Exhibit 10.13

 

COMMERCIAL SUBLEASE AGREEMENT

 

THIS COMMERCIAL SUBLEASE AGREEMENT (the "Commercial Sublease Agreement" or
"Sublease"), made on this 14th day of August 2014 by and between Diego Pellicer
Worldwide Inc. a Delaware Corporation, having an address at 3496 Fairview Way,
West Linn, OR 97068 ("Sublessor") and DPCO, Inc a Colorado Corporation, having
an address at 1 South Harrison Street, Denver, CO 80209 ("Sublessee").

 

WHEREAS, on the 14th day of August, 2014, Sublessor has entered into a
commercial lease agreement with the Landlord (2949 W. Alameda Ave. LLC) for a
period starting from August 1, 2014 and ending on July 31, 2019 (the "Master
Lease"). A copy of the Master Lease Agreement is attached hereto; and

 

WHEREAS, Sublessee and Sublessor wish to enter into this Commercial sublease
Agreement, where under the Sublessor will sublease the Premises to Sublessee.

 

Premises:

 

Subject to the terms and conditions of this Agreement, Sublessor hereby
subleases to Sublessee, and Sublessee hereby subleases from Sublessor, the
following Premises:

 

●Building and property addressed as 2949 W Alameda Ave, Denver, CO 80219 and
described as a +/- 3,300 square foot retail structure, (the "Premises").

 

Term:

 

The term of this Commercial sublease shall commence on the 14th day of August,
2014 and shall continue until the July 31, 2019.

 

Sublease:

 

This Commercial Sublease Agreement will be subject to the remaining terms and
conditions contained in the Master Lease. In such an event, the terms of this
Commercial Sublease Agreement shall control over the Master Lease. The Sublessee
hereby fully agrees acknowledges and agrees to perform all of the Sublessor's
duties and obligations under the Master Lease.

 

Rent*:

 

For the term of this Agreement, the Sublessee shall pay to Sublessor the base
rental of $26,300 per month plus NNN charges. The monthly payment shall be due
in advance on the first day of each calendar month at the following address 3496
Fairview Way, West Linn, OR 97068, or at such other place designated by written
notice from Sublessor.

 

*Additional NNN Rent: Property and personal property taxes, building casualty
and personal property insurance, and wastewater taxes are due each month as
additional rent to Sublessor.

 

 

 

 

Late Charges:

 

Any rent payment not made by the fifth day of the month shall be considered
overdue and in addition to Sublessor's other remedies, Sublessor may levy a late
payment charge equal to five percent (5%) per month on any overdue amount.

 

Rent Payments and Security Deposit:

 

Prior to taking possession of the Premises, Sublessee shall pay first month's
rent, the last two months' rent, and a one month security deposit in the amount
of $100,000 (One Hundred Thousand Dollars) for the full and faithful performance
by the Sublessee of all the terms of this Commercial Sublease. The security
deposit will be refunded to Sublessee after the expiration of this sublease,
provided the Sublessee has fully and faithfully carried out all of its
obligations under this Agreement.

 

Sublessor agrees to notify Sublessee in writing on any notices received by
Sublessor from landlord, including but not limited to a breach of Master Lease.
Sublessor agrees that Sublessee has the right to cure said breach, and offset
the cost of said cure from payments due Sublessor.

Utilities:

 

Sublessee shall pay directly for all utilities, services and charges provided to
the premises, including any and all deposits required.

 

Parking Space:

 

Sublessee is assigned parking as follows: all on Property

 

Use:

 

If consistent with City of Denver zoning requirements, Sublessee shall use the
premises for licensed medical/retail marijuana sales, and for no other purpose
without Sublessor's prior written consent. Notwithstanding the forgoing,
Sublessee shall not use the Premises for the purposes of storing, manufacturing
or selling any explosives, flammables or other inherently dangerous substance,
chemical, thing or device.

 

Quiet Enjoyment:

 

Sublessor covenants and warrants that upon performance by Sublessee of its
obligations hereunder, Sublessor will keep and maintain Lessee in exclusive,
quiet, peaceable and undisturbed and uninterrupted possession of the Premises
during the term of this sublease.

 

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Repairs:

 

Sublessee shall at its own expenses make all necessary repairs to the Premises.
Such repairs shall include routine repairs of floors, walls, ceilings, and other
parts of the Premises damaged or worn through normal occupancy, except for major
mechanical systems or the roof, subject to the obligations of the parties
otherwise set forth in this Sublease.

 

Default and Termination:

 

The occurrence of any one or more of the following events shall constitute a
default and breach of this Sublease by Sublessee:

 

A.Sublessee failing to pay Base Rent or Additional Rent within Ten (10) days of
its due date;

B.Sublessee failing to make any other payments required to be made by Sublessee
when due, where such failure shall continue for a period of seven (7) calendar
days following notice from Sublessor to Sublessee;

C.Sublessee failing to perform or keep any of the other terms, covenants and
conditions herein contained for which it is responsible, and such failure
continuing and not being cured for a period of thirty (30) calendar days after
notice from Sublessor or if such default is a default which cannot be cured
within a 30 calendar day period, then Sublessee's failing to commence to correct
the same within said 30 calendar day period and thereafter failing to prosecute
the same to completion with reasonable diligence; If the default occurs due to
order or citation by the governing authority having jurisdiction over the
premises, whether such default or order is issued to the Sublessor or to the
Sublessee, the time for cure shall conform to the time granted by such governing
authority, including any time granted by any tribunal.

D.Sublessee being adjudicated as bankrupt or insolvent or filing in any court a
petition in bankruptcy or for reorganization or for the adoption of an
arrangement under the Bankruptcy Act (as now or in the future amended) or the
filing of an involuntary bankruptcy against Sublessee unless said involuntary
bankruptcy is terminated within thirty (30) calendar days from the date of said
filing, or Sublessee filing in any court for the appointment of a receiver or
trustee of all or a portion of Sublessee's property or there being appointed a
receiver or trustee for all or a portion of Sublessee's property, unless said
receiver or trustee is terminated within thirty (30) calendar days from the date
of said appointment; Sublessee making any general assignment or general
arrangement of its property for the benefit of its creditors.

E.If there is a breach or default of any provision of the Revolving Line of
Credit Promissory Note or the Licensing Agreement, this sublease shall be in
default.

 

In the event of an occurrence of default as set forth above and not being cured
for a period of thirty (30) calendar days after notice from Sublessor, Sublessor
shall have the right to terminate this Sublease and end the term hereof by
giving to Sublessee written notice of such termination. re-enter and take
possession of the Premises or any part thereof and repossess the Premises. In
the event of a termination of lease as a result of default, Sublessee shall pay
to Sublessor damages including repossession costs, brokerage commissions, legal
expenses, attorneys' fees, expenses of employees, alteration costs and expenses
of preparation of such re letting. Any Late Payment shall bear a penalty of
$200.00.

 

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Upon the expiration or earlier termination of this Agreement, Sublessee shall
return the Premises to Sublessor in good repair, condition and working order,
ordinary wear and tear resulting from proper use thereof alone excepted.

 

Indemnity:

 

Sublessee shall indemnify Sublessor against, and hold Sublessor harmless from,
any and all claims, actions, suits, proceedings, costs, expenses, damages and
liabilities, including reasonable attorney's fees and costs, arising out of,
connected with, or resulting from Sublessee's use of the Premises, including
without limitation the manufacture, selection, delivery, possession, use,
operation, or return of the Premises.

 

Assignment and Subletting:

 

The Sublessor hereby authorizes and consents for the Premises to be sublet by
Sublessee DPCO Denver, LLC, DPCO Jason, LLC, DPCO Brighton, LLC and/or DPCO
Colfax, LLC (the "Third Sublessee"); however Sublessee shall remain responsible
for all terms and conditions of this Sublease. Third Sublessees must meet all
other requirements of this Sublease and shall be liable for all conditions,
covenants and agreements in the Master Lease.

 

Sublessee does not have the right to sublet premises to any other party, other
than stated above.

 

The Sublessee acknowledges it must be licensed by both the City of Denver's
Department of Excise & Licenses, and the State of Colorado's Marijuana
Enforcement Division. Sublessee must keep said licenses current and remain in
good standing. In the event Sublessee receives disciplinary or violation notice,
said notice must be submitted to Sublessor within 3 days of receipt. Should
Sublessee receive notice from City of Denver's Department of Excise or State of
Colorado's Marijuana Enforcement Division, requiring operations to cease,
Sublessee will cease operations immediately, or Sublessee will be in default of
Sublease.

 

Best Business Practices:

 

Sublessee acknowledges that it must adhere to the following standards for
compliance and cultivation:

 

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Compliance:

 

The Sublessee must at all times comply with the following guidelines, failure to
do so will be considered a default under the terms and conditions of this
Sublease.

 

●Preventing the distribution of marijuana to minors;

●Preventing revenue from the sale of marijuana from going to criminal
enterprises, gangs, and cartels;

●Preventing the diversion of marijuana from states where it is legal under state
law in some form to other states;

●Preventing state-authorized marijuana activity from being used as a cover or
pretext for the trafficking of other illegal drugs or other illegal activity;

●Preventing violence and the use of firearms in the cultivation and distribution
of marijuana;

●Preventing drugged driving and the exacerbation of other adverse public health
consequences associated with marijuana use;

●Preventing the growing of marijuana on public lands and the attendant public
safety and environmental dangers posed by marijuana production on public lands;
and

●Preventing marijuana possession or use on federal property.

 

The Sublessee must provide proof of the following information to Sublessor.

 

●Business is duly licensed and registered with the State.

●Provide application (and related documentation) submitted by the business for
obtaining a state license to operate its marijuana-related business.

●Description of the activity for the business, including the types of products
to be sold and the type of customers to be served (e.g., medical versus
recreational customers)

●The business, its owner(s), manager(s), or other related parties are not, or
have not been, subject to an enforcement action by the state or local
authorities responsible for administering or enforcing marijuana-related laws or
regulations.

●The owner(s) or manager(s) of a marijuana-related business reside in the state
in which the business is located.

 

Ventilation and Odor Control:

 

●The pungent odor from marijuana cultivation operations is objectionable to many
people. Offensive odors can easily migrate in and around the marijuana
cultivation site and some strains produce odors that are detectable in the
surrounding neighborhood as well as adjacent tenants.

●It is imperative to properly design the ventilation system, taking into
consideration the square footage and number of plants. A properly sized,
installed and maintained ventilation system can help resolve two issues.
Firstly, having the grow rooms properly balanced will inhibit odors from
escaping. Secondly, the addition of a dehumidifying system to control mold and
pathogen growth should be considered. Ideally, humidity to control molds should
be set under 50%. Contact a reputable HVAC contractor for assistance with these
design elements.

 

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●Three (3) odor control technologies have shown promise with controlling odors
from grow operations.

 

Activated Carbon Filtration - This technique involves forcing the air
circulating within the HVAC system through an activated carbon filter in order
to filter out odors and pathogens that may pose a public health risk. This
method is highly effective and can be used in combination with other
technologies such as an electrostatic precipitator.

 

●The size and layout of the cultivation operation will determine the
requirements for the carbon filtration system. Larger scale operations will
require the use of larger fans and more carbon and will typically increase the
requirements of existing HVAC systems. In addition, as filters age and the
activated carbon becomes clogged with impurities, it will be necessary to
replace the carbon; filters should typically be replaced per the manufacturers
recommendation. In addition, the dust collector "sock" associated with the
carbon filter should be changed out every 6-8 months for proper air flow.

●Carbon filtration is the least energy intensive of the three technologies. In
most cases, the energy required to run the filtration system is already
accounted for in the air handling and exchange system. The excess energy
necessary to force air through the filter is negligible and, depending on the
size of the discharge and intake, often only slightly alters the speed of the
exchange. The use and disposal of the filters creates the most physical waste;
however, the carbon can typically be regenerated for reuse.

 

Negative Ion Generation - These machines, sometimes called electrostatic
precipitators, will use a negative charge to attract positively charged
particles in the air. The charged particles are attracted to the metal filters,
which over time, will become concentrated with particles and require cleaning
with water on a regular basis. In some cases this technology has been shown to
work.

 

●The negative ion generators can improve indoor air quality to a greater degree
than some of the other technologies. The environmental impact of this technology
is also dependent upon size and use. They are typically powered by a single wall
outlet and can run 24 hours a day, 7 days a week. They will also need to be
cleaned which usually requires removing the metal panel and washing it to remove
the particles. Otherwise, they require very little maintenance and their energy
consumption is typically negligible and lower than many fans.

 

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Ozone Generators - Ozone can be extremely effective at breaking down odors and
other contaminants. Potential problems with ozone originate with the molecule's
destructive tendencies. Ozone is an effective sterilizer; however, excessive
and/or unmonitored use has been shown to damage or even destroy crops and can
cause lung irritation.

 

●Although ozone degrades quickly, the output of the gas can be an indoor
environmental hazard to both the people and the plants. Release of the gas
outside can also have varying local effects depending on the time of day,
concentration, and disbursement factors associated with the location and
weather. The major impact will come from energy consumption.

 

Masking Agents - There are also odor masking equipment that can be used for
temporary localized odor control. This method is not recommended to control
odors alone.

 

●A preventative maintenance and replacement plan should be established for any
of theses systems to ensure optimum operation and continuous odor control.

 

Energy Consumption

 

●Energy efficient lighting such as compact fluorescent lights (CFLs), may be a
great alternative to incandescent bulbs in many applications; however, they may
not provide the proper growing spectrum for your plants. High efficiency CFLs or
LEDs should be used whenever possible in non-grow spaces, such as offices and
restrooms. In addition, when installing new electrical equipment, use products
with the Energy Star seal whenever feasible. Always have a licensed electrical
contractor install electrical equipment and lighting to ensure safe wiring and
adherence to local building code requirements.

●Another option to off-set your energy usage is to purchase Windsource from Xcel
Energy or carbon off-sets through Climate Trust or The Carbon Fund.

 

Water Quality and Conservation

 

●Although water covers nearly three quarters of the earth, less than one percent
is clean fresh water. Therefore, it is critical that we conserve and protect
this valuable resource. Never dispose of anything in the outside storm drains.
Keep areas surrounding dumpsters free of debris and wastes. Remember, "nothing
in the storm drain but stormwater". To help with water conservation, educate
staff on turning off the water while washing hands and equipment, installing
low-flow aerators on faucets, and retrofitting toilets to low flow models.

 

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Other Standard Practices

 

●Ensure safe disposal of fertilizers, insecticides, plant growth regulators, and
other chemicals. Buy only what you need and store in a safe place and clean- up
spills immediately. Refer to the Material Safety Data Sheet for disposal
requirements.

●Currently there are no pesticide products that are registered or labeled for
use on medical marijuana. The application of a pesticide to a plant that is not
on the pesticide label is a violation of federal and state pesticide laws.

●Effective July 1, 2011, section 12-43.3-12.200 of the of the Colorado Revised
Statute in part requires that medical marijuana waste must be rendered unusable
prior to leaving the facility by grinding and incorporating the material with
non-consumable solid wastes such as food waste, soil or other compostable
materials. Composting unusable plant material and soils provides a valuable
opportunity to create nutrient rich soil to stimulate healthy plant growth. MMJ
Regulation.pdf

●Provide shower facilities to employees to use before and after work to reduce
the introduction of potentially harmful molds, mildew and bacteria to the
plants, workers and their families.

 

Severability:

 

If any part or parts of this Agreement shall be held unenforceable for any
reason, the remainder of this Agreement shall continue in full force and effect.
If any provision of this agreement is deemed invalid or unenforceable by any
court of competent jurisdiction, and if limiting such provision would make the
provision valid, then such provision shall be deemed to be construed as so
limited.

 

Entire Agreement:

 

This Agreement constitutes the entire agreement between the parties and
supersedes any prior understanding or representation of any kind preceding the
date of this Agreement. There are no other promises, conditions, understandings
or other agreements, whether oral or written, relating to the subject matter of
this Agreement. This Agreement may be modified in writing and must be signed by
both parties.

 

Governing Law:

 

This Agreement shall be governed by and construed in accordance with the laws of
the state of Colorado.

 

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Notices:

 

Any Notice and other communications which either party desires to give the
other, may be given either personally or by post through certified mail, to the
following address:

 

Sublessor:   Sublessee: Diego Pellicer Worldwide Inc.   DPCO, Inc 3946 Fairview
Way   1 S Harrison Street West Linn, OR 97068   Denver, CO 80209

 

Waiver:

 

The failure of either party to enforce any provisions of this Agreement shall
not be deemed a waiver or limitation of that party's right to subsequently
enforce and compel strict compliance with every provision of this Agreement. The
acceptance of rent by Sublessor does not waive Sublessor's right to enforce any
provisions of this Agreement.

 

If Colorado or Denver laws or regulations, or Federal notices or prosecution,
prohibit a Subtenant's operation of a marijuana operation at this location
during the term of this Sublease or if a governmental notice is delivered to
Landlord, Sublessor or Sublessee which requires the cessation of marijuana
cultivation or infusion on the Premises, Landlord, Sublessor or Sublessee may
terminate this Sublease with no penalties and Sublessee shall vacate the
Premises within 30 days, if it cannot be cured, and any deposits and prepaid
rent shall forthwith be returned by Sublessor to Sublessee.

 

If Premises' location or subtenant's subleases, licenses or operations is not
approved, issued and/or licensed by the Marijuana Enforcement Division, City of
Denver Zoning and/or City of Denver Excise and License Department, Sublessee may
terminate this Sublease and this Sublease will become null and void without
penalty, any deposits, prepaid rent payments shall forthwith be returned by
Sublessor to Sublessee. Any rents already paid will be retained by Sublessor.

 

This Sublease may be executed in counterparts, all of which shall collectively
be considered the original. A facsimile signature shall be sufficient and shall
constitute an original signature for all purposes.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Consent as of the day
and year first written above.

 

AGREED TO this 15 day of August, in 2014, by:

 

Sublessor:   Sublessee: Diego Pellicer Worldwide Inc.   DPCO, Inc

 

/s/ Ronald Throgmartin   /s/ Neil Demers   Ronald Throgmartin   Neil Demers  

 

 

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