UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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): May 29, 2020
| Zoned Properties, Inc. |
| (Exact Name of Registrant as Specified in its Charter) |
| Nevada |
| (State or Other Jurisdiction of Incorporation) |
| 000-51640 | 46-5198242 | |
| (Commission File Number) | (IRS Employer Identification No.) | |
|
14269 N. 87th Street, #205
Scottsdale, AZ |
85260 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s telephone number, including area code): (877) 360-8839
N/A
(Former name, former address and former fiscal year, 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.)
| ☐ | 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)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01. Entry into Material Definitive Agreement.
First Amendment to Tempe Lease
On May 29, 2020, Zoned Arizona Properties, LLC (“Zoned Arizona”), a wholly owned subsidiary of Zoned Properties, Inc. (the “Company”), and CJK, Inc. (“CJK”) entered into the First Amendment (the “Tempe Amendment”) to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Zoned Arizona and CJK (the “Tempe Lease”), effective May 31, 2020.
Pursuant to the terms of the Tempe Amendment, among other things, the base rent was increased to $49,200 per month, and the base rent was abated from June 1, 2020 to July 31, 2020. Any increase in the rentable area of the leased premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent.
In addition, the parties agreed that between the effective date of the Tempe Amendment and the second anniversary of the effective date (the “Improvement Period”), CJK will and/or CJK will cause its affiliate, Broken Arrow Herbal Center, Inc. (“Broken Arrow”), to invest a combined total of at least $8,000,000 improvements in and to the property that is the subject of the Tempe Lease and the property that is the subject of the Chino Valley Lease (as defined below). If CJK and/or Broken Arrow fails to deliver to the Company receipted bills for hard and soft costs of improvements to the facilities totaling at least $8,000,000 on or before the 30th day following the expiration of the Improvement Period, CJK will be in default under the Tempe Lease.
Pursuant to the terms of the Tempe Amendment, the parties agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Zoned Arizona and CJK, CJK may terminate the Tempe Lease by delivering written notice to Zoned Arizona, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term.
Second Amendment to Chino Valley Lease
On May 29, 2020, Chino Valley Properties, LLC (“Chino Valley”), a wholly owned subsidiary of the Company, and Broken Arrow entered into the Second Amendment (the “Chino Valley Amendment”) to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Chino Valley and CJK, as amended (the “Chino Valley Lease”), effective May 31, 2020.
Pursuant to the terms of the Chino Valley Amendment, among other things, the base rent was adjusted to $32,800 per month, and the base rent was abated from June 1, 2020 to July 31, 2020. Any increase in the rentable area of the leased premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent.
In addition, the parties agreed that during the Improvement Period, Broken Arrow will and/or Broken Arrow will cause its affiliate, CJK, to invest a combined total of at least $8,000,000 improvements in and to the property that is the subject of the Chino Valley Lease and the property that is the subject of the Tempe Lease. If Broken Arrow and/or CJK fails to deliver to the Company receipted bills for hard and soft costs of improvements to the facilities totaling at least $8,000,000 on or before the 30th day following the expiration of the Improvement Period, Broken Arrow will be in default under the Chino Valley Lease.
Pursuant to the terms of the Chino Valley Amendment, the parties agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Chino Valley and Broken Arrow, Broken Arrow may terminate the Chino Valley Lease by delivering written notice to Chino Valley, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term.
First Amendment to Green Valley Lease
On May 29, 2020, Green Valley Properties, LLC (“Green Valley”), a wholly owned subsidiary of the Company, and Broken Arrow entered into the First Amendment (the “Green Valley Amendment”) to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Green Valley and Broken Arrow (the “Green Valley Lease”), effective May 31, 2020. Pursuant to the terms of the Green Valley Amendment, among other things, the parties agreed and the base rent would be abated from June 1, 2020 to July 31, 2020. In addition, the Green Valley Amendment provides that any increase in the rentable area of the leases premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent.
The parties also agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Green Valley and Broken Arrow, Broken Arrow may terminate the Green Valley Lease by delivering written notice to Green Valley, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term.
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First Amendment to Kingman Lease
On May 29, 2020, Kingman Property Group, LLC (“Kingman”), a wholly owned subsidiary of the Company, and CJK entered into the First Amendment (the “Kingman Amendment”) to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 between Kingman and CJK (the “Kingman Lease”), effective May 31, 2020. Pursuant to the terms of the Kingman Amendment, among other things, the parties agreed and the base rent would be abated from June 1, 2020 to July 31, 2020. In addition, the Kingman Amendment provides that any increase in the rentable area of the leases premises will result in an increase in all amounts calculated based on the same, including, without limitation, base rent.
The parties also agreed that if there is any change in laws such that the dispensing, sale or cultivation of marijuana upon the premises is prohibited or materially and adversely affected as mutually and reasonably determined by Kingman and CJK, CJK may terminate the Kingman Lease by delivering written notice to Kingman, together with a termination payment which shall be the sum of (i) any unpaid rent and interest, plus (ii) 5% of the base rent which would have been earned after termination for the balance of the term.
The foregoing description of the Tempe Amendment, the Chino Valley Amendment, the Green Valley Amendment and the Kingman Amendment is qualified in its entirety by reference to the complete terms and conditions of the Tempe Amendment, the Chino Valley Amendment, the Green Valley Amendment and the Kingman Amendment, copies of which are attached to this Current Report on Form 8-K as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated by reference into this Item 1.01.
Item 7.01. Regulation FD Disclosure.
On June 4, 2020, the Company issued a press release regarding entry into lease amendments with its significant tenant.. The information contained in the website is not a part of this Current Report on Form 8-K. The press release is attached hereto as Exhibit 99.1 and, except with regard to the website referenced therein, incorporated herein by reference.
The information included in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. The information set forth under this Item 7.01 shall not be deemed an admission as to the materiality of any information in this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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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 hereunto duly authorized.
| ZONED PROPERTIES, INC. | |
| Dated: June 4, 2020 | /s/ Bryan McLaren |
| Bryan McLaren | |
| Chief Executive Officer & Chief Financial Officer |
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Exhibit 10.1
FIRST AMENDMENT TO LICENSED MEDICAL MARIJUANA FACILITY TRIPLE NET (NNN) LEASE AGREEMENT
This First Amendment to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement (the “Amendment”) is made this 31st day of May 2020 (the “Effective Date”), by and between Zoned Arizona Properties, LLC (“Landlord”) and CJK, Inc. (“Tenant”), collectively (the “Parties”).
RECITALS
A. The Parties entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 (the “Lease”) for the premises commonly known as 410 South Madison Drive, Tempe, Arizona 85281 (the “Premises”).
B. The parties hereto desire to amend the Lease in accordance with the terms below as of the Effective Date.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for good and valuable consideration, the sufficiency and receipt of which are acknowledged, the parties agree as follows:
AMENDMENT
1. Defined Terms. Terms in this Amendment shall have the same meaning as such terms have in the Lease unless otherwise noted in this Amendment.
2. Amendment.
a. The following is added to the last paragraph of the Licensed Marijuana Facility Provisions:
Under no circumstances shall any advisory fees be due and payable by Tenant to Landlord under this Lease and such advisory fees shall only be due and payable pursuant to the terms of the CASA.
b. The following is added to the end of Section 2.01(c) of the Lease:
Any increase in the Rentable Area of the Premises, as reasonably determined by Landlord and Tenant in accordance with this Section, shall result in an increase in all amounts calculated based on the same, including, without limitation, Base Rent. The parties shall execute an amendment to this Lease reflecting said increase. Any increase in the Rentable Area of the Premises under this Lease shall be effective as of the earlier of (1) issuance of a certificate of occupancy for any such increased Rentable Area of the Premises, or (2) Tenant’s commencement of operations in such portion of the Premises.
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c. A new Section 4.02 is added to the Lease as follows:
4.02 Tenant’s Termination Right
If there is any change in Laws such that the dispensing, sale or cultivation of marijuana upon the Premises is prohibited or materially and adversely affected as mutually and reasonably determined by Landlord and Tenant, Tenant may elect to terminate this Lease by delivering written notice of such termination with the Termination Payment to Landlord (the “Notice”) and such termination shall be effective no sooner than thirty (30) days thereafter. If the Notice is not accompanied by the Termination Payment, termination will be effective no sooner than thirty (30) days following delivery to Landlord of the Termination Payment. For purposes of this Lease, the term “Termination Payment” shall mean the sum of (i) any unpaid Rent which has been earned at the time of such termination plus interest at the rates contemplated by this Lease; plus (ii) five percent (5%) of the Base Rent which would have been earned after termination for the balance of the Term.
d. Section 7.06 to the Lease is deleted in its entirety and replaced with the following:
7.06 Indemnification
| (a) | Tenant, as a material part of the consideration to be rendered to Landlord, hereby agrees to indemnify, protect, reimburse, defend and hold Landlord, Landlord’s managing agent and Lender, the Premises and the Project harmless for, from and against (i) any and all liability, penalties, losses, damages, costs and expenses, demands, causes of action, claims, obligations, judgments or appeals arising from any act or omission of Tenant or of Tenant’s officers, employees, agents, servants, subtenants, concessionaires, licensees, contractors or invitees, including any injury to any person or persons or any damage to any property, and/or resulting from any breach or default in the performance of any obligation to be performed by Tenant hereunder, and (ii) for, from and against all costs and charges, including reasonable attorneys’ and other reasonable professional fees, incurred in and about any of such matters and the defense of any action arising out of the same or in discharging the Project, the Property, the Building and/or Premises, or any part or any thereof, from any and all liens, charges or judgments which may accrue or be placed thereon by reason of any act or omission of Tenant but not the acts or omissions of Landlord. |
| (b) | In no event shall Landlord, its agents, employees and/or contractors be liable for any personal injury or death or property damage caused by other lessees or their agents, as the case may be, or caused by public or quasi-public work, or for consequential damages arising out of any loss of the use of the Premises or any equipment or facilities therein by Tenant or any person claiming through or under Tenant. |
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| (c) | Landlord hereby agrees to indemnify, protect, reimburse, defend and hold Tenant harmless for, from and against any and all liability, penalties, losses, damages, costs and expenses, demands, causes of action, claims, obligations, judgments or appeals arising from any gross negligence or willful misconduct of Landlord or of Landlord’s officers, employees, agents, servants, or contractors but not arising from the acts or omissions of Tenant. |
e. The sixth sentence of Section 9.01 of the Lease is deleted in its entirety.
f. Section 11.01 of the Lease is deleted in its entirety and replaced with the following:
11.01 Reconstruction
If the Building or Premises is damaged or destroyed during the Term, subject to the additional terms of this Lease, Landlord shall repair or rebuild the Building/Premises, in which event Tenant shall assign all insurance proceeds to Landlord and pay to Landlord, on demand, the amount of any deductible applicable under such insurance policy for the repair and restoration of the Building/Premises. Landlord’s’ obligation to rebuild and repair under this Section shall in any event be limited to restoring the Building and any other property covered by Tenant’s insurance to substantially the condition in which the same existed prior to the casualty, and shall be further limited to the extent of the insurance proceeds (and Tenant’s deductible) paid to Landlord for such restoration. Tenant agrees that promptly after completion of such work by Landlord, it will proceed with reasonable diligence and at its sole cost and expense to rebuild, repair and restore its trade fixtures, equipment, furniture, cabling and personal property. Landlord and Tenant shall reasonably cooperate with respect to such reconstruction as to not unreasonably interfere with the obligations of the parties hereunder. In no event shall any Rent be abated as a result of any damage or destruction to the Building/Premises.
g. A new Section 11.07 is added to the Lease as follows:
11.07 Tenant’s Termination Right
If Landlord undertakes the repair and rebuilding of the Building/Premises but fails to substantially complete the same within twenty-four (24) months following the casualty or damage, Tenant may deliver to Landlord written notice of Tenant’s intent to terminate the Lease. If Landlord fails to complete the repairs and restoration within thirty (30) days following Landlord’s receipt of Tenant’s termination notice, the Lease will terminate thirty (30) days after the expiration of such thirty (30) day period.
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h. A new Section 15.06 is added to the Lease as follows:
15.06 Permitted Transfers
Notwithstanding the foregoing, Tenant may assign or transfer the Lease or sublet the Premises, without the Landlord’s prior consent: (a) to a parent, subsidiary, or other affiliate of the Tenant, (b) to the purchaser of all, or substantially all, of (i) Tenant’s assets, or (ii) the membership interests or equity interest in Tenant, (c) to the surviving entity in any merger, consolidation, or conversion involving Tenant, or (d) in connection with the sale, transfer, assignment, pledge, hypothecation or new issuance of the stock or equity interests (including a controlling interest) of the direct or indirect interest of Tenant (each a “Permitted Transfers”); provided that: (1) Tenant delivers to Landlord prior written notice along with any documentation reasonably requested by Landlord evidencing Tenant’s compliance with the terms of this Section 15.06, (2) any such Permitted Transfer is not principally for the purpose of transferring Tenant’s leasehold estate and was made for a legitimate business purpose and not primarily to circumvent the provisions of the Lease, (3) any such Permitted Transfer does not result in the dissolution or termination of Tenant, and (4) neither the tangible net worth of Tenant nor the financial wherewithal of Tenant is reduced following such Permitted Transfer, in the reasonable opinion of Landlord. No Permitted Transfer shall relieve Tenant or Guarantor of any obligation under this Lease, including Tenant’s obligation to pay Base Rent and Additional Rent hereunder.
i. A new Section 17.30 is added to the Lease as follows:
17.30 Investment by Tenant
An affiliate of Landlord, Chino Valley Properties, LLC (“CVP”) and an affiliate of Tenant, Broken Arrow Herbal Center, Inc. (“BAHC”) entered into that certain Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018, as amended by that certain First Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated January 1, 2019 and that certain Second Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement of even date herewith (the “Chino Lease”) with respect to the premises described in the Chino Lease (the “Chino Facility”). The Premises and the Chino Facility shall be collectively referred to herein as the “Facilities.” Between the Effective Date and the second anniversary of the Effective Date (the “Improvement Period”), Tenant shall and/or Tenant shall cause BAHC to invest a combined total of at least $8,000,000.00 (the “Required Sum”) improvements in and to the Facilities in accordance with Section 9.02 of this Lease. If Tenant and/or BAHC fails to deliver to Landlord receipted bills for hard and soft costs of improvements to the Facilities (excluding all fixtures, equipment, furniture, cabling and personal property) totaling at least $8,000,000.00 on or before the thirtieth (30th) day following the expiration of the Improvement Period, Tenant shall be in default under this Lease (and BAHC shall be in default under the Chino Lease) and Landlord and/or CVP shall have all rights and remedies available to Landlord and CVP under this Lease and/or the Chino Lease, respectively.
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j. As of the Effective Date, Exhibit B of the Lease is deleted in its entirety and replaced with the following:
Exhibit B: Rent Payment Schedule
Base Rent:
| 6/1/20-4/30/40* | $0.82 monthly per square foot of Rentable Area of the Premises (initially $49,200.00 monthly based on 60,000 rentable square feet), plus all other amounts due under the Lease, including, without limitation, Rent Tax and Property Taxes |
*Base Rent is abated from 6/1/20 until 7/31/20.
3. Ratification. Landlord and Tenant each hereby reaffirm its rights and obligations under the Lease and all Exhibits, including, without limitation, Section 17 of Exhibit D, as modified by this Amendment. In the event of a conflict or ambiguity between the Lease and this Amendment, the terms and provisions of this Amendment shall control.
4. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one Amendment. Execution copies of this Amendment may be delivered by email, and the parties hereto agree to accept and be bound by scanned signatures transmitted via email hereto, which signatures shall be considered as original signatures with the transmitted Amendment having the same binding effect as an original signature on an original Amendment.
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Zoned Arizona Properties, LLC |
CJK, Inc. |
|||
| By: | /s/ Bryan McLaren | By: | /s/ Delano Phillips | |
| Name: | Bryan McLaren | Name: | Delano Phillips | |
| Title: | Authorized Agent | Title: | Counsel/Authorized Agent | |
| Landlord | Tenant | |||
| May 29, 2020 | May 29, 2020 | |||
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Exhibit 10.2
SECOND AMENDMENT TO LICENSED MEDICAL MARIJUANA FACILITY TRIPLE NET (NNN) LEASE AGREEMENT
This Second Amendment to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement (the “Amendment”) is made this 31st day of May 2020 (the “Effective Date”), by and between Chino Valley Properties, LLC (“Landlord”) and Broken Arrow Herbal Center, Inc. (“Tenant”), collectively (the “Parties”).
RECITALS
A. The Parties entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018, as amended by that certain First Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated January 1, 2019 (the “Lease”) for the premises commonly known as 2144 and 2148 North Road 1 East Chino Valley, Arizona 83462 (the “Premises”).
B. The parties hereto desire to amend the Lease in accordance with the terms below as of the Effective Date.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for good and valuable consideration, the sufficiency and receipt of which are acknowledged, the parties agree as follows:
AMENDMENT
1. Defined Terms. Terms in this Amendment shall have the same meaning as such terms have in the Lease unless otherwise noted in this Amendment.
2. Amendment.
a. Exhibit C to the Lease is deleted in its entirety and replaced with Exhibit C attached to this Amendment.
b. The following is added to the last paragraph of the Licensed Marijuana Facility Provisions:
Under no circumstances shall any advisory fees be due and payable by Tenant to Landlord under this Lease and such advisory fees shall only be due and payable pursuant to the terms of the CASA.
c. The following is added to the end of Section 2.01(c) of the Lease:
Any increase in the Rentable Area of the Premises, as reasonably determined by Landlord and Tenant in accordance with this Section, shall result in an increase in all amounts calculated based on the same, including, without limitation, Base Rent. The parties shall execute an amendment to this Lease reflecting said increase. Any increase in the Rentable Area of the Premises under this Lease shall be effective as of the earlier of (1) issuance of a certificate of occupancy for any such increased Rentable Area of the Premises, or (2) Tenant’s commencement of operations in such portion of the Premises.
d. A new Section 4.02 is added to the Lease as follows:
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4.02 Tenant’s Termination Right
If there is any change in Laws such that the dispensing, sale or cultivation of marijuana upon the Premises is prohibited or materially and adversely affected as mutually and reasonably determined by Landlord and Tenant, Tenant may elect to terminate this Lease by delivering written notice of such termination with the Termination Payment to Landlord (the “Notice”) and such termination shall be effective no sooner than thirty (30) days thereafter. If the Notice is not accompanied by the Termination Payment, termination will be effective no sooner than thirty (30) days following delivery to Landlord of the Termination Payment. For purposes of this Lease, the term “Termination Payment” shall mean the sum of (i) any unpaid Rent which has been earned at the time of such termination plus interest at the rates contemplated by this Lease; plus (ii) five percent (5%) of the Base Rent which would have been earned after termination for the balance of the Term.
e. Section 7.06 to the Lease is deleted in its entirety and replaced with the following:
7.06 Indemnification
| (a) | Tenant, as a material part of the consideration to be rendered to Landlord, hereby agrees to indemnify, protect, reimburse, defend and hold Landlord, Landlord’s managing agent and Lender, the Premises and the Project harmless for, from and against (i) any and all liability, penalties, losses, damages, costs and expenses, demands, causes of action, claims, obligations, judgments or appeals arising from any act or omission of Tenant or of Tenant’s officers, employees, agents, servants, subtenants, concessionaires, licensees, contractors or invitees, including any injury to any person or persons or any damage to any property, and/or resulting from any breach or default in the performance of any obligation to be performed by Tenant hereunder, and (ii) for, from and against all costs and charges, including reasonable attorneys’ and other reasonable professional fees, incurred in and about any of such matters and the defense of any action arising out of the same or in discharging the Project, the Property, the Building and/or Premises, or any part or any thereof, from any and all liens, charges or judgments which may accrue or be placed thereon by reason of any act or omission of Tenant but not the acts or omissions of Landlord. |
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| (b) | In no event shall Landlord, its agents, employees and/or contractors be liable for any personal injury or death or property damage caused by other lessees or their agents, as the case may be, or caused by public or quasi-public work, or for consequential damages arising out of any loss of the use of the Premises or any equipment or facilities therein by Tenant or any person claiming through or under Tenant. |
| (c) | Landlord hereby agrees to indemnify, protect, reimburse, defend and hold Tenant harmless for, from and against any and all liability, penalties, losses, damages, costs and expenses, demands, causes of action, claims, obligations, judgments or appeals arising from any gross negligence or willful misconduct of Landlord or of Landlord’s officers, employees, agents, servants, or contractors but not arising from the acts or omissions of Tenant. |
f. The sixth sentence of Section 9.01 of the Lease is deleted in its entirety.
g. Section 11.01 of the Lease is deleted in its entirety and replaced with the following:
11.01 Reconstruction
If the Building or Premises is damaged or destroyed during the Term, subject to the additional terms of this Lease, Landlord shall repair or rebuild the Building/Premises, in which event Tenant shall assign all insurance proceeds to Landlord and pay to Landlord, on demand, the amount of any deductible applicable under such insurance policy for the repair and restoration of the Building/Premises. Landlord’s’ obligation to rebuild and repair under this Section shall in any event be limited to restoring the Building and any other property covered by Tenant’s insurance to substantially the condition in which the same existed prior to the casualty, and shall be further limited to the extent of the insurance proceeds (and Tenant’s deductible) paid to Landlord for such restoration. Tenant agrees that promptly after completion of such work by Landlord, it will proceed with reasonable diligence and at its sole cost and expense to rebuild, repair and restore its trade fixtures, equipment, furniture, cabling and personal property. Landlord and Tenant shall reasonably cooperate with respect to such reconstruction as to not unreasonably interfere with the obligations of the parties hereunder. In no event shall any Rent be abated as a result of any damage or destruction to the Building/Premises.
h. A new Section 11.07 is added to the Lease as follows:
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11.07 Tenant’s Termination Right
If Landlord undertakes the repair and rebuilding of the Building/Premises but fails to substantially complete the same within twenty-four (24) months following the casualty or damage, Tenant may deliver to Landlord written notice of Tenant’s intent to terminate the Lease. If Landlord fails to complete the repairs and restoration within thirty (30) days following Landlord’s receipt of Tenant’s termination notice, the Lease will terminate thirty (30) days after the expiration of such thirty (30) day period.
i. A new Section 15.06 is added to the Lease as follows:
15.06 Permitted Transfers
Notwithstanding the foregoing, Tenant may assign or transfer the Lease or sublet the Premises, without the Landlord’s prior consent: (a) to a parent, subsidiary, or other affiliate of the Tenant, (b) to the purchaser of all, or substantially all, of (i) Tenant’s assets, or (ii) the membership interests or equity interest in Tenant, (c) to the surviving entity in any merger, consolidation, or conversion involving Tenant, or (d) in connection with the sale, transfer, assignment, pledge, hypothecation or new issuance of the stock or equity interests (including a controlling interest) of the direct or indirect interest of Tenant (each a “Permitted Transfers”); provided that: (1) Tenant delivers to Landlord prior written notice along with any documentation reasonably requested by Landlord evidencing Tenant’s compliance with the terms of this Section 15.06, (2) any such Permitted Transfer is not principally for the purpose of transferring Tenant’s leasehold estate and was made for a legitimate business purpose and not primarily to circumvent the provisions of the Lease, (3) any such Permitted Transfer does not result in the dissolution or termination of Tenant, and (4) neither the tangible net worth of Tenant nor the financial wherewithal of Tenant is reduced following such Permitted Transfer, in the reasonable opinion of Landlord. No Permitted Transfer shall relieve Tenant or Guarantor of any obligation under this Lease, including Tenant’s obligation to pay Base Rent and Additional Rent hereunder.
j. A new Section 17.30 is added to the Lease as follows:
17.30 Investment by Tenant
An affiliate of Landlord, Zoned Arizona Properties, LLC (“Zoned”) and an affiliate of Tenant, CJK, Inc. (“CJK”) entered into that certain Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018, as amended by that certain First Amendment to Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement of even date herewith (the “Tempe Lease”) with respect to the premises described in the Tempe Lease (the “Tempe Facility”). The Premises and the Tempe Facility shall be collectively referred to herein as the “Facilities.” Between the Effective Date and the second anniversary of the Effective Date (the “Improvement Period”), Tenant shall and/or Tenant shall cause CJK to invest a combined total of at least $8,000,000.00 (the “Required Sum”) improvements in and to the Facilities in accordance with Section 9.02 of this Lease. If Tenant and/or CJK fails to deliver to Landlord receipted bills for hard and soft costs of improvements to the Facilities (excluding all fixtures, equipment, furniture, cabling and personal property) totaling at least $8,000,000.00 on or before the thirtieth (30th) day following the expiration of the Improvement Period, Tenant shall be in default under this Lease (and CJK shall be in default under the Tempe Lease) and Landlord and/or Zoned shall have all rights and remedies available to Landlord and Zoned under this Lease and/or the Tempe Lease, respectively.
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k. As of the Effective Date, Exhibit B of the Lease is deleted in its entirety and replaced with the following:
Exhibit B: Rent Payment Schedule
Base Rent:
| 6/1/20-4/30/40* | $0.82 monthly per square foot of Rentable Area of the Premises (initially $32,800.00 monthly based on 40,000 rentable square feet), plus all other amounts due under the Lease, including, without limitation, Rent Tax and Property Taxes |
*Base Rent is abated from 6/1/20 until 7/31/20.
3. Ratification. Landlord and Tenant each hereby reaffirm its rights and obligations under the Lease and all Exhibits, including, without limitation, Section 17 of Exhibit D, as modified by this Amendment. In the event of a conflict or ambiguity between the Lease and this Amendment, the terms and provisions of this Amendment shall control.
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4. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one Amendment. Execution copies of this Amendment may be delivered by email, and the parties hereto agree to accept and be bound by scanned signatures transmitted via email hereto, which signatures shall be considered as original signatures with the transmitted Amendment having the same binding effect as an original signature on an original Amendment.
| Chino Valley Properties, LLC | Broken Arrow Herbal Center, Inc. | |||
| By: | /s/ Bryan McLaren | By: | /s/ Delano Phillips | |
| Name: | Bryan McLaren | Name: | Delano Phillips | |
| Title: | Authorized Agent | Title: | Counsel/Authorized Agent | |
| Landlord | Tenant | |||
| May 29, 2020 | May 29, 2020 | |||
6
EXHIBIT C
PROPERTY LEGAL DESCRIPTION
Parcel 1
All that portion of the Southeast quarter of Section 10, Township 16 North, Range 2 West, of the Gila and Salt River Base and Meridian, Yavapai County, Arizona, as described in Book 4644 of Official Records, Page 294, on file in the office of the Yavapai County Recorder and further shown on the Record of Survey recorded in Book 103 of Land Surveys, Page 81, on file in the office of the Yavapai County Recorder, said portion thereof being more particularly described as follows: Commencing at the Southeast comer of said Section 10;
Thence North 00 degrees 12 minutes 00 seconds West, a distance of 686.48 feet to a point on the East line of said Section 10 and the centerline of Road 1 East in the Town of Chino Valley, Arizona;
Thence South 89 degrees 47 minutes 42 seconds West, a distance of 25.00 feet, to a point on the West right of way line of said Road 1 East;
Thence continuing South 89 degrees 47 minutes 42 seconds West, a distance of 761.32 feet; Thence North 00 degrees 13 minutes 03 seconds West, a distance of 277.13 feet;
Thence South 89 degrees 57 minutes 43 seconds West, a distance of 47.73 feet, to the POINT OF BEGINNING;
Thence continuing South 89 degrees 57 minutes 43 seconds West, a distance of 304.32 feet; Thence North 02 degrees 42 minutes 45 seconds East, a distance of 1659.41 feet, to the beginning of a non-tangent curve, concave to the Southwest, with a radius of 1304.26 feet, the radius point of which bears South 02 degrees 58 minutes 26 seconds West;
Thence Southeasterly along said curve, through a delta angle of 04 degrees 49 minutes 41 seconds, an arc distance of 109.91 feet, the chord bearing of which is South 84 degrees 36 minutes 43 seconds East, with a chord distance of 109.87 feet, to a point of reverse curve, concave to the Northeast, with a radius of 1382.26 feet, the radius point of which bears North 07 degrees 48 minutes 07 seconds East;
Thence Southeasterly along said curve, through a delta angle of 07 degrees 49 minutes 21 seconds, an arc distance of 188.72 feet, the chord bearing of which is South 86 degrees 06 minutes 33 seconds East, with a chord distance of 188.57 feet;
Thence North 89 degrees 58 minutes 46 seconds East, a distance of 193.04 feet;
Thence South 00 degrees 12 minutes 00 seconds East, a distance of 777.65 feet, to the beginning of a tangent curve, concave to the Northwest, with a radius of 15.50 feet, the radius point of which bears South 89 degrees 48 minutes 00 seconds West;
Thence Southwesterly along said curve, through a delta angle of 146 degrees 05 minutes 10 seconds, an arc distance of 39.52 feet, the chord bearing of which is South 72 degrees 50 minutes 35 seconds West, with a chord distance of 29.65 feet, to a point of reverse curve, concave to the Southeast, with a radius of 50.00 feet, the radius point of which bears South 55 degrees 53 minutes 10 seconds West;
Thence Southerly along said curve, through a delta angle of 246 degrees 36 minutes 10 seconds, an arc distance of 215.20 feet, the chord bearing of which is South 22 degrees 35 minutes 05 seconds West, with a chord distance of 83.58 feet;
Thence South 00 degrees 12 minutes 00 seconds East, a distance of 335.33 feet;
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Thence South 89 degrees 57 minutes 43 seconds West, a distance of 102.06 feet; Thence South 01 degrees 05 minutes 30 seconds West, a distance of 255.06 feet; Thence South 89 degrees 57 minutes 43 seconds West, a distance of 69.69 feet;
Thence South 02 degrees 43 minutes 15 seconds West, a distance of 31.98 feet, to the beginning of a tangent curve, concave to the Northwest, with a radius of 52.00 feet, the radius point of which bears North 87 degrees 16 minutes 45 seconds West;
Thence Southwesterly along said curve, through a delta angle of 60 degrees 35 minutes 42 seconds, an arc distance of 54.99 feet, the chord bearing of which is South 33 degrees 01 minutes 06 seconds West, with a chord distance of 52.47 feet;
Thence South 00 degrees 50 minutes 00 seconds West, a distance of 104.35 feet, to the POINT OF BEGINNING.
Parcel 2
All that portion of the Southeast quarter of Section 10, Township 16 North, Range 2 West, of the Gila and Salt River Base and Meridian, Yavapai County, Arizona, as described in Book 4644 of Official Records, Page 294, on file in the office of the Yavapai County Recorder and further shown on the Record of Survey recorded in Book 103 of Land Surveys, Page 81, on file in the office of the Yavapai County Recorder, said portion thereof being more particularly described as follows: Commencing at the Southeast comer of said Section 10;
Thence North 00 degrees 12 minutes 00 seconds West, 686.48 feet to a point on the East line of said Section 10 and the centerline of Road 1 East in the Town of Chino Valley, Arizona;
Thence South 89 degrees 47 minutes 42 seconds West, a distance of 25.00 feet, to a point on the West right-of-way line of said Road 1 East;
Thence continuing South 89 degrees 47 minutes 42 seconds West, a distance of 25.00 feet, to the POINT OF BEGINNING;
Thence North 00 degrees 12 minutes 00 seconds West, 25.00 feet West of and parallel to the said West right of way line of said Road I East, a distance of 1908.96 feet;
Thence South 89 degrees 58 minutes 46 seconds West, a distance of 513.66 feet;
Thence South 00 degrees 12 minutes 00 seconds East, a distance of 777.65 feet, to the beginning of a tangent curve, concave to the Northwest, with a radius of 15.50 feet, the radius point of which bears South 89 degrees 48 minutes 00 seconds West;
Thence Southwesterly along said curve, through a delta angle of 146 degrees 05 minutes 10 seconds, an arc distance of 39.52 feet, the chord bearing of which is South 72 degrees 50 minutes 35 seconds West, with a chord distance of 29.65 feet, to a point of reverse curve, concave to the Southeast, with a radius of 50.00 feet, the radius point of which bears South 55 degrees 53 minutes 10 seconds West;
Thence Southerly along said curve, through- a delta angle of 246 degrees 36 minutes 10 seconds, an arc distance of 215.20 feet, the chord bearing of which is South 22 degrees 35 minutes 05 seconds West, with a chord distance of 83.58 feet;
Thence South 00 degrees 12 minutes 00 seconds East, a distance of 335.33 feet; Thence South 89 degrees 57 minutes 43 seconds West, a distance of 102.06 feet; Thence South 01 degrees 05 minutes 30 seconds West, a distance of 255.06 feet; Thence South 89 degrees 57 minutes 43 seconds West, a distance of 69.69 feet;
Thence South 02 degrees 43 minutes 15 seconds West, a distance of 31.98 feet, to the beginning of a tangent curve, concave to the Northwest, with a radius of 52.00 feet, the radius point of which bears North 87 degrees 16 minutes 45 seconds West;
Thence Southwesterly along said curve, through a delta angle of 60 degrees 35 minutes 42 seconds, an arc distance of 54.99 feet, the chord bearing of which is South 33 degrees 01 minutes 06 seconds West, with a chord distance of 52.47 feet;
Thence South 00 degrees 50 minutes 00 seconds West, a distance of 104.35 feet; Thence North 89 degrees 57 minutes 43 seconds East, a distance of 47.73 feet; Thence South 00 degrees 13 minutes 03 seconds East, a distance of 277.13 feet;
Thence North 89 degrees 47 minutes 42 seconds East, a distance of 736.32 feet, to the POINT OF BEGINNING.
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Exhibit 10.3
FIRST AMENDMENT TO LICENSED MEDICAL MARIJUANA FACILITY TRIPLE NET (NNN) LEASE AGREEMENT
This First Amendment to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement (the “Amendment”) is made this 31st day of May 2020 (the “Effective Date”), by and between Green Valley Group, LLC (“Landlord”) and Broken Arrow Herbal Center, Inc. (“Tenant”), collectively (the “Parties”).
RECITALS
A. The Parties entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 (the “Lease”) for the premises commonly known as 1732 West Commerce Point Plaza, Green Valley, Arizona 85614 (the “Premises”).
B. The parties hereto desire to amend the Lease in accordance with the terms below as of the Effective Date.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for good and valuable consideration, the sufficiency and receipt of which are acknowledged, the parties agree as follows:
AMENDMENT
1. Defined Terms. Terms in this Amendment shall have the same meaning as such terms have in the Lease unless otherwise noted in this Amendment.
2. Amendment.
a. The following is added to the last paragraph of the Licensed Marijuana Facility Provisions:
Under no circumstances shall any advisory fees be due and payable by Tenant to Landlord under this Lease and such advisory fees shall only be due and payable pursuant to the terms of the CASA.
b. The following is added to the end of Section 2.01(c) of the Lease:
Any increase in the Rentable Area of the Premises, as reasonably determined by Landlord and Tenant in accordance with this Section, shall result in an increase in all amounts calculated based on the same, including, without limitation, Base Rent. The parties shall execute an amendment to this Lease reflecting said increase. Any increase in the Rentable Area of the Premises under this Lease shall be effective as of the earlier of (1) issuance of a certificate of occupancy for any such increased Rentable Area of the Premises, or (2) Tenant’s commencement of operations in such portion of the Premises.
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c. A new Section 4.02 is added to the Lease as follows:
4.02 Tenant’s Termination Right
If there is any change in Laws such that the dispensing, sale or cultivation of marijuana upon the Premises is prohibited or materially and adversely affected as mutually and reasonably determined by Landlord and Tenant, Tenant may elect to terminate this Lease by delivering written notice of such termination with the Termination Payment to Landlord (the “Notice”) and such termination shall be effective no sooner than thirty (30) days thereafter. If the Notice is not accompanied by the Termination Payment, termination will be effective no sooner than thirty (30) days following delivery to Landlord of the Termination Payment. For purposes of this Lease, the term “Termination Payment” shall mean the sum of (i) any unpaid Rent which has been earned at the time of such termination plus interest at the rates contemplated by this Lease; plus (ii) five percent (5%) of the Base Rent which would have been earned after termination for the balance of the Term.
d. Section 7.06 to the Lease is deleted in its entirety and replaced with the following:
7.06 Indemnification
| (a) | Tenant, as a material part of the consideration to be rendered to Landlord, hereby agrees to indemnify, protect, reimburse, defend and hold Landlord, Landlord’s managing agent and Lender, the Premises and the Project harmless for, from and against (i) any and all liability, penalties, losses, damages, costs and expenses, demands, causes of action, claims, obligations, judgments or appeals arising from any act or omission of Tenant or of Tenant’s officers, employees, agents, servants, subtenants, concessionaires, licensees, contractors or invitees, including any injury to any person or persons or any damage to any property, and/or resulting from any breach or default in the performance of any obligation to be performed by Tenant hereunder, and (ii) for, from and against all costs and charges, including reasonable attorneys’ and other reasonable professional fees, incurred in and about any of such matters and the defense of any action arising out of the same or in discharging the Project, the Property, the Building and/or Premises, or any part or any thereof, from any and all liens, charges or judgments which may accrue or be placed thereon by reason of any act or omission of Tenant but not the acts or omissions of Landlord. |
| (b) | In no event shall Landlord, its agents, employees and/or contractors be liable for any personal injury or death or property damage caused by other lessees or their agents, as the case may be, or caused by public or quasi-public work, or for consequential damages arising out of any loss of the use of the Premises or any equipment or facilities therein by Tenant or any person claiming through or under Tenant. |
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| (c) | Landlord hereby agrees to indemnify, protect, reimburse, defend and hold Tenant harmless for, from and against any and all liability, penalties, losses, damages, costs and expenses, demands, causes of action, claims, obligations, judgments or appeals arising from any gross negligence or willful misconduct of Landlord or of Landlord’s officers, employees, agents, servants, or contractors but not arising from the acts or omissions of Tenant. |
e. The sixth sentence of Section 9.01 of the Lease is deleted in its entirety.
f. Section 11.01 of the Lease is deleted in its entirety and replaced with the following:
11.01 Reconstruction
If the Building or Premises is damaged or destroyed during the Term, subject to the additional terms of this Lease, Landlord shall repair or rebuild the Building/Premises, in which event Tenant shall assign all insurance proceeds to Landlord and pay to Landlord, on demand, the amount of any deductible applicable under such insurance policy for the repair and restoration of the Building/Premises. Landlord’s’ obligation to rebuild and repair under this Section shall in any event be limited to restoring the Building and any other property covered by Tenant’s insurance to substantially the condition in which the same existed prior to the casualty, and shall be further limited to the extent of the insurance proceeds (and Tenant’s deductible) paid to Landlord for such restoration. Tenant agrees that promptly after completion of such work by Landlord, it will proceed with reasonable diligence and at its sole cost and expense to rebuild, repair and restore its trade fixtures, equipment, furniture, cabling and personal property. Landlord and Tenant shall reasonably cooperate with respect to such reconstruction as to not unreasonably interfere with the obligations of the parties hereunder. In no event shall any Rent be abated as a result of any damage or destruction to the Building/Premises.
g. A new Section 11.07 is added to the Lease as follows:
11.07 Tenant’s Termination Right
If Landlord undertakes the repair and rebuilding of the Building/Premises but fails to substantially complete the same within twenty-four (24) months following the casualty or damage, Tenant may deliver to Landlord written notice of Tenant’s intent to terminate the Lease. If Landlord fails to complete the repairs and restoration within thirty (30) days following Landlord’s receipt of Tenant’s termination notice, the Lease will terminate thirty (30) days after the expiration of such thirty (30) day period.
3
h. A new Section 15.06 is added to the Lease as follows:
15.06 Permitted Transfers
Notwithstanding the foregoing, Tenant may assign or transfer the Lease or sublet the Premises, without the Landlord’s prior consent: (a) to a parent, subsidiary, or other affiliate of the Tenant, (b) to the purchaser of all, or substantially all, of (i) Tenant’s assets, or (ii) the membership interests or equity interest in Tenant, (c) to the surviving entity in any merger, consolidation, or conversion involving Tenant, or (d) in connection with the sale, transfer, assignment, pledge, hypothecation or new issuance of the stock or equity interests (including a controlling interest) of the direct or indirect interest of Tenant (each a “Permitted Transfers”); provided that: (1) Tenant delivers to Landlord prior written notice along with any documentation reasonably requested by Landlord evidencing Tenant’s compliance with the terms of this Section 15.06, (2) any such Permitted Transfer is not principally for the purpose of transferring Tenant’s leasehold estate and was made for a legitimate business purpose and not primarily to circumvent the provisions of the Lease, (3) any such Permitted Transfer does not result in the dissolution or termination of Tenant, and (4) neither the tangible net worth of Tenant nor the financial wherewithal of Tenant is reduced following such Permitted Transfer, in the reasonable opinion of Landlord. No Permitted Transfer shall relieve Tenant or Guarantor of any obligation under this Lease, including Tenant’s obligation to pay Base Rent and Additional Rent hereunder.
i. As of the Effective Date, Exhibit B of the Lease is amended to provide that Base Rent is abated from June 1, 2020 until July 31, 2020.
3. Ratification. Landlord and Tenant each hereby reaffirm its rights and obligations under the Lease and all Exhibits, including, without limitation, Section 17 of Exhibit D, as modified by this Amendment. In the event of a conflict or ambiguity between the Lease and this Amendment, the terms and provisions of this Amendment shall control.
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4. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one Amendment. Execution copies of this Amendment may be delivered by email, and the parties hereto agree to accept and be bound by scanned signatures transmitted via email hereto, which signatures shall be considered as original signatures with the transmitted Amendment having the same binding effect as an original signature on an original Amendment.
| Green Valley Group, LLC | Broken Arrow Herbal Center, Inc. | |||
| By: | /s/ Bryan McLaren | By: | /s/ Delano Phillips | |
| Name: | Bryan McLaren | Name: | Delano Phillips | |
| Title: | Authorized Agent | Title: | Counsel/Authorized Agent | |
| Landlord | Tenant | |||
| May 29, 2020 | May 29, 2020 | |||
5
Exhibit 10.4
FIRST AMENDMENT TO LICENSED MEDICAL MARIJUANA FACILITY TRIPLE NET (NNN) LEASE AGREEMENT
This First Amendment to the Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement (the “Amendment”) is made this 31st day of May 2020 (the “Effective Date”), by and between Kingman Property Group, LLC (“Landlord”) and CJK, Inc. (“Tenant”), collectively (the “Parties”).
RECITALS
A. The Parties entered into a Licensed Medical Marijuana Facility Triple Net (NNN) Lease Agreement dated May 1, 2018 (the “Lease”) for the premises commonly known as 2095 Northern Avenue, Kingman, Arizona 86409 (the “Premises”).
B. The parties hereto desire to amend the Lease in accordance with the terms below as of the Effective Date.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for good and valuable consideration, the sufficiency and receipt of which are acknowledged, the parties agree as follows:
AMENDMENT
1. Defined Terms. Terms in this Amendment shall have the same meaning as such terms have in the Lease unless otherwise noted in this Amendment.
2. Amendment.
a. The following is added to the last paragraph of the Licensed Marijuana Facility Provisions:
Under no circumstances shall any advisory fees be due and payable by Tenant to Landlord under this Lease and such advisory fees shall only be due and payable pursuant to the terms of the CASA.
b. The following is added to the end of Section 2.01(c) of the Lease:
Any increase in the Rentable Area of the Premises, as reasonably determined by Landlord and Tenant in accordance with this Section, shall result in an increase in all amounts calculated based on the same, including, without limitation, Base Rent. The parties shall execute an amendment to this Lease reflecting said increase. Any increase in the Rentable Area of the Premises under this Lease shall be effective as of the earlier of (1) issuance of a certificate of occupancy for any such increased Rentable Area of the Premises, or (2) Tenant’s commencement of operations in such portion of the Premises.
1
c. A new Section 4.02 is added to the Lease as follows:
4.02 Tenant’s Termination Right
If there is any change in Laws such that the dispensing, sale or cultivation of marijuana upon the Premises is prohibited or materially and adversely affected as mutually and reasonably determined by Landlord and Tenant, Tenant may elect to terminate this Lease by delivering written notice of such termination with the Termination Payment to Landlord (the “Notice”) and such termination shall be effective no sooner than thirty (30) days thereafter. If the Notice is not accompanied by the Termination Payment, termination will be effective no sooner than thirty (30) days following delivery to Landlord of the Termination Payment. For purposes of this Lease, the term “Termination Payment” shall mean the sum of (i) any unpaid Rent which has been earned at the time of such termination plus interest at the rates contemplated by this Lease; plus (ii) five percent (5%) of the Base Rent which would have been earned after termination for the balance of the Term.
d. Section 7.06 to the Lease is deleted in its entirety and replaced with the following:
7.06 Indemnification
| (a) | Tenant, as a material part of the consideration to be rendered to Landlord, hereby agrees to indemnify, protect, reimburse, defend and hold Landlord, Landlord's managing agent and Lender, the Premises and the Project harmless for, from and against (i) any and all liability, penalties, losses, damages, costs and expenses, demands, causes of action, claims, obligations, judgments or appeals arising from any act or omission of Tenant or of Tenant’s officers, employees, agents, servants, subtenants, concessionaires, licensees, contractors or invitees, including any injury to any person or persons or any damage to any property, and/or resulting from any breach or default in the performance of any obligation to be performed by Tenant hereunder, and (ii) for, from and against all costs and charges, including reasonable attorneys' and other reasonable professional fees, incurred in and about any of such matters and the defense of any action arising out of the same or in discharging the Project, the Property, the Building and/or Premises, or any part or any thereof, from any and all liens, charges or judgments which may accrue or be placed thereon by reason of any act or omission of Tenant but not the acts or omissions of Landlord. |
| (b) | In no event shall Landlord, its agents, employees and/or contractors be liable for any personal injury or death or property damage caused by other lessees or their agents, as the case may be, or caused by public or quasi-public work, or for consequential damages arising out of any loss of the use of the Premises or any equipment or facilities therein by Tenant or any person claiming through or under Tenant. |
2
| (c) | Landlord hereby agrees to indemnify, protect, reimburse, defend and hold Tenant harmless for, from and against any and all liability, penalties, losses, damages, costs and expenses, demands, causes of action, claims, obligations, judgments or appeals arising from any gross negligence or willful misconduct of Landlord or of Landlord’s officers, employees, agents, servants, or contractors but not arising from the acts or omissions of Tenant. |
e. The sixth sentence of Section 9.01 of the Lease is deleted in its entirety.
f. Section 11.01 of the Lease is deleted in its entirety and replaced with the following:
11.01 Reconstruction
If the Building or Premises is damaged or destroyed during the Term, subject to the additional terms of this Lease, Landlord shall repair or rebuild the Building/Premises, in which event Tenant shall assign all insurance proceeds to Landlord and pay to Landlord, on demand, the amount of any deductible applicable under such insurance policy for the repair and restoration of the Building/Premises. Landlord’s' obligation to rebuild and repair under this Section shall in any event be limited to restoring the Building and any other property covered by Tenant’s insurance to substantially the condition in which the same existed prior to the casualty, and shall be further limited to the extent of the insurance proceeds (and Tenant’s deductible) paid to Landlord for such restoration. Tenant agrees that promptly after completion of such work by Landlord, it will proceed with reasonable diligence and at its sole cost and expense to rebuild, repair and restore its trade fixtures, equipment, furniture, cabling and personal property. Landlord and Tenant shall reasonably cooperate with respect to such reconstruction as to not unreasonably interfere with the obligations of the parties hereunder. In no event shall any Rent be abated as a result of any damage or destruction to the Building/Premises.
g. A new Section 11.07 is added to the Lease as follows:
11.07 Tenant’s Termination Right
If Landlord undertakes the repair and rebuilding of the Building/Premises but fails to substantially complete the same within twenty-four (24) months following the casualty or damage, Tenant may deliver to Landlord written notice of Tenant’s intent to terminate the Lease. If Landlord fails to complete the repairs and restoration within thirty (30) days following Landlord’s receipt of Tenant’s termination notice, the Lease will terminate thirty (30) days after the expiration of such thirty (30) day period.
3
h. A new Section 15.06 is added to the Lease as follows:
15.06 Permitted Transfers
Notwithstanding the foregoing, Tenant may assign or transfer the Lease or sublet the Premises, without the Landlord’s prior consent: (a) to a parent, subsidiary, or other affiliate of the Tenant, (b) to the purchaser of all, or substantially all, of (i) Tenant’s assets, or (ii) the membership interests or equity interest in Tenant, (c) to the surviving entity in any merger, consolidation, or conversion involving Tenant, or (d) in connection with the sale, transfer, assignment, pledge, hypothecation or new issuance of the stock or equity interests (including a controlling interest) of the direct or indirect interest of Tenant (each a “Permitted Transfers”); provided that: (1) Tenant delivers to Landlord prior written notice along with any documentation reasonably requested by Landlord evidencing Tenant’s compliance with the terms of this Section 15.06, (2) any such Permitted Transfer is not principally for the purpose of transferring Tenant’s leasehold estate and was made for a legitimate business purpose and not primarily to circumvent the provisions of the Lease, (3) any such Permitted Transfer does not result in the dissolution or termination of Tenant, and (4) neither the tangible net worth of Tenant nor the financial wherewithal of Tenant is reduced following such Permitted Transfer, in the reasonable opinion of Landlord. No Permitted Transfer shall relieve Tenant or Guarantor of any obligation under this Lease, including Tenant’s obligation to pay Base Rent and Additional Rent hereunder.
i. As of the Effective Date, Exhibit B of the Lease is amended to provide that Base Rent is abated from June 1, 2020 until July 31, 2020.
3. Ratification. Landlord and Tenant each hereby reaffirm its rights and obligations under the Lease and all Exhibits, including, without limitation, Section 17 of Exhibit D, as modified by this Amendment. In the event of a conflict or ambiguity between the Lease and this Amendment, the terms and provisions of this Amendment shall control.
4
4. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one Amendment. Execution copies of this Amendment may be delivered by email, and the parties hereto agree to accept and be bound by scanned signatures transmitted via email hereto, which signatures shall be considered as original signatures with the transmitted Amendment having the same binding effect as an original signature on an original Amendment.
| Kingman Property Group, LLC | CJK, Inc. | |||
| By: | /s/ Bryan McLaren | By: | /s/ Delano Phillips | |
| Name: | Bryan McLaren | Name: | Delano Phillips | |
| Title: | Authorized Agent | Title: | Counsel/Authorized Agent | |
| Landlord | Tenant | |||
| May 29, 2020 | May 29, 2020 | |||
5
Exhibit 99.1
Zoned Properties to Expand Arizona Portfolio with Significant Tenant
Significant Tenant to Invest at least $8 Million of Capital into Portfolio Infrastructure
2020 Lease Amendments Establish New Base Rental Rate, Increasing Portfolio Cash Flow and Revenue Generation
SCOTTSDALE, Ariz., June 4, 2020 /BusinessWire/ -- Zoned Properties® (OTCQB: ZDPY), a strategic real estate development firm whose primary mission is to provide real estate and sustainability services for the regulated cannabis industry, positioning the company for property acquisitions and revenue growth, today announced that it has finalized a set of lease amendments with its Significant Tenant in Arizona that will significantly increase property portfolio value and future cash flow.
Arizona Portfolio Highlights following Amended Lease Terms June 2020
| ● | Significant Tenant has committed to invest at least $8 million in capital for property infrastructure improvements and expansion at Tempe and Chino Valley. |
| ● | Amended lease structure establishes new base rental rate at Tempe and Chino Valley properties, while providing for market-standard terms for both Landlord and Tenant. |
| ● | Arizona portfolio estimated to yield over $30 million of rental cash flow over the contractual life of the lease agreements provided that planned expansion is completed. |
| ● | Square footage of leased and licensed facility space to increase up to 225,000 square feet of operational capacity provided that planned expansion is completed. |
| ● | Zoned Properties owns its Arizona property portfolio outright. No debt has been placed against the properties; therefore, could provide for a healthy source of capital financing in future. |
“The lease amendments, capital investment by our tenant, and continuing property expansion mark the successful execution of a strategic positioning process for our Arizona property portfolio to create value for our shareholders and stakeholders,” commented Bryan McLaren, Chief Executive Officer of Zoned Properties. “We believe this is a win-win scenario, in which we have negotiated a healthy base rental rate for our significant tenant that will allow for competitive growth, increased operational capacity, and increased rental revenue and cash-flow for Zoned Properties. We expect this to meaningfully improve the health of our balance sheet, increasing the tangible value of our company.”
About Zoned Properties, Inc. (OTCQB: ZDPY):
Zoned Properties is a strategic real estate development firm whose primary mission is to provide real estate and sustainability services for clients in the regulated cannabis industry, positioning the company for real estate acquisitions and revenue growth. We intend to pioneer sustainable development for emerging industries, including the regulated cannabis industry. We are an accredited member of the Better Business Bureau, the U.S. Green Building Council, and the Forbes Real Estate Council. We focus on investing capital to acquire and develop commercial properties to be leased on a triple-net basis, and engaging clients that face zoning, permitting, development, and operational challenges. We provide development strategies and advisory services that could potentially have a major impact on cash flow and property value. We do not grow, harvest, sell or distribute cannabis or any substances regulated under United States law such as the Controlled Substance Act of 1970, as amended (the “CSA”).
Website: www.ZonedProperties.com
Twitter: @ZonedProperties
LinkedIN: @ZonedProperties
Safe Harbor Statement
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. All statements other than statements of historical facts included in this press release are forward-looking statements. In some cases, forward-looking statements can be identified by words such as "believe," "expect," "anticipate," "plan," "potential," "continue" or similar expressions. Such forward-looking statements include risks and uncertainties, and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties are discussed in the Company's filings with the Securities and Exchange Commission. Investors should not place any undue reliance on forward-looking statements since they involve known and unknown, uncertainties and other factors which are, in some cases, beyond the Company's control which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects the Company's current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to operations, results of operations, growth strategy and liquidity. The Company assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
COVID-19 Statement
In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. We are monitoring this closely, and although operations have not been materially affected by the COVID-19 outbreak to date, the ultimate duration and severity of the outbreak and its impact on the economic environment and our business is uncertain. All of the properties in our portfolio are open currently to our Significant Tenants and their customers and will remain open pursuant to state and local government requirements. At this time, we do not foresee any material changes to our operations from COVID-19. Our tenants are continuing to generate revenue at these properties and they have continued to make rental payments in full and on time and we believe the tenants’ liquidity position is sufficient to cover its expected rental obligations. Accordingly, while we do not anticipate an impact on our operations, we cannot estimate the duration of the pandemic and potential impact on our business if the properties must close or if the tenants are otherwise unable or unwilling to make rental payments. In addition, a severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our properties and a decreased ability to raise additional capital when needed on acceptable terms, if at all. At this time, the Company is unable to estimate the impact of this event on its operations.
Investor Relations
Zoned Properties, Inc.
Bryan McLaren
Tel (877) 360-8839
Investors@zonedproperties.com
www.zonedproperties.com