the amount or validity, in whole or in part, of any Taxes at its sole expense,
only after paying such Taxes or posting such security as Landlord may reasonably require in order to protect the Premises against
loss or forfeiture. Upon the termination of any such proceedings, Tenant shall pay the amount of such Taxes or part of such Taxes
as finally determined, together with any costs, fees, interest penalties, or other related liabilities. Landlord shall reasonably
cooperate with Tenant in contesting any Taxes, provided Landlord incurs no expense or liability in doing so.
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
6 of 24 |
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LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
10. ALTERATIONS. Tenant may make alterations, additions or improvements to the Premises, including any Tenant Work, TO
BE MATUALLY AGREED UPON BETWEEN LANDLORD AND TENANT WITHIN THIRTY (30)
DAYS OF LEASE EXECUTION, identified on attached Exhibit C (the "Alterations"), only with the prior written
consent of Landlord, which, with respect to Alterations not affecting the structural components of the Premises or utility
systems therein, shall not be unreasonably withheld, conditioned, or delayed. Landlord shall have thirty (30) days in which
to respond to Tenant's request for any Alterations so long as such request includes the name of Tenant's contractors and
reasonably detailed plans and specifications therefore. The term "Alterations" shall not include the installation
of shelves, movable partitions, Tenant's equipment, and trade fixtures that may be performed without damaging existing
improvements or the structural integrity of the Premises and Landlord's consent shall not be required for Tenant's
installation or removal of those items. Tenant shall perform all work at Tenant's expense and in compliance with all
applicable laws and shall complete all Alterations in accordance with plans and specifications approved by Landlord, using
contractors approved by Landlord. Tenant shall pay, when due, or furnish a bond for payment (as set forth in Section 18) all
claims for labor or materials furnished to or for Tenant at or for use in the Premises, which claims are or may be secured by
any mechanics' or materialmens' liens against the Premises or any interest therein. Tenant shall remove all Alterations at
the end of the Lease term unless Landlord conditioned its consent upon Tenant leaving a specified Alteration at the Premises,
in which case Tenant shall not remove such Alteration, and it shall become Landlord's property. Tenant shall immediately
repair any damage to the Premises caused by removal of Alterations.
11.
REPAIRS AND MAINTENANCE; SURRENDER. Tenant shall, at its sole expense, maintain the entire Premises including without
limitation the roof surface and normal repairs and maintenance to all heating, ventilation, and air conditioning
("HVAC") equipment at the Premises, in good condition and promptly make all repairs and replacements, whether
structural or non-structural, necessary to keep the Premises in safe operating condition, including all utilities and other
systems serving the Premises, but excluding the roof structure, subfloor, foundation, exterior walls, and capital repairs and
replacements to the HVAC system (collectively, "Landlord's Repair Items"), which Landlord shall maintain in
good condition and repair at Landlord's expense, provided that Tenant shall not damage any Landlord's Repair Items and shall
promptly repair any damage or injury done thereto caused by Tenant or its employees, officers, agents, servants, contractors,
customers, clients, visitors, guests, or other licensees or invitees . Notwithstanding anything in this Section to the
contrary, Tenant shall not be responsible for any repairs to the Premises made necessary by the negligence or willful
misconduct of Landlord or its employees, officers, agents, servants, contractors, customers, clients, visitors, guests, or
other licensees or invitees therein. If Tenant fails to perform Tenant's obligations under this Section, Landlord may at
Landlord's option enter upon the Premises after ten (10) days' prior notice to Tenant and put the same in good order,
condition and repair and the cost thereof together with interest thereon at the default rate set forth in Section 4 shall be
due and payable as Additional Rent to Landlord together with Tenant's next installment of Base Rent. Upon expiration of the
Lease term, whether by lapse of time or otherwise, Tenant shall promptly and peacefully surrender the Premises, together with
all keys, to Landlord in as good condition as when received by Tenant from Landlord or as thereafter improved, reasonable
wear and tear and insured casualty excepted.
12. ACCESS AND RIGHT OF ENTRY. After twenty-four (24) hours' notice from Landlord (except in cases of emergency, when no notice
shall be required), Tenant shall permit Landlord and its agents, employees and contractors to enter the Premises at all reasonable
times to make repairs, inspections, alterations or improvements, provided that Landlord shall use reasonable efforts to minimize
interference with Tenant's use and enjoyment of the Premises. This Section shall not impose any repair or other obligation upon
Landlord not expressly stated elsewhere in this Lease. After reasonable notice to Tenant, Landlord shall have the right to enter
the Premises for the purpose of (a) showing the Premises to prospective purchasers or lenders at any time, and to prospective
tenants within one hundred eighty (180) days prior to the expiration
or sooner termination of the Lease term; and, (b) for posting "for lease" signs within one hundred eighty (180) days
prior to the expiration or sooner termination of the Lease term.
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
7 of 24 |
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LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
13.
SIGNAGE. Tenant shall obtain Landlord's written consent as to size, location, materials, method of attachment, and appearance,
before installing any signs upon the Premises. Tenant shall install any approved signage at Tenant's sole expense and in compliance
with all applicable laws. Tenant shall not damage or deface the Premises in installing or removing signage and shall repair any
injury or damage to the Premises caused by such installation or removal.
14.
DESTRUCTION OR CONDEMNATION.
a. Damage
and Repair. If the Premises are partially damaged but not rendered untenantable, by fire or other insured casualty, then
Landlord shall diligently restore the Premises to the extent required below and this Lease shall not terminate. The Premises
shall not be deemed untenantable if twenty-five percent (25%) or less of the Premises are damaged. Landlord shall have no
obligation to restore the Premises if insurance proceeds are not available to pay the entire cost of such restoration. If
insurance proceeds are available to Landlord but are not sufficient to pay the entire cost of restoring the Premises, or if
Landlord's lender shall not permit all or any part of the insurance proceeds to be applied toward restoration, then Landlord
may elect to terminate this Lease and keep the insurance proceeds, by notifying Tenant within sixty (60) days of the date of
such casualty.
If
the Premises are entirely destroyed, or partially damaged and rendered untenantable, by fire or other casualty, Landlord may,
at its option: (a) terminate this Lease as provided herein, or (b) restore the Premises to their previous condition to the extent
required below; provided, however, if such casualty event occurs during the last six (6) months of the Lease term (after considering
any option to extend the term timely exercised by Tenant) then either Tenant or Landlord may elect to terminate the Lease. If,
within sixty (60) days after receipt by Landlord from Tenant of written notice that Tenant deems the Premises untenantable, Landlord
fails to notify Tenant of its election to restore the Premises, or if Landlord is unable to restore the Premises within six (6)
months of the date of the casualty event, then Tenant may elect to terminate the Lease upon twenty (20) days' written notice to
Landlord unless Landlord, within such twenty (20) day period, notifies Tenant that it will in fact restore the Premises or actually
completes such restoration work to the extent required below, as applicable.
If
Landlord restores the Premises under this Section 14, Landlord shall proceed with reasonable diligence to complete the work, and
the base monthly rent shall be abated in the same proportion as the untenantable portion of the Premises bears to the whole Premises,
provided that there shall be a rent abatement only if the damage or destruction of the Premises did not result from, or was not
contributed to directly or indirectly by the act, fault or neglect of Tenant, or Tenant's employees, officers, agents, servants,
contractors, customers, clients, visitors, guests, or other licensees or invitees. No damages, compensation or claim shall be
payable by Landlord for inconvenience, loss of business or annoyance directly, incidentally or consequentially arising from any
repair or restoration of any portion of the Premises. Landlord shall have no obligation to carry insurance of any kind for the
protection of Tenant or any alterations or improvements paid for by Tenant; any Tenant Improvements identified in Exhibit B (regardless
of who may have completed them); Tenant's furniture; or on any fixtures, equipment, improvements or appurtenances of Tenant under
this Lease, and Landlord's restoration obligations hereunder shall not include any obligation to repair any damage thereto or
replace the same.
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
8 of 24 |
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LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
b. Condemnation. If
the Premises are made untenantable by eminent domain, or conveyed under a threat of condemnation, this Lease shall
automatically terminate as of the earlier of the date title vests in the condemning authority or the condemning authority
first has possession of the Premises and all Rents and other payments shall be paid to that date. If the condemning authority
takes a portion of the Premises that does not render the Premises untenantable, then this Lease shall continue in full force
and effect and the base monthly rent shall be equitably reduced based on the proportion by which the floor area of any
structures is reduced The reduction in Rent shall be effective on the earlier of the date the condemning authority first has
possession of such portion or title vests in the condemning authority. Landlord shall be entitled to the entire award from
the condemning authority attributable to the value of the Premises and Tenant shall make no claim for the value of its
leasehold. Tenant shall be permitted to make a separate claim against the condemning authority for moving expenses, provided
that in no event shall Tenant's claim reduce Landlord's award.
15. INSURANCE.
a.
Tenant's Liability Insurance. During the Lease term, Tenant shall pay for and maintain commercial general
liability insurance with broad form property damage and contractual liability endorsements. This policy shall name Landlord,
its property manager (if any), and other parties designated by Landlord as additional insureds using an endorsement
form acceptable to Landlord, and shall insure Tenant's activities and those of Tenant's employees, officers,
agents, servants, contractors, customers, clients, visitors, guests, or other licensees or invitees with respect to the
Premises against loss, damage or liability for personal injury or bodily injury (including death) or loss or damage to
property with not less than $6,000,000 PER OCCURRENCE, $7,000,000 AGGREGATE, and a deductible of not more than
$10,000. THIS AMOUNT CAN BE REACHED BY USING “UMBRELLA/EXCESS” LIABILITY IF NEEDED. TENANT SHALL ALSO CARRY
COMMERCIAL AUTOMOBILE LIABILITY INSURANCE IN THE AMOUNT OF $1,000,000 FOR OWNED/NON OWNED/HIRED AUTOS. WORKERS
COMPENSATION/EMPLOYERS LIABILITY SHALL ALSO BE EVIDENCED ON A CERTIFICATE OF LIABILITY INSURANCE. ADDITIONAL INSURED FORM(S)
SHOULD BE INCLUDED WITH THE CERTIFICATE OF INSURANCE. Tenant's insurance will be primary and noncontributory with any
liability insurance carried by Landlord. Landlord may also require Tenant to obtain and maintain business income coverage for
at least six (6) months, business auto liability coverage, and, if applicable to Tenant's Permitted Use, liquor liability
insurance and/or warehouseman's coverage.
b.
Tenant's Property Insurance. During the Lease term, Tenant shall pay for and maintain special form clauses of loss
coverage property insurance (with coverage for earthquake if required by Landlord's lender and, if the Premises are situated
in a flood plain, flood damage) for all of Tenant's personal property, fixtures and equipment in the amount of their full
replacement value, with a deductible of not more than $10,000.
c.
Miscellaneous. Tenant's insurance required under this Section shall be with companies rated A-NII or better in Best's
Insurance Guide, and which are admitted in the state in which the Premises are located. No insurance policy shall be
cancelled or reduced in coverage and each such policy shall provide that it is not subject to cancellation or a reduction in
coverage except after thirty (30) days prior written notice to Landlord. Tenant shall deliver to Landlord upon commencement
of the Lease and from time to time thereafter, copies of the insurance policies or evidence of insurance and copies of
endorsements required by this Section. In no event shall the limits of such policies be considered as limiting the
liability of Tenant under this Lease. If Tenant fails
to acquire or maintain any insurance or provide any policy or evidence of insurance required by this Section, and such failure
continues for three (3) days after notice from Landlord, Landlord may, but shall not be required to, obtain such insurance for
Landlord's benefit and Tenant shall reimburse Landlord for the costs of such insurance upon demand. Such amounts shall be Additional
Rent payable by Tenant hereunder and in the event of non-payment thereof, Landlord shall have the same rights and remedies with
respect to such non-payment as it has with respect to any other non-payment of rent hereunder.
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
9 of 24 |
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LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
d. Waiver
of Subrogation. Landlord and Tenant hereby release each other and any other tenant, their agents or employees, from responsibility
for, and waive their entire claim of recovery for any loss or damage arising from any cause covered by property insurance required
to be carried or otherwise carried by each of them. Each party shall provide notice to the property insurance carrier or carriers
of this mutual waiver of subrogation, and shall cause its respective property insurance carriers to waive all rights of subrogation
against the other. This waiver shall not apply to the extent of the deductible amounts to any such property policies or to the
extent of liabilities exceeding the limits of such policies.
16. INDEMNIFICATION.
a.
Indemnification by Tenant. Tenant shall defend, indemnify, and hold Landlord and its property manager, if any, harmless
against all liabilities, damages, costs, and expenses, including attorneys' fees, for personal injury, bodily injury
(including death) or property damage arising from any negligent or wrongful act or omission of Tenant or Tenant's employees,
officers, agents, servants, contractors, customers, clients, visitors, guests, or other licensees or invitees on or around
the Premises, or arising from any breach of this Lease by Tenant. Tenant shall use legal counsel reasonably acceptable to
Landlord in defense of any action within Tenant's defense obligation.
b.
Indemnification by Landlord. Landlord shall defend, indemnify and hold Tenant harmless against all liabilities, damages,
costs, and expenses, including attorneys' fees, for personal injury, bodily injury (including death) or property damage
arising from any negligent or wrongful act or omission of Landlord or Landlord's employees, officers, agents, servants,
contractors, customers, clients, visitors, guests, or other licensees or invitees on or around the Premises, or arising from
any breach of this Lease by Landlord. Landlord shall use legal counsel reasonably acceptable to Tenant in defense of any
action within Landlord's defense obligation.
c.
Waiver of Immunity. Landlord and Tenant each specifically and expressly waive any immunity that each may be granted under the
Washington State Industrial Insurance Act, Title 51 RCW. Neither party's indemnity obligations under this Lease shall be
limited by any limitation on the amount or type of damages, compensation, or benefits payable to or for any third party under
the Worker Compensation Acts, Disability Benefit Acts or other employee benefit acts.
d.
Exemption of Landlord from Liability. Except to the extent of claims arising out of Landlord's gross negligence or
intentional misconduct, Landlord shall not be liable for injury to Tenant's business or assets or any loss of income
therefrom or for damage to any property of Tenant or of its employees, officers, agents, servants, contractors, customers,
clients, visitors, guests, or other licensees or invitees, or any other person in or about the Premises.
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
10 of 24 |
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LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
e. Survival.
The provisions of this Section 16 shall survive expiration or termination of this Lease.
17. ASSIGNMENT
AND SUBLETTING. Tenant shall not assign, sublet, mortgage, encumber or otherwise transfer any interest in this Lease
(collectively referred to as a "Transfer") or any part of the Premises, without first obtaining Landlord's written
consent which shall not be unreasonably withheld, conditioned, or delayed. No Transfer shall relieve Tenant of any liability
under this Lease notwithstanding Landlord's consent to such Transfer. Consent to any Transfer shall not operate as a waiver
of the necessity for Landlord's consent to any subsequent Transfer. In connection with each request for consent to a
Transfer, Tenant shall pay the reasonable cost of processing same, including attorneys' fees, upon demand of Landlord, up to
a maximum of $1,250. Tenant may sublet to Deigo Pellicer Inc. without landlord approval.
If
Tenant is a partnership, limited liability company, corporation, or other entity, any transfer of this Lease by merger, consolidation,
redemption or liquidation, or any change in the ownership of, or power to vote, which singularly or collectively represents a
majority of the beneficial interest in Tenant, shall constitute a Transfer under this Section.
As
a condition to Landlord's approval, if given, any potential assignee or sublessee otherwise approved by Landlord shall assume
all obligations of Tenant under this Lease and shall be jointly and severally liable with Tenant and any guarantor, if required,
for the payment of Rent and performance of all terms of this Lease. In connection with any Transfer, Tenant shall provide Landlord
with copies of all assignments, subleases and assumption agreement or documents.
18. LIENS. Tenant is not authorized to subject the Landlord's assets to any liens or claims of lien. Tenant shall keep the
Premises free from any liens created by or through Tenant. Tenant shall indemnify and hold Landlord harmless from liability
for any such liens including, without limitation, liens arising from any Alterations. If a lien is filed against the Premises
by any person claiming by, through or under Tenant, Tenant shall, within 10 days after Landlord's demand, at Tenant's
expense, either remove the lien or furnish to Landlord a bond in form and amount and issued by a surety satisfactory to
Landlord, indemnifying Landlord and the Premises against all liabilities, costs and expenses, including attorneys' fees,
which Landlord could reasonably incur as a result of such lien.
19.
DEFAULT. The following occurrences shall each constitute a default by Tenant (an "Event of Default):
a.
Failure To Pay. Failure by Tenant to pay any sum, including Rent, due under this Lease following five (5) days' notice
from Landlord of the failure to pay.
b.
Vacation/Abandonment. Vacation by Tenant of the Premises (defined as an absence for at least fifteen (15) consecutive
days without prior notice to Landlord), or abandonment of the Premises (defined as an absence of five (5) days or more while
Tenant is in breach of some other term of this Lease). Tenant's vacation or abandonment of the Premises shall not be subject
to any notice or right to cure.
c.
Insolvency. Tenant's insolvency or bankruptcy (whether voluntary or involuntary), or appointment of a receiver, assignee or
other liquidating officer for Tenant's business; provided, however, that in the event of any involuntary bankruptcy or other insolvency
proceeding, the existence of such proceeding shall constitute an
Event of Default only if such proceeding is not dismissed or vacated within sixty (60) days after its institution or commencement.
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
11 of 24 |
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LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
d.
Levy or Execution. The taking of Tenant's interest in this Lease or the Premises, or any part thereof, by execution or
other process of law directed against Tenant, or attachment of Tenant's interest in this Lease by any creditor of Tenant, if
such attachment is not discharged within fifteen (15) days after being levied.
e.
Other Non-Monetary Defaults. The breach by Tenant of any agreement, term or covenant of this Lease other than one
requiring the payment of money and not otherwise enumerated in this Section or elsewhere in this Lease, which breach
continues for a period of thirty (30) days after notice by Landlord to Tenant of the breach.
f.
Failure to Take Possession. Failure by Tenant to take possession of the Premises on the Commencement Date or failure by
Tenant to commence any Tenant's Work in a timely fashion.
Landlord
shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no
event less than thirty (30) days after notice by Tenant to Landlord. If Landlord fails to cure any such default within the allotted
time, Tenant's sole remedy shall be to seek actual money damages (but not consequential or punitive damages) for loss arising
from Landlord's failure to discharge its obligations under this Lease. Nothing herein contained shall relieve Landlord from its
duty to perform of any of its obligations to the standard prescribed in this Lease.
Any
notice periods granted herein shall be deemed to run concurrently with and not in addition to any default notice periods required
by law.
20. REMEDIES.
Landlord shall have the following remedies upon an Event of Default. Landlord's rights
and remedies under this Lease shall be cumulative, and none shall exclude any other right or remedy allowed by law.
a. Termination
of Lease. Landlord may terminate Tenant's interest under the Lease, but no act by Landlord other than notice of termination
from Landlord to Tenant shall terminate this Lease. The Lease shall terminate on the date specified in the notice of termination.
Upon termination of this Lease, Tenant will remain liable to Landlord for damages in an amount equal to the Rent and other sums
that would have been owing by Tenant under this Lease for the balance of the Lease term, less the net proceeds, if any, of any
reletting of the Premises by Landlord subsequent to the termination, after deducting all of Landlord's Reletting Expenses (as
defined below). Landlord shall be entitled to either collect damages from Tenant monthly on the days on which rent or other amounts
would have been payable under the Lease, or alternatively, Landlord may accelerate Tenant's obligations under the Lease and recover
from Tenant: (i) unpaid rent which had been earned at the time of termination; (ii) the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the amount of rent loss that Tenant proves could reasonably
have been avoided; (iii) the amount by which the unpaid rent for the balance of the term of the Lease after the time of award
exceeds the amount of rent loss that Tenant proves could reasonably be avoided (discounting such amount by the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award, plus 1%); and (iv) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under the Lease, or which in
the ordinary course would be likely to result from the Event of Default, including without limitation Reletting Expenses described
in Section 20(b) below.
|
©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
12 of 24 |
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LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
b. Re-Entry and
Reletting. Landlord may continue this Lease in full force and effect, and without demand or notice, re-enter and take possession of the Premises or any part thereof, expel the Tenant from the Premises
and anyone claiming through or under the Tenant, and remove the personal property of either. Landlord may relet the Premises, or
any part of them, in Landlord's or Tenant's name for the account of Tenant, for such period of time and at such other terms and
conditions as Landlord, in its discretion, may determine. Landlord may collect and receive the rents for the Premises. To the fullest
extent permitted by law, the proceeds of any reletting shall be applied: first, to pay Landlord all Reletting Expenses (defined
below); second, to pay any indebtedness of Tenant to Landlord other than rent; third, to the rent due and unpaid hereunder; and
fourth, the residue, if any, shall be held by Landlord and applied in payment of other or future obligations of Tenant to Landlord
as the same may become due and payable, and Tenant shall not be entitled to receive any portion of such revenue. Re-entry or taking
possession of the Premises by Landlord under this Section shall not be construed as an election on Landlord's part to terminate
this Lease, unless a notice of termination is given to Tenant. Landlord reserves the right following any re-entry or reletting,
or both, under this Section to exercise its right to terminate the Lease. Tenant will pay Landlord the Rent and other sums which
would be payable under this Lease if repossession had not occurred, less the net proceeds, if any, after reletting the Premises
and after deducting Landlord's Reletting Expenses. "Reletting Expenses" is defined to include all expenses incurred by
Landlord in connection with reletting the Premises, including without limitation, all repossession costs, brokerage commissions
and costs for securing new tenants, attorneys' fees, remodeling and repair costs, costs for removing persons or property, costs
for storing Tenant's property and equipment, and costs of tenant improvements and rent concessions granted by Landlord to any new
Tenant, prorated over the life of the new lease.
c. Waiver of Redemption
Rights. Tenant, for itself, and on behalf of any and all persons claiming through or under Tenant, including creditors of all kinds, hereby waives and surrenders all rights and privileges which
they may have under any present or future law, to redeem the Premises or to have a continuance of this Lease for the Lease term,
or any extension thereof.
d. Nonpayment
of Additional Rent. All costs which Tenant is obligated to pay to Landlord pursuant to this Lease shall in the event of nonpayment be treated as if they were payments of Rent, and Landlord shall have the
same rights it has with respect to nonpayment of Rent.
e. Failure to Remove Property.
If Tenant fails to remove any of its property from the Premises at Landlord's request following an uncured Event of Default,
Landlord may, at its option, remove and store the property at Tenant's expense and risk. If Tenant does not pay the storage cost
within five (5) days of Landlord's request, Landlord may, at its option, have any or all of such property sold at public or private
sale (and Landlord may become a purchaser at such sale), in such manner as Landlord deems proper, without notice to Tenant. Landlord
shall apply the proceeds of such sale: (i) to the expense of such sale, including reasonable attorneys' fees actually incurred;
(ii) to the payment of the costs or charges for storing such property; (iii) to the payment of any other sums of money which may
then be or thereafter become due Landlord from Tenant under any of the terms hereof; and (iv) the balance, if any, to Tenant.
Nothing in this Section shall limit Landlord's right to sell Tenant's personal property as permitted by law or to foreclose Landlord's
lien for unpaid rent.
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
13 of 24 |
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LEASE AGREEMENT
(Single Tenant For Entire Parcel - NNN)
21. MORTGAGE
SUBORDINATION AND ATTORNMENT. This Lease shall automatically be subordinate to any mortgage or deed of trust created by Landlord
which is now existing or hereafter placed upon the Premises including any advances, interest, modifications, renewals, replacements
or extensions ("Landlord's Mortgage"). Tenant shag attorn to the holder of any Landlord's Mortgage or any party acquiring
the Premises at any sale or other proceeding under any Landlord's Mortgage provided the acquiring party assumes the obligations
of Landlord under this Lease. Tenant shall promptly and in no event later than fifteen (15) days after request execute, acknowledge
and deliver documents which the holder of any Landlord's Mortgage may reasonably require as further evidence of this subordination
and attornment. Notwithstanding the foregoing, Tenant's obligations under this Section to subordinate in the future are conditioned
on the holder of each Landlord's Mortgage and each party acquiring the Premises at any sale or other proceeding under any such
Landlord's Mortgage not disturbing Tenant's occupancy and other rights under this Lease, so long as no uncured Event of Default
by Tenant exists.
22. NON-WAIVER.
Landlord's waiver of any breach of any provision contained in this Lease shall not be deemed to be a waiver of the same provision
for subsequent acts of Tenant. The acceptance by Landlord of Rent or other amounts due by Tenant hereunder shall not be deemed
to be a waiver of any previous breach by Tenant.
23. HOLDOVER.
If Tenant shall, without the written consent of Landlord, remain in possession of the Premises and fail to return them to
Landlord after the expiration or termination of the term, the tenancy shall be a holdover tenancy and shall be on a month-to-month
basis, which may be terminated according to Washington law. During such tenancy, Tenant agrees to pay to Landlord 150% of the
rate of rental last payable under this Lease, unless a different rate is agreed upon by Landlord. All other terms of the Lease
shall remain in effect. Tenant acknowledges and agrees that this Section does not grant any right to Tenant to holdover, and that
Tenant may also be liable to Landlord for any and all damages or expenses which Landlord may have to incur as a result of Tenant's
holdover.
24. NOTICES.
All notices under this Lease shall be in writing and effective (i) when delivered in person or via overnight courier to the
other party, (ii) three (3) days after being sent by registered or certified mail to the other party at the address set forth
in Section 1; or (iii) upon confirmed transmission by facsimile to the other party at the facsimile numbers set forth in Section
1. The addresses for notices and payment of rent set forth in Section 1 may be modified by either party only by written notice
delivered in conformance with this Section.
25. COSTS
AND ATTORNEYS' FEES. If Tenant or Landlord engage the services of an attorney to collect monies due or to bring any action
for any relief against the other, declaratory or otherwise, arising out of this Lease, including any suit by Landlord for the
recovery of Rent or other payments, or possession of the Premises, the losing party shall pay the prevailing party a reasonable
sum for attorneys' fees in such action, whether in mediation or arbitration, at trial, on appeal, and in any bankruptcy proceeding.
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
14 of 24 |
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LEASE AGREEMENT
(Single Tenant For Entire Parcel -
NNN)
26. ESTOPPEL CERTIFICATES.
Tenant shall, from time to time, upon written request of Landlord, execute, acknowledge and deliver to Landlord or its designee
a written statement specifying the following, subject to any modifications necessary to make such statements true and complete:
(i) the total rentable square footage of the Premises; (ii) the date the Lease term commenced and the date it expires; (iii) the
amount of minimum monthly Rent and the date to which such Rent has been paid; (iv) that this Lease is in full force and effect
and has not been assigned, modified, supplemented or amended in any way; (v) that this Lease represents the entire agreement between
the parties; (vi) that all obligations under this Lease to be performed by either party have been satisfied; (vii) that there
are no existing claims, defenses or offsets which the Tenant has against the enforcement of this Lease by Landlord; (viii) the
amount of Rent, if any, that Tenant paid in advance; (ix) the amount of security that Tenant deposited with Landlord; (x) if
Tenant has sublet all or a portion of the Premises or assigned its interest in the Lease and to whom; (xi) if
Tenant has any option to extend the Lease or option to purchase the Premises; and (xii) such other factual matters concerning
the Lease or the Premises as Landlord may reasonably request. Tenant acknowledges and agrees that any statement delivered pursuant
to this Section may be relied upon by a prospective purchaser of Landlord's interest or assignee of any mortgage or new mortgagee
of Landlord's interest in the Premises. If Tenant shall fail to respond within ten (10) days to Landlord's request for the statement
required by this Section, Landlord may provide the statement and Tenant shall be deemed to have admitted the accuracy of the information
provided by Landlord.
27. TRANSFER OF
LANDLORD'S INTEREST. This Lease shall be assignable by Landlord without the consent of Tenant. In the event of any transfer
or transfers of Landlord's interest in the Premises, other than a transfer for collateral purposes only, upon the assumption of
this Lease by the transferee, Landlord shall be automatically relieved of obligations and liabilities accruing from and after
the date of such transfer, including any liability for any retained security deposit or prepaid rent, for which the transferee
shall be liable, and Tenant shall attorn to the transferee.
28. LANDLORD'S
LIABILITY. Anything in this Lease to the contrary notwithstanding, covenants, undertakings and agreements herein made on the
part of Landlord are made and intended not as personal covenants, undertakings and agreements for the purpose of binding Landlord
personally or the assets of Landlord but are made and intended for the purpose of binding only the Landlord's interest in the
Premises, as the same may from time to time be encumbered. In no event shall Landlord or its partners, shareholders, or members,
as the case may be, ever be personally liable hereunder.
29. RIGHT TO PERFORM.
If Tenant shall fail to timely pay any sum or perform any other act on its part to be performed hereunder, Landlord may make
any such payment or perform any such other act on Tenant's behalf. Tenant shall, within ten (10) days of demand, reimburse Landlord
for its expenses incurred in making such payment or performance. Landlord shall (in addition to any other right or remedy of Landlord
provided by law) have the same rights and remedies in the event of the nonpayment of sums due under this Section as in the case
of default by Tenant in the payment of Rent.
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
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Page
15 of 24 |
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LEASE AGREEMENT
(Single Tenant For Entire Parcel -
NNN)
30. HAZARDOUS MATERIAL.
As used herein, the term "Hazardous Material" means any hazardous, dangerous, toxic or harmful substance, material
or waste including biomedical waste which is or becomes regulated by any local governmental authority, the State of Washington
or the United States Government, due to its potential harm to the health, safety or welfare of humans or the environment. Landlord
represents and warrants to Tenant that, to Landlord's knowledge without duty of investigation, there is no Hazardous Material
on, in, or under the Premises as of the Commencement Date except as may otherwise have been disclosed to Tenant in writing before
the execution of this Lease. If there is any Hazardous Material on, in, or under the Premises as of the Commencement Date which
has been or thereafter becomes unlawfully released through no fault of Tenant, then Landlord shall indemnify, defend and hold
Tenant harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses including without
limitation sums paid in settlement of claims, attorneys' fees, consultant fees and expert fees, incurred or suffered by Tenant
either during or after the Lease term as the result of such contamination. Tenant shall not cause or permit any Hazardous Material
to be brought upon, kept, or used in or about, or disposed of on the Premises by Tenant, its employees, officers, agents, servants,
contractors, customers, clients, visitors, guests, or other licensees or invitees, except with Landlord's prior consent and then
only upon strict compliance with all applicable federal, state and local laws, regulations, codes and ordinances. If Tenant breaches
the obligations stated in the preceding sentence, then Tenant shall indemnify, defend and hold Landlord harmless from any and
all claims, judgments, damages, penalties, fines, costs, liabilities or losses including, without limitation, diminution in the
value of the Premises; damages for the loss or restriction on use of rentable or usable space or of any amenity of the Premises,
or elsewhere; damages arising from any adverse impact on marketing of space at the Premises; and sums paid in settlement of claims,
attorneys' fees, consultant fees and expert fees incurred or suffered by Landlord either during or after the Lease term. These
indemnifications by Landlord and Tenant include, without limitation, costs incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work, whether or not required by any federal, state or local governmental
agency or political subdivision, because of Hazardous Material present in the Premises, or in soil or ground water on or under
the Premises. Tenant shall immediately notify Landlord of any inquiry, investigation or notice that Tenant may receive from any
third party regarding the actual or suspected presence of Hazardous Material on the Premises.
Without limiting the foregoing, if the presence of any Hazardous Material brought upon,
kept or used in or about the Premises by Tenant, its employees, officers, agents, servants, contractors, customers, clients, visitors,
guests, or other licensees or invitees, results in any unlawful release of any Hazardous Materials on the Premises or any other
property, Tenant shall promptly take all actions, at its sole expense, as are necessary to return the Premises or any other property
to the condition existing prior to the release of any such Hazardous Material; provided that Landlord's approval of such actions
shall first be obtained, which approval may be withheld at Landlord's sole discretion. The provisions of this Section shall survive
expiration or termination of this Lease.
31. QUIET ENJOYMENT.
So long as Tenant pays the Rent and performs all of its obligations in this Lease, Tenant's possession of the Premises will
not be disturbed by Landlord or anyone claiming by, through or under Landlord.
32. MERGER. The
voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger and shall, at
the option of Landlord, terminate all or any existing subtenancies or may, at the option of Landlord, operate as an assignment
to Landlord of any or all of such subtenancies.
33. GENERAL.
a. Heirs and Assigns. This Lease shall apply to and be binding upon Landlord and Tenant and their respective heirs, executors,
administrators, successors and assigns.
b. Brokers' Fees. Tenant represents and warrants to Landlord that except for Tenant's Broker, if any, described or disclosed
in Section 35 of this Lease, it has not engaged any broker, finder or other person who would be entitled to any commission or
fees for the negotiation, execution or delivery of this Lease and shall indemnify and hold harmless Landlord against any loss,
cost, liability or expense incurred by Landlord as a result of any claim asserted by any such broker, finder or other person on
the basis of any arrangements or agreements made or alleged to have been made by or on behalf of Tenant. Landlord represents and
warrants to Tenant that except for Landlord's Broker, if any, described and disclosed in Section 35 of this Lease, it has not
engaged any broker, finder or other person who would be entitled to any commission or fees for the negotiation, execution or delivery
of this Lease and shall indemnify and hold harmless Tenant against any loss, cost, liability or expense incurred by Tenant as
a result of any claim asserted by any such broker, finder or other person on the basis of any arrangements or agreements made
or alleged to have been made by or on behalf of Landlord.
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
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|
Page
16 of 24 |
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LEASE AGREEMENT
(Single Tenant For Entire Parcel
- NNN)
c. Entire Agreement. This Lease contains all of the covenants and agreements between Landlord and Tenant relating to the Premises.
No prior or contemporaneous agreements or understandings pertaining to the Lease shall be valid or of any force or effect and
the covenants and agreements of this Lease shall not be altered, modified or amended to except in writing signed by Landlord and
Tenant.
d. Severability. Any provision of this Lease which shall prove to be invalid, void or illegal shall in no way affect, impair
or invalidate any other provision of this Lease.
e. Force Majeure. Time periods for either party's performance under any provisions of this Lease (excluding payment of Rent)
shall be extended for periods of time during which the party's performance is prevented due to circumstances beyond such party's
control, including without limitation, fires, floods, earthquakes, lockouts, strikes, embargoes, governmental regulations, acts
of God, public enemy, war or other strife.
f. Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of Washington.
g. Memorandum of Lease. Neither this Lease nor any memorandum or "short form" thereof shall be recorded without Landlord's
prior consent.
h. Submission of Lease Form Not an Offer. One party's submission of this Lease to the other for review shall not constitute an
offer to lease the Premises. This Lease shall not become effective and binding upon Landlord and Tenant until it has been fully
signed by both of them.
i. No Light, Air or View Easement. Tenant has not been granted an easement or other right for light, air or view to or from the
Premises. Any diminution or shutting off of light, air or view by any structure which may be erected on or adjacent to the Premises
shall in no way effect this Lease or the obligations of Tenant hereunder or impose any liability on Landlord.
j. Authority of Parties. Each party signing this Lease represents and warrants to the other that it has the authority to enter
into this Lease, that the execution and delivery of this Lease has been duly authorized, and that upon such execution and delivery,
this Lease shall be binding upon and enforceable against the party on signing.
k. Time.
"Day" as used herein means a calendar day and "business day" means any day on which commercial banks are
generally open for business in the state where the Premises are situated. Any period of time which would otherwise end on a non-business
day shall be extended to the next following business day. Time is of the essence of this Lease.
L. LANDLORD'S
OPTION To TERMINATE. SHOULD ANY GOVERNMENTAL AGENCY REQUEST TENANT TO SEIZE OPERATIONS, CLOSE BUSINESS,
AND/OR VACATE, TENANT SHALL VACATE WITHIN THIRTY (30) DAYS WRITTEN NOTICE FROM SUCH GOVERNMENTAL AGENCY AND/OR LANDLORD. UPON
TERMINATION, TENANT SHALL BE RESPONSIBLE FOR PAYMENT TO LANDLORD OF ANY UNAMORTIZED REAL ESTATE COMMISSIONS, FORFEIT SECURITY
DEPOSIT AND LAST MONTHS RENT, AND RETURN THE PREMISES TO ITS ORIGINAL CONDITION AT LANDLORD'S DISCRETION.
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
17 of 24 |
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LEASE AGREEMENT
(Single Tenant For Entire Parcel
- NNN)
IN ADDITION, TENANT GRANTS TO LANDLORD
THE RIGHT TO TERMINATE THIS LEASE AFTER SEPTEMBER 30, 2018 ON THE FOLLOWING TERMS AND CONDITIONS:
(A) LANDLORD'S RIGHT TO TERMINATE THIS LEASE SHALL BE CONDITIONED UPON EITHER: (I) LANDLORD DETERMINING IN ITS SOLE DISCRETION
THAT SUCH TERMINATION IS REQUIRED FOR THE REDEVELOPMENT, MODIFICATION, OR RECONSTRUCTION OF THE PREMISES; OR LANDLORD DETERMINING
IN ITS SOLE DISCRETION THAT SUCH TERMINATION IS REQUIRED BY THE SALE OF THE PREMISES.
(B) LANDLORD MAY EXERCISE ITS RIGHT TO TERMINATE THIS LEASE BY PROVIDING TENANT WITH WRITTEN NOTICE OF TERMINATION, WHICH NOTICE SHALL
SET FORTH THE DATE THE LEASE WILL TERMINATE. IN NO EVENT SHALL THE DATE OF TERMINATION OCCUR ANY SOONER THAN TWELVE (12) MONTHS
AFTER LANDLORD'S ISSUANCE OF THE NOTICE OF TERMINATION.
(C) ON OR BEFORE THE TERMINATION DATE SET FORTH IN THE NOTICE, TENANT WILL SURRENDER POSSESSION OF THE PREMISES TO LANDLORD
IN ACCORDANCE WITH THE PROVISION OF THIS LEASE, AS IF THE TERMINATION DATE WERE THE EXPIRATION DATE OF THIS LEASE AND UPON TERMINATION,
LANDLORD AND TENANT WILL BE RELIEVED OF THEIR OBLIGATIONS UNDER THIS LEASE, EXCEPT FOR THOSE ACCRUING BEFORE THE TERMINATION DATE.
(D) LANDLORD'S RIGHT TO TERMINATE AS PROVIDED IN THIS SECTION IS MATERIAL CONSIDERATION FOR LANDLORD ENTERING INTO THIS LEASE AND
LANDLORD IS RELYING ON THIS RIGHT OF TERMINATION IN EXECUTING AND DELIVERING THIS LEASE. BUT FOR THE RIGHT OF TERMINATION GRANTED
HEREIN, LANDLORD WOULD NOT ENTER INTO THIS LEASE.
M. TENANT'S
OPTION To TERMINATE. IF THERE IS A CHANGE IN THE EXISTING LAWS GOVERNING THE LEGALITY OF TENANT'S
BUSINESS, OR IN THE ENFORCEMENT OF EXISTING LAWS, WHICH MAKE IT IMPOSSIBLE TO CONTINUE OPERATING UNDER THE STATED USE,
OR A SIMILAR USE ACCEPTABLE TO TENANT, TENANT SHALL BE ALLOWED TO TERMINATE THE REMAINDER OF THIS LEASE WITHIN SIXTY (60)
DAYS WRITTEN NOTICE TO LANDLORD. UPON TERMINATION, TENANT SHALL BE RESPONSIBLE FOR PAYMENT TO LANDLORD OF ANY UNAMORTIZED
REAL ESTATE COMMISSIONS, FORFEIT SECURITY DEPOSIT AND LAST MONTHS RENT, AND RETURN THE PREMISES TO ITS ORIGINAL CONDITION AT
LANDLORD'S DISCRETION. TENANT MAY EXERCISE OPTION TO TERMINATE, IN ITS SOLE DISCRETION, IN THE EVENT DIEGO PELLICER INC IS
NOT GRANTED A MARIJUANA RETAIL LICENSE BY WASHINGTON LIQUOR CONTROL BOARD.
N. TENANTS RIGHT OF FIRST REFUSAL To PURCHASE PROPERTY: DURING THE LEASE TERM;
TENANT SHALL HAVE A ONE TIME RIGHT OF FIRST REFUSAL TO PURCHASE THE PROPERTY FOR THE SAME PRICE AND IN ACCORDANCE WITH THE
SAME TERMS AND CONDITIONS AS MAY BE TENDERED TO LANDLORD IN A BONA FIDE OFFER TO PURCHASE BY A PROSPECTIVE PURCHASER.
TENANT SHALL HAVE TEN (10) DAYS FOLLOWING RECEIPT OF WRITTEN NOTICE FROM LANDLORD INDICATING LANDLORD'S INTENT TO ACCEPT
THE SUBJECT OFFER, TOGETHER WITH A COPY OF THE PROPOSED PURCHASE AND SALE AGREEMENT, IN WHICH TO NOTIFY LANDLORD IN WRITING OF
TENANT'S INTENT TO PURCHASE THE PROPERTY FOR THE SAME PURCHASE PRICE AND ON THE SAME TERMS AND CONDITIONS AS SET FORTH IN LANDLORD'S
WRITTEN NOTICE. IF TENANT FAILS TO NOTIFY LANDLORD IN WRITING OF TENANT'S ELECTION TO PURCHASE THE PROPERTY, TENANT'S RIGHT OF
FIRST REFUSAL SHALL BE NULL AND VOID, AND LANDLORD IRREVOCABLY MAY THEN SELL THE PROPERTY TO THE THIRD PARTY.
TENANT UNDERSTANDS THAT LANDLORD
CONSISTS OF TWO (2) INDIVIDUALS. SHOULD ONE (1) OF THE INDIVIDUALS WANT TO BUY THE OTHER INDIVIDUALS SHARE OF THE
PROPERTY, TENANTS RIGHT OF FIRST REFUSAL TO PURCHASE PROPERTY SHALL NOT INHIBIT THE INDIVIDUALS RIGHT TO PURCHASE THE OTHER
INDIVIDUALS SHARE OF THE PROPERTY.
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
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Page
18 of 24 |
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LEASE AGREEMENT
(Single Tenant For Entire Parcel
- NNN)
34. EXHIBITS AND
RIDERS. The following exhibits and riders are made a part of this Lease, and the terms thereof shall control over any inconsistent
provision in the sections of this Lease:
Exhibit A: Legal Description of
the Property
Exhibit B — Tenant Improvement
Schedule
CHECK THE BOX FOR ANY OF THE FOLLOWING
THAT WILL APPLY. CAPITALIZED TERM USED IN THE RIDERS SHALL HAVE THE MEANING GIVEN TO THEM IN THE LEASE.
☒ Rent
Rider
☐ Arbitration
Rider
☐ Letter
of Credit Rider
☐ Guaranty
of Tenant's Lease Obligations Rider
☒ Option
to Extend Rider
35. AGENCY
DISCLOSURE. At the signing of this Lease, Landlord is represented by None (insert both the name of the Broker and the Firm
as licensed) (the "Landlord's Broker"), and Tenant is represented by Paul Jacobson with Regency Group, Inc. (insert
both the name of the Broker and the Firm as licensed) (the "Tenant's Broker").
This Agency Disclosure creates
an agency relationship between Landlord, Landlord's Broker (if any such person is disclosed), and any managing brokers who supervise
Landlord's Broker's performance (collectively the "Supervising Brokers"). In addition, this Agency Disclosure creates
an agency relationship between Tenant, Tenant's Broker (if any such person is disclosed), and any managing brokers who supervise
Tenant's Broker's performance (also collectively the "Supervising Brokers"). If Tenant's Broker and Landlord's Broker
are different real estate licensees affiliated with the same Firm, then both Tenant and Landlord confirm their consent to that
Firm and both Tenant's and Landlord's Supervising Brokers acting as dual agents. If Tenant's Broker and Landlord's Broker are
the same real estate licensee who represents both parties, then both Landlord and Tenant acknowledge that the Broker, his or her
Supervising Brokers, and his or her Firm are acting as dual agents and hereby consent to such dual agency. If Tenants' Broker,
Landlord's Broker, their Supervising Brokers, or their Firm are dual agents, Landlord and Tenant consent to Tenant's Broker, Landlord's
Broker and their Firm being compensated based on a percentage of the rent or as otherwise disclosed on the attached addendum.
Neither Tenant's Broker, Landlord's Broker nor either of their Firms are receiving compensation from more than one party to this
transaction unless otherwise disclosed on an attached addendum, in which case Landlord and Tenant consent to such compensation.
Landlord and Tenant confirm receipt of the pamphlet entitled "The Law of Real Estate Agency."
36. COMMISSION
AGREEMENT. If Landlord has not entered into a listing agreement (or other compensation agreement with TENANT'S
Broker), Landlord agrees to pay a commission to TENANT'S Broker (as identified in the Agency Disclosure paragraph above)
as follows:
☒ $7,500.00
☐ _____%
of the gross rent payable pursuant to the lease
☐ $_____
per square foot of the Permises
☐ Other
_____
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
|
|
Page
19 of 24 |
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LEASE AGREEMENT
(Single Tenant For Entire Parcel - NNN)
Landlord's
Broker ☐ shall ☐ shall not (shall not if not filled in) be entitled to a commission upon the extension by Tenant of
the Lease term pursuant to any right reserved to Tenant under the Lease calculated
☐ as provided above or ☐ as follows ______ (if no box is checked, as provided above). Landlord's Broker ☐ shall
☐ shall not (shall not if not filled in) be entitled to a commission upon the extension by Tenant of the Lease term pursuant
to any right reserved to Tenant under the Lease calculated ☐ as
provided above or ☐ as
follows ______ (if no box is checked, as provided above). Landlord's Broker ☐ shall ☐
shall not (shall not if not filled in) be entitled to a commission
upon any expansion of Premises pursuant to any right reserved to Tenant under the Lease, calculated ☐ as provided
above or ☐ as follows_______ (if no box is checked, as provided above).
Any
commission shall be earned upon execution of this Lease, and paid one-half upon execution of the Lease, and one-half upon occupancy
of the Premises by Tenant AND TENANT BEING OPEN FOR BUSINESS.
If
any other lease or sale is entered into between Landlord and Tenant pursuant to a right reserved to Tenant under the Lease, Landlord
☐ shall ☐ shall not (shall not if not filled in) pay an additional commission according to any commission agreement
or, in the absence of one, according to the commission schedule of Landlord's Broker in effect as of the execution of this Lease.
Landlord's successor shall be obligated to pay any unpaid commissions upon any transfer of this Lease and any such transfer shall
not release the transferor from liability to pay such commissions.
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
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|
Page
23 of 24 |
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LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
EXHIBIT
A
[Legal
Description of the Property]
A
unit of land with a 3,700 square foot (approximate size) building located in the state of Washington within the county
of King, with an address of 2215 4th Ave. S., Seattle, WA 98134-1516. Tax parcel number 766620-5165.
BLK 293
Lot 3 Seattle Tide LDS.
Exhibit A
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©
Commercial Brokers
Association
2011
ALL
RIGHTS RESERVED
CBA
Form ST-NNN
Single Tenant NNN Lease |
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Page
24 of 24 |
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LEASE
AGREEMENT
(Single
Tenant For Entire Parcel - NNN)
EXHIBIT
B
[Tenant
Improvement Schedule (Landlord's Work)]
1. |
Tenant Improvements to be Completed by Landlord |
Tenant
accepts the Premises in an "as is," "where is," "with all faults" condition. However, Landlord at
Landlord's expense will replace the metal roof over the back warehouse portion of the building prior to December 1, 2013. Tenant
shall cooperate with Landlords contractors.
2. |
Tenant Improvements to be Completed by Tenant |
Tenant
at Tenant's expense shall make floor plan, decor, security and air filtration modifications as necessary with Landlord's approval,
which shall not unreasonably be delayed or withheld. All construction work shall be completed to building code and, as necessary,
by licensed bonded contractors.
OPTION TO EXTEND
RIDER
This
Option to Extend Rider ("Rider") is made part of the Lease Agreement dated September 19, 2013 (the "Lease")
between M-P Properties ("Landlord") and Diego Pellicer Worldwide, Inc., a Delaware corporation ("Tenant")
concerning the Premises located at the property commonly known as 2215 4th Ave S., Seattle, WA 98134 (the "Property").
1. | Extension
of Lease. Provided Tenant is not in default of any provision of the Lease at the
time that Tenant exercises the right to extend the Lease or at the time the new term
begins, Tenant shall have one (1) successive option to extend the term of the Lease for
five (5) years. The term of the Lease shall be extended on the same terms, conditions
and covenants set forth in the Lease, except that (i) the amount of the Base Rent stated
in the Lease shall be adjusted as set forth below; (ii) there shall be no free or abated
rent periods, tenant improvement allowances or other concessions that may have been granted
to Tenant at the beginning of the initial term hereof; and (iii) after exercise of Tenant's
final extension term option, there shall be no further extension or renewal term options. |
2. | Notice.
To extend the Lease, Tenant must deliver written notice to Landlord not less than
one hundred twenty (120) days prior to the expiration of the then-current Lease term.
Time is of the essence of this Rider. |
Term |
Base Monthly Rent |
10/1/18 — 9/30/19 |
$7,126.12 plus NNN's |
10/1/19 — 9/30/20 |
$7,375.53 plus NNN's |
10/1/20 — 9/30/21 |
$7,633.68 plus NNN's |
10/1/21 — 9/30/22 |
$7,900.85 plus NNN's |
10/1/22
— 9/30/23 |
$8,177.38 plus NNN's |
Exhibit 99.1
DIEGO PELLICER WORLDWIDE, INC. |
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INDEX |
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|
PAGES |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
2 |
|
|
BALANCE SHEETS |
3 |
|
|
STATEMENTS OF OPERATIONS |
4 |
|
|
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) |
5 |
|
|
STATEMENTS OF CASH FLOW |
6 |
|
|
NOTES TO FINANCIAL STATEMENTS |
7-17 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Diego Pellicer Worldwide Inc.
West Lin, Oregon
We have audited the accompanying balance
sheet of Diego Pellicer Worldwide Inc. as of December 31, 2014 and 2013, and the related statements of operations, changes in stockholders’
equity (deficiency), and cash flows for the year ended December 31, 2014, and from inception (August 26, 2013) to December 31,
2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Diego Pellicer Worldwide Inc. as of December
31, 2014 and 2013 and the results of its operations and its cash flows for the year ended December 31, 2014 and the period from
inception (August 26, 2013) to December 31, 2013 in conformity with accounting principles generally accepted in the United States
of America.
The accompanying financial statements
have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as
a going concern. As disclosed in Note 3, The Company has collected minimal revenue since inception The Company has incurred losses
since inception and its current liabilities exceed its current assets by $1,610,788 and has a stockholders’ deficiency of
$932,231 as December 31, 2014. As discussed in Note 12, on May 23, 2014 the Company received a subpoena from the United States
Department of Justice. Depending on the extent to which the Department of Justice pursues this matter, the Company may be required
to suspend or cease operations. These factors among others raise substantial doubt about the Company's ability to continue as a
going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded
asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Hackensack, New Jersey
March 13, 2015
DIEGO
PELLICER WORLDWIDE, INC.
BALANCE
SHEETS
| |
December 31,
2014 | | |
December 31,
2013 | |
Assets | |
| | |
| |
| |
| | |
| |
Current assets: | |
| | |
| |
Cash and equivalents | |
$ | 33,101 | | |
$ | 140,084 | |
Prepaid expenses | |
| 8,946 | | |
| 7,806 | |
Due from related party | |
| - | | |
| 54,341 | |
Total current assets | |
| 42,047 | | |
| 202,231 | |
| |
| | | |
| | |
Property and Equipment, net | |
| 253,990 | | |
| - | |
| |
| | | |
| | |
Other assets: | |
| | | |
| | |
Investment, at cost | |
| 525,567 | | |
| - | |
Security deposits | |
| 173,000 | | |
| 20,000 | |
Deposits - End of Lease | |
| 150,000 | | |
| - | |
Total other assets | |
| 848,567 | | |
| 20,000 | |
| |
| | | |
| | |
Total assets | |
$ | 1,144,604 | | |
$ | 222,231 | |
| |
| | | |
| | |
Liabilities and Stockholders’ Equity (Deficiency) | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 298,939 | | |
$ | 15,571 | |
Accrued expenses - related party | |
| 124,333 | | |
| 75,730 | |
Accrued Compensation | |
| 1,176,563 | | |
| - | |
Deferred Revenue | |
| 53,000 | | |
| - | |
Loan payable - related party | |
| - | | |
| 17,000 | |
Total current liabilities | |
| 1,652,835 | | |
| 108,301 | |
| |
| | | |
| | |
Deferred revenue | |
| 424,000 | | |
| - | |
Total Liabilities | |
| 2,076,835 | | |
| 108,301 | |
| |
| | | |
| | |
Stockholders’ equity (deficiency): | |
| | | |
| | |
Series A Preferred stock, $0.0001 par value, 10,000,000 shares authorized, as of December 31, 2014 and December 31, 2013, shares issued were 4,836,769 and 561,676 and outstanding were 4,778,569 and 561,676 | |
| 484 | | |
| 56 | |
Series B Preferred stock, $0.0001 par value, 3,000,000 shares authorized, as of December 31, 2014, shares issued and outstanding were 200,000 | |
| 20 | | |
| - | |
Common stock, $0.0001 par value, 87,000,000 shares authorized, as of December 31, 2014 and December 31, 2013 shares issued and outstanding were 13,520,000 | |
| 1,352 | | |
| 1,352 | |
Additional paid-in capital | |
| 4,333,980 | | |
| 526,520 | |
Treasury shares, at cost | |
| (87,300 | ) | |
| - | |
Subscription receivable | |
| - | | |
| (1,352 | ) |
Accumulated deficit | |
| (5,180,767 | ) | |
| (412,646 | ) |
Total stockholders’ equity (deficiency) | |
| (932,231 | ) | |
| 113,930 | |
| |
| | | |
| | |
Total liabilities and stockholders’ equity | |
$ | 1,144,604 | | |
$ | 222,231 | |
See
Accompanying Notes to Financial Statements.
DIEGO
PELLICER WORLDWIDE, INC.
STATEMENTS
OF OPERATIONS
| |
| | |
From Inception | |
| |
Year Ended | | |
(August 26, 2013) to | |
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
REVENUES | |
| | |
| |
Rental income | |
$ | 497,638 | | |
$ | - | |
Licensing revenue | |
| 48,567 | | |
| - | |
Provision for uncollectible rents | |
| (497,638 | ) | |
| - | |
Total Revenues | |
| 48,567 | | |
| - | |
| |
| | | |
| | |
COSTS AND EXPENSES (other income) | |
| | | |
| | |
General and administrative expenses | |
| 3,624,507 | | |
| 412,646 | |
Rent expense | |
| 487,533 | | |
| - | |
Interest income | |
| (73,198 | ) | |
| - | |
Write-off of credit line receivable | |
| 777,846 | | |
| - | |
Total Costs and Expenses | |
| 4,816,688 | | |
| 412,646 | |
| |
| | | |
| | |
Loss before provision for taxes | |
| (4,768,121 | ) | |
| (412,646 | ) |
Provision for taxes | |
| - | | |
| - | |
NET LOSS | |
$ | (4,768,121 | ) | |
$ | (412,646 | ) |
| |
| | | |
| | |
Net loss per share – basic and fully diluted | |
$ | (0.35 | ) | |
$ | (0.03 | ) |
| |
| | | |
| | |
Weighted Average Common Shares Outstanding - basic and diluted | |
| 13,520,000 | | |
| 13,520,000 | |
See
Accompanying Notes to Financial Statements.
DIEGO
PELLICER WORLDWIDE, INC.
STATEMENTS
OF CHANGE IN STOCKHOLDER'S EQUITY (DEFICIENCY)
| |
Shares | | |
$ | |
| |
| | |
| | |
| | |
| | |
Common | | |
| | |
| | |
Additional | | |
| | |
| | |
| |
| |
Common | | |
Treasury | | |
Preferred | | |
Treasury | | |
Preferred | | |
Paid-in | | |
Accumulated | | |
Subscription | | |
| |
| |
Shares | | |
Shares | | |
Series A | | |
Series B | | |
Stock | | |
Shares | | |
Series A | | |
Series B | | |
Capital | | |
Deficit | | |
Receivable | | |
Total | |
Balance
at inception - August 26, 2013 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 0 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance of founders
shares | |
| 13,520,000 | | |
| - | | |
| - | | |
| - | | |
$ | 1,352 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | (1,352 | ) | |
| - | |
Issuance
of Preferred stock for services | |
| - | | |
| - | | |
| 3,733 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,500 | | |
| - | | |
| - | | |
| 3,500 | |
Issuance
of Preferred shares and warrants for cash | |
| - | | |
| - | | |
| 557,943 | | |
| - | | |
| - | | |
| - | | |
| 56 | | |
| - | | |
| 523,020 | | |
| - | | |
| - | | |
| 523,076 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (412,646 | ) | |
| - | | |
| (412,646 | ) |
Balance
– December 31, 2013 | |
| 13,520,000 | | |
| - | | |
| 561,676 | | |
| - | | |
| 1,352 | | |
| - | | |
| 56 | | |
| - | | |
| 526,520 | | |
| (412,646 | ) | |
| (1,352 | ) | |
| 113,930 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Issuance
of Preferred shares and warrants for cash | |
| - | | |
| - | | |
| 4,275,093 | | |
| 200,000 | | |
| - | | |
| - | | |
| 428 | | |
| 20 | | |
| 3,807,460 | | |
| - | | |
| - | | |
| 3,807,908 | |
Treasury shares
acquired | |
| - | | |
| (58,200 | ) | |
| - | | |
| - | | |
| - | | |
| (87,300 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (87,300 | ) |
Subscription
received | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,352 | | |
| 1,352 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,768,121 | ) | |
| - | | |
| (4,768,121 | ) |
Balance
– December 31, 2014 | |
| 13,520,000 | | |
| (58,200 | ) | |
| 4,836,769 | | |
| 200,000 | | |
$ | 1,352 | | |
$ | (87,300 | ) | |
$ | 484 | | |
$ | 20 | | |
$ | 4,333,980 | | |
$ | (5,180,767 | ) | |
| - | | |
$ | (932,231 | ) |
See
Accompanying Notes to Financial Statements.
DIEGO
PELLICER WORLDWIDE, INC.
STATEMENTS
OF CASH FLOW
| |
| | |
From Inception | |
| |
Year Ended | | |
(August 26, 2013) to | |
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
Operating Activities | |
| | |
| |
Net Loss | |
$ | (4,768,121 | ) | |
$ | (412,646 | ) |
Adjustments to reconcile net Loss to net cash provided by operating | |
| | | |
| | |
Amortization of deferred revenue | |
| (48,567 | ) | |
| - | |
Interest income | |
| (70,596 | ) | |
| - | |
Accrued expenses - related party | |
| 48,603 | | |
| 75,730 | |
Non-cash compensation | |
| 1,176,563 | | |
| - | |
Write-off of credit line receivable | |
| 777,846 | | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| (1,140 | ) | |
| (7,806 | ) |
Accounts payable | |
| 283,368 | | |
| 15,571 | |
Net cash used in operating activities | |
| (2,602,044 | ) | |
| (329,151 | ) |
| |
| | | |
| | |
Investing Activities | |
| | | |
| | |
(Advances to) repayment from related party | |
| 54,341 | | |
| (54,341 | ) |
Acquisition of property and equipment | |
| (253,990 | ) | |
| - | |
Security deposits | |
| (153,000 | ) | |
| (20,000 | ) |
Deposits - end of lease | |
| (150,000 | ) | |
| - | |
Advances under line of credit | |
| (707,250 | ) | |
| - | |
Net cash used in investing activities | |
| (1,209,899 | ) | |
| (74,341 | ) |
| |
| | | |
| | |
Financing Activities | |
| | | |
| | |
Collection of subscriptions receivable | |
$ | 1,352 | | |
$ | - | |
Proceeds from (repayment) of loan - related party | |
| (17,000 | ) | |
| 17,000 | |
Proceeds from sale of preferred stock and warrants | |
| 3,807,908 | | |
| 526,576 | |
Acquisition of treasury stock | |
| (87,300 | ) | |
| - | |
Net cash provided by financing activities | |
| 3,704,960 | | |
| 543,576 | |
| |
| | | |
| | |
Net (Decrease) Increase in Cash | |
| (106,983 | ) | |
| 140,084 | |
Cash - beginning of period | |
| 140,084 | | |
| - | |
Cash - end of year | |
$ | 33,101 | | |
$ | 140,084 | |
Supplemental disclosure of non-cash activity: | |
| | | |
| | |
Investment acquired through licensing agreement | |
$ | 525,567 | | |
$ | - | |
See
Accompanying Notes to Financial Statements.
DIEGO
PELLICER WORLDWIDE, INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014
NOTE
1 - ORGANIZATION AND BASIS OF PRESENTATION
Organization
Diego
Pellicer Worldwide, Inc. (“the Company”) was incorporated on August 26, 2013, under the laws of the State of Delaware.
The
Company acquires and leases real estate to licensed marijuana operators, including but not limited to, providing complete turnkey
growing space, processing space, recreational and medical retail sales space and related facilities to licensed marijuana growers,
processors, dispensary and recreational store operators. Additionally, the Company plans to explore ancillary opportunities
in the regulated marijuana industry as well as offering for wholesale distribution branded non-marijuana clothing and accessories.
The
Company does not and will not, until such time as Federal law allows, grow, harvest, process, distribute or sell marijuana or
any other substances that violate the laws of the United States of America, or any other country.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation
The
accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America ("GAAP").
New
accounting pronouncements
From
time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies
that may have an impact on the Company's accounting and reporting. The Company believes that such recently issued accounting pronouncements
and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting
or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.
Use
of Estimates
The
preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those
estimates. These estimates and assumptions include valuing equity securities and derivative financial instruments issued in financing
transactions and share based payment arrangements, determining the fair value of the warrants received for the licensing agreement
, the collectability of accounts receivable and deferred taxes and related valuation allowances. Certain of our estimates, including
evaluating the collectability of accounts receivable, could be affected by external conditions, including those unique to our
industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that
could cause actual results to differ from our estimates. We re-evaluate all of our accounting estimates at least quarterly based
on these conditions and record adjustments when necessary.
Fair
value of financial instruments
As
required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted
prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly
or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity
to develop its own assumptions.
The
three levels of the fair value hierarchy are described below:
Level
1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or
liabilities;
Level
2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially
the full term of the asset or liability; and
Level
3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable
(supported by little or no market activity).
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as
of and December 31, 2014 and December 31, 2013. The respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were
assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts
approximate fair values or they are payable on demand.
Cash
The
Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $250,000. The Company's accounts at these institutions may, at times, exceed the federal
insured limits. The Company has not experienced any losses in such accounts.
Property
and equipment and depreciation policy
Property
and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the
useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed
as incurred.
The
Company intends to take depreciation or amortization on a straight-line basis for all properties, beginning when they are put
into service, using the following life expectancy:
Equipment
– 5 years
Leasehold
Improvements – 10 years, or the term of the lease, whichever is shorter
Buildings
– 20 years
Revenue
recognition
The
Company recognizes revenue from rent, tenant reimbursements, and other revenue sources once all of the following criteria are
met in accordance with SEC Staff Accounting Bulletin 104, Revenue Recognition, (“SAB 104”): (a) the agreement
has been fully executed and delivered; (b) services have been rendered; (c) the amount is fixed or determinable; and (d) the collectability
of the amount is reasonably assured.
In
accordance with FASB Statement of Financial Accounting Standards No. 13, Accounting for Leases (“SFAS 13”),
as amended and interpreted, minimum annual rental revenue is recognized in rental revenues on a straight-line basis over the term
of the related lease. Rental revenue recognition commences when the tenant takes possession or controls the physical use of the
leased space. In order for the tenant to take possession, the leased space must be substantially ready for its intended use. To
determine whether the leased space is substantially ready for its intended use, management evaluates whether the Company or the
tenant is the owner of tenant improvements for accounting purposes. When management concludes that the Company is the owner of
tenant improvements, rental revenue recognition begins when the tenant takes possession of the finished space, which is when such
tenant improvements are substantially complete. In certain instances, when management concludes that the Company is not the owner
(the tenant is the owner) of tenant improvements, rental revenue recognition begins when the tenant takes possession of or controls
the space.
When
management concludes that the Company is the owner of tenant improvements, for accounting purposes, management records the cost
to construct the tenant improvements as a capital asset. In addition, management records the cost of certain tenant improvements
paid for or reimbursed by tenants as capital assets when management concludes that the Company is the owner of such tenant improvements.
For these tenant improvements, management records the amount funded or reimbursed by tenants as deferred revenue, which is amortized
as additional rental income over the term of the related lease. When management concludes that the tenant is the owner of tenant
improvements for accounting purposes, management records the Company’s contribution towards those improvements as a lease
incentive, which is amortized as a reduction to rental revenue on a straight-line basis over the term of the lease.
In
January 2014, the Company entered into an agreement to license certain intellectual property to a third party. In consideration,
the Company received warrants to purchase shares of common stock, which were valued based on an appraisal of the warrants by an
independent third party appraiser. The revenue from the licensing agreement, which is initially recorded as deferred revenue,
is being amortized over the ten year term of the licensing agreement.
The
Company records is rents due from the tenants on a current basis. However, as part of the Line of Credit Agreement, the Company
has deferred collection of such rents until the tenants receive the proper governmental licenses to begin operation. It is anticipated
that such licenses should be obtained in early summer 2015. Management has decided to take the prudent approach and reserve these
amounts due to the contingency factor and experience with typical delays in governmental action.
Leases
The
Company currently leases properties in locations that would be acceptable for regulatory purposes and acceptable to sub-lessees
for the manufacturing and development of their products. The Company evaluates the lease to determine its appropriate classification
as an operating or capital lease for financial reporting purposes. The Company currently has a number of leases, which are all
classified as operating leases.
Minimum
base rent for the Company’s operating leases, which generally have escalating rentals over the term of the lease, is recorded
on a straight-line basis over the lease term. The initial rent term includes the build-out, or may include a short rent holiday
period, for the Company’s leases, where no rent payments are typically due under the terms of the lease.
Income
Taxes
Income
taxes are provided for using the liability method of accounting in accordance with the Income Taxes Topic of the FASB ASC. Deferred
tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation
allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized and when, in the opinion
of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The computation
of limitations relating to the amount of such tax assets, and the determination of appropriate valuation allowances relating to
the realizing of such assets, are inherently complex and require the exercise of judgment. As additional information becomes available,
the Company continually assesses the carrying value of their net deferred tax assets.
Research
and development costs
Research
and development costs are charged to the statement of operations as incurred.
Preferred
Stock
We
apply the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity” when determining the classification
and measurement of preferred stock. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments
and are measured at fair value. We classify conditionally redeemable preferred shares (if any), which includes preferred shares
that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within our control, as temporary equity. At all other times, we classified our preferred shares in
stockholders’ equity. Our preferred shares do not feature any redemption rights within the holders’ control or conditional
redemption features not within our control. Accordingly all issuances of preferred stock are presented as a component of consolidated
stockholders’ equity (deficit).
Common
Stock Purchase Warrants and Other Derivative Financial Instruments
We
classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement
or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our
own stock as defined in ASC 815-40 ("Contracts in Entity's Own Equity"). We classify as assets or liabilities any contracts
that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event
is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement
or net-share settlement). We assess classification of our common stock purchase warrants and other free standing derivatives at
each reporting date to determine whether a change in classification between assets and liabilities is required.
Stock-Based
Compensation
We
recognize compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards,
we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted
price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest.
For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee
awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted
accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals
the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s
performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual
results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period
estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class,
and historical experience.
Loss
per common share
Net
loss per share is provided in accordance with ASC Subtopic 260-10. We present basic loss per share (“EPS”) and diluted
EPS on the face of statements of operations. Basic EPS is computed by dividing reported losses by the weighted average shares
outstanding. Loss per common share has been computed using the weighted average number of common shares outstanding during the
year
NOTE
3 - GOING CONCERN
The
accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. The Company has collected minimal revenue since inception The Company has
incurred losses since inception and its current liabilities exceed its current assets by $1,610,788 and has a stockholders’
deficiency of $932,231 as December 31, 2014. As discussed in Note 12, on May 23, 2014 the Company received a subpoena from the
United States Department of Justice. Depending on the extent to which the Department of Justice pursues this matter, the
Company may be required to suspend or cease operations. These factors among others raise substantial doubt about the Company's
ability to continue as a going concern. These financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts, or amounts and classification
of liabilities that might result from this uncertainty.
Management
believes that the Company's future success is dependent upon its ability to achieve profitable operations, generate cash from
operating activities and obtain additional financing. There is no assurance that the Company will be able to generate sufficient
cash from operations, sell additional shares of stock or borrow additional funds from its stockholders. The Company's inability
to obtain additional cash could have a material adverse effect on its financial position, results of operations, and its ability
to continue in existence. These financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
The
Company intends to continue to raise additional capital and assist the leaseholder in obtaining the proper licenses in order to
conduct their business in growing, processing and retailing cannabis products. Once the licenses are granted, we believe that
a steady stream of income will be achieved and the repayment of our advances would begin.
NOTE
4 – REVOLVING CREDIT LINE
A
sub-lessee, who is operating out of three separate properties leased to him by the Company, is required to obtain a State operating
license to grow, process and sell cannabis products. Until the tenant receives such license, the Company has agreed to and entered
into a $2,500,000 revolving line of credit with the lessee. This line of credit was established to provide funding to the lessee,
consisting of two separate elements: (a) to fund operational costs until the development stage is completed, and (b) to underwrite
the rent due on the sublease agreements. In addition, interest is accruing at the annual rate of 20% on the average monthly amount
due on this line of credit. As of December 31, 2014, the Company has advanced an aggregate of $707,250 towards this line of credit,
and has accrued interest of $70,596. The Company has recorded a reserve for the total advance and accrued interest.
NOTE
5 - INVESTMENT
Investment
In
January 2014, the Company entered into an Agreement with Plandai Biotechnology, Inc. (a publicly traded company) to license to
them certain intellectual property rights in exchange for warrants to purchase 3,333,334 shares of Plandai Biotechnology, Inc.
(“Plandai”) common stock. This license agreement carries a 10-year term with an exercise price of $0.01 per share.
The Company is to obtain certain Trademark rights certified by the government (expected by early summer 2015). On October 10,
2014 the Company filed its Notice of Exercise to execute the warrants to acquire the shares of Plandai, in which the shares have
not yet been issued. The sale of such shares has a "leak out" restriction on them requiring that the sale of such shares
must reach a certain traded price of $0.50 per share. The Company used a third party appraisal firm to ascertain the fair value
of warrants held by the company, which was determined to be $525,567. With the Plandai shares currently trading at $.22 per share,
the Company believes there has been no impairment in the value of its investment. The Company accounts for its investment under
the cost method of accounting.
NOTE
6 – PROPERTY AND EQUIPMENT
Property
and equipment
The
Company has incurred expenses in the build out of one of its leased properties and acquired a large POD equipment for use in growing
operations by lessee. Since the facility and equipment have not yet been put into service, no amortization on the leasehold improvement
nor depreciation on the equipment has been provided.
NOTE
7 – OTHER ASSETS
Security
deposits
These
deposits reflect the deposits on various property leases, most of which call for two months of rental.
Deposits
– end of lease
These
deposits represent an additional two months of rent on various property leases that apply to the "end-of-lease" period.
NOTE
8 – RELATED PARTY
As
of December 31, 2014 and 2013, the Company has unpaid consulting fees to related parties in the amount of $124,333 and $75,730,
respectively. For the year ended December 31, 2014 and from the inception (August 26, 2013) through December 31, 2013, the consulting
fees expensed were $693,417 and $177,500, respectively to related parties.
In
2014, the Company made short term advances to one of its founding stockholders in the amount of $85,000. It was subsequently agreed
under a Board Resolution that the Company would acquire 58,200 Treasury shares of its common stock at the price of $1.50 per share
in exchange for the outstanding debt and accrued interest thereon of $87,300. There were no other related party transactions for
the years ended December 31, 2014 and December 31, 2013.
NOTE
9 - STOCKHOLDERS’ EQUITY
The
total number of shares that the Company has authority to issue is up to one-hundred million (100,000,000) of which eighty-seven
million shares (87,000,000) are designated as common shares; ten million (10,000,000) shares are designated as Series A Preferred,
and three million (3,000,000) shares are designated as Series B Preferred. The Common shares, as well as the Series A and B Preferred
shares have a par value of $0.0001.
On
August 26, 2013, the Company issued 13,250,000 shares of its common stock to its founders at par value as a subscription receivable
which was paid on December 30, 2014.
The
Company under a Series A Convertible Preferred Share Plan, offered such stock and related warrants at a price of $0.9375 per share.
The shares carried attached warrants (equal to 20% of shares acquired) only if the investment met the minimum of 1,066,666 shares
purchased. In March 2014, a single investor was offered a discounted price of $0.78125 for the volume purchase of 3.2 million
shares, with the attached warrants have an exercise price of $1.24 per share. In June 2014 and thereafter, subsequent investors
had the restricted minimum purchase for the attached warrants removed under this Series A Preferred Share Plan and have an exercise
price of $1.40 per share. The total number of warrants issued in 2014 were 790,798. No warrants were issued in 2013.
For
the years ended December 31, 2014 and from inception (August 26, 2013) through December 31, 2013, the Company sold 4,275,093 and
561,676 Series A Preferred shares, respectively. Proceeds received in each year were $3,507,907 and $526,576, respectively.
In
December, the Company offered Series B Preferred shares at $1.50 per share together with warrants (equal to 20% of shares purchased)
at a price of $1.50 per share. In December 2014, The Company issued 200,000 shares for proceeds received in the amount of $300,000.
As
of December 31, 2014, the total number of warrants outstanding were 720,798.
All
of the underlying shares under both the Series A and Series B Preferred shares have been sold pursuant to SEC Rule 144 or may
be sold pursuant to SEC Rule 144 without the requirement for the Company to be in compliance with the current public information
required under SEC Rule 144. The restrictive holding period is six months following the effective date of the Company’s
merger into a public shell, and declared effective by the United States Securities and Exchange Commission (the “SEC”).
The
Company maintains an Equity Incentive Plan pursuant to which 2,480,000 shares of Common Stock are reserved for issuance thereunder.
As of December 31, 2014 and 2013, 320,000 shares under this plan had been issued to certain founding members, who were instrumental
in the development of the Company and were included in the original issuance of common shares, and are reflected in the 13,520,000.
The
Company established an Equity Incentive Plan to provide additional incentive to key employees, directors and consultants, and
to promote the success of the Company’s business. The terms of each option shall be no more than 10 years from the date
of grant at an exercise price equal to the Fair Market Value on the date of the grant.
NOTE
10 - INCOME TAXES
The
reconciliation of income tax benefit at the U.S. statutory rate of 34% for the years ended December 31, 2014 and 2013 to the Company’s
effective tax rate is as follows:
The
reconciliation of income tax benefit at the U.S. statutory rate of 34% for the year ended December 31, 2014 and for the period
from inception (August 26, 2013) to December 31, 2013 to the Company’s effective tax rate is as follows:
|
| |
Year
Ended December 31,
2014 | | |
From
Inception (August 26,
2013) to December 31,
2013 | |
|
Statutory
federal income tax rate | |
| -34 | % | |
| -34 | % |
|
State
income tax, net of federal benefits | |
| -6 | % | |
| -6 | % |
|
Valuation
Allowance | |
| -40 | % | |
| -40 | % |
|
Income
tax provision (benefit) | |
| -80 | % | |
| -80 | % |
The
benefit for income tax is summarized as follows:
|
| |
Year
Ended December 31,
2014 | | |
From
Inception (August 26,
2013) to December 31,
2013 | |
|
Federal | |
| | |
| |
|
Current | |
$ | - | | |
$ | - | |
|
Deferred | |
| (1,620,000 | ) | |
| (140,000 | ) |
|
State | |
| | | |
| | |
|
Current | |
| - | | |
| - | |
|
Deferred | |
| (285,000 | ) | |
| (25,000 | ) |
|
Change
in valuation allowance | |
| (1,905,000 | ) | |
| (165,000 | ) |
|
Income
tax provision (benefit) | |
$ | - | | |
$ | - | |
As
of December 31, 2014 and 2013, the Company had $4,768,121 and $412,646 Federal net operating loss carryovers (“NOLs”),
which begin to expire in 2033. Utilization of NOLs may be subject to limitation under the Internal Revenue Code Section 382 should
there be a greater than 50% ownership change as determined under the regulations.
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or
all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences become deductible. Management considers
the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this
assessment. Based on the assessment, management has established a full valuation allowance against the entire deferred tax
asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.
The
Company files U.S. Federal and various State tax returns that are subject to audit by tax authorities beginning with the year
ended December 31, 2013. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties
as tax expense.
The
tax effects of temporary differences that give rise to the Company’s net deferred tax liability as of December 31, 2014
and 2013 are as follows:
|
| |
Year
Ended December 31,
2014 | | |
From
inception (August 26,
2013) to December 31,
2013 | |
|
Deferred tax asset | |
| | |
| |
|
Net
operating loss carryovers | |
$ | 1,905,000 | | |
$ | 165,000 | |
|
Total
deferred tax assets | |
| 1,905,000 | | |
| 165,000 | |
|
Valuation
Allowance | |
| 1,905,000 | | |
| (165,000 | ) |
|
Deferred
tax asset, net of allowance | |
$ | - | | |
$ | - | |
NOTE
11 - COMMITMENTS AND CONTINGENCIES
The
Company’s business is essentially to lease property in appropriate areas to make available such property for sub-lease to
specifically assigned businesses that grow, process and sell certain products to the general public. Currently the Company has
five (5) separate properties under lease in the States of Colorado, Washington and Oregon.
In
Colorado, there are three properties leased in 2014. Each property was leased for a five (5) year period with an option for an
additional five (5) years, and carry terms requiring triple net (NNN) conditions. Each of the properties, except for one, have
fixed monthly rentals (exclusive of the triple net terms). As of December 31, 2014, the aggregate minimal annual lease payments
under these operating leases were as follows:
|
2015 | |
| 987,364 | |
|
2016 | |
| 1,000,326 | |
|
2017 | |
| 1,011,618 | |
|
2018 | |
| 1,023,246 | |
|
2019 | |
| 526,199 | |
|
TOTAL | |
$ | 4,548,753 | |
In
Washington, there is only one (1) property leased in 2014. The property was leased for a five (5) year period with an option for
an additional five (5) years, and carry terms requiring triple net (NNN) conditions. The property has an escalating annual rental
(exclusive of the triple net terms). As of December 31, 2014, the aggregate minimal annual lease payments under these operating
leases were as follows:
|
2015 | |
| 82,371 | |
|
2016 | |
| 84,999 | |
|
2017 | |
| 87,723 | |
|
2018 | |
| 67,365 | |
|
TOTAL | |
$ | 322,458 | |
In
Oregon, there is only one (1) property leased in 2014. The property was leased for a five (5) year period with an option for an
additional five (5) years, and carry terms requiring triple net (NNN) conditions. The property has an escalating annual rental
(exclusive of the triple net terms). As of December 31, 2014, the aggregate minimal annual lease payments under these operating
leases were as follows:
|
2015 | |
| 62,620 | |
|
2016 | |
| 63,828 | |
|
2017 | |
| 65,060 | |
|
2018 | |
| 66,316 | |
|
2019 | |
| 44,776 | |
|
TOTAL | |
$ | 302,600 | |
Rent
expense for the Company’s operating leases for the year ending December 31, 2014 was $550,025.
NOTE
12 – LEGAL PROCEEDINGS
On
May 23, 2014 Diego Pellicer Worldwide Inc. received a subpoena from the United States Department of Justice, represented by the
United States Attorney’s Office for the Western District of Washington, requesting the production of the Company’s
banking records and documents and records relating to: the structure and organization of the Company; communications between the
Company and its affiliates, including Diego Pellicer, Inc., with potential investors; securities offerings; applications submitted
by Diego Pellicer, Inc. to the Washington State Liquor Control Board in connection with its application to become a retail seller
of cannabis in Washington State; and the Company’s relationship with Plandai Biotechnology.
Based
on limited discussions with the Department of Justice, the Company believes this subpoena was issued in order to determine: (i)
if the Company is or has been engaged in the production, processing or sale of cannabis; (ii) how the Company is related to Diego
Pellicer, Inc.; and (iii) whether investors or potential investors in the Company believed they were investing in a company that
would be engaged in the production, processing or sale of cannabis.
The
Company believes that it has complied fully with all applicable laws, rules and regulations, and intends to cooperate fully with
the government’s investigation.
Depending
on the extent to which the Department of Justice pursues this matter, the Company may be required to suspend or cease its operations,
which could lead to the possible loss of investors’ entire investment in the Company.
Further,
in the event the Company, its officers or its directors are determined to have taken any unlawful action with respect to these
matters, such officers and directors may be barred from performing services on behalf of the Company and/or incarcerated, the
Company may be required to pay fines, and/or the Company may be required to return investors’ investments in the Company.
There can be no guarantee that the Company will have sufficient funds to pay all or any portion of such fines and/or return all
or any portion of such investments made in the Company.
NOTE
13 - SUBSEQUENT EVENTS
The
Company has evaluated events after the date of these financial statements through March 13, 2015, the date that these financial
statements were issued and the material subsequent events, which would require adjustment to or disclosure in the financial status,
are as follows:
On
January 2, 2015, the Board of Directors issued a Resolution authorizing 200,000 warrants to certain consulting group for their
efforts in the development the company structure. These warrants have an exercise price at the $0.0001 par value and are convertible
into common shares of the Company.
Between
February 11, 2015 and February 24, 2015, the Company sold an additional 466,666 Series B Preferred shares at par value of $0.0001
at a price of $1.50 per share. Upon merger into the public shell, the shares will convert into one common share of the new Company.
On
March 11, 2015 (the “Closing Date”), Diego Pellicer Worldwide, Inc. (f/k/a Type 1 Media, Inc.) (the “Company”
or “PubCo”) closed on a merger and share exchange agreement (the “Merger Agreement”) by and among (i)
the Company, and (ii) Diego Pellicer World-wide 1, Inc., a Delaware corporation, (“Diego”), and (iii) Jonathan White,
the majority shareholder of the Company (the “Majority Shareholder”). Pursuant to the terms of the Merger Agreement,
Diego shall be merged with and into the Company, with the Company to continue as the surviving corporation (the “Surviving
Corporation”) in the Merger, and the Company succeeding to and assuming all the rights, assets, liabilities, debts, and
obligations of Diego (the “Merger”).
In
anticipation of the Merger, the Company changed its name from “Type 1 Media, Inc.” to “Diego Pellicer Worldwide,
Inc.” on February 26, 2015.
17
Exhibit 99.2
DIEGO PELLICER WORLDWIDE, INC.
Unaudited Pro Forma Balance Sheets
December 31, 2014
| |
Diego Pellicer | | |
| | |
| | |
| |
| |
Worldwide, Inc. | | |
Type 1
Media, Inc. | | |
| | |
| |
| |
December 31,
2014 | | |
December 31,
2014 | | |
Adjustments | | |
Consolidated | |
Assets | |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| |
Current assets: | |
| | |
| | |
| | |
| |
Cash and equivalents | |
$ | 33,101 | | |
$ | 25,473 | | |
$ | - | | |
$ | 58,574 | |
Prepaid expensed | |
| 8,946 | | |
| - | | |
| - | | |
| 8,946 | |
Total current assets | |
| 42,047 | | |
| 25,473 | | |
| - | | |
| 67,520 | |
| |
| | | |
| | | |
| | | |
| | |
Property and Equipment, net | |
| 253,990 | | |
| 1,548 | | |
| - | | |
| 255,538 | |
| |
| | | |
| | | |
| | | |
| | |
Other assets: | |
| | | |
| | | |
| | | |
| | |
Investment, at cost | |
| 525,567 | | |
| - | | |
| - | | |
| 525,567 | |
Deposits | |
| 323,000 | | |
| - | | |
| - | | |
| 323,000 | |
Total other assets | |
| 848,567 | | |
| - | | |
| - | | |
| 848,567 | |
| |
| | | |
| | | |
| | | |
| | |
Total assets | |
$ | 1,144,604 | | |
$ | 27,201 | | |
$ | - | | |
$ | 1,171,625 | |
| |
| | | |
| | | |
| | | |
| | |
Liabilities and Stockholders’ Equity (Deficiency) | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Current liabilities: | |
| | | |
| | | |
| | | |
| | |
Accounts payable | |
$ | 298,939 | | |
$ | 65,178 | | |
$ | - | | |
$ | 364,117 | |
Accrued expenses - related party | |
| 124,333 | | |
| 16,025 | | |
| - | | |
| 140,358 | |
Accrued Compensation | |
| 1,176,563 | | |
| - | | |
| - | | |
| 1,176,563 | |
Deferred Revenue | |
| 53,000 | | |
| - | | |
| - | | |
| 53,000 | |
Total current liabilities | |
| 1,652,835 | | |
| 81,203 | | |
| - | | |
| 1,734,038 | |
| |
| | | |
| | | |
| | | |
| | |
Deferred revenue | |
| 424,000 | | |
| - | | |
| - | | |
| 424,000 | |
Total Liabilities | |
| 2,076,835 | | |
| 81,203 | | |
| - | | |
| 2,158,038 | |
| |
| | | |
| | | |
| | | |
| | |
Stockholders’ equity (deficiency): | |
| | | |
| | | |
| | | |
| | |
Preferred stock | |
| 504 | | |
| - | | |
| - | | |
| 504 | |
Common stock | |
| 1,352 | | |
| 6 | | |
| - | | |
| 1,358 | |
Additional paid-in capital | |
| 4,333,980 | | |
| (1,778 | ) | |
| (52,410 | ) | |
| 4,279,792 | |
Treasury shares, at cost | |
| (87,300 | ) | |
| - | | |
| - | | |
| (87,300 | ) |
Accumulated deficit | |
| (5,180,767 | ) | |
| (52,410 | ) | |
| 52,410 | | |
| (5,180,767 | ) |
Total stockholders’ equity (deficiency) | |
| (932,231 | ) | |
| (54,182 | ) | |
| - | | |
| (986,413 | ) |
| |
| | | |
| | | |
| | | |
| | |
Total liabilities and stockholders’ equity | |
$ | 1,144,604 | | |
$ | 27,021 | | |
$ | - | | |
$ | 1,171,625 | |
DIEGO PELLICER WORLDWIDE, INC.
Unaudited Pro Forma Statements of Operations
December 31, 2014
| |
Diego Pellicer | | |
| | |
| | |
| |
| |
Worldwide, Inc. | | |
Type 1
Media, Inc. | | |
| | |
| |
| |
December 31, 2014 | | |
December 31, 2014 | | |
Adjustments | | |
Consolidated | |
| |
| | |
| | |
| | |
| |
REVENUES | |
$ | 48,567 | | |
$ | 52,033 | | |
| - | | |
$ | 100,600 | |
| |
| | | |
| | | |
| | | |
| | |
OPERATING EXPENSES (net) | |
| 4,816,688 | | |
| 71,788 | | |
| - | | |
| 4,888,476 | |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME | |
| - | | |
| 4,092 | | |
| - | | |
| 4,092 | |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS | |
$ | (4,768,121 | ) | |
$ | (15,663 | ) | |
| - | | |
$ | (4,783,784 | ) |
Pursuant to the Share Exchange:
On March 11, 2015 (the “Closing Date”),
Diego Pellicer Worldwide, Inc. (f/k/a Type 1 Media, Inc.) (the “Company” or “PubCo”) closed on a merger
and share exchange agreement (the “Merger Agreement”) by and among (i) the Company, and (ii) Diego Pellicer World-wide
1, Inc., a Delaware corporation, (“Diego”), and (iii) Jonathan White, the majority shareholder of the Company (the
“Majority Shareholder”). Pursuant to the terms of the Merger Agreement, Diego shall be merged with and into the Company,
with the Company to continue as the surviving corporation (the “Surviving Corporation”) in the Merger, and the Company
succeeding to and assuming all the rights, assets, liabilities, debts, and obligations of Diego (the “Merger”).
In connection with the closing of the Merger,
on the Closing Date, Jonathan White and Thomas Baxter submitted to the Company a resignation letter pursuant to which they resigned
from their positions as officers and member of the Board of Directors of the Company. Messrs. White and Baxter’s resignations
were not a result of any disagreements relating to the Company’s operations, policies or practices. On the Closing Date,
board of directors of the Company (the “Board”) and the majority stockholders of the Company (the “Shareholders”)
accepted the resignations of Messrs. White and Baxter and, contemporaneously appointed: (i) Philip Gay to serve as the Chief Executive
Officer and member of the Board of Directors, (ii) Ron Throgmartin to act as Chief Operating Officer, (iii) Nick Roberts to act
as Chief Financial Officer; and (iv) Alan Valdes, Douglas Anderson, and Stephen Norris to serve as members of the Board of Directors.
In anticipation of the Merger, the Company
changed its name from “Type 1 Media, Inc.” to “Diego Pellicer Worldwide, Inc.” on February 26, 2015.
The foregoing descriptions of the terms of
the Merger Agreement are qualified in its entirety by reference to the provisions of the Exchange Agreement filed as Exhibit 2.1
to this Report, which is incorporated by reference herein.
Cancellation Agreement
In connection with the Merger, the Company
entered into a cancellation agreement with the Majority Shareholder (the “Cancellation Agreement”) whereby the Majority
Shareholder, owning an aggregate of 55,000,000 (post-split) shares of the Company’s common stock, par value $0.000001 per
share (the “Common Stock”) agreed to cancel the 55,000,000 shares of Common Stock, in exchange for $169,000.
The completion of the Share Exchange resulted
in a change of control. The Share Exchange was accounted for as a reverse merger and recapitalization. Type 1 Media Inc. was the
acquirer for financial reporting purposes and the Company was the acquired company.
Consequently, the assets and liabilities and
the operations reflected in the historical financial statements prior to the Share Exchange were those of Diego Pellicer Worldwide,
Inc. and was recorded at its historical cost basis; and the consolidated financial statements after completion of the Share Exchange
included the assets and liabilities of the Company and Type 1 Media Inc. historical operations of Type 1 Media Inc. and operations
of the Company from the closing date of the Share Exchange
The following unaudited pro forma combined
balance sheets and income statements are based on historical financial statements of Type 1 Media Inc. as if the transaction had
occurred during the period ended December 31, 2014, the date of accounting acquirer’s most recent period end.
The unaudited pro forma combined financial
statements are provided for information purposes only. The pro forma financial statements are not necessarily indicative of what
the financial position or results of operations actually would have been had the acquisition been completed at the dates indicated
below. In addition, the unaudited pro forma combined financial statements do not purport to project the future financial position
or operating results of the combined company. The unaudited pro forma combined financial information has been prepared in accordance
with the rules and regulations of the Securities and Exchange Commission.
For pro forma purposes:
· | The
unaudited Pro Forma Combined Balance Sheets as of December 31, 2014 of the companies
give effect to the transaction as if it had occurred at the beginning of the most recent
year/period ended. |
· | The
unaudited Pro Forma Combined Statements of Operations for the period ended December 31,
2014 combines the income statements of the companies for the indicated periods, giving
effect to the transaction as if it had occurred at the beginning of those periods. |
These unaudited pro forma combined financial
statements and accompanying notes should be read in conjunction with the separate audited financial statements of Type 1 Media
Inc. as of and for the year ended December 31, 2014.
3
Exhibit 99.3
Diego Pellicer
Worldwide Begins Trading Publicly
Under Symbol
“TPMD”
Developing
the World’s First Premium Marijuana Brand
LOS ANGELES,
CA -- (Accesswire) – March 19, 2015 – Diego Pellicer Worldwide, Inc. (OTCBB:TPMD), a real estate and a consumer
retail development company that is focused on developing Diego Pellicer as the world’s first “premium” marijuana
brand, today announced the commencement of trading under the ticker symbol “TPMD” effective March 19, 2015. Additional
information on this transaction can be found in the company’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on March 19, 2015.
Diego Pellicer
Worldwide Inc. (Diego), is a real estate and a consumer retail development company that is focused on developing Diego Pellicer
as the world’s first “premium” marijuana brand by adhering to the highest quality and standards for its facilities
servicing both cannabis and non-cannabis products. The company’s initial focus is to acquire and develop legally compliant
real estate locations for the purposes of leasing them to state licensed companies in the cannabis industry. Diego does not grow
or sell marijuana or marijuana infused products in the early stages of this plan however, the company will be properly positioned
to take advantage of pre-negotiated acquisition contracts with selected Diego tenants in marijuana retail and production facilities
throughout the country instantaneously with the change of federal law.
Mr. Philip Gay, Chief Executive Officer of Diego Pellicer Worldwide Inc., commented, “Our vision is to continue to develop
Diego Pellicer as a premium brand that is valued and positioned to appeal to a broad customer base, similar to what Davidoff is
to cigars, Godiva to chocolate and Starbucks to coffee to take advantage of the emerging legalized cannabis industry in which
the market is projected to grow annually by 27% over the next three years to an expected market value greater than $8B by the
end of 2018.”
In addition, “Diego
believes that in the very near future, the US and other countries will embrace the will of the people, and legalize the responsible
adult use of marijuana. Legalizing national and international commerce of marijuana, will allow Diego to take its brand and unmatched
quality standards to markets all around the globe.”
About Diego Pellicer Worldwide, Inc.
Diego Pellicer
Worldwide, Inc. is a real estate and a consumer retail development company that is focused on developing Diego Pellicer as the
world’s first “premium” marijuana brand by adhering to the highest quality and standards for its facilities
along with both cannabis and non-cannabis products. The company’s initial focus is to acquire and develop legally compliant
real estate locations for the purposes of leasing them to state licensed companies in the cannabis industry. Diego does not grow
or sell marijuana or marijuana infused products in the early stages of this plan.
For more information,
check out: http://diegopellicer.com
Forward-Looking Statements
Forward-Looking
Statements. This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (which
Sections were adopted as part of the Private Securities Litigation Reform Act of 1995). Statements preceded by, followed by or
that otherwise include the words “believe,” “anticipate,” “estimate,” “expect,”
“intend,” “plan,” “project,” “prospects,” “outlook,” and similar words
or expressions, or future or conditional verbs such as “will,” “should,” “would,” “may,”
and “could” are generally forward-looking in nature and not historical facts. These forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the Company's actual results, performance or achievements
to be materially different from any anticipated results, performance or achievements. The Company disclaims any intention to,
and undertakes no obligation to, revise any forward-looking statements, whether as a result of new information, a future event,
or otherwise. For additional risks and uncertainties that could impact the Company’s forward-looking statements, please
see the Company’s Form 8-K filed on March 19, 2015, including but not limited to the discussion under “Risk Factors”
therein, which the Company has filed with the SEC and which may be viewed at http://www.sec.gov.
Contact Information
Hayden IR
Cameron Donahue
cameron@haydenir.com
651-653-1854
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