Exhibit 10.2

 

DEVELOPMENT AGREEMENT

 

THIS DEVELOPMENT AGREEMENT is made and entered into effective this 9th day of
August, 2019 (the “Effective Date”), by and between IIP-PA 4 LLC, a Delaware
limited liability company (“Landlord”), PHARMACANN PENN PLANT LLC, a
Pennsylvania limited liability company (“Tenant”), and IIP OPERATING
PARTNERSHIP, LP, a Delaware limited partnership (“Parent Company”). Landlord,
Tenant and Parent Company shall sometimes collectively be referred to herein as
the “Parties.”

 

RECITALS

 

A.                  WHEREAS, concurrent with the execution of this Agreement,
Landlord acquired certain real property located at Lot No. 4 in Scott Technology
Park, Scott Township, Pennsylvania, as more particularly described on Exhibit A
attached hereto and incorporated herein by reference (the “Land”);

 

B.                  WHEREAS, concurrent with the execution of this Agreement,
Landlord and Tenant entered into that certain Lease dated August 9, 2019 (as the
same may be amended, supplemented or otherwise modified from time to time, the
“Lease”), pursuant to which Tenant leases the Premises;

 

C.                  WHEREAS, Tenant desires to construct and develop certain
industrial and greenhouse Improvements on the Land for medical-use cannabis
cultivation and processing, subject to and in accordance with the terms and
conditions of this Agreement and the Lease;

 

D.                  WHEREAS, Landlord has agreed to pay or reimburse Tenant for
the costs of completing the Improvements up to the Construction Contribution
Amount, subject to and in accordance with the terms and conditions of this
Agreement and the Lease; and

 

E.                   WHEREAS, Tenant will derive certain direct and indirect
benefits from the construction of the Improvements pursuant to this Agreement
and the Lease.

 

NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the receipt of which is
hereby acknowledged, the Parties hereby agree as follows:

 

1.                   Definitions. In addition to those terms defined elsewhere
in this Agreement, the following terms shall have the meanings set forth below:

 

“AAA” shall have the meaning given to such term in Section 11.2 of this
Agreement.

 

“AAA Rules” shall have the meaning given to such term in Section 11.9(a) of this
Agreement.

 

“Architect Arbitrator” shall have the meaning given to such term in Section 11.4
of this Agreement.

 

“Affiliate” shall mean any person or entity that, directly or indirectly,
controls or is controlled by or is under common control with any other entity.

 

“Agreement” shall mean this Development Agreement, as amended from time to time.

 

“Application” shall have the meaning given to such term in Section 6.1 of this
Agreement.

 

“Attorney Arbitrator” shall have the meaning given to such term in Section 11.4
of this Agreement.

 

“Authorized Excess Development Costs” shall have the meaning ascribed to such
term in Section 8 of this Agreement.

 

 

 

 

"Bankruptcy Code" means the United States Bankruptcy Code or any successor
statute (as the same may be amended from time to time).

 

“Budgeted Development Costs” shall mean all Development Costs which are
authorized pursuant to the Development Plan and Budget, which shall include,
without limitation, (a) a fee to Landlord equal to Twenty-Five Thousand Dollars
($25,000.00) to cover Landlord's overhead and expenses for plan review,
engineering review, coordination, scheduling and supervision of the Development
and (b) reimbursement for Landlord's third-party costs actually incurred in
connection with the Development, including Landlord's engagement of a
construction consultant to oversee the Development, provided that any such costs
shall be reasonable and shall be reasonably consistent with market rates paid
for similar services.

 

“Buildings” shall mean an approximately Thirty Thousand Seven Hundred (30,700)
square foot greenhouse facility and an approximately Twenty-Two Thousand Six
Hundred (22,600) square foot headhouse, together with all related facilities and
improvements suitable for the Permitted Use, subject to changes as may be made
in accordance with this Agreement.

 

“Completion Date” shall mean the date which corresponds to the last to occur of
each of the Completion Events.

 

“Completion Events” shall mean the following events: (a) the substantial
completion of the construction, development and installation of the Improvements
and the performance of all other construction and development work for the
Development in accordance with the Development Plan and Budget, as evidenced by
a Certificate of Substantial Completion in the form of the American Institute of
Architects document G704, executed by the project architect and the general
contractor; (b) Landlord has received copies of all certifications and approvals
with respect to the Improvements that may be required from any governmental
authority and any board of fire underwriters or similar body for the use and
occupancy of the Premises, including the issuance of a certificate of occupancy
or similar governmental approval suitable for the Permitted Use; (c) the full
performance by the general contractor(s) of all of its (their) duties and
obligations under the construction contracts with regard to the Development in
accordance with the Development Plan and Budget, other than those items set
forth on a Punch-List prepared by the Tenant and delivered to the general
contractor(s); (d) Landlord has received the general contractor’s final
unconditional waiver and release of lien and final unconditional waivers and
releases of liens from each subcontractor and material supplier with respect to
the Improvements; (e) Landlord has received complete “as built” drawing print
sets, project specifications and shop drawings and electronic CADD files on disc
for the Improvements; (f) Landlord has received an as-built ALTA survey
depicting the Improvements and otherwise reasonably acceptable to Landlord; (g)
Landlord has received a commissioning report prepared by a licensed, qualified
commissioning agent hired by Tenant and approved by Landlord for all mechanical,
electrical and plumbing systems installed in connection with the Development;
(h) Landlord, at Tenant’s sole cost and expense, has received an ALTA owner’s
policy of title insurance with extended coverage, with liability coverage in the
amount of the Construction Contribution Amount plus $925,000), affirmative
coverage for any appurtenant easements to the Premises and such endorsements as
Buyer may request (to the extent available), which title policy shall be issued
by a title company reasonably acceptable to Landlord and shall otherwise be in
form and substance reasonably acceptable to Landlord; and (i) Landlord has
received such other “close out” materials as Landlord reasonably requests.

 

“Construction Contribution Amount” shall mean an amount not to exceed
Twenty-Five Million Fifty-Eight Thousand Dollars ($25,058,000.00).

 

“Construction Payment” shall have the meaning ascribed to such term in Section
6.2 of this Agreement.

 

“Contractor Arbitrator” shall have the meaning given to such term in Section
11.4 of this Agreement.

 

“Default” shall have the meaning ascribed to such term in the Lease.

 

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“Development” shall have the meaning ascribed to such term in Section 2.2 of
this Agreement.

 

“Development Approvals” shall mean: (a) any and all land use and development
entitlements, permits and authorizations relating to the Development; (b)
utility hook-up rights, water allocations, water rights, sewer capacity, density
allocations and other similar rights or approvals regarding the Development; (c)
any and all documents, agreements, instruments and/or understandings with any
local, state or federal governmental agency concerning the construction and
development of any on-site or off-site improvements by one or more of such
governmental agencies; and (d) any and all approvals and/or consents required to
be obtained in connection with the Development for compliance with any CC&Rs (as
such term is defined in the Lease).

 

“Development Costs” shall mean, with respect to the Improvements, any and all
costs, fees and expenses incurred by Tenant arising out of and in connection
with the Improvements.

 

“Development Plan and Budget” shall have the meaning ascribed to such term in
Section 5.1 of this Agreement.

 

“Disbursement Claim” shall have the meaning ascribed to such term in
Section 11.1 of this Agreement.

 

“Disapproved Matters” shall have the meaning ascribed to such term in
Section 4.6 of this Agreement.

 

“Effective Date” shall the meaning ascribed to such term in the introductory
paragraph of this Agreement.

 

“Excess Development Costs” shall mean those Development Costs which are in
excess of the aggregate amounts allocated to Development Costs in the
Development Plan and Budget.

 

“Final Arbitration Decision” shall have the meaning ascribed to such term in
Section 11.10 of this Agreement.

 

“Improvements” shall mean the Buildings and related improvements and facilities
to be constructed on the Land, as generally depicted on Exhibit B attached
hereto, in accordance with the Development Plan and Budget and any work,
improvements or items reasonably inferable therefrom as necessary to produce a
functional facility consistent with the Permitted Use, including, without
limitation, all water control systems, utility lines and related fixtures and
improvements, drainage facilities, landscaping, fencing, signs, parking
facilities, access ways, walkways and related facilities.

 

“Initial Meeting” shall have the meaning ascribed to such term in Section 11.1
of this Agreement.

 

“Insolvency” shall mean either: (a) when the Tenant (i) has an order for relief
entered with respect to it under Chapter 7 or Chapter 11 of the Bankruptcy Code;
(ii) makes a general assignment for the benefit of creditors; (iii) files a
voluntary petition under the Bankruptcy Code; (iv) files a petition or answer
seeking for the Tenant any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the Bankruptcy
Code, any statute, law or regulation; (v) files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against the Tenant in any proceeding of this nature; and/or (vi) seeks, consents
to or acquiesces the appointment of a trustee, receiver or liquidator of the
Tenant or of all or any substantial part of the Tenant’s properties; or (b) (i)
sixty (60) calendar days after the commencement of any proceeding seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under the Bankruptcy Code, any statute, law or regulation, the
proceeding has not been dismissed; or (ii) if, within sixty (60) calendar days
after the appointment without the Tenant’s consent or acquiescence of a trustee,
receiver or liquidator of the Tenant or of all or any substantial part of the
property or estate of the Tenant, the appointment is not vacated or stayed or
within sixty (60) calendar days after the expiration of any such stay, the
appointment if not vacated.

 

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“Land” shall have the meaning ascribed to such term in the recitals to this
Agreement.

 

“Lease” shall have the meaning ascribed to such term in the recitals to this
Agreement.

 

“Landlord” shall the meaning ascribed to such term in the introductory paragraph
of this Agreement.

 

“Landlord Event of Default” shall have the meaning ascribed to such term in
Section 9.7 of this Agreement.

 

“Legal Requirements” shall mean any and all laws, statutes, ordinances, codes,
orders, rules, regulations, permits, licenses, authorizations, entitlements
(including, without limitations, any and all Development Approvals), official
orders and requirements of, or conditions imposed by, all federal (to the extent
not in direct conflict with applicable state, municipal or local cannabis
licensing and program laws, rules and regulations), state, municipal and local
laws, codes, ordinances, rules and regulations of governmental authorities,
committees, associations, or other regulatory committees, agencies or governing
bodies having jurisdiction over the Premises or any portion thereof, Landlord or
Tenant, including both statutory and common law, hazardous waste rules and
regulations, and state cannabis licensing and program laws, rules and
regulations, state, and local governmental regulatory agencies and authorities
and any covenants, conditions and restrictions of record encumbering the Land,
in each case which are as of the date hereof or hereafter become applicable to
the construction, development or operation of the Improvements, including,
without limitation, any of the foregoing relating in any way to hazardous
material and/or hazardous waste.

 

“Notice of Demand” shall have the meaning ascribed to such term in Section 11.2
of this Agreement.

 

“Panel” shall have the meaning ascribed to such term in Section 11.3 of this
Agreement.

 

“Parent Company” shall the meaning ascribed to such term in the introductory
paragraph of this Agreement.

 

“Parties” shall have the meaning ascribed to such term in the introductory
paragraph of this Agreement.

 

“Permitted Use” shall have the meaning ascribed to such term in the Lease.

 

“Premises” shall have the meaning ascribed to such term in the Lease.

 

“Prior Course of Dealing” shall have the meaning ascribed to such term in the
Lease.

 

“Project Agreements” shall have the meaning ascribed to such term in Section 3.5
of this Agreement.

 

“Punch-Lists” shall have the meaning ascribed to such term in Section 3.12 of
this Agreement.

 

“Required Arbitration Construction Payments” shall have the meaning ascribed to
such term in Section 11.10 of this Agreement.

 

“Revised Development Plan and Budget” shall have the meaning ascribed to such
term in Section 5.2 of this Agreement.

 

"SEC Information" shall have the meaning ascribed to such term in Section 3.19
of this Agreement.

 

“Submission” shall have the meaning ascribed to such term in Section 4.1 of this
Agreement.

 

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“Tenant” shall the meaning ascribed to such term in the introductory paragraph
of this Agreement.

 

“Tenant Event of Default” shall have the meaning ascribed to such term in
Section 9.2 of this Agreement.

 

“Term” shall have the meaning ascribed to such term in Section 9.1 of this
Agreement.

 

“Termination Event” shall have the meaning ascribed to such term in Section 9.1
of this Agreement.

 

“Unauthorized Excess Development Costs” shall have the meaning ascribed to such
term in Section 8 of this Agreement.

 

2.                   Tenant Improvements.

 

2.1                Incorporation Into Lease. The Parties acknowledge and agree
that the terms and conditions of this Agreement shall be deemed part of and
incorporated into the Lease. For the avoidance of doubt, the occurrence of a
Tenant Event of Default or a Landlord Event of Default under this Agreement
shall constitute a Default by such Party under the Lease.

 

2.2                General Requirements. Tenant hereby agrees to secure all
necessary Development Approvals in connection with the construction and
development of the Improvements, all in accordance with the Development Plan and
Budget (collectively, the “Development”); and (b) perform all other duties and
obligations to be performed by Tenant in accordance with the terms and
conditions of this Agreement, including without limitation, those duties,
responsibilities and obligations set forth in Section 3 hereof. Without limiting
the foregoing, Tenant shall use commercially reasonable and diligent efforts to
cause the Completion Date to occur no later than eighteen (18) months following
the Effective Date, provided that the Completion Date shall be subject to a
day-for-day extension for any actual delays resulting from events of force
majeure beyond the reasonable control of Tenant.

 

During the Term of this Agreement, Tenant shall fully and timely perform all of
the duties, responsibilities and obligations required to be performed by Tenant
pursuant to this Agreement and the Development Plan and Budget in a commercially
reasonable manner, comparable with other similar quality industrial developments
to be used for similar uses in the greater Pennsylvania market. In connection
with the foregoing, Tenant hereby covenants to furnish its commercially
reasonable skill and judgment in performing its obligations hereunder. Tenant
shall perform its duties, responsibilities and obligations under this Agreement
in a reasonably timely, efficient, expeditious, prudent and economical manner,
consistent with the interest of Landlord, subject in any event to and in
accordance with commercially reasonable standards, and this Agreement and the
Development Plan and Budget.

 

2.3                Employees and Independent Contractors. Tenant shall employ,
on its own behalf and not as employees or independent contractors of Landlord,
at all times a sufficient number of capable employees and/ or independent
contractors to enable it to fulfill Tenant’s duties, responsibilities and
obligations under this Agreement. All salaries, wages, compensation and benefits
paid or payable to any employees and/ or independent contractors of Tenant shall
be borne solely by Tenant and shall not be borne by Landlord, provided such
costs shall be reimbursable to Tenant as a Budgeted Development Cost to the
extent the same is included in the Development Plan and Budget, subject to the
terms and conditions of this Agreement.

 

2.4                Other Activities. This Agreement shall not restrict Tenant or
any of its Affiliates from engaging in any other development or business
activities. Notwithstanding the foregoing, in no event shall Tenant, during the
Term of this Agreement, engage in any other development or business activities
which might or will materially interfere with Tenant’s ability to perform its
duties, responsibilities and obligations under this Agreement.

 

3.                   Duties of Tenant. Subject to the terms and conditions of
this Agreement and the Development Plan and Budget, and in addition to the other
duties, responsibilities and obligations of Tenant under this Agreement, Tenant
hereby agrees to and shall, at Tenant’s sole cost and expense, fully and timely
perform (or cause to be performed) in a commercially reasonable manner the
duties, responsibilities and obligations set forth in this Agreement including,
without limitation, the duties, responsibilities and obligations set forth
below. Tenant shall not undertake the performance of any of the duties,
responsibilities and obligations set forth in this Section 3 or elsewhere in
this Agreement unless such duties, responsibilities and obligations are
expressly authorized pursuant to the Development Plan and Budget or are
otherwise approved by Landlord pursuant to Section 4 hereof.

 

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3.1                Secure all Development Approvals and all other necessary
permits, licenses, consents, authorizations, zoning variances or changes,
(whether regulatory, governmental, quasi-governmental or otherwise), which may
be reasonably necessary or appropriate in connection with the Development.

 

3.2                Secure all surveys, soil tests and other studies and reports
necessary to secure all Development Approvals reasonably required for the
Development and provide Landlord with electronic copies of all of the foregoing
to the extent in Tenant’s possession or reasonable control.

 

3.3                Cause to be prepared and review all preliminary plans,
working drawings, plans and specifications and construction cost estimates
reasonably required for the Development (and provide Landlord with electronic
copies of all of the foregoing to the extent in Tenant’s possession or
reasonable control), and verify the compliance of such plans, working drawings,
plans and specifications and construction cost estimates with this Agreement and
the Development Plan and Budget.

 

3.4                Secure all other documents, agreements, instruments, reports,
studies, surveys, maps, and all other materials reasonably necessary for the
Development.

 

3.5                Solicit and negotiate all agreements, contracts, documents
and other instruments reasonably necessary in order to undertake the activities
required to be performed by Tenant pursuant to Sections 3.1, 3.2, 3.3 and 3.4
above and/or to otherwise commence and/or complete the Development (“Project
Agreements”), which Project Agreements may include, without limitation, any and
all construction contracts and subcontracts, architectural and engineering
contracts, supply contracts, applications and/or agreements with governmental
authorities, as the same may be amended from time to time. In the event any
proposed Project Agreements are with any Affiliate of Tenant, Tenant shall
specifically notify Landlord when processing such proposed Project Agreement
with Landlord for Landlord’s approval pursuant to Section 4 hereof. In
connection with Landlord’s review of such Project Agreements pursuant to Section
4 hereof, Landlord shall not unreasonably disapprove a proposed Project
Agreement which is consistent with the Development Plan and Budget. In no event
shall Tenant be authorized to enter into or execute any such Project Agreements
in the name of or on behalf of Landlord.

 

3.6                Oversee, supervise and manage the planning, design,
construction, and development of the Improvements, all in accordance with the
Development Plan and Budget and in compliance with the Development Approvals and
other Legal Requirements.

 

3.7                Oversee, supervise, manage and coordinate on a daily basis,
the services of all employees, architects, contractors, subcontractors,
supervisors, engineers and other individuals and entities to carry out the
Development, or any portion thereof.

 

3.8                Coordinate and conduct bi-weekly on-site meetings with
members of the construction and development team.

 

3.9                Prepare and submit to Landlord a monthly status report with
respect to the progress of the Development, which status report shall be in form
and substance reasonably satisfactory to Landlord.

 

3.10             Review applications for payment by its contractors and their
subcontractors in connection with the Development and process applications for
payment in accordance with the terms and conditions of this Agreement, including
satisfying the conditions necessary to secure any disbursement of funds for
payment of such application pursuant to Section 6 below.

 

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3.11             Undertake commercially reasonable efforts to determine and
verify the substantial and final completion of all construction and development
work to be performed and/or services to be provided in connection with the
Development including, without limitation, the substantial and final completion
of all obligations to be performed pursuant to the applicable Project
Agreements.

 

3.12             Undertake commercially reasonable efforts to ensure that its
contractor prepares any and all punch-lists of incomplete or unsatisfactory work
and other activities in connection with the Development (“Punch-Lists”), and
undertake commercially reasonable efforts to cause contractor to complete all
items on such Punch-Lists.

 

3.13             Coordinate and arrange for all utility services and required
easements necessary for the Development.

 

3.14             Prepare and submit all applications, forms and packages to
secure the payment of any and all discounts, rebates, refunds, subsidies, or
other concessions referenced in the Development Plan and Budget (if any).

 

3.15             Upon completion of the Development, procure an as-built ALTA
survey that depicts the Improvements and is otherwise reasonably acceptable to
Landlord.

 

3.16             Promptly notify Landlord of any material disputes with
contractors, vendors, materialmen or suppliers, in any case, of which it has
received written notice, and exert all commercially reasonable efforts to give
notice to Landlord prior to any liens filed against all or any portion of the
Land to the extent the Tenant has received written notice of the same. As soon
as reasonably practicable following its receipt of written notice of, or
otherwise becoming aware of, any labor or materialmen’s liens or any other
liens, liabilities or encumbrances against all or any portion of the Land
relating to the Development, Tenant shall provide written notice of such liens,
liabilities or encumbrances to Landlord. The amount of such lien, liability or
encumbrance shall be fully paid or otherwise satisfied by Tenant (or insured
over by the title company selected by Tenant, at Tenant's sole cost and
expense). As used herein, "actual knowledge" of Tenant shall mean the actual
(and not imputed) knowledge of each of Teddy Scott, Brett Novey, Chris Atkinson
and Robert McQueen without duty to inquire or investigate.

 

3.17             Promptly notify Landlord in writing of any potential
construction defects and warranty claims in connection with the Development of
which Tenant has actual knowledge and Tenant’s recommendation for prosecuting
such matters. Upon instruction from Landlord, Tenant shall pursue the course of
action directed by Landlord.

 

3.18             Secure and maintain at Tenant’s principal place of business all
guarantees, warranties, affidavits, waivers, releases, bonds, keys, operating
and maintenance manuals, certificates of occupancy and other permits and
approvals with respect to the Development and provide Landlord with electronic
copies of all of the foregoing to the extent in Tenant’s possession or
reasonable control.

 

3.19             Establish and maintain complete and accurate books and records
with respect to the Development, together with sufficient documentation to fully
support each of the entries in such books and records. Such books and records
shall include proper entries of all receipts, income and disbursements
pertaining to the Development. Such books and records shall be and remain the
property of the Landlord (subject to Tenant’s right to retain copies) and be
maintained by Tenant at Tenant’s principal place of business or at the on-site
construction office on or near the Land. In connection with the foregoing,
Tenant shall make such books and records available to Landlord and its
representatives for inspection and audit at Tenant’s principal place of business
or at the on-site office (or at another location previously approved by
Landlord) at any time and from time to time during regular business hours.
Without limiting the foregoing, Tenant shall provide, as reasonably requested by
Landlord, any necessary or appropriate documents, periodic reports, materials
and information to Landlord and/or any other financial institution or lenders
designated by Landlord, or attorneys and accountants selected by Landlord.
Tenant shall cooperate with accountants and attorneys selected by Landlord in
the preparation of all tax returns and reports required to be filed by Landlord
and/or its Affiliates (including, without limitation, federal income tax
returns, state income tax and/or franchise tax returns, if any, state intangible
tax returns, if any, and state annual reports, if any) and shall provide to such
accountants and/or attorneys all books and records pertaining to the Development
that are requested and that are in the possession and control of Tenant, it
being understood and agreed that Tenant shall have no authority or
responsibility to execute or file any returns of Landlord or its Affiliates.
Additionally, Tenant acknowledges that Landlord or one of its Affiliates may be
required to file various reports and other information with the Securities and
Exchange Commission and other regulatory agencies. Accordingly, Tenant hereby
agrees to and shall timely provide to Landlord and/or such Affiliates any and
all reports and other information required pursuant to this Section (provided
such reports and other information pertain directly to the services to be
performed by Tenant pursuant to this Agreement), together with all other reports
and other information that may be reasonably requested from time to time by
Landlord and/or its Affiliates (provided such reports and other information
pertain directly to the services to be performed by Tenant pursuant to this
Agreement), all of which shall be in form and content reasonably satisfactory to
Landlord or such Affiliate (“SEC Information”). All SEC Information requested by
Landlord and/or any of its Affiliates shall be delivered by Tenant to Landlord
or such Affiliate within ten (10) calendar days of the date of such request by
Landlord and/or such Affiliate.

 

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3.20             Establish and maintain complete and orderly files containing
correspondence, insurance policies, receipts, all paid and unpaid bills,
vouchers and all other documents and papers pertaining to the Development, all
of which shall be and remain the property of Landlord (subject to Tenant’s right
to retain copies) and shall be available to Landlord and its representatives for
inspection at Tenant’s principal place of business, the construction office
located on-site for the Development or at another location previously approved
by Landlord at any time and from time to time during regular business hours.

 

3.21             Immediately advise Landlord of the discovery of any hazardous
substances or materials in, on or about the Land.

 

3.22             Promptly advise the Landlord of any actual or threatened legal
action, condemnation proceeding, claim, tax assessment or damage adversely
affecting the Land and/or the Development which becomes known to Tenant.

 

3.23             At all times comply with all statutes, ordinances, rules and
regulations, licenses and permits, and other Legal Requirements applicable to
the performance of its duties, responsibilities and obligations under this
Agreement.

 

3.24             At all times comply with all covenants, conditions and
restrictions of record affecting the Land, including, without limitation, all
Project Agreements.

 

3.25             Perform all other duties and obligations to be performed by
Tenant in accordance with the terms and conditions of this Agreement and in
accordance with the Prior Course of Dealing.

 

4.                   Landlord’s Approvals. In connection with the performance by
Tenant of all of its duties and obligations as set forth in this Agreement,
Tenant acknowledges and agrees that it is obligated to secure the prior written
approval from Landlord with respect to all matters not previously authorized
pursuant to the Development Plan and Budget in accordance with the procedures
set forth below. Without limiting the foregoing, Tenant shall submit to
Landlord, for Landlord’s review and approval, which approval shall not be
unreasonably withheld, such items expressly requiring Landlord’s prior written
approval pursuant to this Agreement. Landlord’s prior written approval shall be
secured by Tenant in accordance with the following procedures:

 

4.1                Tenant shall prepare and submit to the Landlord, for
Landlord’s review and approval, all matters expressly required to be reviewed
and approved by Landlord pursuant to this Agreement, together with any original
documents, agreements, instruments, correspondence and other information
reasonably required by Landlord to make a determination as to the matters being
reviewed and approved “Submission”). All Submissions to be made to Landlord
pursuant to this Section 4 shall only be effective if such Submissions are
delivered pursuant to the provisions of this Agreement.

 

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4.2                Each Submission shall include a notation on the transmittal
letter accompanying such Submission, which states that the matters being
delivered to Landlord shall be deemed approved by Landlord, unless Landlord
timely delivers its notice of disapproval pursuant to this Section 4.

 

4.3                Landlord shall have a period of ten (10) calendar days after
receipt by Landlord of each Submission in which to review such Submission and
deliver to Tenant written notice of either its approval or disapproval with
respect to the matters being reviewed or of any additional information
reasonably required by Landlord in order to make such a determination. Landlord
shall notify Tenant as soon as reasonably practicable in the event Landlord
requires such additional information.

 

4.4                In the event Landlord fails to timely deliver to Tenant
written notice of its approval or disapproval of the Submission pursuant to
Section 4.3 hereof, the Submission shall be deemed approved.

 

4.5                In the event Landlord timely approves (or is deemed to have
approved) any such Submission, the Landlord and/or the Tenant, as applicable,
shall take such actions required to implement such approved matters.

 

4.6                In the event Landlord disapproves of any of the matters of
such Submission (“Disapproved Matters”), Landlord shall advise Tenant in writing
of its disapproval and the basis for such disapproval. In such a case, Tenant
may take such actions required to satisfy Landlord with respect to the
Disapproved Matters and resubmit such matters to Landlord, for Landlord’s review
and approval, pursuant to this Section 4.

 

5.                   Development Plan and Budget.

 

5.1                Development Plan and Budget. Tenant shall prepare the initial
Development Plan and Budget in connection with the Development (as may be
modified from time to time hereunder, the “Development Plan and Budget”). Tenant
will consult with Landlord in connection with the preparation of the initial
Development Plan and Budget. Following Landlord’s approval of the initial
Development Plan and Budget, Landlord and Tenant shall attach the same as
Exhibit C to this Agreement. During the Term of this Agreement, Tenant shall use
commercially reasonable efforts to comply with the terms and conditions of the
Development Plan and Budget. Notwithstanding the foregoing, Tenant may exceed
the line item amount allocated to any such expenditure as set forth in the
Development Plan and Budget, without the approval by Landlord, provided the
following conditions are satisfied: (a) such expenditure does not exceed the
applicable line item (determined on an aggregate basis), by more than One
Hundred Thousand Dollars ($100,000.00), or thirty percent (30%), whichever is
less; (b) Tenant has recognized cost savings in other categories of the
Development Plan and Budget of equal or greater amounts thereby resulting in no
net overall increase in the Development Plan and Budget; and (c) any such
expenditure or cost savings does not result in a material modification of the
conceptual plan for the Improvements as set forth in the Development Plan and
Budget.

 

5.2                Revision of the Development Plan and Budget. During the Term
of this Agreement, Tenant or Landlord may determine that the Development Plan
and Budget is no longer applicable because of changes in conditions,
circumstances, planned operations, or otherwise. In such case, Tenant shall
prepare and submit to the Landlord, for Landlord’s review and approval, a
revised Development Plan and Budget (as modified hereunder, the “Revised
Development Plan and Budget”) for the remainder of the Term of this Agreement,
indicating in narrative form the reasons why the assumptions used as the basis
of preparing the original Development Plan and Budget (or any Revised
Development Plan and Budget currently in effect) are no longer valid.

 

On or before the expiration of ten (10) calendar days after receipt of the
proposed Revised Development Plan and Budget, Landlord shall deliver written
notice to Tenant setting forth Landlord’s approval or disapproval of all or any
portion of the same. In the event Tenant does not receive a written notice of
approval or disapproval from Landlord within such ten (10) calendar day period,
then the proposed Revised Development Plan and Budget shall be deemed approved
by Landlord. Notwithstanding the foregoing, until such time as the Revised
Development Plan and Budget has been approved (or deemed approved) by the
Landlord in accordance with the terms and conditions of this Section 5.2, the
Tenant shall perform its duties in accordance with the Development Plan and
Budget (or any Revised Development Plan and Budget, as the case may be),
currently then in effect. Following the approval (or deemed approval) by the
Landlord of the Revised Development Plan and Budget (if required hereunder),
with respect to the period of time in question, all references in this Agreement
to the Development Plan and Budget shall mean the Revised Development Plan and
Budget.

 

9

 

 

5.3                Emergency Expenditures. As more fully set forth in Section
5.1 hereof, Tenant shall use commercially reasonable efforts to comply with the
Development Plan and Budget. Notwithstanding anything contained in this
Agreement to the contrary, in the event of any emergency affecting the safety of
persons or property, or which is likely to result in substantial injury, damage
or loss to the Landlord, Tenant is hereby authorized to act in a manner intended
to mitigate or prevent threatened damage, injury or loss and, in connection
therewith, if deemed prudent by the Tenant, and Tenant shall be entitled to make
expenditures in excess of the limitations set forth in the Development Plan and
Budget, without the necessity of securing the approval by the Landlord prior to
such expenditure. Tenant shall deliver written notice to Landlord summarizing
such emergency expenditures, together with copies of all invoices, receipts and
other written documentation evidencing the amounts owing and/or payable. Upon
Landlord’s approval of such expenditures, which approval shall not be
unreasonably withheld, such expenditures shall be deemed to constitute Budgeted
Development Costs.

 

6.                   Landlord's Obligations.

 

6.1                Applications. Once each calendar month, but in no event
earlier than twenty-one (21) calendar days after the last such submission,
Tenant may submit to Landlord a request for payment of a portion of Development
costs (each, an “Application”). Each Application shall include the following:

 

(a)                 A statement setting forth the total amount of the
Construction Contribution Amount requested and supporting invoices from the
general contractor, architect and any subcontractors, material suppliers and
other parties requesting payment with respect to the amount of the Construction
Contribution Amount then being requested, as evidenced by AIA document G 702
Application and Certificate for Payment.

 

(b)                A certification by the general contractor that the
Improvements, or the portion thereof for which payment is requested in that
Application, has been completed pursuant to this Agreement and the applicable
construction documents;

 

(c)                 Except with respect to the final Application, conditional
lien waivers signed by every contractor, subcontractor and supplier who has a
mechanics lien right for any work for which payment is requested stating:

 

(i)                  the contractor, subcontractor, supplier or other claimant
waives conditionally any liens or right to lien with respect to any work for
which payment is being requested in that Application;

 

(ii)                the amount theretofore received by such contractor,
subcontractor or supplier;

 

(iii)              that the contract with the contractor, subcontractor or
supplier has not been changed, or, if the contract has been changed, indicating
the increase or decrease in the amount of the contract; and

 

(iv)               A list of the names and addresses of major subcontractors and
major suppliers of labor and materials used in connection with the work for
which payment is requested.

 

(d)                With respect to any work covered by the immediately preceding
Application, copies of sworn statements and unconditional lien waivers signed by
each contractor, subcontractor and supplier for whom such payment was made
stating:

 

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(i)                  that such contractor, subcontractor or material supplier
unconditionally waives any liens or right to lien with respect to work for which
payment has been received by such contractor, subcontractor and material
supplier;

 

(ii)                the amount theretofore received by such contractor,
subcontractor and material supplier; and

 

(iii)              that the contract with the contractor, subcontractor or
supplier has not been changed, or, if the contract has been changed, indicating
the increase or decrease in the amount of the contract.

 

6.2                Construction Payment. Within ten (10) calendar days of
receiving a complete Application, Landlord will pay to Tenant the amount
requested by Tenant in such Application (each such payment, a “Construction
Payment”), provided that the aggregate amount of the Construction Payments does
not exceed the Construction Contribution Amount. Notwithstanding the foregoing
or any provision herein to the contrary, Landlord may withhold any Construction
Payment, in whole or in part, upon the occurrence and continuation of any Tenant
Event of Default.

 

7.                   No Other Compensation. Tenant acknowledges that Landlord’s
agreement to enter into the Lease with Tenant and Landlord’s agreement to pay
the amounts required hereunder relating to the construction and completion of
the Development constitute the only compensation that Tenant is entitled to
receive for the services to be performed and the work to be completed by Tenant
pursuant to this Agreement. Other than the Construction Payments paid to Tenant
in accordance with the terms and conditions of this Agreement, Tenant shall not
be entitled to receive any payments, reimbursements or other compensation in
connection with the performance of its duties, responsibilities and obligations
under this Agreement. Furthermore, to the extent that the Development Costs
exceed the amount of the Construction Contribution Amount, Tenant shall be
solely responsible for all fees, costs and expenses incurred in connection with
the completion of the Development, including, without limitation, the following:
(a) all salaries, wages, compensation, bonuses and other benefits paid or
payable to any and all employees, representatives, consultants, independent
contractors and agents of Tenant; (b) rent and overhead for the offices of
Tenant; (c) telephone, telegraph, postage and utility charges incurred by
Tenant; (d) office supplies and materials of Tenant; and (e) any and all costs,
fees and expenses incurred by Tenant with respect to the purchase, lease,
maintenance and/or repair of any equipment, machines, furniture, fixtures and
other personal property of Tenant.

 

8.                   Authorized Excess Development Costs. In the event Tenant
incurs any Excess Development Costs without first obtaining Landlord’s prior
written approval, such expenses shall be deemed to constitute “Unauthorized
Excess Development Costs,” and Tenant shall be obligated to pay or otherwise
satisfy such Unauthorized Excess Development Costs. If Tenant has obtained
Landlord’s advanced written approval prior to incurring any Excess Development
Costs in accordance with the provisions of Section 4 hereof, such approved
expenses shall be deemed to constitute “Authorized Excess Development Costs,”
and Landlord agrees to authorize the payment of (and reimburse Tenant for) such
Authorized Excess Development Costs, subject to and in accordance with the terms
and conditions of Section 6 of this Agreement.

 

In the event Tenant incurs any Unauthorized Excess Development Costs, Tenant
hereby agrees to and shall indemnify, defend, hold harmless and protect Landlord
and the Land from and against any mechanic’s or materialmen’s liens, or other
liens, liabilities or encumbrances arising out of or in connection with any such
Unauthorized Excess Development Costs.

 

Tenant shall follow the procedures set forth in Section 6 of this Agreement with
respect to processing any Application for payment requests in connection with
securing the payment of: (i) any Budgeted Development Costs; and (ii) any
Authorized Excess Development Costs.

 

9.                   Term and Termination.

 

9.1                Term. The term of this Agreement (“Term”) shall commence on
the Effective Date and shall terminate on the earlier to occur of the following
events (each, a “Termination Event”):

 

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(i)                  The Completion Date, provided, however, that in the event
there are any items of work on any Punch-Lists to be performed subsequent to the
Completion Date, the Term of this Agreement shall be extended until such time as
the work to be performed pursuant to such Punch-Lists has been completed to the
reasonable satisfaction of the Landlord; or

 

(ii)                Upon the termination of the Lease.

 

9.2                Default by Tenant. The occurrence of one or more of the
following events shall constitute an event of default by Tenant under this
Agreement (“Tenant Event of Default”):

 

(i)                  The failure of Tenant to timely perform and satisfy any of
the material duties and obligations of Tenant under this Agreement and/or the
Development Plan and Budget; provided, however, Tenant shall not be deemed to be
in default of this Agreement if: (i) in the event the default is a monetary
default and Tenant cures such monetary default within ten (10) business days
after receipt of written notice from the Landlord of such monetary default; or
(ii) in the event the default is a non-monetary default and Tenant commences the
cure of such non-monetary default as soon as reasonably practicable following
written notice thereof from the Landlord and completes such cure within thirty
(30) calendar days after receipt of such written notice provided, however if
such non-monetary default cannot reasonably be cured within such thirty (30)
calendar day period, Tenant shall not be deemed to be in default of this
Agreement if Tenant commences to cure such non-monetary default within such
thirty (30) calendar day period, and thereafter diligently pursues the same to
completion; or

 

(ii)                The commission of any act of gross negligence, willful
misconduct, fraud, or intentional misrepresentation by Tenant, or any
executive-level employee of Tenant, in connection with the performance by Tenant
of its duties and obligations under this Agreement; or

 

(iii)              The occurrence of any Default by Tenant under the Lease.

 

Upon the occurrence of a Tenant Event of Default, Landlord and Tenant
acknowledge and agree that such Tenant Event of Default shall constitute a
Default by Tenant under the Lease and Landlord shall have all of the rights and
remedies afforded to Landlord upon the occurrence of a Default by Tenant under
the Lease, as well as any other rights and remedies afforded to Landlord at law
or in equity, including, without limitation, the right to seek specific
performance. Notwithstanding the foregoing, each of Landlord and Tenant hereby
waive the right to recover consequential, special or punitive damages under this
Agreement.

 

9.3                Procedure Upon Termination – Tenant Event of Default. Upon
the effective date of any termination of this Agreement by Landlord due to a
Tenant Event of Default, Landlord and Tenant hereby agree as follows:

 

(i)                  Tenant shall deliver to Landlord all notes, inspections,
documents, agendas, instruments, studies, reports, surveys, maps, working plans,
plans and specifications, correspondence, books and records, and all other
materials in Tenant’s possession or control relating to the Development,
including, without limitation, all original Project Agreements and Development
Approvals; and

 

(ii)                Tenant shall assign and transfer to Landlord all of Tenant’s
right, title and interest in and under to all Development Approvals and all
Project Agreements in connection with the Development.

 

9.4                Effect of Termination. The termination of this Agreement
shall not affect the rights of the terminating party with respect to any damages
it has suffered as a result of any breach of this Agreement by the other party,
nor shall it affect the rights of either party with respect to liability or
claims accrued, or arising out of, events occurring prior to the date of
termination. Neither the right of termination nor the right to sue for damages,
nor any other remedy available to either party hereunder, shall be exclusive of
any other remedy given hereunder or now or hereafter existing at law or in
equity.

 

9.5                Inspections by Landlord. Landlord shall have the right to
inspect the Development at any time that it may elect, subject only to
reasonable notice to Tenant and reasonable safety and security precautions which
Tenant may impose with respect to inspection of the Development. At any time
upon reasonable notice to Tenant, Landlord shall also have the right to inspect
the books and records of Tenant relating to the construction, development and
operation of the Development. To the extent that Landlord desires to copy books
and records or other information in the files of Tenant relating to any aspect
of the Development or Tenant’s performance hereunder, it may do so upon
reasonable notice during normal business hours.

 

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9.6                Indemnification.

 

(a)                 Indemnification by Tenant. Tenant hereby agrees to and shall
indemnify, defend and hold harmless Landlord and its Affiliates, and their
respective managers, members, partners, shareholders, officers, directors,
agents, employees, successors and assigns, from and against any and all claims,
demands, liabilities, causes of action, losses, costs, damages, expenses
(including reasonable attorneys’ fees) or judgments arising out of, or in
connection with, the following matters: (a) a default in the performance by
Tenant of any of the covenants, duties or obligations to be performed by Tenant
under this Agreement, including, without limitation, the occurrence of a Tenant
Event of Default; (b) the performance by Tenant of any acts in connection with
the Development or the Property outside the scope or the authority granted to
Tenant under this Agreement; or (c) any gross negligence, fraud or intentional
misconduct on the part of Tenant in connection with the performance, or any
attempted performance of its duties, responsibilities or obligations under this
Agreement; or (d) any negligence on the part of Tenant in connection with the
performance, or any attempted performance of its duties, responsibilities or
obligations under this Agreement to the extent such claims, demands,
liabilities, causes of action, losses, costs, damages, expenses (including
reasonable attorneys’ fees) or judgments are not otherwise paid or fully
satisfied from the proceeds of any of the insurance policies maintained by the
Parties hereunder.

 

(b)                Indemnification by Landlord. Landlord hereby agrees to and
shall indemnify, defend and hold harmless Tenant and its Affiliates, and their
respective managers, members, partners, shareholders, officers, directors,
agents, employees, successors and assigns, from and against any and all claims,
demands, liabilities, causes of action, losses, costs, damages, expenses
(including reasonable attorneys’ fees) or judgments arising out of, or in
connection with, the following matters: (a) a default in the performance by
Landlord of any of the covenants, duties or obligations to be performed by
Landlord under this Agreement, including, without limitation, the occurrence of
an Landlord Event of Default; (b) any gross negligence, fraud or intentional
misconduct on the part of Landlord in connection with the performance, or any
attempted performance of its duties, responsibilities or obligations under this
Agreement; or (d) any negligence on the part of Landlord in connection with the
performance, or any attempted performance of its duties, responsibilities or
obligations under this Agreement to the extent such claims, demands,
liabilities, causes of action, losses, costs, damages, expenses (including
reasonable attorneys’ fees) or judgments are not otherwise paid or fully
satisfied from the proceeds of any of the insurance policies maintained by the
Parties hereunder.

 

9.7                Default by Landlord. The occurrence of one or more of the
following events shall constitute an event of default by Landlord under this
Agreement (“Landlord Event of Default”):

 

(a)                 The failure of Landlord to timely perform and satisfy any of
the material duties and obligations of Landlord under this Agreement; provided,
however, Landlord shall not be deemed to be in default of this Agreement if: (i)
in the event the default is a monetary default and Landlord cures such monetary
default within ten (10) business days after receipt of written notice from the
Tenant of such monetary default; or (ii) in the event the default is a
non-monetary default and Landlord commences the cure of such non-monetary
default as soon as reasonably practicable following written notice thereof from
the Tenant and completes such cure within thirty (30) calendar days after
receipt of such written notice; provided, however if such non-monetary default
cannot reasonably be cured within such thirty (30) calendar day period, Landlord
shall not be deemed to be in default of this Agreement if Landlord commences to
cure such non-monetary default within such thirty (30) calendar day period, and
thereafter diligently pursues the same to completion; and

 

(b)                The commission of any act of gross negligence, willful
misconduct, fraud, or intentional misrepresentation, or any executive-level
employee of Landlord, in connection with the performance by Landlord of its
duties and obligations under this Agreement.

 

13

 

 

Upon the occurrence of a Landlord Event of Default, Landlord and Tenant
acknowledge and agree that such Landlord Event of Default shall constitute a
Default by Landlord under the Lease and Tenant shall have all of the rights and
remedies afforded to Tenant upon the occurrence of a Default by Landlord under
the Lease, as well as any other rights and remedies afforded to Tenant at law or
in equity, including, without limitation, the right to seek specific
performance.

 

10.                Insurance to Be Maintained by Tenant. During the Term of this
Agreement, Tenant shall, at Tenant’s sole cost and expense, obtain and keep in
full force and effect the following specified insurance:

 

10.1             Builder’s all-risk insurance covering the Improvements and all
materials stored on the Land, together with such endorsements as may be
reasonably required by Landlord.

 

10.2             Owner’s/Contractor’s protective liability insurance written on
a broad-based occurrence coverage form against claims for personal injury
(including bodily injury and death) and property damage, with a reasonably
acceptable deductible, with a combined single limit for bodily injury and
property damage of at least Two Million Dollars ($2,000,000) per occurrence.

 

10.3             Comprehensive or commercial general liability insurance written
on a broad-based occurrence coverage form against claims for personal injury
(including bodily injury and death) and property damage, with a reasonably
acceptable deductible, with a combined single limit for bodily injury and
property damage of at least Two Million Dollars ($2,000,000) per occurrence.

 

10.4             Owned, hired and non-owned automobile liability insurance on a
broad-based occurrence coverage form covering all use of all automobiles, trucks
and other motor vehicles utilized by Tenant and Tenant’s employees in connection
with this Agreement with a combined single limit for bodily injury and property
damage of at least One Million Dollars ($1,000,000) per occurrence.

 

10.5             Workers’ compensation insurance for Tenant’s employees to the
extent required by applicable law and such other insurance that is necessary in
connection with this Agreement that may be required by applicable law.

 

10.6             In the event specific insurance coverage is required under any
of the Project Agreements, the Tenant shall cause all insurance coverages
required under such Project Agreements to be obtained and maintained by the
appropriate parties under the Project Agreements in accordance with the terms
and conditions of such Project Agreements.

 

Landlord and any of its Affiliates designated by Landlord shall be included as
an additional insured under the coverage specified in Sections 10.1 and 10.2
hereof. The insurance provided in this Section is primary and any other
insurance maintained by such additional insured is non-contributing with the
insurance provided in this Section with respect to all claims or liabilities
arising out of or resulting from acts or omissions by or on behalf of the named
insured. Each of the applicable insurance policies shall be issued by such
companies authorized to do business in the State of Pennsylvania. As evidence of
the insurance coverage required pursuant to this Section, Landlord will accept
certificates issued by Tenant’s insurance carrier, acceptable to Landlord,
showing such policies are in full force and effect for the specified period, but
Landlord has the right to review certified policies as reasonably necessary.
Such evidence shall be delivered to Landlord promptly upon execution of this
Agreement. Each policy and certificate shall be subject to Landlord’s reasonable
approval and shall provide that such policy shall not be subject to material
alteration to the detriment of Landlord or Tenant or cancellation without thirty
(30) calendar days’ notice in writing to be delivered by certified mail to
Landlord. Should any such policy of insurance expire or be canceled before the
expiration of this Agreement and Tenant fails to immediately replace such other
insurance as specified, Landlord reserves the right, but shall have no
obligation, to procure such insurance at Tenant’s sole cost and expense.

 

In addition to the insurance required to be maintained by Tenant pursuant to
this Section 10, Tenant shall be responsible for requiring all of the
contractors and subcontractors doing construction work relating to the
Development to purchase and maintain such insurance in conformance to the
requirements set forth on Exhibit D attached hereto and incorporated herein by
reference. Tenant shall also allow Landlord to inspect such evidence of
insurance as Tenant obtains it from such contractors and subcontractors.

 

14

 

 

11.                Arbitration Procedure. In the event there is a dispute with
respect to Landlord’s obligation to fund any Construction Payment to Tenant
pursuant to Section 6.2, such dispute shall be resolved in accordance with this
Section 11. For the avoidance of doubt, neither party shall be relieved of its
obligations under this Agreement or the Lease during the pendency of any
arbitration proceeding conducted pursuant to this Section.

 

11.1             Initial Meeting. If there is a claim, dispute, or other matter
in question between Landlord and Tenant arising out of, or relating to,
Landlord’s obligation to make a Construction Payment to Tenant under this
Agreement (each, a “Disbursement Claim”), either party may give the other party
written notice thereof and representatives of the parties (with or without
accompanying legal counsel) shall meet in person or via telephone conference (an
“Initial Meeting”) at a mutually agreed upon date and time (and location, if in
person) within two (2) business days after the date of such notice. Each party’s
representative attending the Initial Meeting shall have plenary authority to
resolve the Disbursement Claim and shall attempt in good faith to resolve the
Disbursement Claim in a mutually agreed upon manner at the Initial Meeting. If
such Initial Meeting does not result in a mutually agreed upon resolution of the
Disbursement Claim, then the parties’ only options shall be to either (i) waive
the applicable Disbursement Claim, or (ii) pursue binding arbitration of the
Disbursement Claim, as provided below. If a party does not initiate the binding
arbitration procedure as provided for below, then such party shall be deemed to
have waived the applicable Disbursement Claim (subject, however, to a party’s
right to assert any appropriate counterclaims in the arbitration procedure if
the other party does in fact commence the binding arbitration procedure as
provided below).

 

11.2             Notice of Demand. No later than three (3) business days after
the Initial Meeting, the complaining party may file a notice of demand for
arbitration (the “Notice of Demand”) with the Regional Office of the American
Arbitration Association (the “AAA”) nearest to the location of the Property and
simultaneously give notice of such filing with a copy of the Notice of Demand to
the other party. The Notice of Demand shall set forth the nature of the
Disbursement Claim including the relief sought and the amount at issue.

 

11.3             Arbitrators. The parties shall use a panel of three (3)
arbitrators to resolve the Disbursement Claim (the “Panel”). All arbitrators
shall (A) be certified by the AAA, (B) have at least ten (10) years of
experience in construction arbitration, (C) be independent and unrelated in
business or otherwise to the parties, and (D) have demonstrated a continuing
commitment to arbitration education and training.

 

11.4             Selection of Arbitrator(s). The Panel shall consist of one (1)
architect, engineer, licensed attorney, or former judge (the “Architect
Arbitrator”), one (1) general contractor, construction manager, licensed
attorney, or former judge (the “Contractor Arbitrator”), and one (1) licensed
attorney or former judge (the “Attorney Arbitrator”). The Attorney Arbitrator
shall act as the chairperson of the Panel. The parties shall attempt to mutually
agree upon the composition of the entire Panel. If the parties are unable to
agree upon the composition of the entire Panel within three (3) business days
after delivery of the Notice of Demand, the parties shall thereafter have two
(2) business days to propose the arbitrators as follows. Tenant shall select the
Contractor Arbitrator and the Landlord shall select the Architect Arbitrator.
The two party-appointed arbitrators shall select the Attorney Arbitrator as the
third arbitrator within two (2) business days thereafter. If any arbitrators
required to be selected are not selected within the foregoing time periods for
any reason whatsoever, the AAA shall select the applicable arbitrator(s) as soon
as reasonably possible.

 

11.5             Answer / Counterclaims. Within five (5) business days after
receipt of the Notice of Demand, the other party shall deliver to the Panel an
answering statement. If no answering statement is filed within the stated time,
the respondent will be deemed to deny the claims in the Notice of Demand (and
shall be deemed to have waived the right to assert any counterclaims). Failure
to file an answering statement shall not operate to delay the arbitration.

 

11.6             Joinder of Parties. Any arbitration may include by
consolidation, joinder, or otherwise, any person or entity not a party to this
Agreement if it is shown at the time the Notice of Demand is filed that (A) such
person or entity is substantially involved in a common question of fact or law,
(B) the presence of such person or entity is required if complete relief is to
be afforded in the arbitration, and (C) the interest or responsibility of such
person or entity in the matter is substantial; and such person or entity
consents to such consolidation or joinder. All Disbursement Claims alleged
within the same Notice of Demand shall be heard by the same Panel in the same
arbitration.

 

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11.7             Location. The arbitration hearing shall take place in the
Boston, MA area at a specific location mutually agreed to by Landlord and
Tenant.

 

11.8             Brief. At least five (5) business days before the arbitration
hearing, each party shall prepare and submit to the other party and the
arbitrator(s) a brief or memorandum not to exceed five (5) pages discussing the
issues, facts, applicable law and/or contract provisions and their position on
the applicable Disbursement Claims together with a copy of any documents (or
pertinent part thereof) referenced therein, except that any statutes or judicial
decisions may simply be cited without attaching a copy. Each party’s brief
should also specify any witnesses or documents it wishes to subpoena for the
hearing.

 

11.9             Hearing.

 

(a)                 At the hearing, the claimant shall present evidence to
support the applicable Disbursement Claim(s). The respondent shall then present
evidence supporting its defense. Witnesses for each party shall also submit to
questions from the arbitrator and the adverse party. Each party shall have the
opportunity to question and review subpoenaed documents and witnesses based on
its brief or memorandum submitted under Section 11.8, above. The arbitrator has
the discretion to vary this procedure, provided that the parties are treated
with equality and that each party has the right to be heard and is given a fair
opportunity to present its case. Evidence shall be permitted in accordance with
the current AAA Construction Industry Arbitration Rules (the “AAA Rules”).

 

(b)                The arbitrator, exercising his or her discretion, shall
conduct the proceedings with a view toward expediting the resolution of the
dispute and may direct the order of proof, bifurcate proceedings, and direct the
parties to focus their presentations on issues the decision of which could
dispose of all or part of the case.

 

(c)                 When deemed appropriate, the arbitrator may also allow for
the presentation of evidence by alternative means including video conferencing,
internet communication, telephonic conferences and means other than an in-person
presentation. Such alternative means must still afford a full opportunity for
all parties to present any evidence that the arbitrator deems material and
relevant to the resolution of the dispute and when involving witnesses, provide
an opportunity for cross-examination.

 

(d)                The parties may mutually agree to waive oral hearings in any
case.

 

11.10         Written Opinion. The arbitrators shall render a written reasoned
opinion regarding their decision (the “Final Arbitration Decision”) with respect
to the applicable Disbursement Claims as soon as practicable after conclusion of
the arbitration hearing, but in no event later than five (5) business days after
conclusion of the arbitration hearing. The Final Arbitration Decision shall be
limited to whether or not Landlord breached its obligation to fund any
Construction Payments that are the subject of the Disbursement Claims and any
resulting damages, including reimbursement of attorneys’ fees, awarded by the
arbitrators to the prevailing party; provided that, in rendering such Final
Arbitration Decision, the arbitrators shall take into account the remedies
afforded to each party in the event of a default by the other party under the
Lease so as to avoid either party having the right to recover amounts, directly
or indirectly, in excess of the total damages awarded to such party pursuant to
the Final Arbitration Decision, including, without limitation, any adjustment to
Base Rent (as defined in the Lease) pursuant to Section 5.2.3 of the Lease. Any
such Construction Payment amounts required by be funded by Landlord pursuant to
the Final Arbitration Decision are referred to in the Lease as “Required
Arbitration Construction Payments.” Furthermore, the parties acknowledge and
agree that the Final Arbitration Decision shall not be deemed or construed so as
to imply that Landlord has granted its consent, approval or authorization to the
construction of any Improvements under this Agreement or the Lease or to any
other matters requiring Landlord’s consent.

 

16

 

 

11.11         Fees and Expenses for Arbitration. The arbitrators shall be
authorized and directed to award the substantially prevailing party in the
arbitration with reimbursement of its arbitration and reasonable attorney’s
fees, costs, and expenses. The arbitrators shall select the substantially
prevailing part in their reasonable discretion.

 

11.12         Final and Binding. In accordance with the Federal Arbitration Act,
the agreement to arbitrate in this Section 11 shall be final and incontestably
binding upon the parties, and judgment may be entered in any court having
jurisdiction.

 

11.13         Confidentiality. The parties (including the arbitrators) shall
keep confidential and not disclose to third-parties the existence or outcome of
any arbitration proceedings, except to the extent that disclosure is required by
government authorities or under applicable law, or as necessary to preserve or
pursue a claim for reimbursement, contribution, or indemnity against a
third-party, or to preserve or pursue an insurance claim.

 

12.                Miscellaneous.

 

12.1             Notices. Any notice, request, demand, statement, authorization,
approval, consent or other communication required or permitted under this
Agreement shall be in writing and shall be delivered in accordance with the
notice provisions set forth in Section 31 of the Lease.

 

12.2             Entire Agreement. This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter covered by this
Agreement. This Agreement supersedes all previous representations, arrangements,
understandings and agreements by and between the Parties and/or their
Affiliates, with respect to the subject matter covered by this Agreement, and
any such representations, arrangements, understandings and agreements (other
than this Agreement) are hereby cancelled and terminated in all respects. This
Agreement may not be amended, changed or modified except by a writing duly
executed by both of the Parties hereto.

 

12.3             Severability. If any provision of this Agreement, or any
portion of any such provision, is held to be unenforceable or invalid, the
remaining provisions and portions shall nevertheless be carried into effect.

 

12.4             Remedies. All rights and remedies of the Parties are separate
and cumulative, and no one of them, whether exercised or not, shall be deemed to
be to the exclusion of or to limit or prejudice any other legal or equitable
rights or remedies which the Parties may have. The Parties shall not be deemed
to waive any of their rights or remedies under this Agreement or otherwise
unless such waiver is in writing and signed by the party to be bound. No delay
or omission on the part of either party in exercising any right or remedy shall
operate as a waiver of such right or remedy or any other right or remedy. A
waiver on any one occasion shall not be construed as a bar to a waiver of any
right or remedy on any future occasion.

 

12.5             Headings. The headings contained in this Agreement are for
convenience only and are not a part of this Agreement, and do not in any way
interpret, limit or amplify the scope, extent or intent of this Agreement, or
any of the provisions of this Agreement.

 

12.6             Assignment and Binding Effect. Neither Party may assign its
rights or obligations under this Agreement, in whole or in part, without the
written consent of the other Party. This Agreement shall be binding upon and
inure to the benefit of Landlord and Tenant and, subject to the foregoing
limitations, their respective successors and assigns.

 

12.7             Incorporated by Reference. The Exhibits referred to in and
attached to this Agreement are incorporated herein by reference.

 

12.8             Survival. Each provision of this Agreement which establishes
rights and/or obligations which are intended to be enforceable after termination
of this Agreement (including, without limitation, Sections 9.4 and 9.6) shall
survive the termination of this Agreement and shall be binding upon the Parties
for such period of time as may reasonably be required to give full effect to the
intended application thereof.

 

17

 

 

12.9             Capacity to Sign. All of the parties covenant that they possess
all necessary capacity and authority to sign and enter into this Agreement. All
individuals signing this Agreement for a party that is a corporation, a limited
liability company, a partnership or other legal entity, covenant that they have
the necessary capacity, authority and power to act on behalf of, sign for and
bind the respective entity on whose behalf they are signing.

 

12.10         Attorneys’ Fees. In the event any action is initiated for any
breach or default in any of the terms or conditions of this Agreement, then the
party in whose favor judgment shall be entered shall be entitled to have and
recover from the non-prevailing party all costs and expenses (including
attorneys’ fees) incurred in such action and any appeal therefrom.

 

12.11         Governing Law and Adjudication. This Agreement shall be governed
by and interpreted in accordance with the laws (other than that body of law
relating to conflicts of law) of the State of Pennsylvania.

 

12.12         Further Assurances. Landlord and Tenant shall reasonably cooperate
and execute such other documents and instruments reasonably requested by the
other Party to more clearly evidence or carry out the provisions of this
Agreement. Each Party shall cooperate with the other as reasonably appropriate
to facilitate performance by the other Party of its obligations under this
Agreement.

 

12.13         Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original, but all of which together shall
constitute one and the same agreement.

 

12.14         Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF LANDLORD AND TENANT HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY
CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR
IN ANY WAY PERTAINING OR RELATING TO THIS CONTRACT OR IN ANY WAY CONNECTED WITH
OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES HERETO
WITH RESPECT TO THIS CONTRACT OR IN CONNECTION WITH THE TRANSACTIONS RELATED
HERETO OR CONTEMPLATED HEREBY OR THE EXERCISE OF ANY PARTY’S RIGHTS AND REMEDIES
HEREUNDER, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH OF LANDLORD
AND TENANT MAY FILE A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF
THE KNOWING, VOLUNTARY AND BARGAINED AGREEMENT OF THE OTHER PARTY TO WAIVE ITS
RIGHT TO TRIAL BY JURY, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY
DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN LANDLORD AND TENANT SHALL INSTEAD BE
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

12.15         Venue. EACH PARTY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE
STATE COURTS SITUATED IN OR HAVING JURISDICTION OVER THE COUNTY OF LACKAWANNA,
PENNSYLVANIA IN ANY ACTION THAT MAY BE BROUGHT FOR THE ENFORCEMENT OF THIS
AGREEMENT (WITH THE EXPRESS AGREEMENT THAT NO ACTION MAY BE BROUGHT IN FEDERAL
COURT RELATING IN ANY WAY TO THIS AGREEMENT).

 

[Signature Page Follows]

 

18

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.

 

  LANDLORD:       IIP- PA 4 LLC, a Delaware limited liability company       By:
/s/ Brian Wolfe     Name:   Brian Wolfe   Title: Vice President, General Counsel
and Secretary           TENANT:       PHARMACANN PENN PLANT LLC, a Pennsylvania
limited liability company       By: /s/ Brett Novey     Name:   Brett Novey  
Title: Authorized Signatory

 

The undersigned hereby executes this agreement to guaranty the payment
obligations of the Landlord under this Agreement.

 

  PARENT COMPANY:       IIP OPERATING PARTNERSHIP, LP       By: /s/ Brian Wolfe
    Name:   Brian Wolfe   Title: Vice President, General Counsel and Secretary

 

[Signature Page to Development Agreement]

 

19

 

 

EXHIBIT A

 

LEGAL DESCRIPTION OF LAND

 

ALL that certain piece or parcel of land situate in the Township of Scott,
County of Lackawanna, and Commonwealth of Pennsylvania bounded and described as
follows to wit:

 

BEING Lot 4 as shown on plan entitled "LOT LINE CHANGE WITHIN SCOTT TECHNOLOGY
PARK PHASE II/ LOTS- #4 AND #11 PROPOSED LOT LINES" recorded in Map Book 6A,
Page 9481, being more particularly described as follows, to-wit:

 

BEGINNING at a found 5/8" rebar on the southwesterly right-of-way line of Life
Science Drive marking a common corner of Lot 4 and Lot 3, described as per a
survey performed by Engineering Surveying Consultants & Design Inc., on November
7, 2018;

 

THENCE along said common line of the above mentioned Lot 4 and Lot 3 South
44'58'01" West six hundred two and seventy-nine hundredths (602.79') feet to a
found 5/8" iron pin at the Intersection of a stone row;

 

THENCE along lands now or formerly of Virginia Wetherbee (DB 487 PG 751) and
John J. Wasko (DB 1553 PG 666) North 48'40'54" West eleven hundred seventy-one
and five tenths (1171.50') feet to a point, passing a set 5/8" rebar at eight
hundred eighty-six and fifteen hundredths (886.15') feet;

 

THENCE along lands now or formerly of John J. Wasko (DB 1553 PG 666) and Lisa
Tizzoni (Instr.# 2006-34752) North 41'31'06" West six hundred sixty-nine and
sixty-six hundredths (669.66') feet to the corner of Lot 11 as shown on the
above referenced plan;

 

THENCE along said Lot 11 and Lands now or formerly of Baldoni Investment Group,
LLC (Instr.# 2015-12077) South 48'52'06" East eleven hundred forty-one and
ninety-seven hundredths (1141.97') feet to a found 5/8" rebar on the
southwesterly right of way line of Life Science Drive, passing a set 5/8" rebar
at two hundred thirty-four and thirty-five hundredths (234.35') feet and a found
5/8" rebar at seven hundred twenty-four and thirteen hundredths (724.13') feet;

 

THENCE along said right of way line South 41'01'05" West two and eighteen
hundredths (2.18') feet to a point of curvature;

 

THENCE continuing along said right of way line, along a curve to the left having
a radius of seventy (70') feet and an arc length of one hundred five and
twenty-seven hundredths feet (Chord: South 01'57'02 East 95.63') feet to the
point of BEGINNING.

 

CONTAINING 18.287 acres, of land being the same, more or less. BEING ALL of Lot
4 as shown on the above referenced plan;

 

BEING PART of lands conveyed to Pharmacann Penn Plant, LLC by Scranton
Lackawanna Industrial Building Company by deed dated December 10, 2018,
effective December 12, 2018 recorded December 14, 2018 as Instrument No.
201820014 in the Office of the Recorder of Deeds in Lackawanna County,
Pennsylvania;

 

BEING PART of PIN Number 071.04-010-004.03

 

B-1

 

 

EXHIBIT B

 

DEPICTION OF IMPROVEMENTS

 

(see attached) 

 

2

 

 

[tv527253_ex10-2img01.jpg] 

 

   

 

 

EXHIBIT C

 

DEVELOPMENT PLAN AND BUDGET

 

(see attached)

 

C-1

 

 

[tv527253_ex10-2img02.jpg] 

 

   

 

 [tv527253_ex10-2img03.jpg]

Budget Scott Township, PA 22,576 sf PEMB 30,704 sf Greenhouse Code Description
08/01/19 Scope Budget Target Variance Target Budget Summary $1,953,860 $1,298
$1,955,158 1 PharmaCann Soft Costs Not Included 2 PharmaCann FFE & Equipment
Costs $26,920,977 $(4,267,090) $22,653,887 3 Construction Costs Not Included 4
Temporary Grow $28,874,837 $(4,265,792) $24,609,045 5 $3,320,606 $- $3,320,606 6
Owner's Project Contingency $32,195,443 $(4,265,792) $27,929,651 Add Alternates
(Future) 1 Program Changes Contingency $1,000,000 $- $1,000,000 $1,000,000 $-
$1,000,000 Soft Costs PharmaCann Costs Design Costs 1 Civil - GPI $81,630 $-
$81,630 2 Architect - Envision (Contract Fixed Fee) $140,000 $- $140,000 3
Architect - Envision (Additional Services - Redesign) $- $25,000 $25,000 4
Architect - Envision (Hourly) $- $26,298 $26,298 5 Wetlands Delineation - GPI
$17,800 $- $17,800 6 Structural - GPI $42,550 $- $42,550 7 MEP - ME $115,000 $-
$115,000 8 Design Costs Total $396,980 $51,298 $448,278 AHJ Fees 1 Permits
$25,000 $- $25,000 Real Estate 1 Land Purchase $925,000 $- $925,000 2 Clearing
$175,000 $- $175,000 Misc Fees 1 Utility Fees $50,000 $- $50,000 2 Geotechnical
Services - GeoScience Engineering $16,880 $- $16,880 3 Special Inspector -
during construction $- $- $- 4 Builders Control - Escrow $- $- $- 5 Legal,
Project Mgmt, Commissioning $365,000 $(50,000) $315,000 $1,953,860 $1,298
$1,955,158 Page 1 of 2 UPDATED: 08/01/19

   

 

 

[tv527253_ex10-2img04.jpg]

Budget Scott Township, PA 22,576 sf PEMB 30,704 sf Greenhouse Code Description
08/01/19 Scope Budget Target Variance Target Budget FFE PharmaCann Costs Vendor
/ Supplier Costs 1 Interior Signage $- $- $- 2 Exterior Signage $25,000 $-
$25,000 3 Security / Access Control Design-Build $800,000 $- $800,000 4
Furniture - Office, Desk, Tables $87,500 $- $87,500 5 Equipment - Processing
$2,200,000 $(1,000,000) $1,200,000 6 IT - Equipment, Install, Servers $100,000
$- $100,000 $3,212,500 $(1,000,000) $2,212,500 Hard Costs 1 Sitework (SW)
$3,500,000 $- 2 Headhouse (HH) $11,130,000 $- 3 Reduction Based on Accel Bidding
(1) incl in SW/HH above $- 4 Premium for MBE/ WBE/ DBE Participation (2) $- $- 5
Eliminate GH Mezzanine (3) incl in GH below $- 6 Flooring - Alternate Material
to Stonhard (4) incl in HH above $(251,080) 7 Flooring - Eliminate Areas
Receiving Stonhard (5) incl in HH above $(176,253) 8 Reduce Quantity and Height
of FRP (6) incl in HH above $(14,000) 9 Reduce Scope of Hard Ceilings (7) incl
in HH above $(25,000) 10 Eliminate Color Band in Rooms (8) incl in HH above
$(10,000) 11 Reduce Size of Boiler Building & Future Enabling (9) incl in SW/HH
above $- 12 Eliminate Security Fence (10) incl in SW above $(300,000) 13 Toilet
Room Fixture (manufacturer & style) (11) incl in HH above $- 14 Reduce Interior
Build-Out (Shell Space for Future) (12) incl in HH above $(47,680) 15 Generator
Costs (13) incl in HH above $- 16 Reduced Scope of Grow Lights in GH (14) incl
in GL below $- 17 18 SUB-TOTAL $14,630,000 $(824,013) 19 Greenhouse (GH) (15)
(16) $10,033,354 $(2,862,894) 20 SUBTOTAL $24,663,354 $(3,686,907) $20,976,447
21 Grow Lights (GL) $1,024,455 $(290,955) 22 4.5% Construction Contingency
$1,233,168 $(289,228) $26,920,977 $(4,267,090) $22,653,887 Temporary Grow 1
Temporary Grow Facility $2,100,000 $- $2,100,000 $2,100,000 $- $2,100,000
PharmaCann Contingency 1 7.0% PharmaCann Project Contingency $2,021,239
$2,021,239 2 4.5% Pre-Construction Bidding Contingency $1,299,368 $1,299,368
$3,320,606 $- $3,320,606 Page 2 of 2 UPDATED: 08/01/19

   

 

 

EXHIBIT D

 

INSURANCE SCHEDULE

 

Tenant shall be responsible for requiring all of Tenant contractors doing
construction or renovation work to purchase and maintain such insurance as shall
protect it from the claims set forth below which may arise out of or result from
any work performed in connection with the Development, whether such work is
completed by Tenant or by any contractors or by any person directly or
indirectly employed by Tenant or by any person for whose acts Tenant or any
contractors may be liable:

 

1.       Claims under workers’ compensation, disability benefit and other
similar employee benefit acts which are applicable to the work to be performed.

 

2.       Claims for damages because of bodily injury, occupational sickness or
disease, or death of employees under any applicable employer’s liability law.

 

3.       Claims for damages because of bodily injury, or death of any person
other than Tenant’s employees or any contractors’ employees.

 

4.       Claims for damages insured by usual personal injury liability coverage
which are sustained (a) by any person as a result of an offense directly or
indirectly related to the employment of such person by Tenant or any contractors
or (b) by any other person.

 

5.       Claims for damages, other than for the work itself, because of injury
to or destruction of tangible property, including loss of use therefrom.

 

6.       Claims for damages because of bodily injury or death of any person or
property damage arising out of the ownership, maintenance or use of any motor
vehicle.

 

Each contractor’s Commercial General, Automobile, Employers and Umbrella
Liability Insurance shall be written for not less than limits of liability as
follows:

 

a.       Commercial General Liability:

Bodily Injury and Property Damage

 

 

Commercially reasonable amounts, but in any event no less than $1,000,000 per
occurrence and $2,000,000 general aggregate, with $2,000,000 products and
completed operations aggregate.

 

 

b.       Commercial Automobile Liability:

Bodily Injury and Property Damage

 

$1,000,000 per accident

c.       Employer’s Liability:

Each Accident

Disease – Policy Limit

Disease – Each Employee

 

 

 

$500,000

$500,000

$500,000

 

d.       Umbrella Liability:

Bodily Injury and Property Damage

Commercially reasonable amounts (excess of coverages a, b and c above), but in
any event no less than $5,000,000 per occurrence / aggregate.

 

D-1

 

 

All subcontractors shall carry the same coverages and limits as specified above,
unless different limits are reasonably approved by Landlord. The foregoing
policies shall contain a provision that coverages afforded under the policies
shall not be canceled or not renewed until at least thirty (30) days’ prior
written notice has been given to Landlord. Certificates of insurance including
required endorsements showing such coverages to be in force shall be filed with
Landlord prior to the commencement of any work by such contractor or
subcontractor and prior to each renewal. Coverage for completed operations must
be maintained for the lesser of ten (10) years and the applicable statue of
repose following completion of the Improvements, and certificates evidencing
this coverage must be provided to Landlord. The minimum A.M. Best’s rating of
each insurer shall be A- VII. Landlord shall be named as an additional insured
under each contractor’s Commercial General Liability, Commercial Automobile
Liability and Umbrella Liability Insurance policies as respects liability
arising from work or operations performed, or ownership, maintenance or use of
autos, by or on behalf of such contractor. Each contractor and its insurers
shall provide waivers of subrogation with respect to any claims covered or that
should have been covered by valid and collectible insurance, including any
deductibles or self-insurance maintained thereunder.

 

2