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): May 9, 2018 (May 2, 2018)

 

GREEN SPIRIT INDUSTRIES INC.

(Exact name of registrant as specified in its charter)

 

Nevada   333-141929   14-1982491

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification Number)

 

Building No. 3, P.E. 606, int. Jose Efron Ave.

Dorado, Puerto Rico 00646

(Address of principal executive offices) (zip code)

 

(214) 808-8649

(Registrant’s telephone number, including area code)

 

 

(Former name or former address, if changed since last report)

 

Copy to:

Darrin M. Ocasio, Esq.

Sichenzia Ross Ference Kesner LLP

1185 Avenue of the Americas, 37th Floor

New York, New York 10036

Phone: (212) 930-9700

Fax: (212) 930-9725

 

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))

 

 

 

 
 

 

Item 1.01 Entry into Material Definitive Agreement

 

Agreements for Purchase of Real Estate Property

 

On May 2, 2018, Andalucía 511, LLC (“ Andalucía ”), a wholly-owned subsidiary of Green Spirit Industries Inc. (the “ Company ”), simultaneously entered into two deed of sale agreements for the purchase of certain real estate property located in Puerto Rico with McLeary 51, Inc. (the “ Seller ”): (i) one for the purchase of a parcel of land (the “ Land Deed ”); and (ii) one for the purchase of a building (the “ Building Deed ”).

 

Parcel of Land

 

Pursuant to the Land Deed, Andalucía purchased certain real estate property located at 1864 Calle McLeary, San Juan, Puerto Rico 00911 and consisting of approximately 423 square meters of land with a parking lot located thereon, from the Seller for total cash consideration of $350,000. The cost of the deed of sale, notarial fee, transfer tax and registration will be paid by Andalucía.

 

The foregoing summary of the Land Deed does not purport to be complete and is qualified in its entirety by reference to the complete text of the Land Deed, which is filed as Exhibit 10.1 hereto and incorporated by reference herein.

 

Building - B-Well Healing Center

 

Pursuant to the Building Deed, Andalucía purchased certain real estate property located at 51 Calle McLeary, San Juan, Puerto Rico 00911 and consisting of approximately 525 square meters of land with a building located thereon (the “ Building ”), from the Seller for total cash consideration of $800,000. The cost of the deed of sale, notarial fee, transfer tax and registration will be paid by Andalucía. The Building is currently leased by a third-party for the operation of a medical cannabis dispensary under the name “B-Well Healing Center.”

 

The foregoing summary of the Building Deed does not purport to be complete and is qualified in its entirety by reference to the complete text of the Building Deed, which is filed as Exhibit 10.2 hereto and incorporated by reference herein.

 

Sublease Agreement

 

On May 3, 2018, The Company’s majority-owned subsidiary, Sunset Connect Oakland, LLC (“ Sunset Connect ”) entered into a sublease agreement (the “ Sublease ”), effective May 1, 2018, with CPlex, LLC, a California limited liability company (“ CPLEX ), pursuant to which Sunset Connect will sublease from CPLEX approximately 25,000 usable square feet of space in the building located at 685 85 th Avenue, Oakland, California (the “ Sublease Premises ”). Sunset intends to occupy the Sublease Premises for the purpose of cultivating and manufacturing cannabis and cannabis-related products.

 

CPLEX currently leases approximately 106,500 rentable square feet, which consists of approximately 80,000 usable square feet, pursuant to an AIR Commercial Real Estate Association Standard Industrial/Commercial Multi-Tenant Lease-Net, dated March 28, 2016, amended and restated as of August 9, 2016, by and between Kenneth W. Morris, Trustee under Revocable Trust Agreement dated April 10, 1986 (the “ Master Lease ”). The Sublease provides for a term of five (5) years (the “ Term ”), commencing on May 1, 2018 (the “ Commencement Date ”) and ending on the fifth anniversary of the Commencement Date (the “ Expiration Date ”), unless sooner terminated in accordance with the terms of the Sublease. On the Expiration Date, Sunset Connect shall have the option to renew the Sublease for an additional term of two (2) years and eleven (11) months, with such additional term expiring on March 30, 2026 (which is on or about the expiration date of the Master Lease).

 

 
 

 

The rights and obligations of Sunset Connect will be subject to the terms of the Master Lease. Pursuant to the Sublease, Sunset Connect will pay CPLEX an initial monthly base rent of approximately $56,250, or an annual base rent of approximately $675,000, which will increase annually by approximately four percent (4.0%), plus additional monthly fees to cover Sunset Connect’s share of certain operating expenses relating to the Sublease Premises, including utilities, property taxes, insurance, maintenance and security.

 

In connection with the execution of the Sublease, Sunset Connect delivered to CPLEX a cash security deposit in the amount of $112,500 to be held as security for the full and faithful performance by Sunset Connect of the terms, covenants and conditions of the Sublease. In addition, Sunset Connect paid an advance of the first three (3) months of rent in the amount of $168,750.

 

The Sublease contains customary default provisions incorporated by reference from the Master Lease allowing CPLEX to terminate the Sublease if Sunset Connect fails to cure a breach of any of its obligations within specified time periods. Sunset Connect may not assign or further sublease all or any part of the Sublease Premises.

 

The foregoing summary of the Sublease does not purport to be complete and is qualified in its entirety by reference to the complete text of the Sublease, which is filed as Exhibit 10.3 hereto and incorporated by reference herein.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.

 

Exhibit Number   Description
10.1   Deed of Sale – Land (Parcel 8,224), dated May 2, 2018
10.2   Deed of Sale – Building (Parcel 13,906), dated May 2, 2018
10.3   Sublease Agreement, dated May 3, 2018, by and between Sunset Connect Oakland, LLC and CPlex, LLC

 

 
 

 

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.

 

  GREEN SPIRIT INDUSTRIES INC.
     
Dated: May 9, 2018 By: /s/ Thomas Gingerich
  Name: Thomas Gingerich
  Title: Chief Financial Officer

 

 
 

 

----------------------------DEED OF SALE------------------------------

 

-------------------------NUMBER THREE (4)---------------------------

 

---  In the city of San Juan, Puerto Rico, this May second (2), of two thousand eighteen (2018)

 

.-------------------------------------

 

--------------------------------BEFORE ME-------------------------------

 

--- CAROLINA V. CABRERA BOU, Attorney and Notary Public in and for the Commonwealth of Puerto Rico, with offices at Carolina and residence in Guaynabo, Puerto Rico.-

 

---------------------------------APPEAR-----------------------------------

 

----AS PARTY OF THE FIRST PART: MC LEARY 51, INC., a for profit corporation duly registered in the Commonwealth of Puerto Rico, with registry number one seven one eight seven one (171871), and main offices in Guaynabo, Puerto Rico, represented in this act by its designated agent, MR. ROBERTO ROCA BUIGAS, of legal age, married, businessman, and resident of San Juan, Puerto Rico, whose faculty to appear in this act in representation of MC LEARY 51, INC., is evidenced by a Certificate of Corporate Resolution, which was sworn and subscribed by Roberto Roca Buigas, secretary of MC LEARY 51, INC., on May two (2), two thousand and eighteen (2018), before notary public Carolina V. Cabrera Bou, through affidavit number two hundred eleven (211), whom I have identified with Driver’s License number one, seven, three, four, three, two, two (1734322) issued by the Department of Transportation and Public Works (Departamento de Transportación y Obras Públicas) of the Commonwealth of Puerto Rico, which contains his photograph and signature (from hereinafter referred to as “THE SELLER”).---------------------------------------- ---AS PARTY OF THE SECOND PART: ANDALUCIA 511, LLC, a Limited Liability Company duly registered in the Commonwealth of Puerto Rico, with register number four zero six seven three zero (406730), who is a wholly owned subsidiary of GREEN SPIRIT INDUSTRIES, INC., a Nevada Corporation, represented in this act by its Designated Agent, MR. CHRISTIAN RICHARD BRIGGS, of legal age, married, entrepreneur and resident of Carolina, Puerto Rico, whose faculty to appear in this act in representation of ANDALUCIA 511, LLC, is evidenced by a Corporate Resolution, which was duly signed by the Chief Executive Officer of GREEN SPIRIT INDUSTRIES, INC., sole member of ANDALUCIA 511, LLC, MR. LESLIE BALL, on May two (2), two thousand and eighteen (2018), whom I have identified with Driver’s License number, six, nine, one, zero, one, eight, one (6910181) issued by the Department of Transportation and Public Works (Departamento de Transportación y Obras Públicas) of the Commonwealth of Puerto Rico, which contains his photograph and signature (hereinafter referred to as “THE PURCHASER”). The appearing parties consent to the execution of the present document without having the afore-mentioned Corporate Resolution notarized at this particular time.-------------------------------------------------------------

 

1
 

 

--- I, the Notary, attest that through their statements and my believe, I also attest as to their age, civil status, occupation and residence. They assure me that they have the legal capacity necessary for this act, and for the purpose they freely:---------------------------------------------------------------------------- FIRST : Title – That SELLER is the owner in see simple and full dominion title of the following real property described in the Spanish Language as follow, (hereinafter referred to as the “PROPERTY”).---------------------------------------------------

 

--- URBANA : Solar en la Sección Norte del Barrio SANTURCE, de la ciudad de San Juan en el sitio conocido por “EL PARQUE”, con un área superficial de cuatroscientos veintires punto treinta y seis (423.36) metros cuadrados. Es el marcado con el número once (11) en el plano de Urbanización levantado por el Ingeniero Don Joaquín Oliver y sus colindancias y medidas son: por el NORTE, en dieciocho punto noventa y cinco (18.95) metros, con la calle McLeary; por el SUR, en diecinueve punto noventa y cinco (19.95) metros, con terrenos de Don Fernando Zegri; por el ESTE, en veintidos punto cero cinco (22.05) metros, con la calle Gertrudis Court; y por el OESTE, en veintidos punto cero cinco (22.05) metros, con Doña Patricia C. Burlingame. Contiene dicho solar dos edificios el principal es de altos y bajos. Casa número mil ochocientos sesenta y cuatro (1,864) del Bloque de la Calle McLeary, con apartamentos para viviendas a cada piso; el otro con tres garajes en los bajos y en los altos un apartamento de vivienda.----------------

 

----Parcel number eight thousand two hundred and twenty four (8,224) recorded at page number two hundred and six (206), volume two hundred three (203) of Santurce Norte, Property Registry Section I of San Juan.---------------------------

 

---The property is identified with Municipal Revenue Collection Center (CRIM) number 041-0410151-02-901.------

 

-------------------TITLE AND ENCUMBRANCES---------------

 

---- The property was purchased by seller as per deed twenty eight (28) executed on November twenty eight (28) of two thousand and seven (2007) before notary public Luis Alberto Molero Rabassa, recorded at page one hundred ninety eight (198) of volume one thousand one hundred and twenty three (1123) of Santurce Norte, parcel number eight thousand two hundred and twenty four (8,224), of Santurce Norte, Property Registry of San Juan I Section.--------------------------------------------------------------------The Property is encumbered with the following liens:.------First Mortgage in favor of DORAL BANK is mortgage note in the principal amount of Seven Hundred and Six thousand Five Hundred Dollars ($706,500.00) with an annual interest at seven point nine percent (7.9%) due on March one (1) of two thousand twenty one (2021), as per deed number ninety one (91), executed in San Juan, on March six (6) of two thousand six (2006) before Notary Public Juan Manuel Casanova Rivera, recorded at page one hundred and ninety eight (198) of volume one thousand one hundred seventy seven (1177), parcel number eight thousand two hundred twenty four (8,224) of Santurce Norte, Property Registry of San Juan I Section.-------------------------------------------------------------------Second Mortgage in favor of R-G PREMIER BANK OF PUERTO RICO is a mortgage note in the principal amount of Six Hundred Fifteen Thousand Dollars ($615,000.00) with an annual interest at twelve percent (12%), due upon presentation, as per deed number sixty two (62) executed in San Juan, Puerto Rico, on November thirty (30) of two thousand seven (2007), before notary public Sandra de L. Tous-Chevres, recorded at page number two hundred seven (207) of volume one thousand one hundred sixty six (1166), parcel number eight thousand two hundred and twenty four (8,224) of Santurce Norte, Property Registry of San Juan I Section.----------------------------------------------------------Presented is a Judicial Order for the Cancellation of a Lost Mortgage Deed, case number KCP20120182, executed in San Juan on February twelve (12), of two thousand and two (2002) before the First Instance Court of San Juan. The Judicial Order is to cancel the First Mortgage described above. The document was presented on April twenty-three (23), of two thousand fourteen (2014), at turn five hundred and seven (507), of diary one thousand and six (1106) at the Property Registry of San Juan I Section.----------------------------------

 

2
 

 

----The second mortgage note in favor of R-G PREMIER BANK was cancelled through deed number two (2), executed on May second (2), of two thousand eighteen (2018), before Notary Public Luis Alberto Molero Rabassa. Said deed will be presented at the Registry of the Property.----------------------------------------------------------

 

---The appearing parties acknowledge having received a copy of a recent title search dated April twelve (12) of two thousand eighteen (2018), prepared by Magda García Cortés, which among other things includes, the registration status of the PROPERTY, and the liens and encumbrances over the Property as of this date.---------------I the Notary, do hereby CERTIFY that I have advised the appearing parties (i) that the Property is described and the liens and encumbrances are listed herein as reflected by certain title search and report prepared by an independent third party and not by the undersigned Notary; (ii) that this deed must be recorded in the appropriate Property Registry; (iii) of the possibility of intervening documents affecting title being presented for recordation prior to the execution and/or presentation of this deed in the Real Property Registry and of the preference or seniority that said intervening liens and/or encumbrances may gain by such prior execution or earlier presentation; (iv) of the desirability of verifying the status of liens and encumbrances on the property as may appear from the Property Registry on this day and of the adverse consequence which may result from the failure to do so; (v) of the possible existence and pendency of additional unrecorded statutory liens and real property taxes including the statutory preferred legal mortgage in favor of the Commonwealth of Puerto Rico); and (vi) that if any of the Mortgaged Properties is located in a flood zone, the owner or user of such property shall observe and comply with the requirements and provisions of the Flood Prone Zone Regulation of the Planning Board of the Commonwealth of Puerto Rico.-----------------------------

 

---After being so advised the appearing parties execute this deed of sale relying in the title search report stated above and in the appearing party’s representation and acknowledgment that the title search report is correct and that there are no liens or encumbrances over the Real Property, other than those stated above, if any.-------------

 

------------------------------------SALE----------------------------------------SECOND:  The SELLER and the PURCHASER express that they have agreed the sale and purchase of the property herein described in the FIRST clause of this deed, according to the following;------------------------------------------------------------ -------------------------TERMS AND CONDITIONS---------------------THIRD: The SELLER hereby sells, transfers and conveys to the PURCHASER, and the PURCHASER purchases from the SELLER, the property herein described in the FIRST paragraph of this deed with all its rights, improvements, easements, servitude, privileges and appurtenances without reservation or limitation whatsoever. By this deed, without the necessity of further act or deed, the SELLER hereby delivers possession to the PURCHASER for and in consideration of the sum of Three Hundred Fifty Thousand Dollars ($350,000.00), which is paid by the PURCHASER to the SELLER in the following manner ----------------------------------A) The sum of Twenty Five Thousand Dollars ($25,000.00), shall be credited to the Final Purchase Price, pursuant to the Option to Purchase Property Agreement, signed by the appearing parties on February twenty seven (27), two thousand and eighteen (2018).------------------------------B) The difference of Three Hundred Twenty five Thousand Dollars ($325,000.00) is paid by the PURCHASER to SELLER by way of manager’s check along with the execution of this deed.------------------------------------------------------C) SELLER will pay the Notarial fee and the internal revenue stamps of the original deed of sale.-----------------------

 

3
 

 

---- FOURTH: Eviction - SELLER agrees to indemnify PURCHASER against eviction in the manner and to the extent required by the laws of the Commonwealth of Puerto Rico.--------------------------------------------------------------- FIFTH: The payment of all property taxes corresponding to the PROPERTY , including those accrued during the present tax semester, shall be prorated between SELLER and PURCHASER in the following manner: The ones corresponding the Property up to this date will be paid by SELLER and from this date on by the PURCHASER.---------------------------------------------- SIXTH: The execution of this deed is equivalent to the delivery of the possession of the PROPERTY to PURCHASER.----------------------------------------------------------- SEVENTH: The subscribing Notary made the appearing parties the corresponding legal warnings including but not limited to:----------------------------------------

 

---(A)The subscribing Notary hereby advised the appearing parties of the necessity of obtaining a debt certification from Centro de Recaudaciones de Ingresos Municipales (CRIM) prior to the execution of this deed. The appearing parties obtained said certification. Further, the subscribing Notary hereby advises the appearing parties of the necessity of transferring the ownership of the property in favor of the PURCHASER at the Centro de Recaudación de Ingresos Municipales (CRIM).----------

 

---(B) The subscribing Notary Public Hereby advises the PURCHASER of any proprietary interest in any residential property built before the year one thousand nine hundred seventy eighth (1978) that it is hereby duly notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems and impaired memory. Lead poisoning also poses a particular risk to pregnant women. Under section 1018 of Title X, the Residential Lead-Based Paint Hazard Reduction Act of 1992, 42 U.S.C. Section 485d, the seller of any interest in residential property is required to provide the buyer with any information on lead-based paint hazards from risk assessments or inspections in the seller’s possession and notify the buyer of any known lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase. The PURCHASER and SELLER hereby acknowledge that the Authorizing Notary Public has informed them of their rights under the aforementioned federal law, and therefore release her from responsibility on that related to the disclosure requirement on lead-based paint.--------------------------------------------------------------(C) If the PROPERTY shall be found to be located on an area subject to floods any owner and/or occupant, present and future of the same is bound by law to observe and comply with the requirements and dispositions of the Rules and Regulations Regulating Zones Prone to Flooding, under the warning that if said dispositions are not complied with it will result in an illegal act under Section Three (3) of Law Number Eleven (11) of March eight (8) one thousand nine hundred eighty eight (1988), regarding Flood Zones (23 L.P.R.A. Sec. 225 g). The appearing parties hereby recognize and become bound to the truthful compliance of said regulation in the event that they are applied to either one.------------------------------------------------------------------------(D) The obligation of SELLER of including any gain obtained from this sale in its income tax return for the current year, for which it must and comply with the fiscal obligation imposed by law. The subscribing Notary warned SELLER of the convenience of consulting the tax consequences of this sale with its accountant or equivalent professional.-----------------------------------------------(E) Of the convenience of presenting this Deed in the Property Registry for its recordation thereon as soon as possible, and that its failure to record the deed does not affect third parties, for which it is recommended that the PURCHASER obtains at its own cost the corresponding stamps which price was notified by the subscribing attorney.------------------------------------------------------------------(F) I, the Notary, have warned the parties that on March nine (9) of two thousand and nine (2009) Law Number 7 was approved, which is a special law known as “Ley Especial Declarando Estado de Emergencia Fiscal y Establecimiento Plan Integral de Estabilización Fiscal para Salvar el Crédito de Puerto Rico”, as amended by Law Number 37 of July ten (10) of two thousand and nine (2009). This law created a new subtitle “cc” to the Internal Revenue Code of Puerto Rico of 1994, Law Number 120 of October thirty first (31), of one thousand ninety ninety four (1994). This law establishes an additional real estate contribution (tax) of point five hundred ninety one percent (.591%) over the contribution (taxa) determined by the the Municipal Revenue Collection Center (CRIM). It also authorizes to increase the appraisal value of every real estate property already appraised by the Municipal Revenue Collection Center (CRIM), by a factor of ten (10). The Municipal Revenue Collection Center (CRIM), has prepared a new list of values for its registered properties to be used as a base to determine the new contributions (taxes). Any real estate property used as the principal residence of its owner and that its value for the Municipal Revenue Collection Center (CRIM), is under One Hundred Fifty Thousand Dollars ($150,000.00) will be exempt from this contributions (taxes). The new contribution (tax) creates a lien over the property equal to the CRIM’S lien that already exists. This special contribution (tax) will be paid to the order of Departamento de Hacienda de Puerto Rico on September and March, until June two thousand and twelve (2012) or until the government collects Six Hundred Ninety Million Dollars ($690,000,000), whichever comes first.---------------------------------------------------------------(G) The subscribing Notary hereby advises the appearing parties of the enactment of The Comprehensive Environmental Response Compensation and Liability Act (CERCLA) enacted on December eleven (11), of one thousand eighty (1980), which imposed a tax to chemical and petroleum industries in order to create a fund to clean contaminated places. It also establishes that the Federal Government has the authority to directly attend any leakage and/or threat of hazardous substances which could affect public health.-----------------

 

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----------------------------ACCEPTANCE---------------------------

 

---The appearing parties hereby accept, ratify, and confirm this deed as drafted.-----------------------------------------Such is the deed that the appearing parties hereby executed and to which terms they mutually bind themselves to stand for all times under the legal responsibilities arising therefrom according to law.------------I, the Notary, gave them the pertinent legal warnings. That the parties executed this document before me, the Notary, after waiving the right, to which I warned them, of having the presence of witnesses for this execution.----------I, the Notary, do hereby certify that this document was read by the appearing parties and that all of them signed the same, and wrote their initials on the margin of each page of this document, to all and everything before me, the Notary, and in my presence and as to all of which, as well as to all other matters contained in this deed, I, the Notary, do hereby ATTEST .---------------------------------------

 

5
 

 

--------------------------DEED OF SALE--------------------------------

 

-------------------------NUMBER THREE (3)---------------------------

 

---  In the city of San Juan, Puerto Rico, this May second (2), of two thousand eighteen (2018).

 

-------------------------------------

 

--------------------------------BEFORE ME ------------------------------

 

--- CAROLINA V. CABRERA BOU, Attorney and Notary Public in and for the Commontwealth of Puerto Rico, with offices at Carolina and residence in Guaynabo, Puerto Rico.-

 

-----------------------------------APPEAR---------------------------------

 

---AS PARTY OF THE FIRST PART: MC LEARY 51, INC., a for profit corporation duly registered in the Commonwealth of Puerto Rico, with registry number one seven one eight seven one (171871), and main offices in Guaynabo, Puerto Rico, represented in this act by its designated agent, MR. ROBERTO ROCA BUIGAS, of legal age, married, businessman, and resident of San Juan, Puerto Rico, whose faculty to appear in this act in representation of MC LEARY 51, INC., is evidenced by a Certificate of Corporate Resolution, which was sworn and suscribed by Roberto Roca Buigas, secretary of MC LEARY 51, INC., on May two (2), two thousand and eighteen (2018), before notary public Carolina V. Cabrera Bou, through affidavit number two hundred eleven (211), whom I have identified with Driver’s License number one, seven, three, four, three, two, two (1734322) issued by the Department of Transportation and Public Works (Departamento de Transportación y Obras Públicas) of the Commonwealth of Puerto Rico, which contains his photograph and signature (from hereinafter referred to as “THE SELLER”).---------------------------------------- ---AS PARTY OF THE SECOND PART: ANDALUCIA 511, LLC, a Limited Liability Company duly registered in the Commonwealth of Puerto Rico, with register number four zero six seven three zero (406730), who is a wholly owned subsidiary of GREEN SPIRIT INDUSTRIES, INC., a Nevada Corporation, represented in this act by its Designated Agent, MR. CHRISTIAN RICHARD BRIGGS, of legal age, married, entrepreneur and resident of Carolina, Puerto Rico, whose faculty to appear in this act in representation of ANDALUCIA 511, LLC, is evidenced by a Corporate Resolution, which was duly signed by the Chief Executive Officer of GREEN SPIRIT INDUSTRIES, INC., sole member of ANDALUCIA 511, LLC, MR. LESLIE BALL, on May two (2), two thousand and eighteen (2018), whom I have identified with Driver’s License number, six, nine, one, zero, one, eight, one (6910181) issued by the Department of Transportation and Public Works (Departamento de Transportación y Obras Públicas) of the Commonwealth of Puerto Rico, which contains his photograph and signature (hereinafter referred to as “THE PURCHASER”). The appearing parties consent to the execution of the present document without having the afore-mentioned Corporate Resolution notarized at this particular time.-------------------------------------------------------------

 

1
 

 

--- I, the Notary, attest that through their statements and my believe, I also attest as to their age, civil status, occupation and residence. They assure me that they have the legal capacity necessary fot this act, and for the purpose they freely:--------------------------------------------------------------------------- FIRST : Title – That SELLER is the owner in fee simple and full dominion title of the following real property described in the Spanish Languahe as follow, (hereinafter refered to as the “PROPERTY”).-------------------------------------------------------

 

--- URBANA : Solar marcado con el número cincuenta y uno (51) de la Calle McLeary en la sección Norte del Barrio de Santurce, de esta ciudad, con un área superficial de quinientos veinticinco punto veintiocho (525.28) metros cuadrados, en colindancia por el frente, que es su NORTE; en una extensión de veintitrés punto cuarenta y cinco (23.45) metros, con la Calle McLeary; por el fondo, que es su SUR; veintiseis punto cero ocho (28.08) metros, con Alberto Frasqueri Rosa y Alejandrina Galiñanes; por el ESTE; en veintidos punto cero nueve (22.09) metros, con Wnceslao Borda; y por el OESTE; en veinte punto cero dos (22.02) metros con la Calle Los Baños.-----------------------------

 

---Enclava una casa de concreto armado, techada de concreto, de dos plantas.-----------------------------------------------

 

---Parcel number thriteen thousand nine hundred and six (13,906) recorded at page number one hundred fifty two (152), volume three hundred sixty eight (368) of Santurce Norte, Property Registry Section I of San Juan.

 

---The PROPERTY is identified by the Municipal Revenue Collection Center (CRIM) number 041-041-181-01-001--------

 

-------------------TITLE AND ENCUMBRANCES---------------

 

--- The property was purchased by seller as per deed twelve (12) executed on May fourteen (14), of two thousand and seven (2007), before notary public Luis Alberto Molero Rabassa, recorded at page two hundred and four (204), of volume one thousand one hundred and twenty three (1123) of Santurce Norte, parcel number thirteen thousand nine hundred and six (13,906) of Santurce Norte, Property Registry of San Juan I Section.----The Property is encumbered with the following mortgages:---------------------------------------------------------------First Mortgage in favor of EUROBANK is a mortgage note in the principal amount of Seven Hundred Sixty five Thousand Dollars ($765,000.00) with an annual interest at twelve percent (12%) due upon presentation, as per deed number one hundred and sixty five (165), executed in San Juan, on August twenty two (22), of two thousand and five (2005) before Notary Public Nelson William González Rosario recorded at page two hundred and four (204) of volume one thousand one hundred twenty three (1123) parcel number thirteen thousand nine hundred and six (13,906) of Santurce Norte, Property Registry of San Juan I Section.-------------------------------------------------

 

---The First Mortgage is cancelled as per deed number eighteen (18) executed in San Juan on May eleven (11) of two thousand and seven (2007) before Notary Public Gavino J. Rivera Ramos recorded at page number two hundred and four (204) of volume one thousand one hundred and twenty three (1123) parcel number thirteen thousand nine hundred and six (13,906) of Santurce Norte, Property Registry of San Juan I Section.-----------------Second Mortgage in favor of SANTANDER PUERTO RICO is mortgage note in the principal amount of Seven Hundred Thousand Dollars ($700,000.00) with an annual interest at twelve percent (12%), due upon presentation, as per deed number twenty (20) executed in San Juan, on May fourteen (14), of two thousand and seven (2007) before notary public Juan Agustín Rivero, recorded at page number two hundred and four (204) of volume one thousand one hundred and twenty three (1123), parcel number thirteen thousand nine hundred and six (13,906) of Santurce Norte, Property Registry of San Juan I Section.-------------------------------------------------------------------The second mortgage note in favor of SANTANDER PUERTO RICO was cancelled through deed number three (3), executed on May second (2), of two thousand eighteen (2018), before Notary Public Luis Alberto Molero Rabassa. Said deed will be presented at the Registry of the Property.----------------------------------------------------------

 

2
 

 

---The appearing parties acknowledge having received a copy of a recent title search dated April twelve (12) of two thousand eighteen (2018), prepared by Magda García Cortés, which among other things includes, the registration status of the PROPERTY, and the liens and encumbrances over the Property as of this date.---------------I the Notary, do hereby CERTIFY that I have advised the appearing parties (i) that the Property is described and the liens and encumbrances are listed herein as reflected by certain title search and report prepared by an independent third party and not by the undersigned Notary; (ii) that this deed must be recorded in the appropriate Property Registry; (iii) of the possibility of intervening documents affecting title being presented for recordation prior to the execution and/or presentation of this deed in the Real Property Registry and of the preference or seniority that said intervening liens and/or encumbrances may gain by such prior execution or earlier presentation; (iv) of the desirability of verifying the status of liens and encumbrances on the property as may appear from the Property Registry on this day and of the adverse consequence which may result from the failure to do so; (v) of the possible existence and pendency of additional unrecorded statutory liens and real property taxes including the statutory preferred legal mortgage in favor of the Commonwealth of Puerto Rico); and (vi) that if any of the Mortgaged Properties is located in a flood zone, the owner or user of such property shall observe and comply with the requirements and provisions of the Flood Prone Zone Regulation of the Planning Board of the Commonwealth of Puerto Rico.-----------------------------

 

---After being so advised the appearing parties execute this deed of sale relying in the title search report stated above and in the appearing party’s representation and acknowledgment that the title search report is correct and that there are no liens or encumbrances over the Real Property, other than those stated above, if any.-------------

 

------------------------------------SALE----------------------------------------SECOND:  The SELLER and the PURCHASER express that they have agreed the sale and purchase of the property herein described in the FIRST clause of this deed, according to the following;------------------------------------------------------------------------------------- TERMS AND CONDITIONS---------------------THIRD: The SELLER hereby sells, transfers and conveys to the PURCHASER, and the PURCHASER purchases from the SELLER, the property herein described in the FIRST paragraph of this deed with all its rights, improvements, easements, servitude, privileges and appurtenances without reservation or limitation whatsoever. By this deed, without the necessity of further act or deed, the SELLER hereby delivers possession to the PURCHASER for and in consideration of the sum of Eight Hundred Thousand Dollars ($800,000.00), which is paid by the PURCHASER to the SELLER in the following manner ---------------------------------------A) The sum of Twenty Five Thousand Dollars ($25,000.00), shall be credited to the Final Purchase Price, pursuant to the Option to Purchase Property Agreement, signed by the appearing parties on February twenty seven (27), two thousand and eighteen (2018).------------------------------B) The difference of Sen Hundred Seventy Five Thousand Dollars ($775,000.00) is paid by the PURCHASER to SELLER by way of manager’s check along with the execution of this deed.------------------------------------------------------ C) PURCHASER will pay the Notarial fee and the internal revenue stamps of the original deed of sale.----------------------

 

3
 

 

--- FOURTH: Eviction - SELLER agrees to indemnify PURCHASER against eviction in the manner and to the extent required by the laws of the Commonwealth of Puerto Rico.-------------------------------------------------------------- FIFTH: The payment of all property taxes corresponding to the PROPERTY, including those accrued during the present tax semester, shall be prorated between SELLER and PURCHASER in the following manner: The ones corresponding the Property up to this date will be paid by SELLER and from this date on by the PURCHASER.---------------------------------------------- SIXTH: The execution of this deed is equivalent to the delivery of the possession of the PROPERTY to PURCHASER.----------------------------------------------------------- SEVENTH: The subscribing Notary made the appearing parties the corresponding legal warnings including but not limited to:----------------------------------------

 

---(A)The subscribing Notary hereby advised the appearing parties of the necessity of obtaining a debt certification from the Municipal Revenue Collection Center (CRIM), prior to the execution of this deed. The appearing parties obtained said certification. Further, the subscribing Notary hereby advises the appearing parties of the necessity of transferring the ownership of the property in favor of the PURCHASER at the Municipal Revenue Collection Center (CRIM).------------------------------(B) The subscribing Notary Public Hereby advises the PURCHASER of any proprietary interest in any residential property built before the year one thousand nine hundred seventy eighth (1978) that it is hereby duly notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems and impaired memory. Lead poisoning also poses a particular risk to pregnant women. Under section 1018 of Title X, the Residential Lead-Based Paint Hazard Reduction Act of 1992, 42 U.S.C. Section 485d, the seller of any interest in residential property is required to provide the buyer with any information on lead-based paint hazards from risk assessments or inspections in the seller’s possession and notify the buyer of any known lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase. The PURCHASER and SELLER hereby acknowledge that the Authorizing Notary Public has informed them of their rights under the aforementioned federal law, and therefore release her from responsibility on that related to the disclosure requirement on lead-based paint.--------------------------------------------------------------(C) If the PROPERTY shall be found to be located on an area subject to floods any owner and/or occupant, present and future of the same is bound by law to observe and comply with the requirements and dispositions of the Rules and Regulations Regulating Zones Prone to Flooding, under the warning that if said dispositions are not complied with it will result in an illegal act under Section Three (3) of Law Number Eleven (11) of March eight (8) one thousand nine hundred eighty eight (1988), regarding Flood Zones (23 L.P.R.A. Sec. 225 g). The appearing parties hereby recognize and become bound to the truthful compliance of said regulation in the event that they are applied to either one.------------------------------------------------------------------------(D) The obligation of SELLER of including any gain obtained from this sale in its income tax return for the current year, for which it must and comply with the fiscal obligation imposed by law. The subscribing Notary warned SELLER of the convenience of consulting the tax consequences of this sale with its accountant or equivalent professional.-----------------------------------------------(E) Of the convenience of presenting this Deed in the Property Registry for its recordation thereon as soon as possible, and that its failure to record the deed does not affect third parties, for which it is recommended that the PURCHASER obtains at its own cost the corresponding stamps which price was notified by the subscribing attorney.------------------------------------------------------------------(F) I, the Notary, have warned the parties that on March nine (9) of two thousand and nine (2009) Law Number 7 was approved, which is a special law known as “Ley Especial Declarando Estado de Emergencia Fiscal y Establecimiento Plan Integral de Estabilización Fiscal para Salvar el Crédito de Puerto Rico”, as amended by Law Number 37 of July ten (10) of two thousand and nine (2009). This law created a new subtitle “cc” to the Internal Revenue Code of Puerto Rico of 1994, Law Number 120 of October thirty first (31), of one thousand ninety ninety four (1994). This law establishes an additional real estate contribution (tax) of point five hundred ninety one percent (.591%) over the contribution (taxa) determined by the Municipal Revenue Collection Center (CRIM), it also authorizes to increase the appraisal value of every real estate property already appraised by the Municipal Revenue Collection Center (CRIM), by a factor of ten (10). The Municipal Revenue Collection Center (CRIM), has prepared a new list of values for its registered properties to be used as a base to determine the new contributions (taxes). Any real estate property used as the principal residence of its owner and that its value for the Municipal Revenue Collection Center (CRIM), is under One Hundred Fifty Thousand Dollars ($150,000.00) will be exempt from this contributions (taxes). The new contribution (tax) creates a lien over the property equal to the CRIM’S lien that already exists. This special contribution (tax) will be paid to the order of Departamento de Hacienda de Puerto Rico on September and March, until June two thousand and twelve (2012) or until the government collects Six Hundred Ninety Million Dollars ($690,000,000), whichever comes first.---------------------------------------------------------------(G) The subscribing Notary hereby advises the appearing parties of the enactment of The Comprehensive Environmental Response Compensation and Liability Act (CERCLA) enacted on December eleven (11), of one thousand eighty (1980), which imposed a tax to chemical and petroleum industries in order to create a fund to clean contaminated places. It also establishes that the Federal Government has the authority to directly attend any leakage and/or threat of hazardous substances which could affect public health.-----------------

 

4
 

 

----------------------------ACCEPTANCE---------------------------

 

---The appearing parties hereby accept, ratify, and confirm this deed as drafted.-----------------------------------------Such is the deed that the appearing parties hereby executed and to which terms they mutually bind themselves to stand for all times under the legal responsibilities arising therefrom according to law.------------I, the Notary, gave them the pertinent legal warnings. That the parties executed this document before me, the Notary, after waiving the right, to which I warned them, of having the presence of witnesses for this execution.----------I, the Notary, do hereby certify that this document was read by the appearing parties and that all of them signed the same, and wrote their initials on the margin of each page of this document, to all and everything before me, the Notary, and in my presence and as to all of which, as well as to all other matters contained in this deed, I, the Notary, do hereby ATTEST .---------------------------------------.

 

5
 

 

 

ADDENDUM

 

BASIC SUBLEASE INFORMATION

 

THIS SHEET IS AN “ADDENDUM” TO THE SUBLEASE AGREEMENT BETWEEN CPLEX, LLC AND SUNSET CONNECT OAKLAND, LLC DATED MAY 1, 2018 FOR THE SUBLEASED PREMISES KNOWN AS 685 85 TH AVENUE, SUITE V, OAKLAND, CALIFORNIA 94621.

 

Sublandlord:

CPlex, LLC, a California limited liability company

 
     

Subtenant:

 

Sunset Connect Oakland, LLC,

a California limited liability company

 

 

   

Sublease Reference

     
Address of Subleased Premises:

685 85th Avenue, Suite V

Oakland, CA 94621, as shown on Exhibit B

Paragraph 2
     
Area of Subleased Premises: Approximately 25,000 useable square feet identified as Suite V and designated as such on the floor diagram attached hereto as Exhibit B . Paragraph 2
     
Term: 5 years from the Commencement Date, unless the term expires earlier according to the terms in the Expiration Date set forth below. Tenant shall have the option to renew for an additional 2 years and 11 months, with the additional period terminating on March 30, 2026. Paragraph 5
     
Commencement Date: May 1, 2018. Paragraph 5
     
Expiration Date: Five years from the commencement date. Paragraph 5

 

  i  
 

 

Monthly Rent Schedule: Date Range : Monthly Rent Paragraph 7
  5/1/18 – 4/30/19: $56,250.00 NNN  
  5/1/19 – 4/30/20: $58,500.00 NNN  
  5/1/20 – 4/30/21: $60,840.00 NNN  
  5/1/21 –4/30/22: $63,273.60 NNN  
  5/1/22 – 4/30/23: $65,804.54 NNN  

 

Subtenant’s Percentage Share:

31.25% of the total usable square footage in the Premises

(25,000 ÷ 80,000 usf = 31.25%)

Paragraph 8(a)
     
Agreed Use: For the operation of a cannabis cultivation and manufacturing facility, including all activities related to California cannabis license types 1 through 6. Subtenant will comply with applicable state and local law and may operate under temporary permits and licenses. No other use is permitted. Paragraph 9
     
Security Deposit: $112,500.00. Paragraph 10
     
Advance Rent: Subtenant shall pay the first three months’ rent in advance, in the amount of $168,750.00. Paragraph 10
     
Sublandlord’s Address for Notices:

CPlex, LLC

Attention: Scott Bonagofsky

691 85 th Avenue, Oakland, CA 94621

Paragraph 18
     
Subtenant’s Address for Notices

Michael Dillingham

Sunset Connect Oakland, LLC

570 Bryant Street

San Francisco, CA 94107

Paragraph 18

 

Exhibit(s):

Exhibit A

Master Lease Paragraph 27
       
  Exhibit B Diagram of Subleased Premises  

 

References to provisions of the Sublease identified above in the margin are those provisions where references to particular Basic Sublease Information appear, and each such reference shall incorporate the applicable Basic Sublease Information. In the event of any conflict between any Basic Sublease Information and the Sublease, the latter shall control.

 

  ii  
 

 

IN WITNESS WHEREOF, this Basic Sublease Information is executed as of the date of the Sublease set forth above.

 

SUBLANDLORD:

SUBTENANT:

   
CPLEX, LLC, a California limited liability company SUNSET CONNECT OAKLAND, LLC, a California limited liability company

 

By:

   

By:

 

 

Scott Bonagofsky  

 

 
  Chief Executive Officer and Manager of CPLEX, LLC   Name: Tom Gingerich
         
      Title: Chief Financial Officer
        Sunset Connect Oakland, LLC
        Co-Manager of Subtenant

 

CONSENT TO SUBLEASE    
     
I hereby consent to this sublease.    
     
     
Kenneth W. Morris    
Trustee under Revocable Trust Agreement dated April 10, 1986    
Master Lessor    
     
     
Scott Bonagofsky, Master Lessee    
     
     
Robert Larabee, Master Lessee    

 

  iii  
 

 

SUBLEASE

 

THIS SUBLEASE (this “Sublease”) is entered into as of the date of the Sublease specified in the Basic Sublease Information, by and between CPLEX, LLC, a California limited liability company (“CPLEX” or “Sublandlord”), SUNSET CONNECT OAKLAND, LLC, a California limited liability company (“Subtenant”).

 

RECITALS

 

A. Pursuant to that certain AIR Commercial Real Estate Association Standard Industrial/Commercial Multi-Tenant Lease-Net, dated March 28, 2016, amended and restated as of August 9, 2016 (the “Master Lease”), by and between Kenneth W. Morris, Trustee under Revocable Trust Agreement dated April 10, 1986, as Lessor (the “Master Lessor”), and CPLEX, as Lessee, Master Lessor leased to CPLEX and CPLEX leased from Master Lessor certain premises consisting of approximately 106,500 rentable square feet of the ground floor of a commercial warehouse building, of which 80,000 is usable square feet, located at the record address of 685 85th Avenue, Oakland, California (the “Premises”), which Premises are more particularly described in the Master Lease, a redacted copy of which is attached hereto as Exhibit A , and the terms of which are incorporated herein.

 

B. CPLEX desires to sublease approximately 25,000 usable square feet of the Premises identified as Suite V and designated as such on the floor diagram of the Premises attached hereto as Exhibit B (the “Subleased Premises”) to Subtenant, Subtenant desires to sublease the Subleased Premises from CPLEX.

 

NOW THEREFORE, the parties agree as follows:

 

1. RECITALS; CAPITALIZED TERMS . The recitals set forth above are integral parts of this Sublease and shall be deemed to be a part hereof. Unless otherwise expressly provided herein, capitalized terms which are used in this Sublease shall have the same meanings given to them in the Master Lease.

 

2. SUBLEASED PREMISES . CPLEX shall sublease to Subtenant and Subtenant shall sublease from CPLEX the Subleased Premises.

 

3. CONDITION OF SUBLEASED PREMISES . Subtenant acknowledges that it has inspected the Subleased Premises and is thoroughly familiar with its condition. Subtenant accepts the Subleased Premises in its “as is” condition, with all faults and flaws, and acknowledges that neither Sublandlord nor any of its agents has made any representations or warranties regarding the condition of the Subleased Premises or their suitability for Subtenant’s intended use. The Subleased Premises will be delivered to Subtenant on the Commencement Date with construction of improvements in the Premises under way by CPLEX. Sublandlord shall not be obligated to provide any monetary contribution to Subtenant to improve the Subleased Premises. Any alteration work necessary for Subtenant’s occupancy of the Subleased Premises will require the written consent of Sublandlord prior to the commencement of any work, which shall not be unreasonably withheld. Sublandlord shall provide consent for any improvements reasonably necessary for commercial cannabis permit and licensure of the types listed more fully described in Paragraph 9 of this Sublease.

 

Page 1 of 10
 

 

4. MASTER LEASE . Except as otherwise expressly provided in, or otherwise inconsistent with, this Sublease, all provisions of the Master Lease, a copy of which is attached hereto as Exhibit A , are hereby incorporated in this Sublease by reference with the same force and effect as if set forth at length herein, specifically excluding, however the following provisions of the Master Lease: Master Lease Paragraphs 1.1, 1.2(a), 1.2(b), 1.3, 1.4, 1.5, 1.6, 1.7, 1.10(a) and (b), 1.11, 2.1. 2.2, 2.4, 2.5, 3.1, 3.2, 4.1, 12, 15, 23, 25, 26, 31, 37 and 50, Guaranty of Lease, and Addendum to Lease Paragraphs 52, 53 and 54. Each reference in the incorporated provisions of the Master Lease to “Lessor” and “Lessee” shall be deemed to refer to Sublandlord and Subtenant, respectively. Subject to the foregoing, Subtenant assumes and agrees to perform each and every obligation and to comply with each and every covenant of Sublandlord, as Lessee, under the Master Lease, except as to payment obligations, which Sublandlord agrees to pay. Subtenant shall not commit, or permit to be committed, any act or omission which will violate any term or condition of this Sublease which is applicable to the Subleased Premises, and shall indemnify, defend, protect and hold Sublandlord harmless against any and all loss, cost, expense, liability, claim, judgment, demand or cause of action arising from any such violation committed or permitted to be committed by Subtenant (except to the extent caused by Sublandlord or arising from acts or omissions of third parties prior to delivery of the Subleased Premises to Subtenant), which indemnity obligation shall survive the termination of this Sublease.

 

The Master Lease includes express representations made by Master Lessor and describes Master Lessor’s duties in connection with the operation of the Subleased Premises.

 

5. TERM . The term of this Sublease shall be for a period of five (5) years (the “Term”), commencing May 1, 2018 (the “Commencement Date”). The Term shall expire five (5) years from the Commencement Date (the “Expiration Date”). Subtenant shall have the option to renew this Sublease for an additional period of two (2) years and eleven (11) months commencing upon the Expiration Date, which additional period shall terminate on March 30, 2026 (the Expiration Date of the Master Lease).

 

This Sublease shall terminate before the Expiration Date if: (1) either the City of Oakland or the State of California denies, suspends or revokes any license or permit for Subtenant’s cannabis activities; or (2) Subtenant conducts any cannabis activities, other than as set forth in Paragraph 9 , on the Subleased Premises. Either party may enforce these termination provisions by providing notice to the other party. Subtenant shall have thirty (30) days from service of notice to cure, challenge, or accept termination. If Subtenant terminates this Sublease per this Paragraph 5 , Sublandlord shall have the option to retain the Security Deposit, or any portion thereof, as more fully described in Paragraph 10 herein.

 

Page 2 of 10
 

 

Sublandlord and Subtenant acknowledge that aspects of Subtenant’s business operations may be contrary to current federal law. In the event Sublandlord or Subtenant become the object of any enforcement action, or if any government agency requires Subtenant to cease operations permanently or indefinitely, Sublandlord or Subtenant may elect to terminate this Sublease before the Expiration Date and any extension thereof. This provision is not intended to trigger upon minor compliance violations, daily operational business matters, or other routine local and state compliance matters that are civil in nature.

 

6. EARLY ACCESS . NOT APPLICABLE.

 

7. MONTHLY RENT .

 

(a) Subtenant shall pay as monthly rent (the “Monthly Rent”) for the Subleased Premises, in advance on the first day of each month, commencing on the Commencement Date and continuing through the Expiration Date the following amounts for the following periods:

 

  Period Amount
     
  5/1/18 – 4/30/19: $56,250.00 NNN
  5/1/19 – 4/30/20: $58,500.00 NNN
  5/1/20 – 4/30/21: $60,840.00 NNN
  5/1/21 – 4/30/22: $63,273.60 NNN
  5/1/22 – 4/30/23: $65,804.54 NNN

 

Subtenant acknowledges and agrees this is a net Sublease, and the Monthly Rent set forth herein is intended to be payable to Sublandlord net of all costs and expenses billed to Sublandlord by Master Lessor. Monthly Rent shall be paid without deduction, offset, prior notice or demand, in lawful money of the United States of America. If the Term commences on a day other than the first (1st) day of a calendar month or ends on a day other than the last day of a calendar month, a prorated monthly installment shall be paid at the then current rate for the fractional month during which the Term commences and/or terminates. All Monthly Rent shall be paid to Sublandlord at Sublandlord’s Address for Notices specified in the Basic Sublease Information Addendum or at such other place as Sublandlord may from time to time designate in writing.

 

Page 3 of 10
 

 

(b) At the time Subtenant delivers this signed Sublease to Sublandlord, Subtenant shall pay to Sublandlord the amount specified in the Basic Sublease Information Addendum for Monthly Rent due under the Sublease for the first (1st) month of the Term and the Security Deposit.

 

8. ADDITIONAL RENT FOR COMMON AREA OPERATING EXEPNSES .

 

(a) Beginning on the Commencement Date, within ten (10) days after receipt of an invoice therefor from time to time from Sublandlord, Subtenant shall pay to Sublandlord Subtenant’s Percentage Share of any and all Common Area Operating Expenses, as defined in the Master Lease, which are billed to Sublandlord, which Common Area Operating Expenses shall also include charges relating to security, alarms and monitoring for the entire premises or any portion thereof including but not limited to common areas, which are paid by Sublandlord. “Subtenant’s Percentage Share” means 31.25%, calculated taking 25,000 useable square feet of the Subleased Premises and dividing that number by 80,000 usable square feet of the Premises.

 

(b) The estimated Common Area Operating Expenses will be reconciled against actual amounts within sixty (60) days after Sublandlord receives the actual amounts, and the party owing the difference will pay it to the other party within twenty (20) days after reconciliation and such reconciliations shall be based upon the actual statements received by Sublandlord. Sublandlord will provide Subtenant with access to invoices and documentation of Common Area Operating Expenses to verify the accuracy of amounts charged to Subtenant. Subtenant’s Percentage Share of Common Area Operating Expenses payable under this Paragraph 8(b) shall be paid to Sublandlord at the same address for payment of Monthly Rent. If the Term ends on a date other than the last day of a calendar year, then Subtenant’s Percentage Share of Common Area Operating Expenses shall be prorated accordingly on the basis of a 365-day year. The reconciliation obligations set forth in this Paragraph 8(b) shall survive the expiration or termination of this Sublease.

 

(c) Within a reasonable time, and in compliance with local and state ordinances and regulations, Sublandlord shall engage an architect to remeasure the areas identified as useable square feet and rentable square feet. In the event the remeasurement is not completed prior to the mutual execution and delivery of the Lease, Sublandlord and Subtenant shall agree that the square footage stated in Paragraph 1.2(a) shall be used to identify the Premises to be subleased by Subtenant (the “Preliminary Premises”). Once the re-measurement is completed, the parties shall execute an amendment to this Sublease, and any amounts, percentages and figures appearing or referred to in this Sublease which are based upon the square footage of the Subleased Premises, (including, without limitation, the amount of the Monthly Rent, Subtenant’s Share of Common Area Operating Expenses) shall be modified in accordance with such determination, if necessary.

 

Page 4 of 10
 

 

9. AGREED USE. Subtenant shall use the Subleased Premises only for the operation of a cannabis cultivation and manufacturing facility, including all activities related to California cannabis license types 1 through 6 as defined by California and effective on the Commencement Date of this Sublease. Subtenant will comply with applicable state and local law and may operate under temporary permits and licenses. Sublandlord and Subtenant acknowledge that aspects of Subtenant’s business operations may be contrary to current federal law. No other use is permitted, without first obtaining the consent in writing of Sublandlord.

 

10. SECURITY DEPOSIT; ADVANCE RENT.

 

(a) As security for the full and faithful performance of every provision of this Sublease to be performed by Subtenant, Subtenant shall pay to Sublandlord, at the time Subtenant delivers to Sublandlord this signed Sublease, an amount equal to two (2) months of Monthly Rent, or $112,500.00 (the “Security Deposit”). Subtenant shall also pay the first three (3) months of Monthly Rent in advance, totaling $168,750.00, due upon the execution of this Sublease. If Subtenant defaults with respect to any provision of this Sublease, including, but not limited to, the provisions relating to the payment of Monthly Rent, Sublandlord may use, apply or retain all or any part of the Security Deposit for the payment of any rent and any other sum in default, or for the payment of any other amount which Sublandlord may spend or become obligated to spend by reason of Subtenant’s default. If any portion of the Security Deposit is so used or applied, Subtenant shall, within ten (10) business days after written demand therefor, deposit cash with Sublandlord in an amount sufficient to restore the Security Deposit to its original amount, and Subtenant’s failure to do so shall be a material breach of this Sublease. Sublandlord shall not be required to keep the Security Deposit separate from its general funds, and Subtenant shall not be entitled to interest on the Security Deposit. Nothing herein shall be construed to limit the amount of damages recoverable by Sublandlord or any other remedy to the Security Deposit. Subtenant waives the protections of California Civil Code Section 1950.7 (which restricts application of a security deposit only to those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Subtenant, or to clean the Subleased Premises) and all similar laws now in force or subsequently adopted which restrict application of security deposits to specific purposes.

 

(b) The Security Deposit, or so much thereof as has not theretofore been applied by Sublandlord as permitted by this Paragraph 10 , shall be returned, without payment of interest or other increment for its use, to Subtenant, within thirty (30) days after the later of (i) the Expiration Date or earlier termination of the Term as provided herein, or (ii) the date on which Subtenant has vacated the Subleased Premises. Sublandlord’s return of the Security Deposit, or any part thereof, shall not be construed as an admission that Subtenant has performed all of their obligations under this Sublease. No trust relationship is created herein between Sublandlord and Subtenant with respect to the Security Deposit. If Sublandlord disposes of its interest in the Subleased Premises, Sublandlord may deliver or credit the Security Deposit to Sublandlord’s successor in interest in the Subleased Premises and the transferring Sublandlord shall thereupon be relieved of further responsibility with respect to the Security Deposit, provided such successor in interest assumes all of Sublandlord’s obligations under this Sublease, and Subtenant shall look solely to the successor of Sublandlord for any claims therefor.

 

Page 5 of 10
 

 

11. LATE CHARGE; INTEREST . If any Monthly Rent or Common Area Operating Expenses due hereunder is not received by Sublandlord when due and such failure continues for five (5) business days after the due date, Subtenant shall pay to Sublandlord a late charge equal to the greater of (a) $500 or (b) three percent (3%) of such overdue amount. The parties agree that such late charge represents a fair and reasonable estimate of the costs Sublandlord will incur by reason of late payment by Subtenant. In addition, every payment due hereunder from Subtenant to Sublandlord which is not paid within five (5) business days of the due date shall bear interest at ten percent (10%) per annum (the “Interest Rate”) from the date that the same became due and payable until paid.

 

12. DEFAULT .

 

(a) Events of Default . In addition to any other event specified in this Sublease or the Master Lease as a “Default”, the occurrence of any one or more of the following events (“Events of Default”) shall constitute a breach of this Sublease by Subtenant: (i) failure by Subtenant to pay Monthly Rent or any other sum when and as the same becomes due and payable and the continuance of such failure for five (5) business days following the due date; or (ii) failure by Subtenant to perform or observe any other obligations of Subtenant hereunder (other than the payment of Monthly Rent or other sums due hereunder) which continues after written notice identifying such breach, and any cure period provided under the Master Lease.

 

(b) Sublandlord’s Remedies . If an Event of Default occurs, Sublandlord shall be entitled to exercise against Subtenant all of the rights and remedies afforded to Master Lessor in the Master Lease with respect to breaches of the Master Lease by Sublandlord and Subtenant shall indemnify, defend, protect and hold Sublandlord harmless from all damages resulting from the default and shall reimburse Sublandlord for all fees reasonably incurred by Sublandlord in fulfilling Subtenant’s obligations, together with interest on such fees at the Interest Rate. All applicable grace and cure periods set forth in the Master Lease shall be applicable to any Default event.

 

13. ASSIGNMENT AND SUBLETTING . Subtenant has no right to assign this Sublease or further sublease the Subleased Premises. Any attempt by Subtenant to assign this Sublease or further sublet the Subleased Premises shall be void and shall constitute an incurable Event of Default by Subtenant.

 

Page 6 of 10
 

 

14. WAIVER OF LIABILITY . Sublandlord shall not be liable or responsible for, and Subtenant waives all claims against Sublandlord and its managers, members, principals, partners, officers, directors, agents and employees (collectively, the “Sublandlord Protected Parties”) with respect to or arising out of: any death of or injury to Subtenant or any other person, from any causes whatsoever (other than by reason of the gross negligence or willful misconduct of the Sublandlord Protected Parties); or for any loss of or damage to any property outside or within the Subleased Premises belonging to Subtenant or any other person, in each case occurring after the Commencement Date.

 

15. INDEMNITY . Subtenant shall indemnify, defend, protect and hold Sublandlord Protected Parties, Master Lessor and its respective agents and employees harmless and defend Sublandlord Protected Parties and Master Lessor, and its respective agents and employees from and against any and all losses, damages, claims, or liability for any damage to any property or injury, illness or death of any person occurring in or about the Subleased Premises arising after delivery of the Subleased Premises to Subtenant as a result of any acts or omissions of Subtenant arising at any time and from any cause whatsoever (other than (i) by reason of the gross negligence or willful misconduct of Sublandlord or its agents or employees or Master Lessor or its agents or employees, or (ii) arising from acts or omissions of third parties prior to delivery of the Subleased Premises to Subtenant) including, without limitation, claims, costs and liabilities, including reasonable attorneys’ fees and costs, arising out of or in connection with the removal, cleanup or abatement of any hazardous materials which may be in or about the Subleased Premises as a result of any act or omission of Subtenant, its employees, agents or contractors. The provisions of this Paragraph 15 shall survive the expiration or earlier termination of this Sublease.

 

16. INSURANCE .

 

(a) Liability Insurance . Subtenant, at its cost, shall maintain commercial general liability insurance, including contractual liability coverage insuring Subtenant’s indemnity obligations hereunder, with a minimum combined single limit of coverage of Two Million Dollars ($2,000,000.00) or, if required by Master Lessor, the limits required by the terms of the Master Lease, insuring against all liability of Subtenant, its agents, invitees, officers or employees arising out of or in connection with Subtenant’s use or occupancy of the Subleased Premises. The policy shall not eliminate cross-liability and shall contain a severability of interest clause.

 

(b) Subtenant’s Property Insurance . Subtenant, at its cost, shall maintain on all of its personal property in or about the Subleased Premises, a policy of standard fire and extended coverage insurance, with theft, vandalism and malicious mischief endorsements, for full replacement value. The proceeds from any such policy shall be used by Subtenant for the replacement of such personal property.

 

(c) Workers’ Compensation Insurance . Subtenant, at its cost, shall maintain workers’ compensation insurance as required by law.

 

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(d) Insurance Criteria . All the insurance required under this Sublease shall: (i) be issued by insurance companies authorized to do business in the State in which the Premises are located and which are reasonably satisfactory to Sublandlord and Master Lessor; (ii) be issued as a primary policy and not “excess over” or contributory with any other applicable insurance in force for or on behalf of Sublandlord and/or Master Lessor; (iii) name Sublandlord and Master Lessor as additional insureds, except with respect to worker’s compensation insurance; and (iv) specifically include the liability assumed hereunder by Subtenant (provided, however, that the amount of such insurance shall not be construed to limit the liability of Subtenant hereunder). A certificate for each policy, together with evidence of payment of premiums, shall be deposited with Sublandlord at the commencement of the Term, and on renewal of the policy not less than twenty (20) days before expiration of the term of the policy.

 

17. LOADING DOCK . NOT APPLICABLE.

 

18. NOTICES . All notices or demands shall be in writing and shall be given by personal service, certified or registered mail (which shall be deemed delivered three (3) business days after mailing, postage prepaid) or delivered by a reputable overnight air courier service which provides written evidence of delivery (which shall be deemed to be given on the next business day after delivery to the subject air courier service, prepaid). Notices shall be addressed to the addresses for Sublandlord and Subtenant as specified in the Basic Sublease Information Addendum. Either party may change its address for notices or demands by written notice delivered as described herein. Subtenant shall promptly after receipt thereof send to Sublandlord copies of all notices Subtenant receives from Master Lessor. For purposes of Sublandlord’s response to any request by Subtenant, all time periods in the Master Lease within which Master Lessor is required to act or respond shall be extended by ten (10) business days.

 

19. DAMAGE AND DESTRUCTION, EMINENT DOMAIN AND RELOCATION . If the Master Lease confers upon Sublandlord or Master Lessor the right to terminate the Master Lease in the event of damage, destruction, eminent domain or similar circumstances or to exercise the right to relocate Sublandlord, the exercise by Sublandlord or Master Lessor of such termination or relocation right shall not constitute a default or breach by Sublandlord hereunder.

 

20. BROKERS . Sublandlord has contracted with McKinney Advisory Group, Inc., for a commission of two percent (2%) of the base rent for the original term of this Sublease. This commission shall be borne entirely by Sublandlord. Sublandlord and Subtenant each represents that it has dealt with no other brokers in connection with this Sublease and each party shall indemnify, defend, protect and hold the other harmless from and against any and all claims, costs or liability arising out of or relating to a breach by Sublandlord or Subtenant of these representations. The terms of this Paragraph 20 shall survive the expiration or earlier termination of this Sublease.

 

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21. SIGNAGE . NOT APPLICABLE.

 

22. TIME PERIODS . Subject to Paragraph 7 above regarding the timing of payment of Monthly Rent, Subtenant shall perform all of its obligations hereunder at such times, by such dates or within such periods as shall be required to avoid any default under the Master Lease. In no event shall this Paragraph 22 extend or lessen the time, date or period by or within such Subtenant is required to perform except with respect to the time for payment of Monthly Rent which is governed by Paragraph 7 .

 

23. NO RIGHT TO HOLDOVER. Subtenant may not holdover in the Subleased Premises after the Expiration Date. Subtenant shall indemnify, defend, protect and hold Sublandlord harmless from and against any and all claims, liabilities, actions, losses, damages (including, without limitation, direct, indirect, incidental and consequential) and expenses (including, without limitation, court costs and reasonable attorneys’ fees) asserted against or sustained by Sublandlord arising from or by reason of Subtenant’s continued occupancy of the Subleased Premises after the Expiration Date. The terms of this Paragraph 23 shall survive the termination of this Sublease.

 

24. SEVERABILITY . If any provision of this Sublease or any term, paragraph, sentence, clause, phrase or word appearing herein be judicially or administratively held invalid or unenforceable for any reason, such holding shall not be deemed to affect, alter, modify or impair in any manner any other provision, term, paragraph, sentence, clause, phrase or word appearing herein.

 

25. ENTIRE AGREEMENT . This Sublease and the exhibits attached hereto constitute the sole and exclusive agreement between the parties with respect to the Subleased Premises. No amendment, modification of or supplements of this Sublease shall be effective unless in writing and executed by Sublandlord and Subtenant.

 

26. S URVIVAL . All indemnities contained in this Sublease shall survive the expiration or termination hereof.

 

27. EXHIBITS .

 

(a) Exhibit A attached hereto is incorporated by reference.

 

(b) Exhibit B attached hereto is incorporated by reference.

 

28. COUNTERPARTS AND FACSIMILE SIGNATURES . This Sublease may be executed in counterparts which when taken together shall constitute one fully executed original. Electronic, Facsimile, and PDF signatures via e-mail on this Sublease shall be treated and have the same effect as original signatures.

 

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IN WITNESS WHEREOF, this Sublease is executed as of the date of the Sublease set forth above.

 

SUBLANDLORD:

SUBTENANT:

   
CPLEX, LLC, a California limited liability company SUNSET CONNECT OAKLAND, LLC, a California limited liability company

 

By:    

By:

 
         

Name:

Scott Bonagofsky   Name: Tom Gingerich
         

Title:

Chief Executive Officer and Manager of CPLEX, LLC  

Title:

Chief Financial Officer

        Sunset Connect Oakland, LLC
        Co-Manager of Subtenant

 

CONSENT TO SUBLEASE  
   
I hereby consent to this Sublease.  
   
   
Kenneth W. Morris  
Trustee under Revocable Trust Agreement dated April 10, 1986  
Master Lessor  
   
   
Scott Bonagofsky, Master Lessee  
   
   
Robert Larabee, Master Lessee  

 

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