UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Corporate Office Properties Trust
- - --------------------------------------------------------------------------------
(Name of Issuer)
Common Shares of Beneficial Interest
(par value $0.01 per share)
Series A Convertible Preferred Shares of Beneficial Interest
(par value $0.01 per share)
- - --------------------------------------------------------------------------------
(Title of Class of Securities)
22002T108
- - --------------------------------------------------------------------------------
(CUSIP Number)
Dan R. Skowronski
General Counsel and Secretary
Constellation Properties, Inc.
250 W. Pratt Street, 23rd Floor
Baltimore, Maryland 21201-2423
(410) 783-2814
- - --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 28, 1998
- - --------------------------------------------------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement of Schedule 13G to report
the acquisition which is the subject of the Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
page 1 of 15
<PAGE>
CUSIP No. 22002T108
- - --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Baltimore Gas and Electric Company
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 52-0280210
- - --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- - --------------------------------------------------------------------------------
3 SEC USE ONLY
- - --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- - --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- - --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
- - --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 6,182,634*
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0*
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 6,182,634*
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0*
- - --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,182,634*
- - --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- - --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.8%
- - --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- - --------------------------------------------------------------------------------
* Common Shares of Beneficial Interest of the Issuer
Represents Common Shares held by Constellation Properties, Inc.
Page 2 of 15
<PAGE>
CUSIP No. 22002T108
- - --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Baltimore Gas and Electric Company
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 52-0280210
- - --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- - --------------------------------------------------------------------------------
3 SEC USE ONLY
- - --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- - --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- - --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
- - --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 865,566*
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0*
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 865,566*
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0*
- - --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
865,566*
- - --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- - --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
100%
- - --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- - --------------------------------------------------------------------------------
* Series A Convertible Preferred Shares of Beneficial Interest of the Issuer
Represents Series A Convertible Preferred Shares held by Constellation
Properties, Inc.
Page 3 of 15
<PAGE>
CUSIP No. 22002T108
- - --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Constellation Enterprises, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 52-2080643
- - --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- - --------------------------------------------------------------------------------
3 SEC USE ONLY
- - --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- - --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- - --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
- - --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 6,182,634*
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0*
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 6,182,634*
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0*
- - --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,182,634*
- - --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- - --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.8%
- - --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- - --------------------------------------------------------------------------------
* Common Shares of Beneficial Interest of the Issuer
Represents Common Shares held by Constellation Properties, Inc.
Page 4 of 15
<PAGE>
CUSIP No. 22002T108
- - --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Constellation Enterprises, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 52-2080643
- - --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- - --------------------------------------------------------------------------------
3 SEC USE ONLY
- - --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- - --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- - --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
- - --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 865,566*
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0*
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 865,566*
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0*
- - --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
865,566*
- - --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- - --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
100%
- - --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- - --------------------------------------------------------------------------------
* Series A Convertible Preferred Shares of Beneficial Interest of the Issuer
Represents Series A Convertible Preferred Shares held by Constellation
Properties, Inc.
Page 5 of 15
<PAGE>
CUSIP No. 22002T108
- - --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Constellation Properties, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 52-1237835
- - --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- - --------------------------------------------------------------------------------
3 SEC USE ONLY
- - --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- - --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- - --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
- - --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 6,182,634*
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0*
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 6,182,634*
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0*
- - --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,182,634*
- - --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- - --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.8%
- - --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- - --------------------------------------------------------------------------------
* Common Shares of Beneficial Interest of the Issuer
Page 6 of 15
<PAGE>
CUSIP No. 22002T108
- - --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON: Constellation Properties, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 52-1237835
- - --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- - --------------------------------------------------------------------------------
3 SEC USE ONLY
- - --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- - --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
- - --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
- - --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 865,566*
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0*
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 865,566*
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0*
- - --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
865,566*
- - --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- - --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
100%
- - --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- - --------------------------------------------------------------------------------
* Series A Convertible Preferred Shares of Beneficial Interest of the Issuer
Page 7 of 15
<PAGE>
Item 1. Security and Issuer.
This statement on Schedule 13D relates to Common Shares of Beneficial
Interest, par value $0.01 per share (the "Common Shares"), of Corporate Office
Properties Trust, a Maryland real estate investment trust (the "Issuer"), and
Series A Convertible Preferred Shares of Beneficial Interest, par value $0.01
per share (the "Preferred Shares"), of the Issuer. The Issuer has its principal
executive offices at One Logan Square, Suite 1105, Philadelphia, Pennsylvania
19103.
Item 2. Identity and Background.
This statement on Schedule 13D is being filed on behalf of Baltimore
Gas and Electric Company ("BGE"), Constellation Enterprises, Inc. ("CEI") and
Constellation Properties, Inc. ("CPI") (collectively, the "Reporting Persons").
BGE is a Maryland corporation and has its principal business and executive
offices at 39 West Lexington Street, Baltimore, Maryland 21201. BGE is primarily
engaged in the gas and electric utility business. The Common Shares and the
Preferred Shares are owned of record by CPI, which is a wholly owned subsidiary
of Constellation Real Estate Group, Inc. ("CREG"), which is a wholly owned
subsidiary of Constellation Holdings, Inc. ("CHI"), which is a wholly owned
subsidiary of CEI, which is a wholly owned subsidiary of BGE. Each of CPI, CREG,
CHI and CEI is a Maryland corporation and has its principal executive and
business offices at 250 West Pratt Street, Baltimore, Maryland 21201-2423.
None of the Reporting Persons have, during the last five years, (i)
been convicted in a criminal proceeding (excluding minor traffic violations or
similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction a result of which it was or is
subject to a judgment, decree or final order enjoining future violations of,. or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violations with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
CPI, acquired the securities of the Issuer pursuant to (i) the
Contribution Agreement (the "Contribution Agreement") dated as of May 14, 1998,
by and among the entities listed as sellers therein and Corporate Office
Properties, L.P. and the Issuer, as amended on July 16, 1998 and September 28,
1998; and (ii) the Service Company Asset Contribution Agreement (the "Asset
Contribution Agreement") dated May 14, 1998, by and among Constellation Real
Estate, Inc., KMS Oldco, Inc., CREG, Corporate Office Properties, L.P. and the
Issuer. BGE, through its subsidiaries, contributed real property, interests in
entities that own real property and a mortgage, and other assets to the Issuer
in exchange for cash, assumption of $59.6 million of indebtedness, 6,182,634
Common Shares and 865,566 Preferred Shares of the Issuer. The Preferred Shares
do not entitle the holder thereof to any vote, except (i) as required by
applicable law, (ii) in connection with an amendment to the Issuer's Declaration
of Trust that would amend, alter or repeal any of the rights, preferences or
powers of the Preferred Shares or (iii) the right to designate up to two members
of the Board of Trustees as described below. The Preferred Shares are
convertible, beginning two years after the closing of the transactions
contemplated by the Contribution Agreement and the Asset Contribution Agreement
(the "Transaction"), into Common Shares on the basis of 1.8748 Common Shares for
Page 8 of 15
<PAGE>
each Preferred Share, subject to adjustment upon certain events, in accordance
with the terms and provisions of the Articles Supplementary of the Issuer
relating to such Preferred Shares filed with the State Department of Assessments
and Taxation of Maryland.
Item 4. Purpose of Transaction.
CPI, acquired the securities of the Issuer as an investment and in
consideration of the assets transferred to the Issuer as described in Item 3
above. After the closing of the Transaction, the Issuer expanded its Board of
Trustees from seven to nine, and the Issuer elected thereto Edward A. Crooke,
Chairman of Constellation Enterprises, Inc. and Vice Chairman of BGE, and Steven
D. Kesler, President of Constellation Investments, Inc., each of whom were
designated by CPI in accordance with its rights as the holder of Preferred
Shares. Mr. Crooke is a Class III Trustee whose term expires in 2001, and Mr.
Kesler is a Class II Trustee whose term expires in 2000. If any member of the
Board of Trustees designated by CPI withdraws for any reason, CPI will have the
right to designate such withdrawing Trustee's replacement. Thereafter, CPI will
be entitled to designate two Trustees as long as it owns any Preferred Shares
and at least 30% of the Issuer's outstanding Common Shares, and will be entitled
to designate one Trustee as long as it owns any Preferred Shares and less than
30% but more than 15% of the outstanding Common Shares. The foregoing
calculations include as outstanding the Common Shares owned by CPI as well as
the Common Shares issuable upon conversion of Preferred Shares owned by CPI.
Moreover, if the Issuer fails at any time or from time to time to pay when due
two consecutive quarterly dividend payments on the Preferred Shares, then the
holders of the Preferred Shares will be entitled to elect two additional members
to the Board of Trustees of the Issuer to serve until all accrued and unpaid
dividends on the Preferred Shares have been paid in full.
The Issuer has granted registration rights with regard to the Common
Shares to CPI in exchange for the consideration described in Item 3 above,
pursuant to the Registration Rights Agreement dated September 28, 1998, by the
Issuer and certain persons named therein. Within six months after the closing of
the Transaction, the Issuer is obligated to file a shelf registration statement
with regard to the Common Shares issued in the Transaction, as well as the
Common Shares issuable upon conversion of the Preferred Shares (the "Registrable
Securities"). The Issuer is also required, at the demand of holders of 10% or
more of the Registrable Securities, to register such holders' Registrable
Securities, subject to the right to defer the filing of the necessary
registration statement for a period not to exceed 90 days under certain limited
circumstances. In addition, the Issuer has granted the holders of the
Registrable Securities "piggy-back" rights.
After the closing of the Transaction, Jay H. Shidler remains as
Chairman and Clay W. Hamlin, III remains as Chief Executive Officer of the
Issuer. Randall M. Griffin, formerly President of CREG, became President and
Chief Operating Officer of the Issuer. In addition, Roger A. Waesche, Jr.,
formerly Senior Vice President of Finance of Constellation Real Estate, Inc.,
became Senior Vice President-Finance of the Issuer and John H. Gurley, formerly
Vice President and General Counsel of Constellation Real Estate, Inc. became
Vice President and General Counsel of the Issuer.
Page 9 of 15
<PAGE>
After the closing of the Transaction, the Issuer expects to close on
additional properties held by CPI or its affiliates that are currently under
construction or development. The closing of two of the properties is scheduled
to occur on the earlier of December 31, 1998 or the date on which certain
occupancy levels are achieved on one of the properties and on the earlier of
March 31, 1999 or the date on which certain occupancy levels are achieved on the
other property. The total consideration to be paid by the Issuer for the
properties will include, inter alia, approximately 846,143 Common Shares and
118,460 Preferred Shares.
Except as set forth above, the Reporting Persons do not have as of the
date hereof any plans or proposals that relate to or would result in: (i) the
acquisition of additional securities of the Issuer or the disposition of
securities of the Issuer; (ii) an extraordinary corporate transaction, such as a
merger, reorganization or liquidation involving the Issuer or any of its
subsidiaries; (iii) a sale or transfer of a material amount of assets of the
Issuer or any of its subsidiaries; (iv) any change in the present Board of
Trustees or management of the Issuer, including any plans or proposals to change
the number or term of trustees or to fill any vacancies of the Board; (v) any
material change in the present capitalization or dividend policy of the Issuer;
(vi) any other material change in the Issuer's business or corporate structure;
(vii) any changes in the Issuer's declaration of trust, by-laws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Issuer by any person; (viii) causing a class of securities of the
Issuer to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (ix) causing a class of securities of the
Issuer to become eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934, as amended; or (x) any action
similar to any of those enumerated above. Notwithstanding anything to the
contrary contained herein, the Reporting Persons reserve the right to change
their present intentions with respect to the matters described in this
paragraph.
Item 5. Interest in Securities of Issuer.
Based upon the Issuer's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998 filed with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, as of September 28, 1998,
15,953,717 Common Shares are issued and outstanding and 865,566 Preferred Shares
are issued and outstanding. The Reporting Persons have sole power to vote and
dispose of 6,182,634 Common Shares, which constitutes 38.8% of the outstanding
Common Shares, and 865,566 Preferred Shares, which constitutes 100% of the
outstanding Preferred Shares.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer.
There are presently no contracts, arrangements, understandings or
relationships (legal or otherwise) among the persons filing this Schedule 13D,
or between such persons and any other person, with respect to any securities of
the Issuer, including, but not limited to, transfer or voting of any securities,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantees or profits, division of profits or loss, or the giving or withholding
of proxies.
Page 10 of 15
<PAGE>
The Issuer has granted registration rights with regard to the Common
Shares to CPI in exchange for the consideration described in Item 3 above,
pursuant to the Registration Rights Agreement dated September 28, 1998, by the
Issuer and certain persons named therein. Within six months after the closing of
the Transaction, the Issuer is obligated to file a shelf registration statement
with regard to the Common Shares issued in the Transaction, as well as the
Common Shares issuable upon conversion of the Preferred Shares (the "Registrable
Securities"). The Issuer is also required, at the demand of holders of 10% or
more of the Registrable Securities, to register such holders' Registrable
Securities, subject to the right to defer the filing of the necessary
registration statement for a period not to exceed 90 days under certain limited
circumstances. In addition, the Issuer has granted the holders of the
Registrable Securities "piggy-back" rights.
page 11 of 15
<PAGE>
Item 7. Material to be filed as Exhibits
Exhibit No. Document
1. Contribution Agreement dated as of May
14, 1998, by and among the entities
listed as sellers therein and Corporate
Office Properties, L.P. and Corporate
Office Properties Trust.
2. First Amendment to Contribution Agreement
dated as of July 16, 1998, by and between
Corporate Office Properties Trust and
Corporate Office Properties, L.P. and the
sellers named therein.
3. Second Amendment to Contribution
Agreement dated as of September 28, 1998,
by and between Corporate Office
Properties Trust and Corporate Office
Properties, L.P. and the sellers named
therein.
4. Service Company Asset Contribution
Agreement, dated May 14, 1998, by and
among Constellation Real Estate, Inc.,
KMS Oldco, Inc., CREG, Corporate Office
Properties, L.P. and the Issuer.
5. Registration Rights Agreement dated
September 28, 1998, by the Issuer and
certain persons named therein.
6. Articles Supplementary of Corporate
Office Properties Trust classifying the
Series A Convertible Preferred Shares of
Beneficial Interest.
page 12 of 15
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 8, 1998
BALTIMORE GAS AND ELECTRIC COMPANY
By: /s/ David A. Brune
Name: David A. Brune
Title: Vice President, Finance and Accounting,
Chief Financial Officer and Secretary
Page 13 of 15
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 8, 1998
CONSTELLATION ENTERPRISES, INC.
By: /s/ David A. Brune
Name: David A. Brune
Title: Vice President, Chief Financial Officer
and Secretary
page 14 of 15
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 8, 1998
CONSTELLATION PROPERTIES, INC.
By: /s/ Dan R. Skowronski
Name: Dan R. Skowronski
Title: General Counsel and Secretary
Page 15 of 15
CONTRIBUTION AGREEMENT
Between
CORPORATE OFFICE PROPERTIES TRUST AND
CORPORATE OFFICE PROPERTIES, L.P.,
COLLECTIVELY, BUYER
and
THE SELLERS LISTED ON THE
SIGNATURE PAGE TO THIS AGREEMENT
(Constellation Real Estate Portfolio/
Completed Properties)
Dated as of May 14, 1998
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED. THE SECURITIES REFERENCED HEREIN HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT
CONFIRMED THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
<PAGE>
THIS CONTRIBUTION AGREEMENT is made and entered into as of this 14th
day of May, 1998 (the "Contract Date"), by and between the entities
listed on the signature page to this Agreement as Sellers and also identified on
Exhibit "Sellers" attached hereto (collectively, the "Sellers" and each
individually, a "Seller"), Corporate Office Properties, L.P., a Delaware limited
partnership ("COPLP"). and Corporate Office Properties Trust, a Maryland real
estate investment trust ("REIT") (COPLP and the REIT, hereinafter collectively
the "Buyer").
Background
The Sellers, except for CPI (as defined below) only as to Tred Avon (as
defined below), own one hundred percent (100%) of the Interests (the
"Interests") of the entities and limited liability companies identified on
Exhibit "Entities" (the "Entities"). Each Entity (except Tred Avon) is the
record and beneficial owner of its respective Project or Projects (as defined
below) identified on Exhibit "Projects", and CPI is the record and beneficial
owner of fee simple title to the Project known as Brandon (defined below). Tred
Avon is the record and beneficial owner of the Tred Avon Loan Documents (defined
below). The Interest of each Seller (which is such Seller's full capital,
profits, voting and other interest in the subject Entity) in each Entity is set
forth on Exhibit "Sellers".
The Projects include the Land and those certain buildings (the
"Buildings"), each containing that number of net rentable square feet, as
specified on Exhibit "Projects" attached hereto. The Buildings are leased by the
Entities (except Tred Avon) and CPI as to Brandon, to Tenants (as defined below)
for office and retail purposes. Each of the Buildings is commonly known by the
respective street address in the cities, counties and states described on
Exhibit "Projects" attached hereto. For purposes of this Agreement the term,
"Projects," shall be deemed to mean, on a collective basis with respect to each
Entity or Seller, as applicable: (i) all of the parcels of land identified on
Exhibit "Projects" attached hereto (collectively, the "Land"), together with all
rights, easements and interests appurtenant thereto, including, but not limited
to, any streets or other public ways adjacent to such Land and any water or
mineral rights owned by, or leased to, such Entity or CPI as to Brandon; (ii)
all improvements located on the Land, including, but not limited to, the
Buildings, and all other structures, systems, and utilities associated with, and
utilized by, such Entity, or CPI as to Brandon in the ownership and operation of
the Buildings (all such improvements being collectively referred to herein as
the "Improvements"), but excluding improvements, if any, owned by Tenants of
such applicable Buildings; (iii) all personal property owned by such Seller or
Entity, or CPI as to Brandon and either (A) located on or in the Land or
Improvements, or (B) used in connection with the operation and maintenance of
the Project (collectively, the "Personal Property"); (iv) all building
materials, supplies, hardware, carpeting and other inventory owned by such
Entity or Seller, or CPI as to Brandon and maintained in connection with such
Entity's or CPI's ownership and operation of the Land and/or Improvements
(collectively, the "Inventory"); (v) all trademarks, tradenames, development
rights and entitlements and other intangible property used or useful in
connection with the foregoing (collectively, the "Intangible Personal
Property"), except the right to use
2
<PAGE>
the name Constellation; and (vi) such Entity's interest, and CPI's interest as
to Brandon, in all leases and other agreements to occupy all or any portion of
the Land and/or Improvements in effect on the Contract Date or into which such
Entity or CPI enters prior to the Closing (as defined below), but pursuant to
the express terms of this Agreement (collectively, the "Leases").
The Sellers and Buyer desire to enter this Agreement relating to the
sale by the Sellers to Buyer of Interests, and the sale by CPI to Buyer of
Brandon, in exchange for cash, debt assumption, and Shares (as defined below)
pursuant to the terms of this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the parties agree as follows:
1. DEFINITIONS.
All terms which are not otherwise defined in this Contribution
Agreement shall have the meaning set forth in this Section 1.
1.1. "Accredited Investor" shall have the meaning set forth in
Regulation D promulgated under the Securities Act of 1933, as amended.
1.2. "Additional Rent" shall have the meaning set forth
in Section 15.1.5.
1.3. "Affiliate(s)" shall have the meaning set forth in
Section 21.
1.4. "Assumed Indebtedness" shall mean (a) the outstanding
principal balance of the indebtedness as of the Closing Date of those two (2)
Entities identified on Exhibit "Assumed Indebtedness" with respect to those two
(2) Projects identified on Exhibit "Assumed Indebtedness" as such indebtedness
is described (including a statement of the outstanding principal balance as of
the date of this Agreement) on Exhibit "Assumed Indebtedness" and (b) the
outstanding principal balance as of the Closing Date of such portion of the
Satisfied Indebtedness that Buyer, in its sole discretion, elects to assume. The
Assumed Indebtedness identified in clause (a) of the preceding sentence is
evidenced and secured by the Assumed Loan Documents described on Exhibit
"Assumed Loan Documents". Buyer's right to assume the Assumed Indebtedness is
subject to the provisions of Section 3.2.7.
1.5. "Assumed Loan Documents" shall mean the documents
evidencing or securing the Assumed Indebtedness, as described on Exhibit
"Assumed Loan Documents".
1.6. "Base Rent" shall have the meaning set forth in
Section 15.1.5.
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1.7. "Brandon" shall mean the Project located at 7609
Energy Parkway, Anne Arundel County, Maryland and identified as Brandon on
Exhibit "Projects".
1.8. "Buildings" shall have the meaning set forth in the
recitals to this Agreement.
1.9. "Buyer" shall mean collectively the REIT (as defined
below) and Corporate Office Properties, L.P., a Delaware limited partnership the
sole general partner of which is the REIT.
1.10. "Buyer Indemnified Parties" shall have the meaning set
forth in Section 13.3.
1.11. "Buyer's Closing Notice" shall have the meaning set
forth in Section 6.1.
1.12. "Buyer's Request" shall have the meaning set forth
in Section 6.3.
1.13. "Buyer's Conditions Precedent" shall mean all
conditions precedent to Buyer's obligations to close as set forth in this
Agreement.
1.14. "Buyer's Reasonable Costs" shall mean all out-of-pocket
costs and expenses incurred by Buyer in connection with this Agreement and the
Projects, including, but not limited to, legal fees, title company charges,
engineering fees, environmental consultant's fees, architects' and surveyors'
fees and other similar charges.
1.15. "CPI" shall mean Constellation Properties, Inc., a
Maryland corporation.
1.16. "CPI Affiliates" shall mean entities controlled by CPI.
1.17. "Cash Component" shall have the meaning set forth in
Section 3.
1.18. "Certification of Default" shall have the meaning
set forth in Section 6.3.
1.19. "Closing" shall mean (a) the occurrence of the events
described in Section 6.1 as to all Sellers, other than the NBP 135 Sellers and
Woodlands Sellers, and defined in Section 6.1 as the First Closing, (b) the
occurrence of the events described in Section 6.2.1 as to the NBP 135 Sellers
and defined in Section 6.2.1 as the NBP 135 Closing, and (c) the occurrence of
the events described in Section 6.2.2 as to Woodlands, and defined in Section
6.2.2 as the Woodlands Closing.
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1.20. "Closing Date" shall mean (a) the date set forth in
Section 6.1 as to all Sellers, other than the NBP 135 Sellers and the Woodlands
Sellers, and defined in Section 6.1 as the First Closing Date, (b) the date set
forth in Section 6.2.1 as to the NBP 135 Sellers and defined in Section 6.2.1 as
the NBP 135 Closing Date, and (c) the date set forth in Section 6.2.2 as to the
Woodlands Sellers and defined in Section 6.2.2 as the Woodlands Closing Date.
1.21. "Closing Statement" shall have the meaning set forth
in Section 16.1.11.
1.22. "Common Share Amount" shall have the meaning set
forth in Section 3.2.3 below.
1.23. "Common Shares" means common shares of the REIT.
1.24. "Consideration" shall have the meaning set forth in
Section 3.
1.25. "Constellation Lease" shall have the meaning set forth
in Section 5.6.
1.26. "Contract Date" shall mean the date set forth in the
first paragraph of this Agreement.
1.27. "Convertible Preferred Shares" shall mean convertible
cumulative preferred shares of the REIT to be classified and issued by the REIT
in accordance with the Amended and Restated Declaration of Trust of the REIT as
amended. Each Convertible Preferred Share has a liquidation preference of $25.00
and pays a cumulative dividend of 5.5% per year. The dividend shall have a
preference over dividends payable on the Common Shares. Each Convertible
Preferred Share is convertible into Common Shares at an initial conversion price
of $13.335 per Common Share (subject to anti-dilution adjustments) and otherwise
subject to the terms of the Amended and Restated Declaration of Trust of the
REIT, as may be further amended. Convertible Preferred Shares delivered to
Sellers at Closing under this Agreement shall not be converted before two (2)
years after the Closing Date and shall not be converted if such conversion would
result in the Sellers owning, in the aggregate, more than forty-five percent
(45%) in the aggregate of the outstanding Common Shares of the REIT.
Notwithstanding the foregoing, if there is a change in control of the REIT, the
two year prohibition against conversion shall be deemed to have terminated and
the Convertible Preferred Shares may thereafter be converted into Common Shares
(subject, however, to the 45% limitation and to the terms of the Amended and
Restated Declaration of Trust of the REIT, as amended prior to such change in
control).
1.28. "CREG" shall mean Constellation Real Estate Group, Inc.,
which is the one hundred percent (100%) direct owner of CPI and a guarantor
under certain indebtedness of the Sellers.
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1.29. "Damage" shall have the meaning set forth in Section 19.
1.30. "Delinquent Rents" shall have the meaning set forth in
Section 17.9.
1.31. "Development Management Agreement" shall have the
meaning set forth in Section 5.7.
1.32. "Development Projects Acquisition Agreements" shall have
the meaning set forth in Section 5.4.
1.33. "Disapproved Exception" shall have the meaning set forth
in Section 9.2.
1.34. "Eminent Domain" shall have the meaning set forth in
Section 19.
1.35. "Entities" shall mean the Entities identified on Exhibit
"Entities".
1.36. "Environmental Law(s)" shall have the meaning set forth
in Section 13.1.1.
1.37. "Environmental Permits" shall have the meaning set forth
in Section 13.1.2.
1.38. "Escrowee" shall mean the Title Company.
1.39. "Estoppel Certificate" shall have the meaning set forth
in Section 15.2 of this Agreement.
1.40. "Existing Loan Documents" shall mean the Assumed
Loan Documents and the Satisfied Loan Documents.
1.41. "First Closing" shall have the meaning set forth in
Section 6.1.
1.42. "First Closing Date" shall have the meaning set forth in
Section 6.1.
1.43. "Governmental Authority/Authorities" shall mean any
agency, commission, department or body of any municipal, township, county,
local, state or Federal governmental or quasi-governmental regulatory unit,
entity or authority having jurisdiction or authority over all or any portion of
the Projects or the management, operation, use or improvement thereof.
1.44. "Hazardous Conditions" shall have the meaning set
forth in Section 13.1.3.
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1.45. "Hazardous Material(s)" shall have the meaning set forth
in Section 13.1.4.
1.46. "Improvements" shall have the meaning set forth in the
recitals to this Agreement.
1.47. "Informational Materials" shall have the meaning set
forth in Section 11.1.8 below.
1.48. "Intangible Personal Property" shall have the meaning
set forth in the recitals to this Agreement.
1.49. "Interests" shall have the meaning set forth in the
recitals to this Agreement.
1.50. "Inventory" shall have the meaning set forth in the
recitals to this Agreement.
1.51. "Investor Materials" shall have the meaning set forth in
Section 4.1.3.
1.52. "Land" shall have the meaning set forth in the recital
to this Agreement.
1.53. "Leases" shall have the meaning set forth in the
recitals to this Agreement.
1.54. "Lenders' Approvals" shall have the meaning set forth in
Section 14.1.5.
1.55. "Letter of Credit" shall have the meaning set forth in
Section 6.3.
1.56. "Losses" shall have the meaning set forth in Section
13.3.
1.57. "NBP 135" shall mean the Entity identified as NBP 135 on
Exhibit "Entities" which owns the Project identified as 135 National Business
Park on Exhibit "Projects".
1.58. "NBP 135 Gross Value" shall have the meaning set forth
in Section 3.1.
1.59. "NBP 135 Sellers" shall mean those Sellers who are
selling all of the Interests in NBP 135.
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1.60. "NBP 135 Lease Achievement Date" shall have the meaning
set forth in Section 6.2.1 of this Agreement.
1.61. "NBP 135/Woodlands Closing" shall have the meaning set
forth in Section 6.2.
1.62. "NBP 135/Woodlands Closing Date" shall have the meaning
set forth in Section 6.2.
1.63. "Net Asset Value" shall have the meaning set forth in
Section 3.1.
1.64. "Net Value Percentage Allocation" shall mean the
percentage assigned to each Project on Exhibit "Net Value Percentage
Allocation", the total percentage of which is one hundred percent (100%). Shares
shall be allocated among the Projects by multiplying the Net Asset Value by the
Net Value Percentage Allocation of each Project.
1.65. "NOI" shall have the meaning set forth in Section 3.2.
1.66. "Notice of Dispute" shall have the meaning set forth i
Section 6.3.
1.67. "Notice of Objection" shall have the meaning set forth
at Section 6.3.
1.68. "Option Projects" shall have the meaning set forth in
Section 5.5.
1.69. "Option/ROFR Agreements" shall have the meaning set
forth in Section 5.5.
1.70. "Permitted Exceptions" shall have the meaning set forth
in Section 9.2.
1.71. "Personal Property" shall have the meaning set forth in
the recitals to this Agreement.
1.72. "Post-Closing Seller" shall have the meaning set forth
in Section 13.3.
1.73. "Preferred Share Amount" shall have the meaning set
forth in Section 3.2.2.
1.74. "Projects" shall have the meaning set forth in the
recitals to this Agreement.
1.75. "Proxy Statement" shall have the meaning set forth in
Section 4.5.
1.76. "Records" shall mean all books, records, tax returns,
correspondence, financial data, leases, and all other documents and matters,
public or private, maintained by
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the Entities, the Sellers or its or their agents, relating to receipts and
expenditures pertaining to all of the Projects for the three most recent ful
calendar years and the current calendar year and all contracts, rental
agreements and all other documents and matters, public or private, maintained
by the Entities, the Sellers or its or their agents, relating to operations
of the Projects.
1.77. "Registration Rights Agreement" shall mean the
Registration Rights Agreement in favor of the Sellers to be entered into by the
REIT at Closing in the form attached hereto as Exhibit "Registration Rights
Agreement".
1.78. "Regulatory Violation Notice" shall have the meaning
set forth in Section 4.1.3.
1.79. "REIT" means Corporate Office Properties Trust, a
Maryland real estate investment trust, which is the sole general partner of
Corporate Office Properties, L.P.
1.80. "Release" shall have the meaning set forth in Section
13.1.5.
1.81. "Remedial Action" shall have the meaning set forth in
Section 13.1.6.
1.82. "Remedial Costs" shall have the meaning set forth in
Section 13.1.7.
1.83. "Satisfied Indebtedness" shall mean the outstanding
principal balance as of the Closing Date of the indebtedness of those Entities
identified on Exhibit "Satisfied Indebtedness" with respect to those Projects
identified on Exhibit "Satisfied Indebtedness" as such indebtedness is described
(including a statement of the outstanding principal balance as of the date of
this Agreement) on Exhibit "Satisfied Indebtedness". The Satisfied Indebtedness
is evidenced and secured by the Satisfied Loan Documents described on Exhibit
"Satisfied Loan Documents". Buyer, in Buyer's sole discretion, shall have the
right to assume any portion of the Satisfied Indebtedness, provided, however,
that as to any such assumed portion, the Entities, Sellers and CREG, as
applicable, obligated under such assumed portion are released from all
obligations under such assumed portion. If Buyer, in Buyer's sole discretion,
elects to assume any portion of the Satisfied Indebtedness, such portion shall
become part of the Assumed Indebtedness, and the amount of Satisfied
Indebtedness shall be reduced by an amount equal to the amount of the
outstanding principal of such assumed portion as of the Closing Date.
1.84. "Satisfied Loan Documents" shall mean the documents
evidencing or securing the Satisfied Indebtedness.
1.85. "SEC" shall mean the Securities and Exchange Commission.
1.86. "Securities Act" shall mean the Securities Act of 1933,
as amended.
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1.87. "Sellers" shall mean those persons and entities listed
as Sellers on the signature page to this Agreement and listed on Exhibit
"Sellers" .
1.88. "Sellers' Condition Precedent" shall mean all conditions
precedent to Seller's obligations to close as set forth in this Agreement.
1.89. "Seller Indemnified Parties" shall have the meaning set
forth in Section 20.4 of this Agreement.
1.90. "Service Company Agreement" shall have the meaning set
forth at Section 5.3.
1.91. "Shares" shall mean collectively Common Shares and
Convertible Preferred Shares.
1.92. "Tank(s)" shall have the meaning set forth in Section
13.1.9.
1.93. "Taxes" shall have the meaning set forth in Section
11.1.4(b).
1.94. "Tax Returns" shall have the meaning set forth in
Section 11.1.4(b).
1.95. "Tenants" shall have the meaning set forth in Section
15.1.
1.96. "TIF Agreement" shall have the meaning set forth in
Section 5.8.
1.97. "Title Company" shall mean Commonwealth Land Title
Insurance Company.
1.98. "Title Reports" shall have the meaning set forth in
Section 9.2.
1.99. "Tred Avon" shall mean Tred Lightly Limited Liability
Company, a Maryland limited liability company, which is the holder of the Tred
Avon Loan Documents.
1.100. "Tred Avon Loan Documents" shall mean the notes, deeds
of trust encumbering the Project identified as Tred Avon on Exhibit "Projects",
and other loan documents described on Exhibit "Tred Avon Loan Documents"
evidencing and securing first and second deed of trust loans in the aggregate
original principal amount of $10,000,000.00 from TA Associates Limited
Partnership, a Maryland limited partnership, the owner of Tred Avon, to Tred
Avon.
1.101. "Woodlands" shall mean the Entity identified as
Woodlands on Exhibit "Entities" which owns the Project identified as Woodlands I
on Exhibit "Projects".
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1.102. "Woodlands Gross Value" shall have the meaning set
forth in Section 3.1.
1.103. "Woodlands Lease Achievement Date" should have the
meaning set forth in Section 6.2.2.
1.104. "Woodlands Sellers" shall mean those Sellers who are
selling all of the Interests in Woodlands.
2. ASSIGNMENT AND TRANSFER OF INTERESTS.
2.1. At Closing, each Seller agrees to assign and transfer to
Buyer, and Buyer agrees to accept and take from each Seller, on the terms and
conditions set forth in this Agreement, all of such Seller's right, title and
interest in the Interests, and CPI agrees to convey to Buyer and Buyer agrees to
accept, CPI's fee simple title interest in Brandon.
3. CONSIDERATION.
Calculations under this Section 3 shall be computed separately for the
First Closing with all Sellers, other than the NBP 135 Sellers and the Woodlands
Sellers under Section 6.1, and for the NBP 135/Woodlands Closing with the
Woodlands Sellers and NBP 135 Sellers under Section 6.2 and, with respect to
each such Closing, shall relate only to those Sellers, Interests, and Projects
which are the subject of such Closing.
In consideration of the assignment of the Interests to Buyer and
conveyance of Brandon to Buyer, and subject to the terms of this Agreement, at
Closing, the Buyer shall (a) pay to Sellers an amount equal to the Satisfied
Indebtedness (the "Cash Component"), (b) acquire the Interests and Brandon under
and subject to the Assumed Indebtedness and (c) deliver to the Sellers, Shares
(consisting of Seventy-Five percent (75%) Common Shares and Twenty-Five percent
(25%) Convertible Preferred Shares, as more particularly described in Section
3.2 below) having an aggregate value equal to the Net Asset Value (defined
below) of the Projects. Such consideration shall be referred to in this
Agreement as the "Consideration." The Shares issued to the Sellers at Closing
shall be issued to the respective Sellers in the same proportion as the
respective Sellers assign and convey Brandon and the Interests (subject to
appropriate rounding to eliminate fractional Shares), as more particularly
described on Exhibit "Share Schedule", as such allocation may be adjusted on the
updated Exhibit Share Schedule to be prepared by Buyer and to be mutually and
reasonably approved by Sellers and the Buyer at the Closing (the "Updated
Exhibit Share Schedule" or the "Share Schedule").
3.1. The "Net Asset Value" of the Projects (excluding NBP 135
and Woodlands) equals $142,550,000.00 [and as to NBP 135, $12,150,000.00 (the
"NBP 135 Gross Value"), and as to Woodlands, $17,600,000.00 (the "Woodlands
Gross Value"), both subject to adjustment as set forth in Section 3.2.5] less
the Cash Component, less the Assumed Indebtedness with respect to all Projects
(as such amount is reflected in the Exhibit "Assumed
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Indebtedness" on the Closing Date). The Net Asset Value shall be further
adjusted by the positive or negative adjustments and prorations described in
Section 17 below, all of which shall be adjusted as of the Closing Date. The Net
Asset Value is allocated among the Projects in accordance with Exhibit "Net
Value Percentage Allocation".
3.2. The Consideration shall be determined, allocated and paid
by the Buyer to the Sellers at Closing as follows:
3.2.1. The Cash Component shall be allocated among, and paid
to the Sellers, in accordance with Exhibit "Cash Component Allocation".
3.2.2. Buyer shall acquire the Interests and Brandon subject
to the Assumed Indebtedness at the time of the Closing. Sellers acknowledge and
agree that the Sellers shall be solely responsible for any and all assumption
fees, transfer fees and other costs associated with the Buyer's acquisition of
the Interests subject to the Assumed Indebtedness and, in the event that the
holder of any existing financing on the Projects is unwilling to consent to the
transfer of the Interests, and Buyer elects to proceed to Closing, Sellers shall
be solely responsible for any prepayment penalties in connection the payment of
any such indebtedness.
3.2.3. Buyer shall deliver to Sellers Convertible Preferred
Shares ($25 par value per unit) having an aggregate value equal to Twenty-Five
percent (25%) of the Net Asset Value of the Projects. This value expressed in
dollars shall be referred to as the "Preferred Share Amount." Divide the
Preferred Share Amount by $25 (the par value of the Convertible Preferred
Shares) to determine the number of Convertible Preferred Shares to be delivered.
If this calculation would result in a fractional number of Convertible Preferred
Shares to be delivered to Sellers, the Buyer shall round that fraction up or
down, as the case may be, to the nearest whole number of Convertible Preferred
Shares. The Share Schedule shall establish the allocation of Convertible
Preferred Shares to each Seller.
3.2.4. Buyer shall deliver Common Shares having an aggregate
value equal to Seventy-Five percent (75%) of the Net Asset Value of the
Projects. This value expressed in dollars shall be referred to as the "Common
Share Amount". Divide the Common Share Amount by $10.50 to arrive at the number
of Common Shares to be delivered. If this calculation would result in a
fractional number of Common Shares to be delivered to Seller, the Buyer shall
round that fraction up or down, as the case may be, to the nearest whole number
of Common Shares. The Share Schedule shall establish the allocation of Common
Shares to each Seller.
3.2.5. The NBP 135 Gross Value shall be decreased if the NOI
(defined below) of NBP 135 at the time of the NBP 135/Woodlands Closing is less
than $1,071,807. The Woodlands Gross Value shall be decreased if the NOI for
Woodlands at the time of the NBP 135/Woodlands Closing is less than $1,364,531.
If the NOI of NBP 135 is less than $1,071,807 at the time of the NBP
135/Woodlands Closing, the NBP 135 Gross Value shall
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equal the NOI of NBP 135 at the time of the NBP 135/Woodlands Closing divided by
a capitalization rate of 8.82%. If the NOI of Woodlands is less than $1,364,531
at the time of the NBP 135/Woodlands Closing, the Woodlands Gross Value shall
equal the NOI of Woodlands at the time of the NBP 135/Woodlands Closing divided
by the capitalization rate of 7.75%. "NOI" means the net operating income for a
Project determined as customarily calculated in the commercial real estate
industry for Projects similar to the Project for which the determination is
being made, based on the annualized operating revenues to be received from the
Project from Leases in effect (with Tenants paying rent) ten (10) days before
the NBP 135/Woodlands Closing Date less the estimated annual operating expenses,
including, without limitation, a management fee of three and one-half percent
(3.5%) of revenues, a structural reserve equal to $.20 per square foot of the
Project, and a vacancy reserve of five percent (5%) of the number of square feet
of the Project times the anticipated average rent per square foot for the
Project.
3.2.6. The number of Common Shares at any time held by the
Sellers, in the aggregate, shall not exceed forty-five percent (45%) of the
outstanding Common Shares of the REIT.
3.2.7. Buyer's right to assume the Assumed Indebtedness is
subject to the condition that the Sellers and CREG, as applicable, are released
from their obligations under the Assumed Indebtedness. If, despite Buyer's
commercially reasonable efforts to have the Sellers and CREG released from thei
obligations under the Assumed Indebtedness, Buyer is unable to obtain such
release as to Assumed Indebtedness relating to a specific Project, Buyer shall
indemnify the Sellers and CREG, as applicable, obligated on the subject Assumed
Indebtedness with respect to the deleted Project, and Sellers and CREG, as
applicable, shall accept such indemnification by Buyer in lieu of a release.
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4. SHARES; INVESTOR MATERIALS; PROXY STATEMENT.
4.1.1. Investor Materials. Each Seller, on or before ten (10)
days after the date of this Agreement, shall complete a questionnaire (in
substantially the form set forth in Exhibit "Investor Materials" attached
hereto, the "Investor Materials") providing, among other things, information
concerning each Seller's status as an Accredited Investor, and shall provide or
cause to be provided to Buyer, or to any other party designated by Buyer, such
other information and documentation as may reasonably be requested by Buyer in
furtherance of the issuance of the Shares as contemplated hereby.
Notwithstanding anything contained in this Agreement to the contrary, in the
event that, in the reasonable opinion of Buyer, based on advice of its
securities counsel, (x) any such person or entity providing Investor Materials
is not considered an Accredited Investor, (y) the proposed delivery of Shares
hereunder might not qualify for the exemption from the registration requirements
of Section 5 of the Securities Act, or (z) the proposed delivery of Shares
hereunder would violate any applicable federal or state securities laws, rules
or regulations, or agreements to which the REIT or the Buyer is a party, or any
tax related or other legal rules, agreements or constraints applicable to Buyer
or the REIT, Buyer shall so advise Seller, in writing (the "Regulatory Violation
Notice") within five (5) business days after such determination is made. In the
event a Regulatory Violation Notice is delivered, this Agreement shall terminate
and no party shall have any further liability hereunder except (i) as otherwise
expressly set forth in this Agreement and (ii) to the extent a breach of this
Agreement gives rise to, or becomes the basis for, the Regulatory Violation
Notice.
4.2. Certain Informational Materials. Sellers have been
furnished with the informational materials listed on Exhibit "Informational
Materials"). Sellers have read, reviewed and understand the Informational
Materials, and have been afforded the opportunity to ask questions of those
persons it considers appropriate and to obtain any additional information it
desires in respect of the Shares and the business, operations, conditions
(financial and otherwise) and current prospects of the COPLP and the REIT.
Sellers consulted their own financial, legal and tax advisors with respect to
the economic, legal and tax consequences of delivery of the Shares and have not
relied on the Informational Materials, COPLP, the REIT or any of their officers,
directors, affiliates or professional advisors for such advice as to such
consequences. Notwithstanding anything to the contrary contained in this Section
4.2, the effect of any representations or warranties expressly made by COPLP and
the REIT in this Agreement shall not be diminished, abrogated or compromised by
this Section 4.2.
4.3. Transfer Requirements. Sellers may only sell, transfer,
assign, pledge or encumber, or otherwise convey any or all of the Shares, in
strict compliance with the charter documents of the REIT, the registration and
other provisions of the Securities Act (and the rules promulgated thereunder),
any state securities laws, and the Registration Rights Agreement, in each case
as may be applicable. The provisions of this Section 4.3 shall survive the
Closing.
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4.4. Registration Rights. At the Closing, the REIT shall
execute and deliver the Registration Rights Agreement to the Sellers.
4.5. Proxy Statement. As promptly as practicable after the
execution of this Agreement, the REIT shall prepare and file with the SEC a
Proxy Statement (the "Proxy Statement") which shall solicit the votes of the
REIT's shareholders with respect to the transactions contemplated hereby. The
Proxy Statement shall include the recommendation of the REIT's Board of Trustees
in favor of this Agreement and the transactions contemplated hereby; provided,
however, that the Board of Trustees may modify or withdraw such recommendation
if it believes in good faith after consultation with legal counsel that the
modification or withdrawal of such recommendation is necessary for the Board to
comply with its fiduciary obligations under applicable law.
5. REIT BOARD OF TRUSTEES; CERTAIN REIT OPERATIONS;
RELATED TRANSACTIONS.
5.1. Composition of REIT Board of Trustees. The REIT hereby
agrees that the Proxy Statement will include, as a part of the transaction
recommended to, and to be voted upon by the REIT's shareholders, an arrangement
reasonably satisfactory to Sellers and the REIT whereby immediately following
Closing, Sellers shall have the right to have two representatives of the Sellers
(each, a "Seller Representative") serve as members of the Board of Trustees of
the REIT (the "Board") for as long as Sellers are the owners, in the aggregate,
of more than thirty percent (30%) of the REIT's outstanding Common Shares, and
to have one Seller Representative serve as a member of the Board for as long as
Sellers are the owners, in the aggregate, of less than thirty percent (30%) but
more than fifteen percent (15%) of the REIT's outstanding Common Shares. The
initial Seller Representatives shall be designated by Sellers to the REIT prior
to the filing of the Proxy Statement. The principal terms of the arrangement
shall be as follows. At Closing, the number of members of the Board shall be
increased by two pursuant to Article III, Section 2 of the Bylaws of the REIT,
and the two initial Seller Representatives shall be appointed to the Board
pursuant to Article III, Section 10 of the Bylaws of the REIT. One Seller
Representative shall be appointed for a three-year term, and the other Seller
Representative shall be appointed for a two-year term. Such Seller
Representatives shall serve the foregoing terms without regard to the
percentage of Common Shares owned by Sellers, notwithstanding the first
sentence of Section 5.1. One Seller Representative shall be appointed to the
Investment Committee of the Board and each Seller Representative shall be
eligible for appointment to other committees of the Board. Appropriate provision
shall be made to assure that Sellers shall have the right to designate a
replacement for a Seller Representative in the event of the death, resignation
or removal of such person, and for a change in the number of Board members or
otherwise to assure continued representation on the Board by the Seller
Representative(s) in the event a Seller Representative who has been
nominated for election is not re-elected at a time when the Sellers are entitled
to have the Board representation described herein. For purposes of calculating
the percentages of Common Shares outstanding and owned by the Sellers, it shall
be assumed that any Convertible Preferred Shares then owned by the Sellers have
been converted into Common Shares and that such Common Shares are outstanding
and owned by the Sellers.
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5.2. REIT Offices. From and after Closing, the REIT shall
maintain offices in Columbia, Maryland and in the Philadelphia, Pennsylvania
vicinity at such locations as the officers of the REIT shall elect. Initially,
general real estate operations shall be headquartered in the Columbia, Maryland
office of the REIT, and capital markets and acquisitions activities of the REIT
shall be headquartered in the Philadelphia, Pennsylvania office of the REIT.
5.3. Service Company Agreement. Concurrently with the
execution of this Agreement, Buyer and Constellation Real Estate, Inc. ("CREI"),
an affiliate of the Sellers, are entering into an agreement for the acquisition
by Buyer, or its Affiliate, of certain of the assets of CREI, including, without
limitation, tangible and intangible assets, and the Seventy-Five percent (75%)
interest of CREI in Constellation Realty Management LLC (the "Service Company
Agreement") for a purchase price of $2,500,000 payable in Shares. Closing under
the Service Company Agreement is to occur immediately after and on the same day
as Closing under this Agreement. The obligations of Sellers and Buyer to
complete Closing under this Agreement are subject to the completion of closing
under the Service Company Agreement.
5.4. Development Projects. Promptly following the execution of
this Agreement, Buyer and affiliates of the Sellers and other entities shall
negotiate in good faith to enter into two (2) acquisition agreements (the
"Development Projects Acquisition Agreements") for the acquisition by Buyer of
Interests in entities owning development projects in Maryland and Virginia as
will be more particularly described in the Development Projects Acquisition
Agreements. The Development Projects Acquisition Agreements will provide, among
other things, that they shall become effective among the parties thereto upon
the completion of Closing under Section 6.1 of this Agreement.
5.5. Option Projects. Concurrently with the execution of this
Agreement, Buyer and affiliates of the Sellers are entering into two (2) option
agreements with respect to the properties known as Lot 11 of the National
Business Park and Woodlands Two. At Closing, Buyer and the entities owning one
hundred percent (100%) of the interests (except as to the Option Project
identified as "Annapolis Exchange" on Exhibit "Option Projects") in the owners
of the Projects listed on Exhibit "Option Projects" (the "Option Projects"), as
the case may be, are entering into option agreements or option and right of
first refusal agreements (the "Option/ROFR Agreements"), granting to Buyer the
option to acquire one hundred percent (100%) of the interests in the entities
owing such Option Projects and fifty percent (50%) of the interests in Annapolis
Exchange.
5.6. Constellation Lease. At Closing, St. Barnabas Limited
Partnership, a Maryland limited partnership, the Entity owing the Project
identified as One Constellation Centre on Exhibit "Projects" and CPI shall enter
into a lease for CPI's leasing of approximately 48,863 square feet in One
Constellation Centre at a rent of $18.50 per square foot for two (2) years in
accordance with the terms of Exhibit "Constellation Lease" ("Constellation
Lease").
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5.7. Development Management Agreement. At Closing, Buyer or an
Affiliate of Buyer, as Buyer shall elect, and CPI shall enter into a management
services agreement pursuant to which Buyer, or Buyer's Affiliate, shall provide
management services to CPI with respect to CPI's post-Closing real estate
portfolio for an eighteen (18) month period after Closing and shall receive the
following compensation: (a) from the Closing Date through the last day of the
third month after the Closing Date, $250,000.00 per month; (b) from the
first day of the fourth month after the Closing Date through the last
day of the sixth month after the Closing Date, $150,000.00 per month;
(c) from the first day of the seventh month after the Closing Date
through the last day of the tenth month following the Closing Date,
$100,000.00 per month, and; (d) from the first day of the eleventh
month following the Closing Date through the last day of the eighteenth
month following the Closing Date, $50,000.00 per month (the "Development
Management Agreement"). The Development Management Agreement shall be
substantially in form of Exhibit "Development Management Agreement".
5.8. TIF Indemnification Agreement. Buyer and CPI shall enter
into an indemnification agreement substantially in the form of the
Indemnification Agreement attached hereto as Exhibit "TIF Indemnification
Agreement" (the "TIF Agreement") for CPI's indemnification of Buyer for certain
tax increases relating to the special tax district and the tax incremental
financing affecting the Projects located in the National Business Park, Anne
Arundel County, Maryland.
6. CLOSING.
6.1. First Closing. The assignment and transfer of the
Interests, the conveyance of Brandon, and the other transactions contemplated
herein with respect to all Sellers except the NBP 135 Sellers and the Woodlands
Sellers (the "First Closing") shall be consummated on the date (the "First
Closing Date"), after the shareholders of the REIT have approved all of the
transactions contemplated by this Agreement, specified by Buyer on not less than
seven (7) days notice to Sellers (the "Buyer's Closing Notice"), provided that
the First Closing Date shall not be sooner than July 1, 1998 or later than
thirty (30) days after the shareholders of the REIT have approved all of the
transactions contemplated by this Agreement. Sellers shall have the right to
postpone the First Closing to a date that is up to five (5) days after the First
Closing Date specified in Buyer's Closing Notice by giving Buyer notice of such
postponement. If the shareholders of the REIT have not approved the transactions
contemplated by this Agreement by October 30, 1998, this Agreement shall
terminate and become null and void, the Letter of Credit shall be returned to
the Buyer, and the parties shall be released from all liability or obligation to
the other. The Closing shall take place at the offices of Saul, Ewing, Remick &
Saul LLP, Centre Square West, 1500 Market Street, 38th Floor, Philadelphia,
Pennsylvania 19102, or at such other place as may mutually agreed upon by the
parties.
6.2. NBP 135/Woodlands Closing.
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6.2.1. The assignment and transfer of the Interests in NBP 135
and the other transactions contemplated herein with respect to the NBP 135
Sellers (the "NBP 135 Closing"), shall occur after the First Closing under
Section 6.1 of this Agreement, on the date (the "NBP 135 Closing Date") within
thirty (30) days after the "NBP 135 Lease Achievement Date" (defined below)
specified by Buyer on not less than seven (7) days notice to Sellers, but not
later than December 31, 1998. As used in this Section 6.2.1, "NBP 135 Lease
Achievement Date", shall mean the date on which at least ninety-five percent
(95%) of the rentable area of NBP 135 has been leased to Tenants who or which
have entered into Leases in accordance with Section 12.1 of this Agreement and
have commenced paying rent under such Leases.
6.2.2. The assignment and transfer of the Interests in
Woodlands and the other transactions contemplated herein with respect to
Woodlands (the "Woodlands Closing", which shall occur after the First Closing
under Section 6.1 of this Agreement on the date (the "Woodlands Closing Date")
within thirty (30) days after the "Woodlands Lease Achievement Date" (defined
below) specified by Buyer on not less than seven (7) days notice to Sellers, but
not later than December 31, 1998. As used in this Section 6.2.2, "Woodlands
Lease Achievement Date" shall mean the date on which at least ninety-five
percent (95%) of the rental area of Woodlands has been leased to Tenants who or
which have entered into Leases in accordance with Section 12.1 of this Agreement
and have commenced
paying rent under such Leases.
6.2.3. Sellers shall provide Buyer with detailed written
updates of leasing activity, lease status, and occupancy and rent payment
levels at NBP 135 and Woodlands at least monthly until the NBP 135/Woodlands
Closing, shall permit Buyer to review and copy leasing information for NBP 135
and Woodlands, and shall give Buyer prompt notice of the date Sellers believe is
the Lease Achievement Date.
6.3. Letter of Credit. On or before thirty (30) days after the
date of this Agreement, Buyer shall deliver to the Title Company, as escrowee
(the "Escrowee"), a non-transferrable, irrevocable standby letter of credit in
the amount of Five Million Dollars ($5,000,000.00) (the "Letter of Credit")
issued by a bank selected by Buyer, naming the Escrowee as the Beneficiary, and
having an expiration date no sooner December 10, 1998. The Letter of Credit
shall provide that the Escrowee may present it for payment only after Escrowee
receives a Certification of Default. The Letter of Credit shall be returned to
Buyer (a) upon Closing, or, (b) within fifteen (15) days after Buyer's request
by simultaneous notice to Escrowee and Sellers ("Buyer's Request"), upon
termination of this Agreement by Buyer under any Section of this Agreement
giving Buyer the right to so terminate (provided that Buyer is not in default
hereunder), or if for any reason other than the default of Buyer, Closing is not
completed under this Agreement, unless Sellers dispute the return of the Letter
of Credit to Buyer by notice of dispute to Escrowee and Buyer (the "Notice of
Dispute") given within ten (10) days after Buyer's Request. If the Escrowee
receives a Notice of Dispute, then the Escrowee shall continue to hold the
Letter of Credit until (a) the Escrowee receives a written notice signed by
Randall M. Griffin or John Harris Gurley, Esquire or
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Charles E. Garman or Dan R. Skowronski and Buyer, directing the delivery of the
Letter of Credit, or (b) a final order of court of competent jurisdiction is
entered in a proceeding in which all Sellers and the Buyer are named as parties,
directing the delivery of the Letter of Credit in either of which events
described in clause (a) or clause (b), the Escrowee shall deliver the Letter of
Credit in accordance with such direction.
6.3.1. Upon delivery by Sellers to Escrowee of a notarized
default certificate signed by Randall M. Griffin or John Harris Gurley, Esquire
or Charles E. Garman or Dan R. Skowronski certifying that Buyer has defaulted in
the performance of Buyer's obligations under this Agreement and specifying the
alleged default in the form of Exhibit "Certification of Default" (the
"Certification of Default"), Escrowee shall promptly submit a draft on the
Letter of Credit to the issuing bank. Escrowee shall then hold the proceeds from
negotiation of the Letter of Credit (the "Proceeds") in escrow and shall deposit
the Proceeds in a separate, interest-bearing money market account in a Federally
insured bank.
6.3.2. Promptly following receipt of the Certification of
Default, Escrowee shall send a copy thereof to Buyer. If the Escrowee does not
receive from the Buyer written notice of objection (the "Notice of Objection")
to the Certification of Default within fifteen (15) days after the date of
Buyer's receipt of Certification of Default, Escrowee, after the expiration of
such fifteen (15)day period, shall pay the Proceeds, together with all interest
accrued thereon, to the Sellers, which shall be retained by the Sellers as
liquidated damages for any default or breach by Buyer under this Agreement and
Sellers' sole and exclusive remedy against Buyer for any default or breach under
this Agreement. Upon receipt of a Notice of Objection from Buyer, the Escrowee
shall promptly send a copy thereof to Sellers.
6.3.3. If the Escrowee receives a Notice of Objection from
Buyer within such fifteen (15) day period, then the Escrowee shall continue to
hold the Proceeds until (i) the Escrowee receives a written notice signed b
Randall M. Griffin or John Harris Gurley, Esquire or Charles E. Garman or Dan R.
Skowronski and Buyer, directing the disbursement of the Proceeds, or (ii) a
final order of court of competent jurisdiction is entered in a proceeding in
which all Sellers and the Buyer are named as parties, directing the disbursement
of the Proceeds, in either of which events described in clause (i) or clause
(ii), the Escrowee shall disburse the Proceeds in accordance with such
direction. If the Proceeds are paid to the Sellers pursuant to such direction,
the Proceeds shall be retained by Sellers as liquidated damages for any breach
or default by Buyer under this Agreement and as Sellers' sole and exclusive
remedy against Buyer for any breach or default under this Agreement. If the
Escrowee receives a Notice of Objection within the fifteen (15) day period set
forth above, the Escrowee shall have no liability by reason of its failure to
deliver the Proceeds to Sellers until the Escrowee has received the direction of
the nature described in clause (i) or clause (ii) above.
6.3.4. Sellers and Buyer agree that the Proceeds shall
constitute liquidated damages for any breach or default by Buyer of any Buyer's
obligations under this Agreement prior to the Closing Date or due to Buyer's
failure to complete Closing in
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accordance with the terms of the Agreement, and that Sellers' receipt
of such Proceeds shall be Sellers' sole and exclusive remedy against Buyer for
any such breach or default by Buyer under this Agreement. This Section 6.3.4
shall not, however, be deemed to alter or impair any rights or remedies that
Sellers may have under this Agreement after Closing has been completed.
6.3.5. The Escrowee may act upon any instrument or other
writing believed by Escrowee in good faith to be genuine and to be signed and
presented by the proper person, and shall not be liable in connection with the
performance of any duties imposed upon the Escrowee by the provisions of this
Agreement, except for the Escrowee's own willful default or gross negligence.
The Escrowee shall have no duties or responsibilities except those set forth in
this Agreement, unless the same is in writing and signed by Buyer and Randall M.
Griffin or John Harris Gurley, Esquire or Charles E. Garman or Dan R. Skowronski
on behalf of Sellers. Buyer and Sellers shall jointly and severally indemnify
and hold Escrowee harmless from and against all costs, claims, and expenses,
including reasonable attorneys' fees, relating to the performance of Escrowee of
Escrowee's obligations under this Agreement, except with respect to Escrowee's
willful default or gross negligence. The Escrowee shall have the right to
continue to hold the Letter of Credit if there is any dispute between the
parties regarding delivery of the Letter of Credit. The Escrowee shall have the
right to pay the Proceeds into court of competent jurisdiction if there is any
dispute between the parties regarding the payment of the Proceeds.
7. SELLER'S DELIVERIES.
To the extent in any Seller's possession or control, each Seller shall
continue to make available to Buyer, from and after the Contract Date, at
reasonable times and upon reasonable notice, all documents, contracts,
information, Records and exhibits pertinent to the transaction that is the
subject of this Agreement, including, but not limited to, the documents listed
as "Seller's Deliveries" on Exhibit "Seller's Deliveries" attached hereto.
8. INSPECTION PERIOD.
8.1. Project Inspection. At all times prior to the Closing,
including times following the Inspection Period, Buyer, its agents and
representatives shall be entitled to conduct an inspection of the Projects,
which will include the rights to: (i) enter upon the Land and Improvements, on
reasonable notice to Seller, to perform inspections and tests of any and all of
the Projects, including, but not limited to, inspection, evaluation and testing
of the heating, ventilation and air-conditioning systems and all components
thereof, all structural and mechanical systems within the Improvements,
including, but not limited to, sprinkler systems, power lines and panels, air
lines and compressors, automatic doors, tanks, pumps, plumbing and all
equipment, vehicles, and Personal Property; (ii) examine and copy any and all
Records; (iii) make investigations with regard to zoning, environmental
(including, but not limited to, an environmental assessment as specified in
Section 8.2, which includes, but is not limited to, an analysis of the presence
of any asbestos, chlordane, formaldehyde or other
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Hazardous Material in, under or upon the Projects, or any underground storage
tanks on, or under, the Land), building, code, regulatory and other legal or
governmental requirements; (iv)make or obtain market studies and real estate tax
analyses; and (v) interview Tenants with respect to their current and
prospective occupancies. Without limitation of the foregoing, Buyer or its
designated independent or other accountants may audit the Operating Statements
(as defined in Exhibit "Seller's Deliveries" attached hereto), and Sellers shall
supply such documentation as Buyer or its accountants may reasonably request in
order to complete such audit. Notwithstanding anything to the contrary contained
in this Agreement, the effect of any representations, warranties or undertakings
made by Sellers in this Agreement shall not be diminished, abrogated, or
compromised by the foregoing inspections, environmental assessments or other
tests or investigations made by Buyer.
8.2. Environmental Assessment. Buyer or Buyer's agent(s) shall
have the right to employ one or more environmental consultants or other
professional(s) to perform or complete such environmental inspections and
assessments of the Projects as Buyer deems necessary or desirable. Buyer and its
consultants shall also have the right to undertake or complete a technical
review of all documentation, reports, plans, studies and information in
possession or control of Sellers, or its past or present environmental
consultants, concerning or in any way related to the environmental condition of
the Projects. In order to facilitate the assessments and technical review, each
Seller shall extend its full cooperation (but without third party expense to
such Seller) to Buyer and its environmental consultants, including, without
limitation, providing access to all files and fully and completely answering all
questions.
8.3. Buyer's Undertaking. Buyer hereby covenants and agrees
that it shall cause all studies, investigations and inspections performed at the
Projects pursuant to this Section 8 to be performed in a manner that does not
materially or unreasonably disturb or disrupt the tenancies or business
operations of any of the Projects' Tenants. In the event that, as a result of
Buyer's exercise of its rights under Sections 8.1 and 8.2, physical damage
occurs to any or all of the Projects, then Buyer shall promptly repair such
damage, at Buyer's sole cost and expense, so as to return the Projects to
substantially the same condition as exists on the Contract Date. Buyer hereby
indemnifies, protects, defends and holds each Seller harmless from and against
any and all losses, damages, claims, causes of action, judgments, damages, costs
and expenses that such Seller actually suffers or incurs as a direct result of
any physical damage caused to, in, or at the Projects during the course of, or
as a result of, any or all of the studies, investigations and inspections that
Buyer elects to perform (or causes to be performed) pursuant to this Section 8.
8.4. Confidentiality. Each party agrees to maintain in
confidence, and not to disclose to Tenants or Tenants' employees, the
information contained in this Agreement or pertaining to the transaction
contemplated hereby and the information and data furnished or made available by
Sellers to Buyer, its agents and representatives in connection with Buyer's
investigation of the Projects and the transactions contemplated by this
Agreement; provided, however, that each party, its agents and representatives
may disclose such information and
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data (i) to such party's accountants, attorneys, existing or prospective
lenders, investment bankers, accountants, underwriters, ratings agencies,
partners, consultants and other advisors in connection with the transactions
contemplated by this Agreement to the extent that such representatives
reasonably need to know (in the disclosing party's reasonable discretion) such
information and data in order to assist, and perform services on behalf of, the
disclosing party; (ii) to the extent required by any applicable statute, law,
regulation or Governmental Authority (including, but not limited to, Form 8-K
and other reports and filings required by the SEC and other regulatory entities,
as described in Exhibit "Securities Reporting Requirements" attached hereto) or
by the New York Stock Exchange in connection with the listing of the Conversion
Shares; (iii) in connection with any litigation that may arise between the
parties in connection with the transactions contemplated by this Agreement or
otherwise relating to the Projects or any of them; (iv) to the extent such
disclosure is required or appropriate in connection with any securities offering
or other capital markets or financing transaction undertaken by the REIT; (v) to
the extent such information and data become generally available to the public
other than as a result of disclosure by such party or its agents or
representatives; and (vi) to the extent such information and data become
available to such party or its agents or representatives from a third party who,
insofar as is known to such party, is not subject to a confidentiality
obligation to the other party hereunder; and (vii) to the extent necessary in
order to comply with each party's respective covenants, agreements and
obligations under this Agreement. In the event the transactions contemplated by
this Agreement shall not be consummated, such confidentiality shall be
maintained indefinitely. Furthermore, Sellers and Buyer acknowledge that,
notwithstanding any contrary term of this Section 8.4, Buyer shall have the
right to conduct Tenant interviews during the Inspection Period, and the
disclosure of the existence of this Agreement to the Tenants shall not
constitute a breach of the above restriction. Buyer shall also have the right to
issue a press release mutually acceptable to Buyer and Sellers upon the
execution of this Agreement and consummation of the transactions described in
this Agreement.
9. TITLE AND SURVEY MATTERS.
9.1. Title. At the Closing, Sellers agree that each Entity
(except Tred Avon) and Brandon shall have good and marketable fee simple title
to its Project(s), free and clear of all liens, claims and encumbrances except
for the Permitted Exceptions. From and after the date of this Agreement, Sellers
shall not take any action, or fail to take any action, that would cause title to
the Projects to be subject to any title exceptions or objections, other than the
Permitted Exceptions.
9.2. Title Commitments/Surveys. On or before thirty (30) days
after the Contract Date, Buyer shall furnish Sellers with a preliminary title
reports issued by the Title Company covering the Projects (the "Title Reports")
and a written notice specifying those title exceptions which are not acceptable
to Buyer in Buyer's commercially reasonable judgment, which objection may
include matters shown on any updated or re-certified survey which Buyer may
obtain (the "Disapproved Exceptions"). Buyer's failure to designate as one of
the Disapproved Exceptions a title exception shown on the Title Report shall
constitute Buyer's
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approval of such title exception (all title exceptions not designated by Buyer
as Disapproved Exceptions are in this Agreement called "Permitted Exceptions").
The applicable Seller(s) shall use their best efforts to cause the removal of
all Disapproved Exceptions on or before ten (10) days after Buyer's notice to
Seller of such Disapproved Exceptions, except that liens of an ascertainable
amount and other items which can be removed by the payment of money shall be
paid and discharged by Sellers at or before Closing. Within such ten (10) day
period, Seller(s) shall notify Buyer of all Disapproved Exceptions that
Seller(s), after using their best efforts, are unable to remove. Seller(s)'
failure to give Buyer notice of Seller(s)' inability to remove any
Disapproved Exceptions shall constitute such Seller(s)' covenant that such
Disapproved Exceptions shall be removed at or prior to the Closing. Buyer shall
have the rights set forth in Section 9.4 if any Disapproved Exceptions cannot be
removed by the applicable Seller(s) at or prior to the Closing.
9.3. It shall be an Buyer's Condition Precedent that the
marked-up Title Reports delivered on the Closing Date shall be in the form
described in this Section 9.3 and have all standard and general printed
exceptions deleted so as to afford full "extended form coverage," and shall
further include an owner's comprehensive endorsement, an endorsement certifying
that the bills for the real estate taxes pertaining to the Land and Improvements
do not include taxes pertaining to any other real estate; an access endorsement;
a contiguity endorsement, if applicable; a subdivision or plat act endorsement;
a survey endorsement; a non-imputation endorsement; a Fairway endorsement; and a
creditors' rights endorsement (if available).
9.4. If Sellers are unable to correct or remove any
Disapproved Exceptions in accordance with the requirements of this Section 9,
Buyer shall have the sole option of either (i) completing the Closing subject to
such Disapproved Exceptions without any abatement of the Consideration, except
that liens of an ascertainable amount and other items which can be removed by
payment of money shall be paid and discharged by Sellers or (ii) having the
Letter of Credit returned to Buyer and being immediately paid Buyer's Reasonable
Costs and, in the latter event, the parties shall be released from all liability
or obligation to the other and this Agreement shall then and thereafter be null
and void.
9.5. Tred Avon Loan Documents. At Closing, the Tred Avon Loan
Documents shall be free and clear of all liens, claims, encumbrances and
security interests of any nature, except the portion of the Assumed Indebtedness
held by Provident Bank of Maryland for which the Tred Avon Loan Documents are
security, and shall evidence and secure first and second deeds of trust as
described on Exhibit "Tred Avon Loan Documents" encumbering the Project
identified as Tred Avon on Exhibit "Projects".
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10. REPRESENTATIONS AND WARRANTIES AS TO PROJECTS.
10.1. Sellers. The Sellers represent and warrant to Buyer, for
themselves and the Entities, that the following matters are true as of the
Contract Date and shall be true as of the Closing Date and covenant as follows:
10.1.1. Title. The Entities and CPI as to Brandon are the
legal fee simple titleholder of the Projects as more particularly described on
Exhibit "Projects", and, other than with respect to the Permitted Exceptions,
have, good, marketable and insurable title to the Projects, free and clear of
all mortgages and security interests (other than the Assumed Indebtedness and
Satisfied Indebtedness), leases, agreements and tenancies (other than the
Leases), licenses, claims, options, options to purchase, liens, covenants,
conditions, restrictions, rights-of-way, easements, judgments and other matters
affecting title to the Projects. The Projects are the only tangible assets owned
by the Entities. The sole business of each Entity is its ownership and operation
of the Project owned by it.
10.1.2. Seller's Deliveries. All of Seller's Deliveries
listed on Exhibit "Seller's Deliveries" attached hereto and all other items
delivered by Sellers pursuant to this Agreement are true, accurate, correct and
complete in all material respects, and fairly present the information set forth
in a manner that is not misleading. The copies of all documents and other
agreements delivered or furnished and made available by Sellers to Buyer
pursuant to this Agreement constitute all of and the only Leases and other
agreements relating to or affecting the ownership and operation of the Projects,
there being no material "side" or other agreements, written or oral, in force or
effect, to which any Seller or Entity is a party or to which the Project(s)
is/are subject.
10.1.3. Defaults. Neither the Entities nor any Seller is in
default under any of the documents, recorded or unrecorded, referred to in the
title commitments. To the knowledge of Sellers, there are no defaults under any
of the Major Repair Contracts, Contracts or Governmental Approvals (as such
terms are defined in Exhibit "Seller's Deliveries" attached hereto).
10.1.4. Contracts. There are no contracts of any kind relating
to the management, leasing, operation, maintenance or repair of any Project,
except the Contract listed on Exhibit "Service Contracts" attached hereto.
Each Seller and each Entity has performed all material obligations required to
be performed by it, and is not in default, under any of such Contracts. The
Contract may, by the express terms thereof be assigned to Buyer by notice to
such effect to the appropriate contract party, without penalty or other payment
by Sellers, the Entities or Buyer.
10.1.5. Improvements. The Improvements were completed and
installed in accordance with the Plans (as defined in Exhibit "Seller's
Deliveries" attached hereto), which were approved by all Governmental
Authorities having jurisdiction thereover, and there
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are not outstanding any notices of any material violation of any governmental
laws, ordinances, rules or regulations with respect to such Improvements.
10.1.6. Employees. The Entities do not have any employees.
10.1.7. Compliance with Laws and Codes. The Projects, and the
use and operation of any or all of them are (or the use and operation of any
component, portion or area of any Project is) in material compliance with
applicable municipal and other governmental laws, ordinances, regulations,codes,
licenses, permits and authorizations, and there are presently and validly in
effect all licenses, permits and other authorizations necessary (including,
without limitation, certificates of occupancy) for the use, occupancy and
operation of the Projects as they are presently being operated, whether required
of any Entity or any Tenant. Without limiting the foregoing, the Projects comply
in all material respects with all applicable requirements of the Americans With
Disabilities Act of 1990 (42 U.S.C.A. ss.12101 et seq.). The Projects are zoned
by the municipality in which they are located so as to permit office and retail
uses and structures thereon, in a manner that accommodates and is fully
compatible with the Buildings and Improvements as they presently exist. No
zoning, subdivision, environmental, Hazardous Material, building code, health,
fire, safety or other law, order or regulation is, or, on the Closing Date will
be, violated by the continued maintenance, operation or use of any Improvements
or parking areas in the Projects, and no notice of any such violation issued by
any Governmental Authority having jurisdiction over the Projects is outstanding.
All existing streets and other improvements, including water lines, sewer lines,
sidewalks, curbing and streets at each Project have been paid for and either
enter such Project through adjoining public streets, or, if they enter through
private lands, do so in accordance with valid, irrevocable easements running
with the ownership of such Project.
10.1.8. Litigation. There are no pending (or to the best of
each Seller's knowledge, threatened) judicial, municipal or administrative
proceedings affecting any Entity or any Project, or in which any Seller is or
will be a party by reason of such Entity's ownership or operation of any Project
or any portion thereof, including, without limitation, proceedings for or
involving collections, condemnation, eminent domain, alleged building code or
environmental or zoning violations, or personal injuries or property damage
alleged to have occurred on any Project or by reason of the condition, use of,
or operations on, such Project, except certain litigation to which CPI is a
party, but which is not material to the transfer of any Interests or Brandon by
CPI and is not related to any Project. No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy, reorganization
or other proceedings are pending against any Entity, any Seller, or to the best
of Seller's knowledge, threatened against any Entity or any Seller, nor are any
of such proceedings contemplated by any Entity or any Seller. In the event any
proceeding of the character described in this Section 10.1.8 is initiated or
threatened against any Entity or Seller prior to the Closing, Sellers shall
promptly advise Buyer thereof in writing, Sellers shall remain responsible
therefor, and Sellers shall indemnify, defend and hold Buyer from any claims,
losses, liabilities and expenses (excluding, without limitation, reasonable
counsel fees) relating to any such occurrence.
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10.1.9. Insurance. Each Entity or Seller now has in force
customary and commercially reasonable amounts of property, liability and
business interruption insurance relating to the Projects from established and
reputable insurers. No Entity or Seller has received any notice from any
insurance carrier, nor is any Entity or Seller aware of, any defects or
inadequacies in the Projects that, if not corrected, would result in termination
of insurance coverage or increase in the normal and customary cost thereof.
10.1.10. Financial Information. All Operating Statements (as
defined in Exhibit "Seller's Deliveries" attached hereto) delivered by Sellers,
and all of Sellers' and/or the Entities' Records, are complete, accurate, true
and correct, in all material respects; have been compiled in accordance with
generally accepted accounting principles; and accurately set forth the results
of the operation of the Projects and Entities for the periods covered. There has
been no material adverse change in the financial condition or operation of the
Projects and Entities since the period covered by the Operating Statements.
10.1.11. Re-Zoning. There is not now pending, and neither any
Entity nor any Seller has knowledge of, any threatened proceeding for the
rezoning of any Project or any portion thereof, or the taking of any other
action by governmental authorities that would have any material adverse impact
on the value of any Project or use thereof.
10.1.12. Real Estate Taxes. True and complete copies of the
mpst recent real estate "Tax Bill(s)" for (and the only real estate tax bills
applicable to) the Projects have been delivered to Buyer. Except as set forth on
Exhibit "Real Estate Tax Matters" attached hereto, no Entity nor Seller has
received notice of and does not have any actual knowledge of any proposed
increase in the assessed valuation or rate of taxation of any or all of the
Projects from that reflected in the most recent Tax Bills. Except as described
on Exhibit "Real Estate Tax Matters" attached hereto, there is not now pending,
and no Entity will, without the prior written consent of Buyer, institute prior
to the Closing Date, any proceeding or application for a reduction in the real
estate tax assessment of any of the Projects or any other relief for any tax
year. There are no outstanding agreements with attorneys or consultants with
respect to the Tax Bills that will be binding on Buyer or any of the Projects
after the Closing, except for Constellation Centre as noted on Exhibit "Real
Estate Tax Matters". Other than the amounts disclosed by the Tax Bills, no other
real estate taxes have been, or will be, assessed against the Projects, or any
portion thereof, in respect of the year 1998 or any prior year, and no special
assessments of any kind (special, bond or otherwise) are or have been levied
against the Projects, or any portion thereof, that are outstanding or unpaid,
and, to the best of each Seller's knowledge, none will be levied prior to the
Closing. Each Entity has paid all real estate taxes presently due and owing with
respect to the Projects.
10.1.13. Easements and Other Agreements. To the knowledge of
Sellers, no Entity or Seller is in default in complying with the terms and
provisions of any of
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the covenants, conditions, restrictions, rights-of-way or easements constituting
one or more of the Permitted Exceptions.
10.1.14. Lease Controversies. Except as described in Exhibit
"Lease Controversies" attached hereto, no material controversy, complaint,
negotiation or renegotiation, proceeding, suit or litigation relating to all or
any of the Leases, is pending or, to the knowledge of Sellers, threatened,
whether in any tribunal or informally. Sellers are and shall remain responsible
after the Closing Date for defending (or continuing) any such suit, proceeding
or other matter relating to periods prior to the Closing Date, and all damages,
loss, expenses and costs related thereto.
10.1.15. Existing Loan Documents. Exhibits "Assumed Loan
Documents" and "Satisfied Loan Documents" set forth true, correct and complete
schedules of all of the notes, deeds of trust, and other loan documents
evidencing or securing the Assumed Indebtedness and Satisfied Indebtedness,
respectively. Sellers have delivered true, correct and complete copies of the
Existing Loan Documents to Buyer prior to the date hereof as part of the
Seller's Deliveries. Each Entity and Seller has complied with (and, prior to the
Closing, shall continue to comply with) the terms of, and all notices or
correspondence received from the holders of, the Existing Loan Documents
Each Entity and/or Seller has paid (and, at all times prior to the Closing,
shall pay) all sums due under the Existing Loan Documents. No Entity or Seller
shall make any prepayment of any amount due under the Loan Documents. The
Existing Loan Documents are in full force and effect, and, to the best knowledge
of each Seller and each Entity, no Entity nor any Seller is in default
thereunder, and there has not occurred any event which, with the giving of
notice and/or the passage of time, or both, would constitute a default by any
Entity or Seller thereunder or under any of the Existing Loan Documents. The
outstanding principal balance under the Assumed Indebtedness as of the Contract
Date is $13,062,178 ($9,625,148.00 as to the Project known as Cranberry Square
and $3,457,030.00 secured by a security interest in the deed of trust
encumbering the Project known as Tred Avon.)
10.1.16. Tred Avon Loan Documents. Exhibit "Tred Avon Loan
Documents" attached hereto sets forth a true, correct and complete schedule of
all of the notes, deeds of trust and the other loan documents evidencing or
securing the Tred Avon Indebtedness. Sellers have delivered true, correct and
complete copies of the Tred Avon Loan Documents to Buyer prior to the date
hereof as part of the Seller's Deliveries. TA Associates Limited Partnership has
complied with the terms of, and all notices or correspondence received from the
holder of, the Tred Avon Loan Documents. TA Associates Limited Partnership has
paid all sums due under the Tred Avon Loan Documents. The Tred Avon Loan
Documents are in full force and effect, and to the best knowledge of each Seller
and each Entity, TA Associates Limited Partnership is not in default thereunder,
and there has not occurred any event which, with the giving of notice and/or the
passage of time, or both, would constitute a default by TA Associates Limited
Partnership thereunder or under any of the Tred Avon Loan Documents. The
outstanding principal balance under the Tred Avon Loan Documents on the Contract
Date is $9,659,512.00.
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10.1.17. Condemnation. Sellers and the Entities have no
knowledge of any pending or contemplated condemnation or other governmental
taking proceedings affecting all or any part of any or all of the Projects.
10.1.18. Disclosure. No representation or warranty made by any
Seller in this Agreement, no exhibit attached hereto with respect to the
Projects, and no schedule contained in this Agreement contains any untrue
statement of a material fact, or omits to state a material fact necessary in
order to make the statements contained therein not misleading. Except as
otherwise expressly set forth in this Agreement, Seller makes no representation
or warranty, express or implied, as to the physical condition of the Projects,
and Buyer is purchasing the Interests and Brandon with the Projects "AS-IS,
WHERE-IS" as to physical condition.
The representations and warranties in this Section 10 shall be deemed
remade by each Seller as of the Closing Date with the same force and effect as
if in fact specifically remade at that time. The representations and warranties
made in this Section 10 shall survive the Closing for a period of eighteen (18)
months. Notwithstanding anything to the contrary herein, the effect of the
representations and warranties made in this Agreement by Sellers shall not be
diminished, abrogated or deemed to be waived by the inspections, assessments, or
any other investigations made by Buyer.
11. REPRESENTATIONS AS TO INTERESTS/SECURITIES AND RELATED MATTERS.
11.1. Sellers. The Sellers represent and warrant to Buyer that
the following matters are true as of the Contract Date and shall be true as of
the Closing Date and covenant as follows:
11.1.1. Authority. Each Seller is duly formed, validly
existing, and in good standing under the laws of Maryland, and has the power and
authority to own the Interests owned by it. The execution and delivery of this
Agreement by Sellers, and the performance of this Agreement by Sellers, have
been duly authorized by Sellers, respectively, and this Agreement is binding on
Sellers and enforceable against them in accordance with its terms. No consent of
any creditor, investor, partner, shareholder, tenant-in-common, judicial or
administrative body, Governmental Authority, or other governmental body or
agency, or other party to such execution, delivery and performance by Sellers is
required. Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in a breach of, default under,
or acceleration of, any agreement to which Sellers are a party or by which
Sellers, or the Projects are bound; or (ii) violate any restriction, court
order, agreement or other legal obligation to which Sellers, and/or any of the
Projects are subject.
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11.1.2. Entities. Each Entity is duly formed, validly
existing, and in good standing under the laws of Maryland, and has the power and
authority to own its Project (or, as to Tred Avon, the Tred Avon Loan
Documents). Sellers have delivered to Buyer, as part of Sellers' Deliveries, all
of the documents relating to the formation or governance of the Entities. Each
Entity is a single purpose entity, organized for the sole purpose of owning its
Project (or as to Tred Avon, the Tred Avon Loan Documents).
11.1.3. Interest. The direct and indirect ownership of each
Seller including percentage interests of ownership, is as reflected on Exhibit
"Sellers". The Interests constitute one hundred percent (100%) of the Interests
in the Entities, except Tred Avon in which CPI owns a seventy-five percent (75%)
Interest. Each Seller owns the Interests owned by such Seller, as set forth on
Exhibit "Sellers" hereto, free and clear of all liens, charges, encumbrances,
restrictive agreements and assessments, other than restrictions on transfers and
other similar provisions as set forth in the relevant Partnership Agreement,
which such Seller warrants and represents shall not be violated by the
assignment of Interests contemplated by this Agreement. Upon the assignment of
such Seller's Interest to the Buyer (or its designee(s)), the Buyer will receive
good and absolute title thereto, free from all liens, charges, encumbrances,
restrictive agreements and assessments whatsoever, other than restrictions on
transfers and other similar provisions as set forth in the relevant Partnership
Agreement. Each Seller hereby waives, with respect to the assignment
contemplated by this Agreement, any "right of refusal" or other restriction on
transfer set forth in the Partnership Agreement of any Entity of which such
Seller is a partner. There are no outstanding options, contracts, calls,
commitments or demands of any nature relating to the Interests of any Seller.
11.1.4. No Transfers of Interests. There will be no changes
in the composition of any Entity between the date of this Agreement and Closing,
except for transfers by and between entities controlled by CPI ("CPI
Affiliates"). Transfers of any Interests to CPI Affiliates shall be subject to
this Agreement, the transferor/assignor Sellers shall not be relieved of their
obligations under this Agreement, and the CPI Affiliates which are transferees/
assignees of Interests shall become Sellers under this Agreement. Sellers shall
give Buyer written notice of such transfers to CPI Affiliates and shall provide
Buyer with copies of all executed documents effecting such transfers.
11.1.5. Tax-Related Issues.
(a) Each Entity is, and at all times has been,
properly treated as a partnership for federal income tax purposes and not as an
"association" or "publicly traded partnership" taxable as a corporation.
(b) Each Entity has filed or caused to be filed in a
timely manner (within any applicable extension periods) all tax, information or
other returns required to be filed by the Code or by applicable state, or loca
tax laws (collectively, "Tax Returns"). Such Tax Returns are true, correct and
complete in all respects; and all federal, state or local income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
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premium, unemployment, disability, personal property, sales, use, transfer,
registration, estimated, or other tax of any kind whatsoever, including any
interest, penalty or other addition thereto, whether disputed or not
(collectively, "Taxes") due, and Taxes due in respect of any person for which
the applicable Entity had an obligation to withhold and/or otherwise pay over
Taxes, have been timely paid in full or will be timely paid in full by the due
date thereof (and whether or not shown on a Tax Return). With respect to any
taxable year for which a statute of limitations (or similar provision) has not
yet run, none of the Tax Returns of the applicable Entity has been audited by a
government or taxing authority, nor is any such audit or other proceeding in
process, pending, threatened (either in writing or verbally, formally or
informally) or expected to be asserted with respect to Taxes (or the collectio
of Taxes) of the applicable Entity, and no Entity has received notice (either
in writing or verbally, formally or informally) or expects to receive notice
that it has not filed a Tax Return or not paid Taxes required to be filed,
withheld, or paid by it. Each Entity has disclosed on its federal income tax
returns all positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Code Section 6662. No claim has
ever been made by an authority in a jurisdiction where such Entity does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
11.1.6. United States Person. Each Entity and each Seller is
a "United States Person" within the meaning of Section 1445(f)(3) of the Code,
as amended, and shall execute and deliver an "Entity Transferor" certification
at Closing.
11.1.7. Entity Liabilities. Except for (i) the Assumed
Indebtedness, and (ii) any accrued liabilities and obligations of the Entities
that are being adjusted at the Closing pursuant to Section 17 of this Agreement,
the Entities shall not have any liabilities or obligations, either accrued,
absolute, contingent, or otherwise, which will not be paid or discharged on or
before the Closing Date. In addition, except for the claims and liabilitie
described in the preceding sentence, neither the Sellers nor the Entities have
received notice of any claim against (or liability of) the Entities arising from
business done, transactions entered into or other events occurring prior to the
Closing Date (and to the best knowledge of the Sellers and the Entities,
no basis for any such claim or liability exists).
11.1.8. Investment Representation. Each Seller has such
knowledge and experience in financial and business matters so as to be fully
capable of evaluating the merits and risks of an investment in the Shares. No
Shares will be issued, delivered or distributed to any person or entity who
either (i) is a resident of the State of California or New York or (ii) is
other than an Accredited Investor with respect to whom there has been delivered
to Buyer satisfactory Investor Materials confirming the status of such person or
entity as an Accredited Investor. Each Seller has been furnished with the
informational materials described in Section 4.2 above (collectively, the
"Informational Materials"), and has read and reviewed the Informational
Materials and understands the contents thereof. The Sellers have been afforded
the opportunity to ask questions of those persons they consider appropriate and
to obtain any additional information they desire in respect of the Shares and
the business, operations, conditions (financial and otherwise) and current
prospects of the
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Buyer and the REIT. The Sellers have consulted their own financial, legal and
tax advisors with respect to the economic, legal and tax consequences of
delivery of the Shares and have not relied on the Informational Materials,
Buyer, the Buyer, the REIT or any of their officers, directors, affiliates or
professional advisors for such advice as to such consequences. All of the
holders of interests in each Seller are Accredited Investors. No Seller
requires the consent of any interest holder in order to consummate the
transactions contemplated by this Agreement, including, without limitation,
to amend any partnership agreement, operating agreement, charter or other
governing document of such Seller. All of the Sellers are formed under the law
of the State of Maryland, or as to natural individuals, are domiciled in the
State of Maryland.
11.1.9. The representations and warranties in this Section
11.1 shall be deemed remade by each Seller, as of the Closing Date with the same
force and effect as if specifically remade at that time. The representations and
warranties made in this Section 11.1 shall survive the Closing without
limitation.
11.2. COPLP and the REIT. COPLP and the REIT represent and
warrant to Sellers that the following matters are true as of the Contract Date
and shall be true as of the Closing Date:
11.2.1. COPLP is a limited partnership validly existing under
the laws of the State of Delaware and has all requisite power to carry on its
business as now conducted. The REIT is the sole general partner of COPLP and is
a duly formed and validly existing Maryland real estate investment trust. Each
of COPLP and the REIT has full power and authority and possesses all material
authorizations and approvals necessary to enable it to execute and deliver this
Agreement and the other documents to be executed by it pursuant to this
Agreement, and perform its obligations hereunder and thereunder. This Agreement
and the other documents to be executed by COPLP and the REIT pursuant to this
Agreement when executed and delivered by COPLP and the REIT will, subject to
approval by the shareholders of the REIT prior to Closing, constitute valid and
legally binding obligations of each of COPLP and the REIT, enforceable against
them in accordance with their respective terms, subject to bankruptcy and
insolvency laws, and to equitable principles which may be imposed by courts.
11.2.2. Subject to approval by the shareholders of the REIT,
the execution, delivery and performance of this Agreement and the other
documents to be executed, delivered and performed pursuant to this Agreement do
not and will not (with or without the passage of time or the giving of notice):
(i) violate or conflict with COPLP's Partnership Agreement or the REIT's Amended
and Restated Declaration of Trust, or any law binding upon COPLP or the REIT;
(ii) violate or conflict with, result in a breach of, or constitute a default or
otherwise cause any loss of benefit under, any agreement or other obligation to
which COPLP or the REIT is a party or by which either of them (or the assets of
either of them) is bound, or give to any other party any rights (including,
without limitation, rights of termination, foreclosure, cancellation or
acceleration) in, or with respect to COPLP
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or the REIT; or (iii) result in, require, or permit the creation or imposition
of, any restriction, mortgage, deed of trust, pledge, lien, security interest or
other charge, claim or encumbrance upon, or with respect to, COPLP or the REIT
or the assets of either of them.
11.2.3. There are no actions, suits, claims, proceedings,
investigations or inspections, pending or (to the REIT's knowledge) threatened,
against or affecting COPLP or its Affiliates which could have a material adverse
affect on COPLP and its Affiliates considered as a whole, and to the REIT's
knowledge there are no matters of litigation or governmental proceedings
expected to be brought against it or its Affiliates which could have a material
adverse affect on the financial condition of the REIT and its Affiliates
considered as a whole.
11.2.4. No consent, order, approval or authorization of, or
registration, declaration or filing with, any court, administrative agency o
commission or other governmental authority or agency, domestic or foreign, is
required by or with respect to the COPLP or the REIT in connection with the
execution, delivery and perform nce of this Agreement and the other documents to
the executed, delivered and performed pursuant to this Agreement.
11.2.5. The Informational Materials did not, as of their
respective dates of filing, contain any untrue statement of a material fact o
omit to state a material fact required to be stated therein or necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading. There has not been any material adverse change in the
business of COPLP or the REIT since March 31, 1998. Except as may otherwise be
set forth therein, the financial statements (including the notes thereto) of the
REIT set forth in the Informational Materials present fairly the consolidated
financial position of the REIT as at the dates set forth therein and its results
of operations, changes in consolidated stockholder equity and cash flows for
periods covered thereby, all in conformity with United States generally accepted
accounting principles applied on a consistent basis for such periods.
11.2.6. The Shares to be issued at Closing will, when issued
and delivered, be duly authorized, validly issued, fully paid, non-assessable
shares of the REIT free from all claims of preemptive rights.
11.2.7. COPLP has been at all times, and presently intends to
continue to be, classified as a partnership for federal income tax purposes and
not an association taxable as a corporation or a publicly traded partnership
taxable as a corporation. The REIT is now, and presently intends to continue to
be classified, as a real estate investment trust under Section 856 of the
Internal Revenue Code of 1986, as amended.
11.2.8. All documents and other papers delivered by or on
behalf of COPLP or the REIT in connection with the transactions contemplated by
this Agreement are accurate and complete in all material respects and are
authentic. No representation or warranty of COPLP or the REIT contained in this
Agreement contains any untrue statement of
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a material fact or omits to state a fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. Except as
described in this Agreement or in the Informational Materials there is no fact
known to COPLP or the REIT or (other than proposed or enacted legislation,
proposed or enacted regulation, or general economic or real estate industry
conditions and changes) that materially adversely affects or, so far as COPLP
and the REIT can reasonably foresee, materially threatens, the assets,
activities, prospects, financial condition or results of COPLP or the REIT.
11.2.9. The representations and warranties in this Section
11.2 shall be deemed remade by COPLP and REIT as of the Closing Date with the
same force and effect as if remade at Closing. The representations and
warranties made in this Section 11.2 shall survive Closing without limitation.
12. COVENANTS OF SELLER.
Sellers (for themselves and for the Entities) hereby covenant with
Buyer as follows:
12.1. New Leases. Neither the Entities nor CPI as to Brandon
shall amend any Lease or execute any new lease, license, or other agreement
affecting the ownership or operation of all or any portion of the Projects or
for personal property, equipment, or vehicles, without Buyer's prior written
approval. The Tred Avon Loan Documents shall not be amended without the prior
written consent of Buyer. The Existing Loan Documents shall not be amended
without the prior written consent of Buyer. Buyer shall be deemed to have
consented to any document or action under Sections 12.1 or 12.2 for which
Sellers have requested approval by written request (specifying in such request
that Buyer must object, if at all, within five (5) days after receipt) to Buyer
if Buyer does not object to such document or action within five (5) days after
receiving such request from Sellers. No prepayment shall be made under any of
loans evidenced or secured by the Existing Loan Documents.
12.2. New Contracts. Neither the Entities nor CPI shall enter
into any contract with respect to the ownership and operation of all or any
portion of any or all of the Projects that will survive the Closing, or that
would otherwise affect the use, operation or enjoyment of any or all of the
Projects, without Buyer's prior written approval, except for service contracts
entered into in the ordinary course of business that are terminable, without
penalty, on not more than 30 days' notice, for which no consent shall be
required.
12.3. Insurance. The insurance policies described in Section
10.1.11 above shall remain continuously in force through and including the
Closing Date.
12.4. Operation of Projects. The Entities and CPI as to
Brandon shall operate and manage the Projects in a manner consistent with the
manner in which they are being operated on the Contract Date, maintaining the
current level of services, shall maintain the Projects in good repair and
working order; shall keep on hand sufficient materials, supplies,
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equipment and other Personal Property for the efficient operation and management
of the Projects in a first class manner; and shall perform, when due, all of the
Entities' obligations under the Existing Loan Documents, Leases, Contracts,
Governmental Approvals and other agreements relating to the Projects and
otherwise in accordance with applicable laws, ordinances, rules and regulations
affecting the Projects. Except as otherwise specifically provided herein, the
Entities and CPI as to Brandon shall deliver the Projects at Closing in
substantially the same condition as each of them is in on the Contract Date,
reasonable wear and tear excepted. Sellers shall cause Tred Avon to the collect
the indebtedness under, and shall hold the Tred Avon Loan Documents in the
manner in which they are currently being collected and held. Sellers shall cause
the Entities to pay when due all amounts due under Existing Loan Documents and
to perform all obligations of such Entities under the Loan Documents.
12.5. Pre-Closing Expenses. Sellers have paid or will pay or
cause to be paid in full, prior to the Closing, all bills and invoices for
labor, goods, material and services of any kind relating to the Projects and
utility charges, relating to the period prior to the Closing. Except as the
parties may otherwise agree at or prior to Closing, any alterations,
installations, decorations and other work required to be performed under any and
all agreements affecting the Projects have been or will, by the Closing, be
completed and paid for in full.
12.6. Good Faith. All actions required pursuant to this
Agreement that are necessary to effectuate the transaction contemplated herein
will be taken promptly and in good faith by Sellers or the Entities, as
applicable, and each Seller shall furnish Buyer with such documents or further
assurances as Buyer may reasonably require.
12.7. No Assignment. After the Contract Date and prior to the
Closing, no Seller shall assign, alienate, lien, encumber or otherwise transfer
all or any part of any or all of the Interests, the Projects or any interest in
any or all of them, except for transfers of Interests to CPI Affiliates. Sellers
shall give Buyer notice of the transfers of any Interests to CPI Affiliates,
together with copies of the signed documents effecting such transfers.
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12.8. Availability of Records, Audit Representation Letter.
12.8.1. Upon Buyer's request, for a period of two
years after the Closing, Sellers shall (i) make the Records available to Buyer
for inspection, copying and audit by Buyer's designated accountants; and (ii)
cooperate with Buyer (without any third party expense to Sellers) in obtainin
any and all permits, licenses, authorizations, and other Governmental Approvals
necessary for the operation of any or all of the Projects. Without limitation of
the foregoing in this Section 12.8, Sellers agree to abide by the terms of
Exhibit "Securities Reporting Requirements" attached hereto. At any time before
or within two years after the Closing, Sellers further agree to provide to the
Buyer's designated independent auditor, upon request of Buyer or such auditor:
(x) access (to the same extent to which Buyer would be entitled to such access)
to the books and records of the Projects and all related information (including
the information listed on Exhibit "Securities Reporting Requirements") regarding
the period for which Buyer is required to have the Project audited under the
regulations of the Securities and Exchange Commission, and (y) a representation
letter delivered by each managing agent of the Projects regarding the books and
records of the Projects, in substantially the form as attached hereto as Exhibit
"Audit Representation Letter".
12.8.2. In addition, Sellers shall provide, and cooperate,
in all respects, in providing, Buyer with copies of, or access to, such factual
information as may be reasonably requested by Buyer, and in the possession or
control of Sellers, to enable the REIT to issue one or more mutually agreed upon
press releases concerning the transaction that is the subject of this Agreement,
to file a Current Report on Form 8-K (as specified on Exhibit "Securities
Reporting Requirements" attached hereto), if, as and when such filing may be
required by the SEC and to make any other filings that may be required by any
Governmental Authority. The obligation of Sellers to cooperate in providin
Buyer with such information for Buyer to file its Current Report on Form 8-K
shall survive the Closing.
12.9. Change in Conditions. Sellers shall promptly notify
Buyer of any change in any condition with respect to any or all of the Entities,
the Projects or of the occurrence of any event or circumstance that makes any
representation or warranty of Sellers to Buyer under this Agreement untrue or
misleading, or any covenant of Buyer under this Agreement incapable or less
likely of being performed, it being understood that Sellers' obligation to
provide notice to Buyer under this Section 12.9 shall in no way relieve Sellers
of any liability for a breach by Sellers of any of its representations,
warranties or covenants under this Agreement.
12.10. Entity Structure. Except for transfers of Interests to
CPI Affiliates, from the Contract Date through and including the Closing Date,
the Entities and Sellers shall maintain the same composition of its partners,
shareholders and members as the case may be, as exists on the Contract Date,
unless otherwise expressly or consented to by Buyer in writing.
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12.11. Cure of Violations. On or before the Closing Date,
Sellers shall cure (or escrow sufficient funds at the Closing with the Title
Company to cure) (i) all violation(s) of law, code, ordinance or regulation that
are the subject of any written notice issued by a Governmental Authority with
respect to any Project, and (ii) legal deficiencies discovered at or in any
Project before the Closing.
12.12. Tenant Purchase Rights. Exhibit "Tenant Purchase
Rights" sets forth the purchase rights of three (3) Tenants as more particularly
described in Exhibit "Tenant Purchase Rights", a right of first option held by
Giant of Maryland, Inc. ("Giant") with respect to the Cranberry Square Project
(the "Giant Purchase Right"), an option to purchase held by the United States of
America with respect to the One National Business Park Project (the "USA
Purchase Right"), and a right of first refusal held by Green Spring Health
Services, Inc. with respect to the Woodlands I Project (the "Green Spring
Purchase Right").
12.12.1. Buyer agrees to accept the One National Business
Park Project subject to the USA Purchase Right.
12.12.2. Promptly after the Contract Date, Sellers shall
notify Giant of this transaction and the sale of the Interests of the Entity
owning the Cranberry Square Project. The obligation of Buyer to purchase the
Interests of Entity owning Cranberry Square is contingent upon Giant's entering
into an agreement of sale to purchase the Cranberry Square Project on or before
the Closing Date. If, prior to Closing, Giant enters into an agreement to
purchase the Cranberry Square Project or the Interests of the Entity owing the
Cranberry Square Project, the Cranberry Square Project shall be deleted from
this Agreement, this Agreement shall be deemed to have been automatically
amended so as to delete the Project from this Agreement, and Buyer and Sellers
shall proceed to close on the remaining Projects subject to a reduction in the
Consideration by the amount of the Consideration allocated to the Cranberry
Square Project.
12.12.3. Promptly after the Contract Date, Sellers shall
notify Green Spring Health Services, Inc. ("Green Spring") of this transaction
and the sale of the Interests of the Entity owning the Woodlands I Project.
Buyer's obligation to purchase the Interests of the Entity owning the Woodlands
I Project is contingent upon (a) the exercise by Green Spring of the Green
Spring Purchase Right or (b) the waiver by Green Spring on or before the Closing
Date (either inwriting or due to the passage of time) of its right, if any, to
purchase the Woodlands I Project pursuant to the terms contemplated by this
Agreement. If Green Spring exercises the Green Spring Purchase Right or does no
waive such right (either in writing or due to the passage of time) on or before
the Closing Date, the Green Spring Purchase Right with respect to the Woodlands
I Project as it relates to the transaction contemplated by this Agreement, the
Woodlands I Project shall be deleted from this Agreement, this Agreement shall
be deemed to have been automatically amended so as to delete the Woodlands I
Project from this Agreement, and Buyer and Sellers shall proceed to
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close on the remaining Projects, subject to a reduction in the Consideration by
the amount of the Consideration allocated to the Woodlands I Project.
All covenants made in this Agreement by Sellers shall survive the Closing for a
period of eighteen (18) months.
13. ENVIRONMENTAL WARRANTIES AND AGREEMENTS.
13.1. Definitions. Unless the context otherwise requires:
13.1.1. "Environmental Law" or "Environmental Laws"
shall mean all applicable past,present or future federal, state and local
statutes, regulations, directives, ordinances, rules, court orders, decrees,
arbitration awards and the common law, which pertain to environmental matters,
contamination of any type whatsoever or health and safety matters, as such have
been amended, modified or supplemented from time to time (including all present
and future amendments thereto and re-authorizations thereof). Environmental Laws
include, without limitation, those relating to: (i) the manufacture, processing,
use, distribution, treatment, storage, disposal, generation or transportation of
Hazardous Materials; (ii) air, soil, surface, subsurface, groundwater or noise
pollution; (iii) Releases; (iv) protection of wildlife, endangered species,
wetlands or natural resources; (v) Tanks; (vi) health and safety of employees
and other persons; and (vii) notification requirements relating to the
foregoing. Without limiting the above, Environmental Law also includes the
following: (i) the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ss.ss. 9601 et seq.), as amended ("CERCLA"); (ii) the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act (42 U.S.C. ss.ss. 6901 et seq.), as amended ("RCRA"); (iii) the Emergency
Planning and Community Right to Know Act of 1986 (42 U.S.C. ss.ss. 11001 et
seq.), as amended; (iv) the Clean Air Act (42 U.S.C. ss.ss. 7401 et seq.), as
amended; (v) the Clean Water Act (33 U.S.C. ss.1251 et seq.), as amended; (vi)
the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), as amended; (vii)
the Hazardous Materials Transportation Act (49 U.S.C. ss.ss. 1801 et seq.), as
amended; (viii) the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
ss. 136 et seq.), as amended;(ix) the Federal Safe Drinking Water Act (42 U.S.C.
ss. 300f et seq.), as amended; (x) the Federal Radon and Indoor Air Quality
Research Act (42 U.S.C. ss. 7401 note, et seq.); (xi) the Occupational Safety
and Health Act (29 U.S.C. ss. 651 et seq.), as amended; (xii) any state, county,
municipal or local statutes, laws or ordinances similar or analogous to
(including counterparts of) any of the statutes listed above; and (xiii) any
rules, regulations, directives, orders or the like adopted pursuant to or
implementing any of the above.
13.1.2. "Environmental Permit" or "Environmental Permits"
shall mean licenses, certificates, permits, directives, requirements,
registrations, government approvals, agreements, authorizations, and consents
which are required under or are issued pursuant to an Environmental Law or are
otherwise required by Governmental Authorities.
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13.1.3. "Hazardous Conditions" refers to the existence or
presence of any Hazardous Materials on, in, under, or at, the Projects
(including air, soil and groundwater) or any portion of any of them.
13.1.4. "Hazardous Material" or "Hazardous Materials" shall
mean:
(a) any chemical, pollutant, contaminant, pesticide,
petroleum or petroleum product or by product, radioactive substance, solid waste
(hazardous or extremely hazardous), special, dangerous or toxic waste,
substance, chemical or material regulated, listed, limited or prohibited under
any Environmental Law, including without limitation: (i) friable or damaged
asbestos, asbestos-containing material, presumed asbestos-containing material,
polychlorinated biphenyls ("PCBs"), solvents and waste oil; (ii) any "hazardous
substance" as defined under CERCLA; and (iii) any "hazardous waste" as defined
under RCRA; and
(b) even if not prohibited, listed, limited or
regulated by an Environmental Law, all pollutants, contaminants, hazardous,
dangerous or toxic chemical materials, wastes or any other substances, including
without limitation, any industrial process or pollution control waste (whether
or not hazardous within the meaning of RCRA) which could pose a hazard to the
environment, or the health and safety of any person or impair the use or value
of any portion of the Projects.
13.1.5. "Release" means any spill, discharge, leak, migration,
emission, escape, injection, dumping or other release or threatened release of
any Hazardous Material into the environment, whether or not notification or
reporting to any Governmental Authority was or is required. Release includes,
without limitation, historical releases and the meaning of Release as defined
under CERCLA.
13.1.6. "Remedial Action" shall mean any and all corrective
or remedial action, preventative measures, response, removal, transport,
disposal, clean-up, abatement, treatment and monitoring of Hazardous Materials
or Hazardous Conditions, whether voluntary or mandatory, and includes all
studies, assessments, reports or investigations performed in connection
therewith to determine if such actions are necessary or appropriate
(including investigations performed to determine the progress or status of any
such actions), all occurring on or after the Contract Date.
13.1.7. "Remedial Costs" shall include all costs, liabilities
expenses and fees incurred on or after the date of this Agreement in connection
with Remedial Action, including but not limited to: (i) the fees of
environmental consultants and contractors; (ii) reasonable attorneys' fees
(including compensation for in-house and corporate counsel provided such
compensation does not exceed customary rates for comparable services); (iii) the
costs associated with the preparation of reports, and laboratory analysis
(including charges for expedited results if reasonably necessary); (iv)
regulatory, permitting and review fees; (v) costs of soil and/or water treatment
(including groundwater monitoring)and/or
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transport and disposal; and (vi) the cost of supplies, equipment, material and
utilities used in connection with Remedial Action.
13.1.8. "Tank" or "Tanks" means above-ground and underground
storage tanks, vessels and related equipment, including appurtenant pipes, lines
and fixtures containing or previously containing any Hazardous Material or
fraction thereof.
13.2. Warranties. Sellers, for themselves and for the
Entities, hereby represent and warrant as follows with respect to each Project:
13.2.1. Sellers and the Entities have made available or
delivered to Buyer originals (or true, complete and accurate copies) of all of
the documents in their possession, custody or control, which documents include
and/or relate to:
(a) All approvals, plans, specifications, test borings,
percolation tests, engineering studies, surveys or other environmental data
concerning the Projects;
(b) All permits (including Environmental Permits), approvals,
registrations, Tank registration and/or closure documentation, certificates,
applications, notices, orders, directives, legal pleadings, correspondence or
other documents of any nature that any Entity or Seller, any tenant of Entity,
any of Entity's predecessors-in-title or any tenant of Entity's
predecessors-in-title have submitted to, or received from, any Governmental
Authority regarding the Projects and their use, compliance or non-compliance
with Environmental Laws; and
(c) The results of any investigation of any of the
Projects including, but not limited to, Phase I or Phase II site assessments,
asbestos inspection and/or removal reports, tests or investigations of soil or
other substrate air, groundwater, surface water, or the building interior, and
any testing or investigation results relating to the removal or abandonment of
any Tanks from the Projects.
13.2.2. To the knowledge of Sellers, each Project is owned
and operated in material compliance with all Environmental Laws and
Environmental Permits.
13.2.3. There are no pending or, to the Sellers' and
Entities' knowledge, threatened: (i) claims, complaints, notices, correspondence
or requests for information received by Sellers or the Entities with respect to
any violation or alleged violation of any Environmental Law or Environmental
Permit or with respect to any corrective or remedial action for or cleanup of
the Project or any portion thereof; and (ii) written correspondence, claims,
complaints, notices, or requests for information from or to Sellers or Entities
regarding any actual, potential or alleged liability or obligation under or
violation of any Environmental Law or Environmental Permit with respect to the
Project or any portion thereof.
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13.2.4. To Seller's knowledge, there have been no Release
and there has not been a threatened Release of a Hazardous Material on, in,
under or at the Project or any portion thereof.
13.2.5. No Project is listed, proposed or nominated for
listing on the National Priorities List pursuant to CERCLA (the "NPL"), the
Comprehensive Environmental Response and Liability Information System
("CERCLIS") or on any other similar list of sites under analogous state laws.
13.2.6. Except as listed and described on Exhibit "USTs",
there are no Tanks at, on or under the Project. Neither the Sellers nor the
Entities have removed, closed or abandoned any Tanks at the Projects, and
neither the Sellers nor the Entities have any knowledge of the existence,
abandonment, closure or removal of Tanks at the Projects.
13.2.7. To the knowledge of Sellers, there are no PCBs or
friable or damaged asbestos at the Projects.
13.2.8. To the knowledge of Sellers, there has been no
storage, treatment, disposal, generation, transportation or Release of any
Hazardous Materials by any Entity or Seller or by any other person or entity for
which any Seller or Entity is or may be held responsible, at, on, under, or
about any Project (or any portion thereof) in violation of Environmental Laws.
13.3. Indemnity. Notwithstanding anything to the contrary in
this Agreement, with respect to each Project, each of the Sellers, and each of
Sellers' shareholders, partners and members, (collectively, jointly and
severally, "Post Closing Seller") agree to and do hereby indemnify, defend and
hold harmless Buyer, the REIT and each of their respective partners,
shareholders, agents, contractors, employees, officers, directors, trustees,
shareholders, and each of their successors and assigns (collectively, the "Buyer
Indemnified Parties"), from and against any and all liabilities, claims,
demands, suits, administrative proceedings, causes of action, costs, damages,
personal injuries and property damages, losses and expenses, both known and
unknown, present and future, at law or in equity (collectively, "Losses"),
arising out of, by virtue of or related in any way to a breach by Sellers of any
of their representations and warranties under Sections 13.2 through and
including 13.2.8.
Without limiting any of Post-Closing Seller's above indemnification
obligations, Post-Closing Seller further acknowledges and agrees that its
obligation to indemnify the Buyer Indemnified Parties with respect to any breach
by Sellers of their representations and warranties under Sections 13.2 through
and including 13.2.8, includes, without limitation: (i) any and all Remedial
Costs associated with any Tank, Hazardous Material, Hazardous Condition or any
Release; (ii) to the maximum extent allowed by law, all fines and/or penalties
that may be imposed in connection with any Tank or the existence of any
Hazardous Material on, at, under, near, in or about the Projects; (iii) the
defense of any claim
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made by any individual or entity (including any government, governmental agency
or entity) concerning any of the foregoing, which defense shall be conducted by
counsel and with the assistance of environmental advisors and consultants,
in all cases subject to the prior written approval of Buyer; and (iv) reasonable
attorneys' fees and costs and environmental advisors' and consultants' fees
incurred by any of the Buyer Indemnified Parties with respect to enforcing its
rights under this indemnification provision. This Section 13 shall survive the
Closing for a period of thirty (30) months. Indemnification claims by Buyer
under this Section 13.3 are subject to Section 20.3.
14. ADDITIONAL CONDITIONS PRECEDENT TO CLOSING.
14.1. Buyer's Conditions Precedent. In addition to the other
conditions enumerated in this Agreement, the following shall be additional
Buyer's Conditions Precedent:
14.1.1. Physical Condition. The physical condition of each
Project shall be substantially the same on the Closing Date as on the Contract
Date, reasonable wear and tear excepted, unless the alteration of said physical
condition is the result of Damage.
14.1.2. Pending Actions. At the Closing, there shall be no
administrative agency, litigation or governmental proceeding of any kind
whatsoever, pending or threatened, that, after the Closing, would, in Buyer's
sole and absolute discretion, materially and adversely affect any Entity or the
value or marketability of any Project or the Projects as a whole, or the ability
of Buyer to operate any or all of the Projects in the manner it is (they are)
being operated on the Contract Date.
14.1.3. Zoning. On the Closing Date, no proceedings shall be
pending or threatened that could or would involve the change, redesignation,
redefinition or other modification of the zoning classifications of (or any
building, environmental, or code requirements applicable to) any or all of the
Projects, or any portion thereof, or any property adjacent to any Project, in a
manner which, in Buyer's sole and absolute discretion, would materially and
adversely affect the value or marketability of any Project.
14.1.4. Flood Insurance. As of the Closing Date, if any
Project is located in a flood plain, Buyer shall have obtained flood plain
insurance in form and substance acceptable to Buyer.
14.1.5. Assumed Indebtedness. Sellers shall provide to Buyer
letters from each of the holders of the Assumed Indebtedness dated no earlier
than 30 days prior to the Closing Date, approving the transfer of the Interests
to the Buyer, setting forth the amount of principal and interest outstanding as
of the Closing Date, and stating that there has not been, and there does not
currently exist, any default under any of the Assumed Indebtedness. Such letters
shall be referred to collectively as the "Lenders' Approvals."
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14.1.6. Satisfied Indebtedness. Sellers shall provide to
Buyers payoff letters good through the Closing Date from all holders of the
Satisfied Indebtedness stating
the amount required to pay off the Satisfied Indebtedness.
14.1.7. Owners. The composition of partners, shareholders and
members of each Entity and each Seller on the Closing Date shall be the same as
on the Contract Date, except for transfers to CPI Affiliates.
14.1.8. Bankruptcy. As of the Closing Date, no Seller, no
Entity and no Project is the subject of any bankruptcy proceeding for which
approval of this transaction has not been given and issued by the applicable
bankruptcy court.
14.1.9. Representations and Warranties True. The
representations and warranties of Sellers contained in this Agreement shall be
true and correct as of the Closing Date in all material respects, as though such
representations and warranties were made on such date.
14.1.10. Covenants Performed. All covenants and obligations of
Sellers required to be performed on or prior to the Closing Date shall have been
performed, in all material respects.
14.1.11. Approval by Buyer's Shareholders. REIT's Board of
Trustees and shareholders shall have approved this Agreement and the
consummation of the transactions contemplated by this Agreement.
14.2. Seller's Additional Conditions Precedent. The following shall be
additional Seller's Conditions Precedent:
14.2.1. Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement shall be true and correct as
of the Closing Date, in all respects, as though such representations and
warranties were made on such date.
14.2.2. Covenants. All covenants of Buyer required to be
performed on or prior to the Closing Date shall have been performed, in all
material respects.
15. LEASES-CONDITIONS PRECEDENT AND WARRANTIES WITH RESPECT THERETO.
15.1. Warranties as to Leases. With respect to each of the
tenants listed on the Rent Roll (as defined in Exhibit "Seller's Deliveries")
provided to Buyer by Sellers and any other tenants leasing space in any or all
of the Projects as of the Closing Date (collectively, the "Tenants"), Sellers,
for themselves and for the Entities, represent and warrant to Buyer as of the
Contract Date and as of the Closing Date as follows:
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15.1.1. Each of the Leases is in full force and effect strictly
according to the terms set forth therein and in the Rent Roll, and has not been
modified, amended, or altered, in writing or otherwise. Each Tenant is legally
required to pay all sums and perform all obligations set forth in the Leases,
without concessions, abatements, offsets or other bases for relief or
adjustment;
15.1.2. All obligations of the lessor under the Leases that
accrue to the date of the Closing have been performed, including, but not
limited to, all required tenant improvements, cash or other inducements, rent
abatements or moratoria, installations and construction (for which payment in
full has been made in all cases), and each Tenant has unconditionally accepted
lessor's performance of such obligations. No Tenant has asserted any offsets,
defenses or claims available against rent payable by it or other performance or
obligations otherwise due from it under any Lease;
15.1.3. Other than as shown on the Rent Roll, no Tenant is in
default under or is in arrears in the payment of any sums or in the performance
of any obligations required of it under its Lease. No Tenant has prepaid any
rent or other charges;
15.1.4. Each Entity and CPI as to Brandon have no reason to
believe that any Tenant is, or may become, unable or unwilling to perform any or
all of its obligations under its Lease, whether for financial or legal reasons
or otherwise;
15.1.5. Neither base rent ("Base Rent"), nor regularly payable
estimated Tenant contributions or operating expenses, insurance premiums, real
estate taxes, common area charges, and similar or other "pass-through" or non-
base rent items including, without limitation, cost-of-living or so-called
"C.P.I." or other such adjustments (collectively, "Additional Rent"), nor any
other item payable by any Tenant under any Lease has been heretofore prepaid for
more than one month nor shall it be prepaid between the Contract Date and the
Closing Date for more than one month;
15.1.6. No guarantor(s) of any Lease has been released or
discharged, partially or fully, voluntarily or involuntarily, or by operation of
law, from any obligation under or in connection with any Lease or any
transaction related thereto;
15.1.7. Except as specifically disclosed on Exhibit
"Commissions," there are no brokers' commissions, finders' fees, or other
charges payable or to become payable to any third party on behalf of any Entity
as a result of or in connection with any Lease or any transaction related
thereto, including, but not limited to, any exercised or unexercised option(s)
to expand or renew;
15.1.8. Each security deposit provided for under each Lease shall
be fully assigned to Buyer at the Closing. No Tenant or any other party has
asserted any claim (other than for customary refund at the expiration of a
Lease) to all or any part of any security deposit;
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15.1.9. Sellers shall pay, and retain sole and exclusive\
responsibility for, all expenses due on or before the Closing Date connected
with or arising out of the negotiation, execution and delivery of the Leases,
including, without limitation, brokers' commissions (subject to Section 17.7),
leasing fees and recording fees (as well as the cost of all tenant improvements,
subject to Section 17.7, not paid for by Tenants), and Sellers shall be deemed
to have certified and warranted payment thereof to Buyer at the Closing;
15.1.10. Except as set forth on Exhibit "Tenant Purchase Rights",
no Tenant has, by virtue of its Lease or any other agreement or understanding,
any purchase option with respect to any Project, or any portion thereof, or any
right of first refusal to purchase any Project, or a portion thereof, whether
triggered by the transactions contemplated by this Agreement or by a subsequent
sale of such Project or a portion thereof. Except as set forth on the Rent Roll,
no Tenant has, by virtue of its Lease, or any other agreement or understanding
any of the following: (a) the right or option to expand its tenancy into space
at any Project other than the space that such Tenant is currently occupying;
(b) the right or option to terminate its Lease; and (c) the right or option to
contract the space at any Project that such Tenant is currently occupying;
15.1.11. (a) Except as specifically disclosed on the Rent Roll
delivered to Buyer, no Tenant has sublet its leased premises; and (b) there are
no outstanding requests from any Tenants to Seller, requesting any consent to an
assignment of the Tenant's Lease or to a sublease of all or some portion of a
Tenant's leased premises.
Each Seller hereby indemnifies, defends and holds Buyer harmless from
and against all loss, damage, liability, cost, expense (including, but not
limited to, reasonable fees of attorneys of Buyer's choice) and charges which
Buyer may incur, or to which Buyer may become subject, as a consequence of any
breach of the warranties contained in this Section 15. The foregoing indemnity
shall survive the Closing for a period of eighteen (18) months.
15.2. Estoppel Certificates from Tenants. Sellers shall use
Sellers' commercially reasonable efforts to obtain, on or prior to the Closing
Date, a tenant's estoppel certificate from Tenants occupying at least eighty
percent (80%) of each Project (except Tred Avon) or such larger percentage as
Buyer's lender or lenders may require (provided, that Buyer advises Sellers of
lender requirements at least thirty (30) days before Closing) (the "Estoppel
Certificate"), dated no earlier than thirty (30) days prior to the Closing Date,
from each of the Tenants. The Estoppel Certificate shall be certified to Buyer,
the Entity owning the Project in which the applicable Tenant is located, and any
other party designated by Buyer. If Sellers (despite Sellers' required best
efforts) are unable to obtain an Estoppel Certificate from the required
percentage of Tenants Buyer's sole remedy shall be to proceed to close and
accept Seller's own Estoppel Certificate with respect to the Lease and tenancy
for which Sellers fail to procure an Estoppel Certificate from the relevant
Tenant (and any Estoppel Certificate so executed by a Seller shall also be
tailored, in a manner mutually and reasonably acceptable to Buyer and such
Seller, to reflect its issuance by the landlord, rather than the
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Tenant in question). Each such Estoppel Certificate shall be substantially in
the form attached hereto as Exhibit "Tenant Estoppel Certificate" or in such
other form as Buyer's lender or lenders may require. At Buyer's request, when
Sellers request the Tenant Estoppels, Sellers shall simultaneously request, and
thereafter Sellers shall use Sellers' commercially reasonable efforts to obtain,
on or before the Closing Date, from each Tenant a subordination, non-disturbance
and attornment agreement in such form and content as Buyer or Buyer's lender may
require.
16. CLOSING DELIVERIES.
16.1. Sellers' Deliveries. At the Closing (or such other times
as may be specified below), Sellers shall deliver or cause to be delivered to
Buyer the following, in form and substance reasonably acceptable to Buyer and
Sellers:
16.1.1. Assignment of Interests. As to each Entity, an
Assignment and Assumption Agreement, an Amendment to the Entity Agreement, and
an Amendment to the filed Entity Certificate setting forth the assignment by
each of the Sellers of such Seller's Interests and his, her or its withdrawal
from the Entity and the admission of the Buyer and/or its designee(s) as
partners of the Entity, which amendment shall be executed and acknowledged by
all Sellers and the Buyer.
16.1.2. Release. A release from each Seller releasing each
Entity and the Buyer (and its designee(s)) as partners of the Entities from any
obligations and liabilities with respect to the original formation of the
Entities, and any other matter arising from business done, transactions entered
into or events occurring prior to the Closing Date.
16.1.3. Opinion. The opinion, in form and substance
reasonably acceptable to Buyer and Buyer's counsel, of Dan R. Skowronski,
Esquire, General Counsel of Constellation Holdings, Inc., to the effect that,
providing, or with respect to:
(a) Each Entity is a duly organized and validly
existing entity in good standing under the laws of the State of Maryland;
(b) (i) the legal existence and good standing of
each Entity and each Seller in Maryland; (ii) the due authorization, execution
and delivery of this Agreement, and the other documents required (under the
terms of this Agreement) to be delivered by each Seller; (iii) that this
Agreement and the other documents required (under the terms of this Agreement)
to be delivered by each Seller, constitute the legal, valid and binding
obligations of such Seller, enforceable against it in accordance with their
respective terms, except to the extent that enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws of general applicability relating to or affecting the
enforcement of creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a proceeding of
equity or at law;
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(c) The execution and delivery of this Agreement and all other
agreements delivered in connection herewith or at the Closing, the consummation
of the transactions herein contemplated, and compliance with the terms of this
Agreement and all other agreements delivered in connection herewith or at the
Closing will not conflict with, or result in a breach of, any of the terms,
conditions or provisions of, or constitute a default under, any note, indenture,
mortgage, deed of trust, contract or other agreement or instrument to which any
Entity is a party or by which any Entity is bound, or any law or order, rule,
regulation, writ, injunction or decree of any government, governmental
instrumentality or court, domestic or foreign; and
(d) There is no litigation or investigation pending or, to the
best of such counsel's knowledge, threatened against any Entity, any Project,
or any part thereof.
16.1.4. Lenders' Approvals and Payoff Letters. The Lenders'
Approvals from all holders of the Assumed Indebtedness in conformity with
Section 14.1.5 and the payoff letters required by Section 14.1.6.
16.1.5. Estoppel Certificates. The Estoppel Certificates of all
Tenants in conformity with Section 15.2;
16.1.6. Keys. Keys to all locks located at each Project;
16.1.7. Affidavit of Title and ALTA Statement. As to each
Project, an Affidavit of Title (or comparable document) as reasonably required
by the Title Company in the Commonwealth of Pennsylvania as a condition to the
deletion of the general exceptions of Schedule B, Section 2 of each Title
Policy, executed by the applicable Entity or Seller, as applicable, and in form
and substance acceptable to the Title Company and to Buyer;
16.1.8. Letters to Tenants. If requested by Buyer, letters
executed by the applicable Entities and, if applicable, its management agent,
addressed to all Tenants, in form provided by Buyer, notifying all Tenants of
the transfer of control of the Projects and directing payment of all rents
accruing after the Closing Date to be made to Buyer or at its direction;
16.1.9. Title Policies. The title policies (or "marked-up"
Title Reports) issued by the Title Company, dated as of the Closing Date in the
amount of the Consideration allocated to each Project, in accordance with the
requirements of Section 9 (it being understood that CPI as to Brandon will
provide any certificates or undertakings required in order to induce the Title
Company to insure over any "gap" period resulting from any delay in recording of
documents or later-dating the title insurance file);
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16.1.10. Original Documents. To the extent not previously
delivered to Buyer, originals of the Leases, Assigned Contracts and Governmental
Approvals;
16.1.11. Closing Statement. A closing statement conforming to the
proration and other relevant provisions of this Agreement (the "Closing
Statement") duly executed by Sellers;
16.1.12. Plans and Specifications. All plans and specifications
relating to the Projects in any Entity's or Seller's possession and control or
otherwise available to any Entity or Seller;
16.1.13. Tax Bills. Copies of the most currently available Tax
Bills to the extent not previously delivered to Buyer;
16.1.14. Entity Transfer Certificate. Entity transfer
certifications confirming that each Seller is a "United States Person"
within the meaning of Section 1445 of the Internal Revenue Code of 1986, as
amended;
16.1.15. Rent Roll. A Rent Roll, prepared as of the Closing Date,
certified by the applicable Sellers to be true, complete and correct through the
Closing Date;
16.1.16. Registration Rights Agreement. The Registration Rights
Agreement, dated as of the Closing Date and duly executed by the Sellers;
16.1.17. Share Schedule. The Share Schedule, duly executed by
Sellers;
16.1.18. Certificates of Occupancy. Currently valid certificates
of occupancy (or comparable permits or licenses), to the extent in Sellers'
possession or control, with respect to the entirety of each Project;
16.1.19. Closing Certificate. A certificate, signed by Sellers,
certifying to the Buyer that the representations and warranties of Sellers
contained in this Agreement are true and correct on all material respects as of
the Closing Date and that all covenants required to be performed by Sellers
prior to the Closing Date have been performed in all material respects;
16.1.20. Resolutions, Consents, Approvals. Certified Resolutions,
consents, and approvals of each Sellers evidencing such Seller's authority to
execute this Agreement and consummate the transactions contemplated by this
Agreement.
16.1.21. Good Standing Certificate. Currently dated good standing
certificates for the Sellers and the Entities.
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16.1.22. Deed. Special Warranty Deed, Executed by CPI, in
recordable form conveying Brandon to Buyer free and clear of all liens, claims
and encumbrances except for the Permitted Exceptions.
16.1.23. Bill of Sale. General Warranty Assignment and Bill of
Sale, executed by CPI, assigning, conveying and warranting to Buyer title to the
Personal Property and Inventory as to Brandon, free and clear of all
encumbrances, other than the Permitted Exceptions.
16.1.24. General Assignment. An assignment, executed by CPI to
Buyer, of all right, title and interest of Contributor and its agents in and to
the Intangible Personal Property as to Brandon.
16.1.25. Assignment of Contracts. An assignment, executed by CPI
and Buyer, to Buyer of CPI's right, title and interest in and to those of the
Contracts that will remain in effect after Closing. CPI shall also assign to
Buyer all guarantees and warranties given to CPI in connection with the
operation, construction, improvement, alteration or repair of any or all of
Brandon.
16.1.26. Assignment of Leases and Estoppel Certificates. An
assignment of CPI's right, title and interest in and to the Leases as to Brandon
(including all security deposits and/or other deposits thereunder), with
customary reciprocal indemnity provisions.
16.1.27. Option/ROFR. The signed Option/ROFR Agreements.
16.1.28. Constellation Lease. The signed Constellation Lease.
16.1.29. Development Management Agreement. The signed Development
Management Agreement.
16.1.30. TIF Agreement. The signed TIF Agreement.
16.1.31. License Agreements. Signed License Agreements in form a
nd content reasonably acceptable to Sellers and Buyer giving Buye r, and Buyer's
successors and assigns, the right to use the names "National Business Park".
"Constellation Centre", and "Piney Orchard" in connection with the ownership and
operation of those Projects.
16.1.32. Articles of Transfer. Signed articles of transfer to the
extent required by the State Department of A ssessments and Taxation of
Maryland.
16.1.33. Other. Such other documents and instruments as may
reasonably be required by Buyer (including, without limitation, those of the
Seller's Deliveries in Seller's possession or control that have not previously
been delivered to Buyer), its (or its
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underwriters' or lenders') counsel or the Title Company and that may be
necessary to consummate the transactions that are the subject of this Agreement
and to otherwise give effect to the agreements of the parties hereto.
16.2. Buyer's. As a condition precedent to Seller's obligationclose
("Seller's Condition Precedent"), Buyer shall cause to be delivered to
Sellers the following, each in form and substance reasonably acceptable to
Sellers and Buyer and their respective counsel:
16.2.1. The Consideration. The Consideration required to be
delivered by Buyer to Sellers under this Agreement.
16.2.2. Organizational Documents. (i) A copy certified by the
Secretary of State of the State of Maryland of the Declaration of Trust of the
REIT and a good standing certificate for the REIT; (ii) a copy certified by the
Secretary of State of the State of Delaware of the certificate of limite
partnership of the Buyer and a good standing certificate for the Buyer; and
(iii) a copy, certified by the secretary or an assistant secretary of the REIT,
of the resolution of the REIT's board of directors, authorizing the transactions
described herein;
16.2.3. Closing Statement. A Closing Statement, duly executed
by the Buyer;
16.2.4. Registration Rights Agreement. The Registration Rights
Agreement, duly executed by the REIT;
16.2.5. Share Schedule. Share Schedule, duly executed by the
Buyer;
16.2.6. Tenant Letters. If Buyer has requested such letters, the
Tenant Letters, duly executed by the Buyer;
16.2.7. Opinion. An opinion of counsel for COPLP and the REIT,
in form and substance reasonably satisfactory to Seller and Seller's counsel,
providing or with
respect to: (i) the legal existence and good standing of COPLP and the REIT;
(ii) the due authorization, execution and delivery of this Agreement, and the
other documents required (under the terms of this Agreement) to be delivered by
COPLP and the REIT, as applicable; (iii) that the Shares issued and delivered to
Sellers as part of the Consideration have been duly authorized and validly
issued by the REIT and constitute fully paid, non-assessable shares of the REIT,
free from all pre-emptive rights; (iv) that this Agreement and the other
documents required (under the terms of this Agreement) to be delivered by each
of COPLP and the REIT, as applicable, constitute the legal, valid and binding
obligations of COPLP and the REIT, enforceable against them in accordance with
their respective terms, except to the extent that enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws of general applicability relating to or affecting the
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enforcement of creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a proceeding of
equity or at law;
16.2.8. ROFR. The signed ROFR Agreements.
16.2.9. Constellation Lease. The signed Constellation Lease;
16.2.10. Development Management Agreement. The signed
Development Management Agreement;
16.2.11. TIF Agreement. The signed TIF Agreement.
16.2.12. Licenses. The licenses referred to in Section 16.1.31.
16.2.13. Articles of Transfer. The articles of transfer
referred to in Section 16.1.32.
16.2.14. Other. Such other documents and instruments as may
reasonably be required by Sellers or its or their respective counsel or the
Title Company and that are necessary to consummate the transaction which is the
subject of this Agreement and to otherwise effect the agreements of the parties
hereto.
17. PRORATIONS AND ADJUSTMENTS.
The following shall be prorated and adjusted between Sellers and Buyer
as of the Closing Date, except as otherwise specified:
17.1. The amount of all security and other Tenant deposits,
and interest due thereon, if any, shall be credited to Buyer;
17.2. Buyer and Sellers shall divide the cost, if any, of any
closing escrows hereunder equally between them;
17.3. Water, electricity, sewer, gas, telephone and other
utility charges based, to the extent practicable, on final meter readings and
final invoices, or, in the event final readings and invoices are not available,
based on the most currently available billing information, and reprorated upon
issuance of final utility bills;
17.4. Amounts paid or payable under any Assigned Contracts
shall be prorated based, to the extent practicable, on final invoices, or, in
the event final invoices are not available, based on the most currently
available billing information, and reprorated upon issuance of final invoices;
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17.5. All real estate, personal property and ad valorem taxes
applicable to the Projects and levied with respect to current tax year shall be
prorated as of the Closing Date, utilizing the actual final Tax Bills for those
Projects. Prior to or at the Closing, Sellers shall pay or have paid all Tax
Bills that are due and payable prior to or on the Closing Date and shall furnish
evidence of such payment to Buyer and the Title Company. Each party's respective
obligations to reprorate real estate taxes shall survive the Closing.
17.6. All assessments, general or special, shall be prorated
as of the Closing Date on a "due date" basis such that the applicable Entity or
Seller shall be responsible for any installments of assessments which are first
due or payable prior to the Closing Date and Buyer shall be responsible for any
installments of assessments which are first due or payable on or after the
Closing Date;
17.7. Commissions of leasing and rental agents for any Lease
entered into as of or prior to the Contract Date, whether with respect to base
lease term or future expansions, shall be paid in full at or prior to the
Closing by Seller, without contribution or proration from Buyer, except for
renewal commissions as disclosed to Buyer in Exhibit "Commissions". As to Leases
entered into between the Contract Date and the Closing Date in accordance with
Section 12.1, commissions shall be prorated as of the Closing Date based upon
the portion of the term of the Lease before Closing and the portion of the term
of this Lease after Closing. At Closing, COPT shall reimburse CPI the amount of
leasing commissions payable to unaffiliated third-parties and tenant
improvements costs payable to unaffiliated third-parties incurred by CPI with
respect to Leases entered into, subject to Section 12.1 of this Agreement, after
March 9, 1998 at the Project known as "One Constellation Centre", the amount
claimed for reimbursement evidenced by invoices or paid receipts from such third
parties or other evidence of expense reasonably required by Buyer..
17.8. Current interest under Assumed Indebtedness shall be
prorated as of the Closing Date.
17.9. All Base Rents and other charges, including, without
limitation, all Additional Rent, shall be prorated as of the Closing Date. At
the time(s) of final calculation and collection from Tenants of Additional Rent
for 1998, there shall be a re-proration between Sellers and Buyer as to
Additional Rent adjustments, with such re-prorations being payable to the
appropriate recipient in cash. Such re-proration shall be paid upon Buyer's
presentation of its final accounting to Seller, certified as to accuracy by
Buyer. At the Closing, no "Delinquent Rents" (rents or other charges that are
due as of the Closing) shall be prorated in favor of Seller. The parties'
respective obligations to reprorate Additional Rent shall survive the Closing.
Notwithstanding the foregoing, Buyer shall use reasonable efforts after the
Closing Date to collect any Delinquent Rents due to Sellers from Tenants, but
Buyer shall not be required to sue any Tenants. All rents and other charges
received by (or for the benefit of) Buyer from any Tenant after the Closing
shall be first applied against current and past due obligations owed to, or for
the benefit of, Buyer (with respect to those obligations accruing subsequent to
the Closing Date), and any excess shall be delivered to Seller, but only to the
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extent of amounts in default and owed to, and for the benefit of, Sellers for
the period prior to the Closing Date. In no event, however, shall any sums be
paid to Sellers to the extent Sellers have been previously reimbursed for such
default out of any security deposit and security deposits have been
appropriately prorated hereunder; and
17.10. Such other items that are customarily prorated in
transactions of this nature shall be ratably prorated.
17.11. With respect to the Project known as "Cranberry
Square", at Closing, Buyer shall reimburse CPI amounts expended by CPI from and
after March 9, 1998 until the Closing Date on the expansion of the Cranberry
Square Project, subject, however, to the limitation, that the amount payable to
CPI under this Section 17.11 shall not exceed the amount determined by
subtracting the costs to complete the expansion of the Cranberry Square Project
after the Closing Date as reasonably determined by Buyer and Sellers from Two
Million Two Hundred Thousand Dollars ($2,200,000.00). Amounts claimed for
reimbursement shall be evidenced by invoices or paid receipts from third-parties
not affiliated with CPI, or other evidence of expense reasonably required by
Buyer.
For purposes of calculating prorations, Buyer shall be deemed, through
control of the Entities, to be in title to the Projects, and therefore entitled
to the income therefrom and responsible for the expenses thereof, for the entire
Closing Date. All such prorations shall be made on the basis of the actual
number of days of the year and month that shall have elapsed as of the Closing
Date. Bills received after the Closing that relate to expenses incurred,
services performed or other amounts allocable to the period prior to the Closing
Date shall be paid, in cash, by Seller, to the extent due and owing. Bills
received by Sellers after the Closing Date that relate to expenses incurred,
services performed or other amounts allocable to the period on or after the
Closing Date, shall be paid, in cash, by the Buyer, to the extent due and owing.
18. CLOSING EXPENSES.
18.1. Sellers will pay the entire cost of all assumption
charges, release fees, prepayment fees and any other fees or costs in connection
with the assumption, payoff, release and satisfaction of the Assumed Mortgages
and the Satisfied Mortgages, and all fees imposed by its accountants and
attorneys and consultants in connection with this Agreement and the transaction
contemplated hereunder. Buyer will pay the entire cost of the title policies,
the Surveys (inclusive of any updates thereof), and all fees imposed by its
accountants, attorneys, and environmental and engineering consultants.
18.2. Although Seller and Buyer believe that no real estate
transfer or recording fees or taxes will be due in connection with the
assignment of the Interests, if it is finally determined that such taxes are due
and payable in connection herewith, then the Buyer and the Sellers which held
Interests the transfer of which is deemed subject to real estate transfer tax
shall divide equally the costs of contesting such taxes and shall divide equally
the
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full amount of such taxes if they are finally determined to be payable. This
Section 18.2 shall survive Closing.
18.3. Sellers and Buyer shall divide equally all recordation
taxes and fees, and all realty transfer taxes applicable to the conveyance of
Brandon.
19. DESTRUCTION, LOSS OR DIMINUTION OF PROJECTS.
If, prior to the Closing, all or any portion of any Project is damaged
by fire or other natural casualty (collectively, "Damage"), or is taken or made
subject to condemnation, eminent domain or other governmental acquisition
proceedings (collectively, "Eminent Domain"), then the following procedures
shall apply:
19.1. If the aggregate cost of repair or replacement in
connection with any Damage at any Project or the value of the Eminent Domain
involving any single Project (collectively, "repair and/or replacement") is
$200,000.00 or less (on a per Project basis), in the mutual and reasonable
opinions of Buyer and Seller, Buyer shall close and take the Project(s) in
question as diminished by the Damage or Eminent Domain, as the case may be,
subject to a reduction in the Contribution Consideration otherwise due at the
Closing, in the full amount of the cost of repair and/or replacement. Any
casualty insurance or condemnation proceeds shall be the sole property of
Seller.
19.2. If the aggregate cost of repair and/or replacement at
any single Project is greater than $200,000.00, in the mutual and reasonable
opinions of Buyer and Seller, then Buyer, in its sole and absolute discretion,
may elect any of the following options: (i) Buyer may delete and eliminate from
this Agreement any Project that is in need of repair and/or replacement in
excess of $200,000.00 by giving written notice to Seller, in which event (A)
this Agreement shall be deemed to have been automatically amended so as to
eliminate the deleted Projects herefrom, and (B) Buyer and Sellers shall proceed
to close on the remaining Projects (i.e., the non-deleted Projects) subject to
an appropriate and commensurate reduction in the Consideration (which reduction
shall include, without limitation, an amount equal to the full cost of repair
and/or replacement of any portion of any non-deleted Project that Buyer proceeds
to purchase); or (iii) Buyer may proceed to close on all of the Projects,
subject to (1) a reduction in the Consideration equal to $200,000.00, on a per
Project basis, otherwise due at the Closing and (2) an assignment of the
proceeds of Seller's casualty insurance proceeds for all Damage (or condemnation
awards for any Eminent Domain) in excess of $200,000.00, on a per Project basis,
together with payment to Buyer by Sellers of any uninsured or deductible amount
not covered by such proceeds. In such event, Sellers shall fully cooperate with
Buyer in the adjustment and settlement of the insurance claim or governmental
acquisition proceeding and if, as of the Closing, the insurance proceeds (or
condemnation award) assignable to Buyer shall not have been collected from the
insurer or Governmental Authority, then a cash credit in the amount thereof
shall be given to Buyer, to be repaid to Sellers out of and upon Buyer's actual
receipt of insurance proceeds. The proceeds and benefits under any rent loss or
business interruption policies attributable to the
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period following the Closingshall likewise be transferred and paid over (and, if
applicable, likewise credited on an interim basis) to Buyer.
19.3. In the event of a dispute between Sellers and Buyer with
respect to the cost of repair and/or replacement with respect to the matters set
forth in this Section 19, an engineer designated by Sellers and an engineer
designated by Buyer shall select an independent engineer licensed to practice in
the jurisdiction where the Project in question is located who shall resolve such
dispute. All fees, costs and expenses of such third engineer so selected shall
be shared equally by Buyer and Seller.
20. DEFAULT.
20.1. Default by Seller. If any of Sellers' representations
and warranties contained herein shall not be true and correct on the Contract
Date and continuing thereafter through and including the Closing Date, or if any
Seller fails to perform any of the covenants and agreements contained herein to
be performed by such Seller within the time for performance as specified herein
(including Seller's obligation to close), or if any of the Buyer's Conditions
Precedent shall not have been satisfied, Buyer may elect either to (i) terminate
Buyer's obligations under this Agreement by written notice to Sellers, in which
event Buyer shall retain all rights and remedies available to it; or (ii) close,
in which event Buyer may file an action for either or both of specific
performance and damages to compel Sellers to cure all or any of such default(s),
in whole or in part, whereupon Buyer shall be entitled to deduct from the
Consideration, the cost of such action and cure, and all reasonable expenses
incurred by Buyer in connection therewith, including, but not limited to,
attorneys' fees of Buyer's counsel. Notwithstanding anything to the contrary
herein and in addition to any other remedies of Buyer, Buyer shall be entitled
to recover actual (but not consequential) damages suffered by Buyer by reason of
Seller's defaults hereunder and/or any delay occasioned thereby, including,
without limitation, Buyer's Reasonable Costs. The remedies of Buyer set forth in
this Section 20.1 shall be in addition to remedies otherwise applicable or
provided in this Agreement or otherwise available to Buyer at law or in equity,
including, without limitation, specific performance, it being understood that
Buyer's rights and remedies under this Agreement shall always be non-exclusive
and cumulative and that the exercise of one remedy or form of relief available
to Buyer hereunder shall not be exclusive or constitute a waiver of any other.
Buyer's remedies under this Section 20.1 shall not be limited by Section 20.3.
20.2. Default by Buyer. In the event Buyer defaults in its
obligations to acquire the Interests and Brandon, then Sellers' sole and
exclusive remedy shall be to cause the Escrowee to deliver the Proceeds,
together with all interest earned thereon, to Seller, the amount thereof being
fixed and liquidated damages, it being understood that Sellers' actual damages
in the event of such default are difficult to ascertain and that such proceeds
represent the parties' best current estimate of such damages. Sellers shall have
no other remedy for any default by Buyer prior to Closing.
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20.3. Indemnification of Buyer.
20.3.1. Indemnification. Each of Seller and each of
Seller's shareholders, members and partners, jointly and severally, as the case
may be, shall and does hereby indemnify, protect, defend and hold the Buyer
Indemnified Parties harmless from and against any claims, losses, demands,
liabilities, suits, costs and damages suffered by the Buyer Indemnified Parties,
including consequential as well as actual damages and attorneys' fees of counsel
selected by the Buyer Indemnified Parties and other costs of defense, incurred,
arising against, or suffered by, the Buyer Indemnified Parties or its assigns as
a direct or indirect consequence of (i) any breach of any representation,
warranty or covenant made in this Agreement by Seller, or any other default by
Seller, whether discovered before or after the Closing or (ii) any default
claim, action or omission arising or alleging to arise under the Existing Loan
Documents and relating to the period prior to the Closing, whether asserted
before or after the Closing. This indemnification obligation shall expire
eighteen (18) months from the Closing Date, except as to until thirty (30)
months after the date of this Agreement, and except as to claims under Section
11.1 which may be made until the expiration of the time period under the statute
of limitation applicable to such claims..
20.3.2. Limitation of Claims. No claims for
indemnification under this Agreement may be asserted by Buyer Indemnified
Parties against the Sellers until the aggregate amount of such indemnification
claims exceeds $125,000.00, whereupon all such amounts may be claimed.
20.4. Indemnification of Sellers.
20.4.1. Indemnification. Buyer shall indemnify, protect,
defend and hold Sellers' and each of Sellers' shareholders, members and partners
(the "Seller Indemnified Parties") harmless from and against any claims, losses,
demands, liabilities, suits, costs and damages suffered by the Seller
Indemnified Parties, including consequential as well as actual damages an
attorneys' fees of counsel selected by the Seller Indemnified Parties and other
costs of defense, incurred, arising against, or suffered by, the Seller
Indemnified Parties or its assigns as a direct or indirect consequence of any
breach of any representation, warranty or covenant made in this Agreement by
Buyer, or any other default by Buyer, whether discovered before or after the
Closing. This indemnification obligation shall survive Closing.
20.5. Buyer Notice and Right to Cure. Anything contained in
this Agreement to the contrary notwithstanding, any thing or act which would
otherwise be a default hereunder by Buyer shall not be a default unless Sellers
shall have given Buyer notice of such default, and Buyer shall have failed to
cure the same within thirty (30) days after such notice. No notice of default
shall be required in the case of Buyer's default in failing to complete Closing
on the required Closing Date.
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20.6. Sellers' Notice and Right to Cure. Anything contained in
this Agreement to the contrary notwithstanding, any thing or act which would
otherwise be a default hereunder by Sellers shall not be a default unless Buyer
shall have given Sellers notice of such default, and Sellers shall have failed
to cure the same within thirty (30) days after such notice. No notice of default
shall be required in the case of Sellers' default in failing to complete Closing
on the required Closing Date.
21. SUCCESSORS AND ASSIGNS.
The terms, conditions and covenants of this Agreement shall be binding
upon and shall inure to the benefit of the parties and their respective
nominees, successors, beneficiaries and assigns; provided, however, no direct or
indirect conveyance, assignment or transfer of any interest whatsoever of, in or
to any or all of the Projects or of this Agreement shall be made by Sellers
during the term of this Agreement except to CPI Affiliates, as permitted in
Section 11.1.4. Buyer may assign all or any of its right, title and interest
under this Agreement to the Buyer, the REIT or to any corporate or partnership
entity affiliated with, or related to, the Buyer or the REIT ("Affiliate"). For
purposes of this Agreement, an Affiliate shall, without limitation, include any
entity having common ownership or management with Buyer or the REIT. No such
assignee shall accrue any obligations or liabilities hereunder until the
effective date of such assignment. In addition to its right of assignment, Buyer
shall also have the right, exercisable at or prior to the Closing, to designate
any Affiliate, as the contract party under any contract to be entered into at
Closing pursuant to the terms of this Agreement by Buyer, or as the grantee or
transferee of any or all of the conveyances, transfers and assignments to be
made by Sellers at the Closing hereunder, independent of, or in addition to, any
assignment of this Agreement. In the event of an assignment of this Agreement by
Buyer (but not in the event of the designation of any Affiliate), its assignee
shall be deemed to be the Buyer hereunder for all purposes hereof, and shall
have all rights of Buyer hereunder (including, but not limited to, the right of
further assignment). In the event that an Affiliate shall be designated as a
transferee hereunder, that transferee shall have the benefit of all of the
representations and rights which, by the terms of this Agreement, are
incorporated in or relate to the conveyance in question.
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22. LITIGATION.
Sellers and Buyer waive all rights to a jury trial with respect to any
disputes relating to this Agreement, whether arising before or after Closing. In
the event of litigation between the parties with respect to any Project, this
Agreement, the performance of their respective obligations hereunder or the
effect of a termination under this Agreement, the losing party shall pay all
costs and expenses incurred by the prevailing party in connection with such
litigation, including, but not limited to, reasonable attorneys' fees of counsel
selected by the prevailing party. The parties hereby further acknowledge and
agree that in the event of litigation between them, as contemplated above, and
the resolution of that litigation through compromise, settlement, or partial
judgment, the court before which such litigation is initially brought shall have
the right to allocate responsibility, between Sellers and Buyer, for all costs
and expenses (including, but not limited to, attorneys' reasonable fees)
incurred by both Sellers and Buyer in the pursuit of that litigation resolved
through compromise, settlement or partial judgment. Notwithstanding any
provision of this Agreement to the contrary, the obligations of the parties
under this Section 22 shall survive termination of this Agreement and the
Closing, if applicable.
23. NOTICES.
Any notice, demand or request which may be permitted, required or
desired to be given in connection therewith shall be given in writing and
directed to Sellers and Buyer as follows:
Sellers:
Constellation Real Estate, Inc.
8815 Centre Park Drive - Suite 400
Columbia, MD 21045
Attention: General Counsel
and
Constellation Holdings, Inc.
250 West Pratt Street
Baltimore, MD 21201-2423
Attention: Dan R. Skowronski, Esquire
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With a copy to its attorneys:
Stephen L. Owen, Esquire
Piper & Marbury LLP
36 South Charles Street
Baltimore, MD 21201-3018
Buyer:
Corporate Office Properties Trust
One Logan Square, Suite 1105
Philadelphia, PA 19103
Attention: Clay W. Hamlin, III
President and Chief Executive
Officer
With a copy to its attorneys:
F. Michael Wysocki, Esquire
Saul, Ewing, Remick & Saul LLP
Centre Square West
1500 Market Street - 38th Floor
Philadelphia, PA 19102
Notices shall be deemed properly delivered and received when and if either (i)
personally delivered, including via facsimile; or (ii) on the first business day
after deposit with a commercial overnight courier for delivery on the next
business day. Any party may change its address for delivery of notices by
properly notifying the others pursuant to this Section 23.
24. BENEFIT.
This Agreement is for the benefit only of the parties hereto and their
nominees, successors, beneficiaries and assignees as permitted in Section 21
above and no other person or entity shall be entitled to rely hereon, receive
any benefit herefrom or enforce against any party hereto any provision hereof.
25. LIMITATION OF LIABILITY.
25.1. Upon the Closing, neither the REIT nor the Buyer shall
assume or undertake to pay, satisfy or discharge any liabilities, obligations or
commitments of Sellers other than those specifically agreed to between the
parties and set forth in this Agreement. Except as otherwise specifically
provided in this Agreement, neither the REIT nor the Buyer shall assume or
discharge any debts, obligations, liabilities or commitments of Seller, whether
accrued now or hereafter, fixed or contingent, known or unknown. Neither the
holders of Shares nor the trustees, officers, employees or agents of the REIT
shall be liable under this
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Agreement and all parties hereto shall look solely to the REIT assets for the
payment of any claim or for the performance of any obligation of the REIT as a
party to this Agreement, both in its own capacity and in its capacity as a
general partner of the Buyer.
25.2. None of the shareholders, directors, officers, employees
or agents of the Sellers shall be liable under this Agreement and all parties
hereto shall look solely to the Sellers' assets for the payment of any claim or
for the performance of any obligation of the Sellers as a party to this
Agreement.
26. BROKERAGE.
Each party hereto represents and warrants to the other that it has
dealt with no brokers or finders in connection with this transaction and that no
broker, finder or other party is entitled to a commission, finder's fee or other
similar compensation as a result hereof, except Legg Mason Real Estate Services,
Inc. under separate agreement with Buyer. Buyer shall pay to Legg Mason Real
Estate Services, Inc. the compensation payable to it with respect to this
transaction. Sellers hereby indemnify, protect and defend and hold Buyer
harmless from and against all losses, claims, costs, expenses, damages
(including, but not limited to, attorneys' fees of counsel selected by Buyer)
resulting or arising from the claims of any broker, finder or other such party,
claiming by, through or under the acts or agreements of any Seller. Buyer hereby
indemnifies, defends and holds each Seller harmless from and against all losses,
claims, costs, expenses, damages (including, but not limited to, attorneys' fees
of counsel selected by such Seller) resulting or arising from the claims of any
broker, finder or other such party claiming by, through or under acts or
agreements of Buyer. This Section 26 shall survive any termination of this
Agreement and the Closing, if applicable.
27. REASONABLE EFFORTS.
Sellers and Buyer shall use their reasonable, diligent and good faith
efforts, and shall cooperate with and assist each other in their efforts, to
obtain any and all consents and approvals of third parties (including, but not
limited to, governmental authorities) to the transaction contemplated hereby,
and to otherwise perform as may be necessary or otherwise reasonably requested
by the other party to effectuate and carry out the purposes of, this Agreement.
59
<PAGE>
28. MISCELLANEOUS.
28.1. Entire Agreement. This Agreement, the Services Company
Agreement, and the two option agreements described above constitute the entire
understanding between the parties with respect to the transaction contemplated
herein, and all prior or contemporaneous oral agreements, understandings,
representations and statements, and all prior written agreements,
understandings, letters of intent and proposals are merged into this Agreement.
Neither this Agreement nor any provisions hereof may be waived, modified,
amended, discharged or terminated except by an instrument in writing signed by
the party against which the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
28.2. Time of the Essence. Time is of the essence of this
Agreement. If any date herein set forth for the performance of any obligations
by Sellers or Buyer or for the delivery of any instrument or notice as herein
provided should be on a Saturday, Sunday or legal holiday, the compliance with
such obligations or delivery shall be deemed acceptable on the next business day
following such Saturday, Sunday or legal holiday. As used herein, the term
"legal holiday" means any state or federal holiday for which financial
institutions or post offices are generally closed in the State of Maryland for
observance thereof.
28.3. Conditions Precedent. 28.3.1 The obligations of Buyer to
make the payments and deliver the Shares as described in Section 3 above and to
close the transaction contemplated herein are subject to the express Buyer's
Conditions Precedent set forth in this Agreement, each of which is for the sole
benefit of Buyer and may be waived at any time by written notice thereof from
Buyer to Seller. The waiver of any particular Buyer's Condition Precedent shall
not constitute the waiver of any other.
28.3.2 The obligations of Sellers to close the transaction
contemplated herein are subject to the express Sellers' Condition Precedent set
forth in this Agreement, each of which is for the sole benefit of Sellers and
may be waived at any time by written notice thereof from Sellers to Buyer. The
waiver of any particular Sellers' Condition Precedent shall not constitute the
waiver of any other.
28.4. Construction. This Agreement shall not be construed more
strictly against one party than against the other merely by virtue of the fact
that it may have been prepared by counsel for one of the parties, it being
recognized that both Sellers and Buyer have contributed substantially and
materially to the preparation of this Agreement. The headings of various
Sections in this Agreement are for convenience only, and are not to be utilized
in construing the content or meaning of the substantive provisions hereof.
28.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland.
28.6. Partial Invalidity. The provisions hereof shall be
deemed independent and severable, and the invalidity or partial invalidity or
enforceability of any one provision shall not affect the validity of
enforceability of any other provision hereof.
28.7. Expenses. Except and to the extent as otherwise
expressly provided to the contrary herein, Buyer and Sellers shall each bear its
own respective costs and expenses relating to the transactions contemplated
hereby, including, without limitation, fees and
60
<PAGE>
expenses of legal counsel or other representatives for the services used, hired
or connected with the proposed transactions mentioned above.
28.8. Control of Defense Counsel. Each indemnified party shall
give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against the indemnified party in respect of which indemnity
may be sought hereunder, but failure so to notify an indemnifying party (i)
shall not relieve it from any liability which it may have under any indemnity
provided herein unless and to the extent it did not otherwise learn of such
action and the lack of notice by the indemnified party results in the forfeiture
by the indemnifying party of substantial rights and defenses and (ii) shall not,
in any event, relieve the indemnifying party from any obligations to any
indemnified party hereunder other than its indemnification obligation if the
indemnifying party so elects within a reasonable time after receipt of such
notice, the indemnifying party may assume the defense of such action or
proceeding at such indemnifying party's own expense with counsel chosen by the
indemnifying party; provided, however, that, if such indemnified party or
parties reasonably determine that a conflict of interest exists where it is
advisable for such indemnified party or parties to be represented by separate
counsel or that, upon advice of counsel, there may be legal defenses available
to them which are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled to one
separate counsel at the indemnifying party's expense. If an indemnifying party
is not so entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence of
this Section 28.8 , the indemnifying party or parties will pay the reasonable
fees and expenses of counsel for the indemnified party or parties. In such event
however, no indemnifying party will be liable for any settlement effected
without the written consent of such indemnifying party. If an indemnifying party
is entitled to assume, and assumes, the defense of such action or proceeding in
accordance with this Section, such indemnifying party shall not be liable for
any fees and expenses of counsel for the indemnified parties incurred thereafter
in connection with such action or proceeding.
28.9. Waiver of Conditions Precedent. Buyer and Sellers shall
each have the right, in its sole and absolute discretion, to waive any Condition
Precedent for its benefit contained in this Agreement.
28.10. Certain Securities Matters. No sale of Shares is
intended by the parties by virtue of their execution of this Agreement.
28.11. Counterparts. This Agreement may be executed in any
number of identical counterparts, any of which may contain the signatures of
less than all parties, and all of which together shall constitute a single
agreement.
28.12. Calculation of Time Periods. Notwithstanding anything
to the contrary contained in this Agreement, any period of time provided for in
this Agreement that is intended to expire on or prior to the Closing Date, but
that would extend beyond the Closing Date if permitted to run its full term,
shall be deemed to expire upon the Closing.
61
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have executed this Acquisition Agreement on the date first above written.
Buyer:
CORPORATE OFFICE PROPERTIES, L.P.
By: Corporate Office Properties
Trust, its sole general partner
By:_________________________________
Clay W. Hamlin, III, President
and Chief Executive Officer
62
<PAGE>
<PAGE>
JOINDER BY ESCROWEE
Commonwealth Land Title Insurance Company, intending to be legally
bound, joins in this Agreement to evidence its agreement to act as Escrowee
under this Agreement and to be bound by the provisions of this Agreement
applicable to Escrowee.
COMMONWEALTH LAND TITLE INSURANCE COMPANY
By: ______________________________
Name:
Title:
<PAGE>
SCHEDULE OF EXHIBITS
Exhibit "Sellers"
Exhibit "Net Value Percentage Allocation"
Exhibit "Entities"
Exhibit "Registration Rights Agreement"
Exhibit "Projects"
Exhibit "Share Schedule"
Exhibit "Cash Component Allocation" Exhibit "Assumed Indebtedness"
Exhibit "Satisfied Indebtedness" Exhibit "Investor Materials" Exhibit
"Certification of Default" Exhibit "Informational Materials" Exhibit
"Seller's Deliveries" Exhibit "Permitted Exceptions" Exhibit "Service
Contracts" Exhibit "Real Estate Tax Matters" Exhibit "Lease
Controversies" Exhibit "Assumed Loan Documents" Exhibit "Satisfied Loan
Documents" Exhibit "Tred Avon Loan Documents" Exhibit "Securities
Reporting Requirements" Exhibit "Audit Representation Letter" Exhibit
"USTs" Exhibit "Tenant Estoppel Certificate" Exhibit "Option Projects"
Exhibit "Tenant Purchase Rights" Exhibit "Constellation Lease " Exhibit
"TIF Agreement" Exhibit "Commissions" Exhibit "Development Management
Agreement"
<PAGE>
EXHIBIT "SELLERS"
<PAGE>
EXHIBIT "NET VALUE PERCENTAGE ALLOCATION"
<PAGE>
EXHIBIT "ENTITIES"
<PAGE>
EXHIBIT "REGISTRATION RIGHTS AGREEMENT"
<PAGE>
EXHIBIT "PROJECTS"
<PAGE>
EXHIBIT "CONSTELLATION LEASE"
<PAGE>
EXHIBIT "SHARE SCHEDULE"
<PAGE>
EXHIBIT "CASH COMPONENT ALLOCATION"
<PAGE>
EXHIBIT "ASSUMED INDEBTEDNESS"
<PAGE>
EXHIBIT "ASSUMED LOAN DOCUMENTS"
<PAGE>
EXHIBIT "SATISFIED INDEBTEDNESS"
<PAGE>
EXHIBIT "SATISFIED LOAN DOCUMENTS"
<PAGE>
EXHIBIT "TRED AVON LOAN DOCUMENTS"
<PAGE>
EXHIBIT "INVESTOR MATERIALS"
CORPORATE OFFICE PROPERTIES TRUST
INVESTOR QUESTIONNAIRE
---------------------------------------------------------------------
ALL INFORMATION HEREIN WILL BE TREATED CONFIDENTIALLY UNLESS
REQUIRED BY COURT ORDER OR OTHERWISE REQUIRED BY THE
CORPORATE OFFICE PROPERTIES TRUST (THE "REIT")
TO DEMONSTRATE THE AVAILABILITY OF EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF RELEVANT FEDERAL AND STATE LAWS GOVERNING
THE OFFER AND SALE OF THE SECURITIES.
--------------------------------------------------------------------
Corporate Office Properties Trust
One Logan Square - Suite 1105
Philadelphia, PA 19103
Ladies and Gentlemen:
The information contained herein is being furnished to you in order for
you to determine whether (i) the undersigned may receive Common Shares and
Convertible Preferred Shares of the REIT (collectively, the "Securities") as
contemplated by the Acquisition Agreement between Corporate Office Properties,
L.P. (the "UPREIT") and the other signatories thereto with respect to the
acquisition of the Interests in the entities owning the portfolio of
Constellation Real Estate, Inc., Columbia, Maryland (the "Agreement"), and (ii)
the undersigned's subscription for the Securities as evidenced by the execution
of the Agreement may be accepted by you in accordance with the requirements of
Section 4(2) of the Securities Act of 1933, as amended (the "Act"), and
Regulation D promulgated thereunder ("Regulation D"). The undersigned
understands that you will rely on the information contained herein for purposes
of, among other things, determining whether the undersigned is an "Accredited
Investor" as such term is defined in Regulation D. The undersigned also
understands that this Questionnaire is not an offer of the Securities or any
other securities to the undersigned.
The undersigned understands that its answers will at all times be kept
confidential unless required by court order or otherwise required by the REIT or
UPREIT to demonstrate the availability of exemptions from the registration
requirements of relevant federal and state laws governing the offer and sale of
the Securities. By signing this Investor Questionnaire, the undersigned agrees
that the REIT may present this Investor Questionnaire to such parties as either
deems appropriate if called upon under law to establish the availability under
federal or state laws of an exemption from registration of the offer and sale of
the Securities.
-----------
INSTRUCTIONS
(A) Complete either Section I or Section II, whichever is applicable,
on pages 3-7.
<PAGE>
(B) On page 8, date and sign where indicated. If the investor is a
corporation, a Notary Public must complete and sign on page 9.
Please print or type your answers. If the answer to any question is
"No" or "Not Applicable," please so state. Please provide information for every
investor, using a separate questionnaire for each. Please do not confuse
individual assets or income with assets or income of a trust, corporation or
partnership in which you have an interest; do, however, list the value of your
interest in such entities.
INDIVIDUALS MUST COMPLETE SECTION I
AND
CORPORATIONS, ENTITIES AND OTHER ENTITIES MUST COMPLETE
SECTION II
ALL QUESTIONS IN THE APPROPRIATE SECTION MUST BE ANSWERED -
SECTION I. QUESTIONS FOR INDIVIDUALS
1. Name:______________________________________ Age:____________
U.S. Citizen: Yes_____ No_____
Number of Dependents:_____ Social Security No.:_________________________________
2. Are you acquiring the Securities of the UPREIT for your own account?
Yes_____ No_____
If no, please specify:
3. Method of Investment Qualification: An individual will qualify as an
Accredited Investor if he or she meets any one of the following requirements.
Please indicate if you meet any of the following requirements:
(A) I am a natural person and had an individual income in excess
of $200,000 in each of the two most recent years and
reasonably expect an income in excess of $200,000 in the
current year. For these purposes, "income" means my individual
adjusted gross income for federal income tax purposes, plus
(i) any deduction for long term capital gains; (ii) any
deduction for depletion; (iii) any exclusion for interest; and
(iv) any losses of a partnership allocated to an individual
limited partner.
Yes_____ No_____
2
<PAGE>
(B) I am a natural person and had a joint income with my spouse in
excess of $300,000 in each of the two most recent years and
reasonably expect a joint income with my spouse in excess of
$300,000 in the current year. For these purposes, "income"
shall be determined as set forth in Section 3(A) above.
Yes_____ No_____
(C) I am a natural person and had an individual net worth on the
date hereof (or joint net worth with my spouse) in excess of
$1 million (including my home, home furnishings and
automobiles).
Yes_____ No_____
(D) I am a director, executive officer or general partner of the REIT.
Yes_____ No_____
I understand that the UPREIT and the REIT will rely upon the accuracy and
completeness of my responses to the foregoing questions and I represent and
warrant to the UPREIT and the REIT as follows:
(a) The answers to the above questions are complete and correct
and may be relied upon by the UPREIT and the REIT in
determining whether the undersigned is an Accredited Investor.
(b) I will immediately notify the UPREIT and the REIT of any
material change in any statement made herein occurring prior
to the closing of any subscription for the Securities.
(c) The acquisition of the Securities will be solely for my
account, and not for the account of any other person or with a
view toward transfer, resale, assignment, fractionalization or
distribution thereof.
SECTION II. QUESTIONS FOR CORPORATIONS, ENTITIES AND OTHER ENTITIES
1. Name and Nature (e.g., limited partnership, corporation,
trust, limited liability company) of Entity:
2. Date of Organization:
3. State of Organization:
4. Taxpayer Identification No.:
5. Accredited Investor Suitability Requirements.
(A) Has the subscribing entity been formed for the specific purpose of
investing in the Securities?
Yes_____ No_____
3
<PAGE>
(B) If your answer to question A is "No," INITIAL OR CHECK
whichever of the following statements is applicable to the
subscribing entity; if your answer to question A is "Yes" or
if none of the statements in clause (1) below is applicable,
the subscribing entity must be able to certify to statement
(2) below in order to qualify as an Accredited Investor.
(1) The undersigned entity certifies that it is an Accredited Investor
because it is:
(i) a bank as defined in Section 3(a)(2) of the Act, or a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Act, whether acting in an individual or fiduciary
capacity;
Yes_____ No_____
(ii) a broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934;
Yes_____ No_____
(iii) an insurance company as defined in Section 2(13) of the Act
Yes_____ No_____
(iv) an investment company registered under the Investment
Company Act of 1940;
Yes_____ No_____
(v) a business development company as defined in Section 2(a)
(48) of the Investment Company Act of 1940;
Yes_____ No_____
(vi) a Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958;
Yes_____ No_____
(vii) a plan established by a state or its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees provided that
such employee benefit plan has total assets in excess of $5,000,000;
Yes_____ No_____
4
<PAGE>
(viii) an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, provided that the
investment decision is made by a plan fiduciary, as defined in Section
3(21) of such Act, and the plan fiduciary is either a bank, insurance
company or registered investment adviser or provided that the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, the investment decisions are made solely by persons
that are Accredited Investors (if a self-directed plan with more than
one investment account, (1) each participant must maintain a separate
investment account within the plan, and (2) the funds of the separate
investment accounts within the plan must not be commingled);
Yes_____ No_____
(ix) a private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
Yes_____ No_____
(x) an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, a corporation, a
Massachusetts or similar business trust, or partnership, not formed for
the specific purpose of acquiring the Securities, with total assets in
excess of $5,000,000; or
Yes_____ No_____
(xi) a trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of investing in the Securities, whose
subscription is directed by a sophisticated person as defined in Rule
506(b)(2)(ii) promulgated under the Act.
Yes_____ No_____
(2) The undersigned entity certifies that it is an Accredited Investor
because each of its stockholders, partners or other equity holders meets at
least one of the following conditions:
(i) It is a natural person and had an individual net worth at
the time of subscription for (or joint net worth with spouse) in excess
of $1 million (including my home, home furnishings and automobiles).
Yes_____ No_____
(ii) It is a natural person and had an individual income
(without including any income of my spouse) in excess of $200,000 (or
joint income with my spouse in excess of $300,000) in each of the two
most recent years and reasonably expect an individual income in excess
of $200,000 (or joint income with my spouse in excess of $300,000) in
the current year. For these purposes, "income" means my individual
adjusted gross income for federal income tax purposes, plus (i) any
deduction for long term capital gains; (ii) any deduction for
depletion; (iii) any exclusion for interest; and (iv) any losses of a
partnership allocated to an individual limited partner.
Yes_____ No_____
5
<PAGE>
(iii) The stockholder, interest holder or other equity holder
is a corporation, partnership, trust or other entity which meets the
description of at least one of the organizations specified in statement
B(1) above or whose stockholders, partners, beneficiaries or other
equity holders meet at least one of the descriptions in this statement
B(2).
Yes_____ No_____
6. The undersigned entity has all requisite authority to acquire the
Securities referenced in, and to enter into, the Subscription Agreement.
Yes_____ No_____
The undersigned understands that the UPREIT and the REIT will rely upon the
accuracy and completeness of its responses to the foregoing questions and
represents and warrants to the UPREIT and the REIT as follows:
(a) The answers to the above questions are complete and correct
and may be relied upon by the UPREIT and the REIT in
determining whether the undersigned is an Accredited Investor.
(b) The undersigned will immediately notify the UPREIT and the
REIT of any material change in any statement made herein
occurring prior to the closing of any offering by the
undersigned of the Securities.
(c) The undersigned is able to bear the economic risk of an
investment in the Securities of the size contemplated. In
making this statement, consideration has been given to whether
the undersigned can afford to hold the investment for an
indefinite period of time and whether the undersigned can
afford a complete loss of its investment. The undersigned
offers as evidence of its ability to bear the economic risk
the information contained in this Investor Questionnaire.
(d) The acquisition of the Securities will be solely for the
undersigned's account, and not for the account of any other
person or with a view toward transfer, resale, assignment,
fractionalization or distribution thereof.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Investor
Questionnaire this ______ day of _______________, 199___ and declare that it is
truthful and correct.
INDIVIDUALS CORPORATIONS, ENTITIES AND
OTHER ENTITIES
Signature of Investor Name of Entity
Authorized Signature
PRINT Name of Investor PRINT Name and Title of Person Signing
Address: Address:
7
<PAGE>
ACKNOWLEDGMENT FOR CORPORATE INVESTOR
STATE OF __________________ )
) SS
COUNTY OF __________________ )
On this ______ day of __________________, 199___, before me personally
appeared ____________________________ to me known, who, being first by me duly
sworn, did depose and say that (s)he resides at _____________________________
that (s)he is the ______________ of ________________________, the corporation
described in and which executed the above instrument; that [the corporation has
no seal]* [(s)he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it is so affixed by order of the
Board of Directors of said corporation]*, and that (s)he signed his(her) name
thereto by order of said corporation's Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
-----------------------------------------
Notary Public:
My Commission Expires:
[SEAL]
- - -------------------------------
* Strike out whichever bracketed clause does not apply.
<PAGE>
EXHIBIT "INFORMATIONAL MATERIALS"
The following documents filed to date by the REIT with the Securities
and Exchange Commission pursuant to either the Securities Exchange Act of 1934,
as amended or the Securities Act of 1933, as amended:
1. Annual Report on Form 10-K for the year ended December 31, 1997;
2. Proxy Statement dated February 11, 1998; and,
3. Prospectus dated April 22, 1998 included in Registration Statement
Number 333-47465 filed pursuant to Rule 424(b).
<PAGE>
EXHIBIT "SELLER'S DELIVERIES"
1. Copies of any and all Leases and all other agreements
affecting the Projects.
2. A rent roll (the "Rent Roll") indicating all Tenants, spaces
occupied and vacant (including the square footage thereof), Base Rent,
escalations, "pass-throughs" (including, but not limited to, real estate taxes,
utilities, insurance and/or operating expenses), Additional Rent, rent
adjustments (including, but not limited to, Consumer Price Index, or other
adjustments) construction allowances, abatements, concessions, lease
commencement and expiration dates, renewal or expansion options, options to
purchase, cancellation rights, security and/or other deposits.
3. A schedule of all employees of Sellers engaged in the operation or
maintenance of the Projects or Contributor's business, setting forth in respect
of each employee: such employee's name, position, duties, current salary or
wages, Christmas or other bonus, fringe benefits, accrued vacation time and sick
leave, and information as to any other compensation in cash or in kind to which
such employee may be entitled.
4. Copies of all hazard, rent loss, liability and other insurance
policies currently in force with respect to the Projects and/or Contributor's
business (the "Existing Insurance Policies").
5. Copies of all income and expense statements, year-end financial and
monthly and annual operating statements (the "Operating Statements") for the
Projects for calendar years 1995, 1996, 1997 and, to the extent available, 1998.
Sellers shall deliver to Acquiror all Operating Statements prepared in the
ordinary course of business promptly upon preparation thereof relating to
periods prior to Closing, even if prepared after Closing.
6, Copies of all engineering and architectural plans and
specifications, drawings, studies and surveys relating to the Projects
(collectively the "Plans"), in Contributor's possession or control, and copies
of any reports or studies (including, but not limited to, inspection reports of
governmental authorities or insurance carriers), in Contributor's possession or
control, in respect of the physical condition or operation of the Projects or
recommended improvements thereto.
7. Copies of the bill or bills issued for the years 1995, 1996, 1997
and, if available, 1998, for all real estate taxes and personal property taxes
and copies of any and all notices pertaining to real estate taxes or assessments
applicable to the Projects (the "Tax Bills"). Sellers shall promptly deliver to
Acquiror copies of any such bills or notices received by Sellers after the
Contract Date, even if received after Closing.
8. Copies of all brokerage commission, management, leasing,
maintenance, repair, service, pest control and supply contracts (including,
without limitation, janitorial, elevator, scavenger, laundry and landscaping
agreements), equipment rental agreements and master antenna agreements (if
applicable), and any other contracts or agreements relating to or affecting the
Projects (other than Major Repair Contracts, as defined herein) or which will be
binding upon the Projects or Acquiror subsequent to Closing, all as amended (the
"Contracts").
<PAGE>
9. Copies of all contracts for repairs or capital replacements to be
performed at the Projects, or covering such work performed during the two (2)
years immediately preceding the Contract Date for a contract price in excess of
$10,000.00 "Major Repair Contracts").
10. Copies of all certificates of occupancy, licenses, permits,
authorizations and approvals required by law or by any governmental authority
having jurisdiction thereover in respect of the Projects, or any portion
thereof, occupancy thereof or any present use thereof (the "Governmental
Approvals").
11. Copies of any operating budgets for the Projects for the years
1996, 1997, and 1998.
12. Copies of the documents pursuant to which Sellers is organized and
operates its business, together with proof of the authority of the signatory or
signatories of this Agreement on behalf of Sellers to execute this Agreement.
13. Copies of all guarantees, warranties and other documents or
instruments evidencing or relating to the Intangible Personal Property.
14. Copies of all unrecorded easements and licenses of Sellers for the
benefit of any Project or portion thereof or of third parties burdening any
Project or portion thereof.
15. Copies of all of the organizational documents pertaining to each
Entity (including all partnership agreements, as amended, certificates of
limited partnership and any other documents pertaining to the organization,
operation or management of each Entity).
16. Copies of all of the Existing Loan Documents (as defined in the
body of this Agreement) and any correspondence or notices pertaining thereto.
2
<PAGE>
EXHIBIT "TENANT PURCHASE RIGHTS"
<PAGE>
EXHIBIT "SERVICE CONTRACTS"
<PAGE>
EXHIBIT "REAL ESTATE TAX MATTERS"
<PAGE>
EXHIBIT "LEASE CONTROVERSIES"
<PAGE>
EXHIBIT "SECURITIES REPORTING REQUIREMENTS"
For the period of time commencing on the date of the Acquisition
Agreement and continuing through the second anniversary of the Closing Date,
Sellers shall, from time to time, upon reasonable advance notice from the REIT,
provide the REIT and its representatives, agents and employees with access to
all financial and other information in its possession or with respect to which
it has reasonable access pertaining to the period of Seller's ownership and
operation of the Projects, which information is relevant and reasonably
necessary, in the opinion of the REIT's outside, third party accountants (the
"Accountants"), to enable the REIT and its Accountants to prepare financial
statements in compliance with any or all of (a) Rule 3-14 of Regulation S-X of
the Securities and Exchange Commission (the "Commission"); (b) any other rule
issued by the Commission and applicable to the REIT; and (c) any registration
statement, report or disclosure statement filed with the Commission by, or on
behalf of, the REIT; provided, however, that in any such event(s), the UPREIT
shall reimburse Sellers for those third party, out-of-pocket costs and expenses
that Sellers incur in order to comply with the foregoing requirements. Sellers
acknowledge and agree that the following is a representative description of the
information and documentation that the REIT and the Accountants may require in
order to comply with (a), (b) and (c) above. Sellers shall provide such
information, and documentation on a per-Project basis, if available.
1. Rent rolls for the calendar month in which the Closing occurs and
the eleven (11) calendar months immediately preceding the calendar month in
which the Closing occurs;
2. Seller's written analysis of both (a) scheduled increases in base
rent required under any Leases in effect on the Closing Date; and (b) rent
concessions imposed those Leases, and the straight line effect of (a) and (b);
3. Seller's internally-prepared Operating Statements;
4. Access to Leases;
5. Seller's budgeted annual and monthly income and expenses, compared
to actual annual and monthly income and expenses;
6. Most currently available real estate tax bills;
7. Access to Seller's cash receipt journal(s) and bank statements for
the Projects;
8. Seller's general ledger with respect to the Projects;
9. Seller's schedule of expense reimbursements required under Leases in
effect on the Closing Date;
<PAGE>
10. Schedule of those items of repairs and maintenance performed by, or
at the direction of Seller, during Seller's final fiscal year in which Seller
owns and operates the Projects (the "Final Fiscal Year");
11. Schedule of those capital improvements and fixed asset additions
made by, or at the direction of, Seller during the Final Fiscal Year;
12. Access to Seller's invoices with respect to expenditures made
during the Final Fiscal Year; and
13. Access (during normal and customary business hours) to responsible
personnel to answer accounting questions.
<PAGE>
EXHIBIT "AUDIT REPRESENTATION LETTER"
[Date]
Dear Sirs:
We are writing at your request to confirm our understanding that your
audit of the statement of operating income for the year ended
_____________________, ______, was made for the purpose of expressing an opinion
as to whether the statement of operating income presents fairly, in all material
respects, the results of operations of [Name of Project] in conformity with
generally accepted accounting principles. In connection with your audit we
confirm, to the best of our knowledge and belief, the following representations
made during your audit.
1. All financial records, board minutes and data related to the
property have been made available to you.
2. There have been no:
(a) Irregularities involving any member of management or
employees who have significant roles in the system of internal accounting
control structure.
(b) Irregularities involving other employees that could have a
material effect on the financial statements.
(c) Communications from regulatory agencies concerning
noncompliance with, or deficiencies in, financial reporting practices that could
have a material effect on the financial statements.
(d) Violations or possible violations of laws or regulations,
the effects of which should be considered for disclosure in the financial
statements or as a basis for recording a loss contingency.
3. There are no:
(a) Unasserted claims or assessments that are probable of
assertion and must be disclosed in accordance with Statement of Financial
Accounting Standards No. 5.
(b) Material liabilities or gain or loss contingencies
(including oral and written guarantees) that are required to be accrued or
disclosed by Statement of Financial Accounting Standards No. 5.
(c) Material transactions that have not been properly recorded
in the accounting records underlying the financial statements.
<PAGE>
(d) Events that have occurred subsequent to
___________________, ___________ in the financial statements that would require
adjustment to or disclosure in the financial statements, except for the sale
which you are aware of.
4. Appropriate adjustment, when material, has been made for:
(a) Uncollectible amounts recorded under lease contracts.
(b) Rental income received in advance.
(c) Rent concessions, abatements, or rent holidays.
5. The Company has complied with all aspects of contractual agreements
that would have a material effect on the financial statements in the event of
noncompliance.
6. All significant related party transactions have been properly
recorded or disclosed in the financial statements.
7. In the opinion of the undersigned the ____________ and _____________
financial information provided to you contains all adjustments necessary for a
fair presentation of operating income.
By:
[Seller/Seller's Manager]
<PAGE>
EXHIBIT "USTS"
<PAGE>
EXHIBIT "TENANT ESTOPPEL CERTIFICATE"
To:
(Lease to be Attached)
The undersigned, ______________________________________ ("Tenant"),
hereby certifies that:
(a) Annexed hereto as Exhibit "A" is a true and correct copy
of the lease ("Lease"), dated as of the _____ day of _______________, 19___, by
and between the undersigned, as tenant ("Tenant"), and
_____________________________________________ as landlord ("Landlord"), covering
certain [insert type of property] space ("Premises") in the building located at
_________________________________ ("Building"). The net rentable square footage
of the Premises is ________________________.
(b) The Lease is valid and in full force and effect on the
date hereof. The term of the Lease commenced on ____________, 19___, and the
termination date of the present term of the Lease, excluding renewals, is
__________________, 19___.
(c) There are no other agreements between Landlord and Tenant
with respect to the Premises.
(d) There are no uncured defaults on the part of Tenant or on
the part of Landlord under the Lease, and no event has occurred and no condition
exists which, with the giving of notice or the lapse of time, or both, will
constitute a default under the Lease.
(e) Fixed Rent payable by Tenant presently is $______________
per month and no such rent has been paid more than thirty (30) days in advance
of its due date. Tenant's security deposit is
$---------------.
(f) Additional Rent (including Tenant's share of tax increases
and cost of living increases) payable by Tenant presently is $______________ per
month and no such rent has been paid more than thirty (30) days in advance of
its due date.
(g) Tenant claims no present charge, lien or claim of offset
under the Lease or otherwise, against rents or other charges due or to become
due thereunder.
(h) Tenant has accepted possession of the Premises and any
improvements required by the terms of the Lease to be made by the lessor
thereunder have been completed to the satisfaction of Tenant.
(i) The address for notices to be sent to Tenant is as set
forth in the Lease.
<PAGE>
(j) This Estoppel Certificate may be relied upon by any
prospective purchaser or encumbrancer of the Building.
(k) Tenant has no right of first refusal, option or other
right to purchase the Premises or the Building, nor does Tenant have any right
to unilaterally cancel the Lease. Tenant has no renewal options or expansion
options.
(l) Rents payable pursuant to the Lease are not based upon the
income or profits of Tenant.
(m) There is not a material amount of personal property
demised to the Tenant under or in connection with the Lease.
(n) Except for services customarily provided by landlords in
the geographic area of the Premises, there are no services furnished to the
Tenant in connection with the lease of the Premises.
(o) The Lease was not entered into in connection with a sale/
leaseback transaction.
(p) There are no subleases under or in connection with the
Lease.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Estoppel Certificate on the _____ day of ______________, 19____.
------------------------------------
(Tenant)
By: ______________________________
2
<PAGE>
- - -ii-
371015.6 9/4/98
371015.6 9/4/98
EXHIBIT "CERTIFICATION OF DEFAULT"
[CONSTELLATION REAL ESTATE LETTERHEAD]
[DATE]
VIA FEDERAL EXPRESS
Commonwealth Land Title Insurance Company
1700 Market Street
Philadelphia, PA 19103
Attention: M. Gordon Daniels, Esquire
Re: Certification of Default under that certain Contribution Agreement dated
as of May ____, 1998 for the Constellation Real Estate Portfolio/Completed
Properties
Dear Mr. Daniels:
Commonwealth Land Title Insurance Company ("Escrowee") is the escrow
agent under the Contribution Agreement described above (the "Contribution
Agreement"). In such capacity, Escrowee is presently holding that certain
$5,000,000 letter of credit issued by ____________________ (the "Issuer") for
the benefit of Escrowee (the "Letter of Credit") in escrow under and subject to
the terms of the Contribution Agreement. Capitalized terms which are not
otherwise defined in this letter shall have the meaning set forth in the
Contribution Agreement.
You are hereby advised, and the undersigned hereby certifies, that
Buyer has defaulted in the performance of Buyer's obligations under the
Contribution Agreement by __________________________________ [INSERT HERE
DETAILED DESCRIPTION OF NATURE OF ALLEGED DEFAULT]. As required by Section 6.3.1
of the Contribution Agreement, you are hereby directed to submit a draft on the
Letter of Credit in the amount of $5,000,000 to the Issuer, and to hold such
Proceeds in escrow in accordance with the terms of the Contribution Agreement in
a separate, interest bearing, money market account in a federally insured bank.
<PAGE>
This notice constitutes a Certification of Default as defined in the
Contribution Agreement.
[INSERT SIGNATURE BLOCK; MUST BE
SIGNED BY RANDALL M. GRIFFIN,
JOHN HARRIS GURLEY,
CHARLES E. GARMAN OR
DAN R. SKOWRONSKI AND NOTARIZE]
cc: Clay W. Hamlin, III (via Federal Express)
F. Michael Wysocki, Esquire (via Federal Express)
<PAGE>
STATE OF MARYLAND
COUNTY OF ____________________
On this _____ day of __________, 1998, before me, the undersigned
officer, personally appeared ____________________________, known to me (or
satisfactorily proven) to be the person who executed the Certification of
Default and acknowledged that he is the _______________________ of
___________________________ and that he executed the same for the purposes
therein contained on behalf of the corporation by signing his name as such
officer.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal.
------------------------------------
Notary Public
<PAGE>
EXHIBIT "OPTION PROJECTS"
All documents listed below are attached.
1. National Business Park
5 Year Option and Right of First Refusal
2. Brown's Wharf adjacent land - Right of First Refusal
3. Constellation Centre Unit 6 and 2 - Right of First Refusal
4. Annapolis Exchange
2 Year Option to Purchase (LLC Member interests)
<PAGE>
EXHIBIT "COMMISSIONS"
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS.................................................................3
2. ASSIGNMENT AND TRANSFER OF INTERESTS.......................................10
3. CONSIDERATION..............................................................10
4. SHARES; INVESTOR MATERIALS; PROXY STATEMENT................................13
5. REIT BOARD OF TRUSTEES; CERTAIN REIT OPERATIONS; RELATED TRANSACTIONS......14
6. CLOSING....................................................................16
7. SELLER'S DELIVERIES........................................................19
8. INSPECTION PERIOD..........................................................19
9. TITLE AND SURVEY MATTERS...................................................21
10. REPRESENTATIONS AND WARRANTIES AS TO PROJECTS.............................22
11. REPRESENTATIONS AS TO INTERESTS/SECURITIES AND RELATED MATTERS............27
12. COVENANTS OF SELLER.......................................................31
13. ENVIRONMENTAL WARRANTIES AND AGREEMENTS...................................35
14. ADDITIONAL CONDITIONS PRECEDENT TO CLOSING................................38
15. LEASES-CONDITIONS PRECEDENT AND WARRANTIES WITH RESPECT THERETO...........40
16. CLOSING DELIVERIES........................................................42
17. PRORATIONS AND ADJUSTMENTS................................................47
18. CLOSING EXPENSES..........................................................50
19. DESTRUCTION, LOSS OR DIMINUTION OF PROJECTS...............................50
20. DEFAULT...................................................................52
21. SUCCESSORS AND ASSIGNS....................................................54
22. LITIGATION................................................................55
23. NOTICES...................................................................55
24. BENEFIT...................................................................56
<PAGE>
25. LIMITATION OF LIABILITY...................................................56
26. BROKERAGE.................................................................57
27. REASONABLE EFFORTS........................................................57
28. MISCELLANEOUS.............................................................57
FIRST AMENDMENT TO CONTRIBUTION AGREEMENT
THIS FIRST AMENDMENT TO CONTRIBUTION AGREEMENT ("First Amendment") is
made and executed as of this 16th day of July, 1998 by and between CORPORATE
OFFICE PROPERTIES TRUST and CORPORATE OFFICE PROPERTIES, L.P. (collectively, the
"Buyer") and the Sellers listed on the signature page to this First Amendment
and defined in the Contribution Agreement (collectively, the "Sellers" and each
individually, a "Seller").
A. Sellers and Buyer entered into a Contribution Agreement dated May
14, 1988 pursuant to which Sellers agreed to contribute a property known as
Brandon and certain interests in Entities which own certain real estate and a
mortgage in Maryland to the Buyer in exchange for cash, the assumption of
certain debt, and Common Shares and Convertible Preferred Shares (the
"Contribution Agreement"). Capitalized terms used, but not defined, in this
First Amendment shall have the meanings given to such terms in the Contribution
Agreement.
B. Sellers and Buyer desire to amend the Contribution Agreement as set
forth in this First Amendment.
NOW, THEREFORE, in consideration of the agreements contained herein and
intending to be legally bound hereby, Sellers and Buyer agree as follows:
1. Section 6.1 of the Contribution Agreement is hereby deleted
in its entirety and the following Section 6.1 is substituted in its place:
"6.1 First Closing. The assignment and transfer of the
Interests, the conveyance of Brandon, and the other
transactions contemplated herein with respect to all Sellers
except the NBP 135 Sellers and the Woodlands Sellers (the
"First Closing") shall be consummated on the date (the
"First Closing Date"), after the shareholders of the REIT
have approved all of the transactions contemplated by this
Agreement, specified by Buyer on not less than seven (7)
days notice to Sellers (the "Buyer's Closing Notice"),
provided that the First Closing Date shall not be sooner
than September 14, 1998, unless mutually agreed upon by
Sellers and Buyer, or later than forty-five (45) days after
the shareholders of the REIT have approved all of the
transactions contemplated by this Agreement. Sellers shall
have the right to postpone the First Closing to a date that
is up to five (5) days after the First Closing Date
specified in Buyer's
<PAGE>
Closing Notice by giving Buyer notice
of such postponement. If the shareholders of the REIT have
not approved the transactions contemplated by this Agreement
by October 30, 1998, this Agreement shall terminate and
become null and void, the Letter of Credit shall be returned
to the Buyer, and the parties shall be released from all
liability or obligation to the other. The Closing shall
take place at the offices of Saul, Ewing, Remick & Saul LLP,
Centre Square West, 1500 Market Street, 38th Floor,
Philadelphia, Pennsylvania 19102, or at such other place as
may mutually agreed upon by the parties.
2. This First Amendment may be executed in counterparts, each
of which shall constitute an original, but all of which together shall
constitute one and the same document. Delivery of executed copies of this First
Amendment by facsimile transmission shall be deemed effective to amend the
Agreement. Each party transmitting such facsimile agrees to promptly deliver an
original executed copy of this First Amendment to the other party by recognized
overnight courier.
3. As amended by this First Amendment, the Contribution
Agreement shall remain in full force and effect.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
2
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, Sellers
and Buyer have executed this First Amendment on the day and year first above
written.
BUYER:
CORPORATE OFFICE PROPERTIES, L.P.
By: Corporate Office Properties Trust,
its sole general partner
By: /s/ Clay W. Hamlin, III
Clay W. Hamlin, III
President and Chief Executive Officer
WITNESS SELLERS:
CONSTELLATION PROPERTIES, INC., a Maryland
corporation
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
NBP-I LIMITED PARTNERSHIP, a Maryland
limited partnership
By: Constellation Properties, Inc.,
a Maryland corporation, General Partner
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
[SIGNATURES CONTINUED ON NEXT PAGE]
3
<PAGE>
NBP-II LIMITED PARTNERSHIP, a Maryland
limited partnership
By: Constellation Properties, Inc.,
a Maryland corporation, General Partner
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
NBP-IV, LLC, a Maryland limited liability
company
By: CPI National Business Park, IV, Inc.,
a Maryland corporation, Member
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
ST. BARNABAS LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Constellation Properties, Inc.,
a Maryland corporation, General Partner
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
By: CPO Constellation Centre, Inc.,
a Maryland corporation,
General Partner
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
[SIGNATURES CONTINUED ON NEXT PAGE]
4
<PAGE>
LAUREL TOWER ASSOCIATES LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Constellation Properties, Inc.,
a Maryland corporation, General Partner
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
By: CPO Laurel Towne, Inc.,
a Maryland corporation, General Partner
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
THREE CENTRE PARK ASSOCIATES LIMITED
PARTNERSHIP, a Maryland limited partnership
By: Constellation Properties, Inc.,
a Maryland corporation, General Partner
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
By: CPO Three Centre Park, Inc., a Maryland
corporation, General Partner
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
[SIGNATURES CONTINUED ON NEXT PAGE]
5
<PAGE>
BROWN'S WHARF LIMITED PARTNERSHIP, a Maryland
limited partnership
By: Constellation Properties, Inc.,
a Maryland corporation, General Partner
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
By: CPI Brown's Wharf, Inc., a Maryland
corporation, General Partner
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
CRANBERRY-140 LIMITED PARTNERSHIP, a Maryland
limited partnership
By: Constellation Properties, Inc.,
a Maryland corporation, General Partner
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
TRED LIGHTLY LIMITED LIABILITY COMPANY,
a Maryland limited company
By: CPI Tred Avon, Inc., a Maryland
corporation, Member
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
[SIGNATURES CONTINUED ON NEXT PAGE]
6
<PAGE>
CONSTELLATION GATESPRING, LLC, a Maryland
limited partnership
By: CPI Gatespring, Inc., a Maryland
corporation, Member
/s/ Roger Waesche, Jr. By: /s/ Randall M. Griffin
Randall M. Griffin
President
7
SECOND AMENDMENT TO CONTRIBUTION AGREEMENT
THIS SECOND AMENDMENT TO CONTRIBUTION AGREEMENT ("Second Amendment") is
made and executed as of this 28th day of September, 1998 by and between
CORPORATE OFFICE PROPERTIES TRUST and CORPORATE OFFICE PROPERTIES, L.P.
(collectively, the "Buyer") and the Sellers listed on the signature page to this
Second Amendment and as defined in the Contribution Agreement (collectively, the
"Sellers" and each individually, a "Seller").
A. Sellers and Buyer entered into a Contribution Agreement dated May
14, 1988, as amended on July 16, 1998 by a First Amendment to Contribution
Agreement (the "Contribution Agreement"), pursuant to which Sellers agreed to
contribute a property known as Brandon and certain interests in Entities which
own certain real estate and a mortgage in Maryland to the Buyer in exchange for
cash, the assumption of certain debt, and Common Shares and Convertible
Preferred Shares. Capitalized terms used, but not defined, in this Second
Amendment shall have the meanings given to such terms in the Contribution
Agreement.
B. Sellers and Buyer desire to amend the Contribution Agreement as set
forth in this Second Amendment.
NOW, THEREFORE, in consideration of the agreements contained herein and
intending to be legally bound hereby, Sellers and Buyer agree as follows:
1. Exhibit "TIF Agreement" is hereby deleted from the
Contribution Agreement, and Exhibit "TIF Agreement" attached hereto and made a
part hereof, is hereby attached to and made part of the Contribution Agreement
as Exhibit "TIF Agreement".
2. Buyer hereby elects to convert all of the Satisfied
Indebtedness to Assumed Indebtedness pursuant to Section 1.83 of the
Contribution Agreement. Sellers and CREG shall be released from all future
liability under such converted Assumed Indebtedness.
3. Pursuant to Section 11.1.4 of the Contribution Agreement,
Sellers have elected to transfer certain partnership and limited liability
company interests prior to Closing as shown in Exhibit "Interest Changes"
attached hereto and made a part hereof. Except as shown on Exhibit "Interest
Changes", there have been no changes in the composition of any Entity between
May 14, 1998 and the date hereof. Sellers represent and warrant that certified
copies of all documents necessary to effectuate the transfers shown on Exhibit
"Interest Changes" will be delivered to Buyer on or before the First Closing.
4. The term "Development Management Agreement" is hereby
deleted from Section 1.31 of the Contribution Agreement, and the term "Project
Consulting and Management Agreement" is substituted in its place. The term
"Development Management Agreement" is hereby deleted wherever it appears in
Section 5.7 of the Contribution Agreement, and the term "Project Consulting and
Management Agreement" is hereby substituted in its place. Exhibit "Development
<PAGE>
Management Agreement" is hereby deleted from the Contribution Agreement, and
Exhibit "Projects Consulting and Management Agreement" attached hereto and made
a part hereof, is hereby attached to and made part of the Contribution Agreement
as Exhibit "Project Management and Consulting Agreement".
5. The first sentence of Section 6.2.1 of the Contribution
Agreement is amended by changing "December 31, 1998" to "March 31, 1999". The
second sentence of Section 6.2.2 is revised by adding at the end thereof the
following language:
"; provided, however, that notwithstanding the foregoing,
Buyer and Sellers shall consummate the Woodlands Closing
simultaneously with the closing of the first financing
transaction by Buyer for all or any portion of the Projects
transferred to Buyer at the First Closing. In the event of
such a simultaneous closing of a financing transaction with
the Woodlands Closing, the Woodlands Gross Value shall be
$17,600,000, and shall not be reduced pursuant to Section
3.2.5; and Sellers shall, from time to time, reimburse Buyer,
within seven (7) days after presentation of a bill therefor,
for all interest payments with respect to financing on the
Woodlands I Project from the date of the Woodlands Closing
until October 21, 1998."
6. Exhibit "Option Projects" to the Contribution Agreement is
hereby deleted from the Contribution Agreement, and Exhibit "Option Projects"
attached hereto and made a part hereof, is hereby attached to and made part of
the Contribution Agreement as Exhibit "Option Projects". All references in the
Contribution Agreement to the Option Project identified as "Annapolis Exchange"
are deleted.
7. Exhibit "Projects" to the Contribution Agreement is hereby
amended by adding to the reference for One Constellation Centre the following:
"Unit 5, Constellation Centre Condominium
vacant land
30,495 sq. ft. tract"
and by changing the reference to Constellation Centre - Nations Bank Parcel from
"25,933 sq. ft. tract" to "47,701 sq. ft. tract".
8. The address for notices to Buyer is hereby changed as
follows:
Corporate Office Properties Trust
401 City Avenue, Suite 615
Bala Cynwyd, PA 19004-1126
Attention: Clay W. Hamlin, III
President and Chief Executive Officer
2
<PAGE>
Copies of notices to Buyer shall still be sent as set forth in the Contribution
Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Sellers
and Buyer have executed this Second Amendment on the day and year first above
written.
BUYER:
CORPORATE OFFICE PROPERTIES, L.P.
By: Corporate Office Properties Trust,
its sole general partner
By: /s/ Clay W. Hamlin
Clay W. Hamlin, III
President and Chief Executive Officer
SELLERS:
CONSTELLATION PROPERTIES, INC.,
a Maryland corporation
By: /s/ Dan R. Skworonski
Dan R. Skowronski
Secretary
CPI NATIONAL BUSINESS PARK I, INC.,
a Maryland corporation
By: /s/ Dan R. Skworonski
Dan R. Skowronski
Secretary
CPI NATIONAL BUSINESS PARK II, INC.,
a Maryland corporation
By: /s/ Dan R. Skowronski
Dan R. Skowronski
Secretary
[SIGNATURES CONTINUED ON NEXT PAGE]
3
<PAGE>
CPI NATIONAL BUSINESS PARK IV, INC.,
a Maryland corporation
By: /s/ Dan R. Skowronski
Dan R. Skowronski
Secretary
CPO CONSTELLATION CENTRE, INC.,
a Maryland corporation
By: /s/ Dan R. Skowronski
Dan R. Skowronski
Secretary
CPO LAUREL TOWER, INC.,
a Maryland corporation
By: /s/ Dan R. Skowronski
Dan R. Skowronski
Secretary
CPO THREE CENTRE PARK, INC.,
a Maryland corporation
By: /s/ Dan R. Skowronski
Dan R. Skowronski
Secretary
CPI BROWN'S WHARF, INC.,
a Maryland corporation
By: /s/ Dan R. Skowronski
Dan R. Skowronski
Secretary
[SIGNATURES CONTINUED ON NEXT PAGE]
4
<PAGE>
CPI PARTNER, INC., a Maryland corporation
By: /s/ Dan R. Skowronski
Dan R. Skowronski
Secretary
CPI TRED AVON, INC., a Maryland corporation
By: /s/ Dan R. Skowronski
Dan R. Skowronski
Secretary
CPI GATESPRING, INC., a Maryland corporation
By: /s/ Dan R. Skowronski
Dan R. Skowronski
Secretary
5
<PAGE>
EXHIBIT "TIF AGREEMENT "
INDEMNIFICATION AGREEMENT
(National Business Park--TIF)
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made this 28th day of
September, 1998 by CONSTELLATION PROPERTIES, INC. ("CPI") in favor of CORPORATE
OFFICE PROPERTIES L.P. ("COPLP"); CPI being sometimes referred to as
"Indemnitor" and COPLP, and its successors and assigns, being sometimes referred
to as "Indemnitee."
WITNESSETH
WHEREAS, CPI, through various related and affiliated entities, has
developed and continues to develop the "National Business Park", which is
located in Annapolis Junction, Anne Arundel County, Maryland (the "Park");
WHEREAS, in connection with the development of the Park, CPI
determined, in conjunction with the County Council of Anne Arundel County,
Maryland, that in order to most efficiently and effectively develop the
necessary infrastructure and public improvements in and around the vicinity of
the Park, that Anne Arundel County would (i) impose tax incremental financing on
certain properties located in the County, including, among others, the Park, and
(ii) create a Special Tax District which included the Park pursuant to the
authority granted to the County Council by Article 6, Title 4A, Section 4A-101
et seq. of the Anne Arundel County Code;
WHEREAS, the Special Tax District pertaining to the Park is commonly
referred to as the "NBP Special Tax District" and was approved by the County
Council of Anne Arundel County on March 4, 1998, in Bill No. 15-98;
WHEREAS, as of the date hereof, COPLP has (i) acquired an ownership
interest in several of the NBP Properties described as Lot 3B (commonly referred
to as the "Tower" or "One National Business Park"), Lot 6AR (known as "131
National Business Park"), Lot 6-BR (known as "133 National Business Park"), Lot
7A (known as "135 National Business Park") and Lot 7B (known as "141 National
<PAGE>
Business Park") and (ii) will acquire an interest in Lot 11 (known as "134
National Business Park") pursuant to the terms of that certain Option Agreement
dated May 14, 1998 by and between NBP-III, LLC and COPLP;
WHEREAS, One National Business Park, 131 National Business Park, 133
National Business Park, 135 National Business Park and 141 National Business
Park and 134 National Business Park are referred to collectively herein as the
"COPLP Properties";
WHEREAS, CPI does not anticipate that there will be any increase in the
taxes or assessments levied on the COPLP Properties as a result of the tax
incremental financing or the creation of the NBP Tax District, as compared to
the taxes or assessments that would be levied on the COPLP Properties if the tax
incremental financing or the NBP Tax District did not exist;
WHEREAS, in consideration of COPLP acquiring an ownership interest in
the COPLP Properties, to the extent that the taxes and/or assessments levied on
the COPLP Properties as a result of the creation and continued existence of the
tax incremental financing and/or the NBP Tax District exceed those taxes and/or
assessments which would be levied if the tax incremental financing and/or NBP
Tax District did not exist (the "Tax Differential"), CPI has agreed to indemnify
and hold COPLP harmless from and against any additional taxes and/or assessments
resulting from the Tax Differential which are levied on the COPLP Properties in
which COPLP or any affiliates or subsidiary acquires an ownership interest.
NOW THEREFORE, it is mutually agreed, as follows:
1. Incorporation of Recitals. The Recitals shall be deemed
to be an integral part of this Agreement.
2. Indemnification.
2.1 Indemnitor hereby indemnifies Indemnitee and undertakes to
hold it harmless from the Tax Differential and shall reimburse Indemnitee within
forty-five (45) days after receipt from Indemnitee of a written notice
identifying the amount of the Tax Differential and reasonable supporting
documentation ("Indemnitee's Request").
2.2 Indemnitor shall notify Indemnitee in writing within
thirty (30) days after receipt of Indemnitee's Request of any objections to the
Indemnitee's Request (the "Objection Notice"). If Indemnitor delivers an
2
<PAGE>
Objection Notice within the thirty (30) day period, Indemnitor shall have the
right to extend the forty-five (45) day period for payment for an additional
period of forty-five (45) days (resulting in payment being required within
ninety (90) days after the date of Indemnitee's Request) to permit the
Indemnitor to evaluate the cause for the Tax Differential with the appropriate
officials of Anne Arundel County.
2.3 If Indemnitor determines, in conjunction with Anne Arundel
County, that the Tax Differential claimed by the Indemnitor was not computed
accurately, Indemnitor shall notify the Indemnitee in writing on or before that
day which is sixty (60) days after the date of Indemnitee's Request of the
accurate amount of the Tax Differential, if any, together with reasonable
supporting documentation which is either prepared by Anne Arundel County or
obtained from its records.
2.4 Any claims made by Indemnitee under the terms of this
Agreement shall be made within three (3) years after the date of that the Tax
Differential is assessed or levied.
3. Term. The term of this Agreement shall be from the date hereof to
that date which is twenty (20) calendar years after the date hereof ("Term").
Indemnitee shall have no further rights to deliver an Indemnitee's Request after
the expiration of the Term.
4. Binding Nature. This Agreement and all duties and rights hereunder
shall run with the land and shall be binding on Indemnitor's successors and
assigns and shall inure to the benefit of Indemnitee's successors and assigns.
5. Miscellaneous.
(a) Notices. Any notice required by the terms hereof shall be
given in writing at the address set forth below by any of the following means:
(a) personal service, (b) electronic communication, whether by facsimile, telex,
telegram or telecopy, (c) registered or certified United State mail, postage
prepaid, return receipt requested, or (d) by nationally recognized overnight
delivery service, as follows:
CPI: Constellation Properties, Inc.
8815 Centre Park Drive, Suite 100
Columbia, Maryland 21045
Attn: President
With a copy to: Constellation Properties, Inc.
250 West Pratt Street, 24th Floor
Baltimore, Maryland 21201
Attn: General Counsel
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COPLP: Corporate Office Properties, L.P.
8815 Centre Park Drive, Suite 400
Columbia, Maryland 21045
Attn: General Counsel
With a copy to: Corporate Office Properties L.P.
Corporate Office Properties Trust
401 City Avenue, Suite 615
Bala Cynwyd, PA 19004-1126
Attention: Clay W. Hamlin, III
President and Chief
Executive Officer
Such address(es) may be changed by either party by notice to the
other in the manner provided above. Any notice sent (i) pursuant to subsection
(a) shall be deemed received upon personal service, (ii) pursuant to subsection
(b) shall be deemed received upon dispatch by electronic means, (iii) pursuant
to subsection (c) shall be deemed received three (3) days following depositin
the United States mail, and (iv) pursuant to subsection (d) shall be deemed
received one (1) business day after delivery to the nationally recognized
overnight delivery service.
(b) Applicable Law. The formation of this Agreement and the
respective rights and obligations of the parties under this Agreement shall be
construed in accordance with the laws of the State of Maryland.
(c) Captions. The captions of the Agreement are for
convenience purposes only and shall have no effect on its construction or
interpretation.
(d) Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
(e) Entire Agreement.This Agreement, together with any
exhibits attached hereto, represents the entire agreement between Owner and
Manager and all prior agreements and negotiations have been merged herein. This
Agreement may not be changed or terminated orally.
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(f) Severability. Each provision of this Agreement is intended
to be severable. If any term or provision of this Agreement shall be determined
by a court of competent jurisdiction to be illegal or invalid for any reason
whatsoever, that provision shall be severed from this Agreement and shall not
affect the validity of the remainder of this Agreement.
(g) Attorney's Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such may be entitled.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective on the day and year first set forth above.
ATTEST: CONSTELLATION PROPERTIES, INC.
_______________________________ By: /s/ Dan R. Skowronski
Dan R. Skowronski, Secretary
ATTEST: CORPORATE OFFICE PROPERTIES L.P.
By: Corporate Office Properties Trust
, its sole general partner
_______________________________ By: /s/ Clay W. Hamlin, III
Clay W. Hamlin, III
President and Chief Executive
Officer
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<PAGE>
STATE OF COUNTY OF ,
TO WIT:
I HEREBY CERTIFY, that on this day of , 1998,
before me, undersigned Notary Public of said State, personally appeared ,
who acknowledged himself to be the of Constellation
Properties, Inc., a Maryland corporation, known to me or satisfactorily
proven to be the person whose name is subscribed to the within instrument,
and acknowledged that he executed the same for the purposes therein
contained as the duly authorized of said corporation
by signing the name of the corporation himself as
IN WITNESS WHEREOF, I have set my hand and Notarial Seal, the day and
year first above written.
------------------------------------
Notary Public
My commission expires:
STATE OF COUNTY OF ,
TO WIT:
I HEREBY CERTIFY, that on this __ day of__ , 1998, before me, undersigned
Notary Public of said State, personally appeared CLAY W. HAMLIN, III, known to
me or satisfactorily proven to be the person whose name is subscribed to the
within instrument, who acknowledged himself to be the President and Chief
Executive Officer of Corporate Office Proerties Trust, general partner of
Corporate Office Properties L.P., a limited partnership and acknowledged that he
executed the same for the purposes therein contained as the duly authorized
President and Chief Executive Officer of said general partner of said limited
partnership by signing the name of the corporation by himself as President and
Chief Executive Officer.
IN WITNESS WHEREOF, I have set my hand and Notarial Seal, the day and
year first above written.
-----------------------------------
Notary Public
My commission expires:
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ATTORNEY CERTIFICATION
THE UNDERSIGNED, an attorney admitted to practice before the Court of
Appeals of Maryland, hereby certifies that the above instrument was prepared by
me or under my supervision.
-----------------------------------
John Harris Gurley, Attorney-at-Law
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EXHIBIT "INTEREST CHANGES"
Type of Interest Original % Closing %
---------------- ---------- ---------
PARTNERSHIPS
Brown's Wharf Limited Partnership
Constellation Properties, Inc. GP 0.4 0.4
LP 39.6 98.6
CPI Brown's Wharf, Inc. GP 0.6 0.6
LP 59.4 0.4
NBP-II Limited Partnership
Constellation Properties, Inc. GP 2.0 2.0
LP 2.94 78.0
CPI National Business Park
II, Inc. GP 0.0 0.0
LP 95.06 20.0
LIMITED LIABILITY COMPANIES
Tred Lightly Limited Liability Company
Constellation Properties, Inc. Member 0.0 75.0
CPI Tred Avon, Inc. Member 75.0 0.0
TA Associates Member 25.0 25.0
Limited Partnership
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EXHIBIT "PROJECT CONSULTING AND MANAGEMENT AGREEMENT"
PROJECT CONSULTING AND MANAGEMENT AGREEMENT
THIS PROJECT CONSULTING AND MANAGEMENT AGREEMENT (hereinafter the
"Agreement") is made as of the 28th day of September, 1998, by and between
CONSTELLATION PROPERTIES, INC. (hereinafter "Owner"), and CORPORATE OFFICE
MANAGEMENT, INC., a Maryland Corporation (hereinafter "Manager").
W I T N E S S E T H:
WHEREAS, Owner through its various subsidiaries and affiliates is the
owner of a portfolio of properties and projects (both vacant land and buildings
in construction) located in the Central Maryland area (hereinafter the
"Properties"), the exact locations and designations of the Properties being
known by the parties hereto;
WHEREAS, Owner is managing its ownership of the Properties, including
the planning and development of the Properties for residential, commercial and
industrial uses; and
WHEREAS, Owner and Manager acknowledge and agree that the following
projects are included, among others, within the Properties and are currently in
various stages of development by the Owner through the specified subsidiaries
and affiliates: (i) NBP IV, LLC is the owner of an office building known as 135
National Business Parkway which project is nearing completion; needing only
certain interior, elevator and exterior landscaping work to be completed; (ii)
Constellation Gatespring, LLC is the owner of an office building project known
as Woodlands One which project is nearing completion; (iii) Piney Orchard
Village Center, LLC is the owner of a retail strip project known as Piney
Orchard Village Center which project is under construction with completion
scheduled for completion December 31, 1998; and (iv) Constellation Springfield,
LLC is the owner of 60% LLC interest in another entity (Fran-Spring TSA, LLC)
which is the owner of a retail shopping center in Springfield, Virginia, which
project is under construction with completion scheduled for December 31, 1998 (
the foregoing items (i) through (iv) collectively referred to herein as the
"Under Development Projects").
WHEREAS, Owner desires to employ Manager to provide ongoing planning,
management and consulting services with respect to the management of Owner's
Properties, including management of the completion of development of the Under
Development Projects;
WHEREAS, Owner desires to employ Manager as set forth herein and
Manager is willing to manage same in accordance with the terms set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the sums of money to be paid by
Owner to Manager, and in further consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Recitals. Each party represents to the other that
the recitals set forth above contain no material misrepresentation of fact.
2. Employment of Manager. Owner hereby retains Manager, and
Manager hereby agrees, to provide to Owner consulting services and general
management and administration services with respect to the Properties and to
initiate, and thereafter, to diligently coordinate, supervise and pursue all
steps necessary to implement development plans for the various Properties upon
such schedules as are reasonably approved from time to time by Owner, upon the
terms and conditions, and for the term and compensation hereinafter set forth.
3. Term. The term of this Agreement, and of the employment of
Manager by Owner pursuant hereto, shall be for the period commencing as of the
date hereof and ending on the date that is the last day of the month that is
eighteen (18) months after the date of this Agreement ("Term").
4. Services. Subject to the direction and control of Owner,
the consulting, development, management and administrative services to be
rendered by Manager shall, when appropriate, include, but not be limited to,
each of the following services:
(a) Preliminary site analysis and project planning.
(b) Coordinate and manage the process of securing
preliminary approval of the land use plans and the preliminary engineering
criteria.
(c) Assist Owner in retaining appropriate consultants
related to the various Properties including, but not limited to, landscape
architect, civil engineer, architect, traffic consultant, soil engineer,
attorney, accountant, marketing consultant, appraiser and surveyor and
thereafter, act as Owner's representative's contact with such consultants
regarding the development of the Properties.
(d) Act as Owner's representative and liaison with
community and other civic groups in connection with the development of the
Properties.
(e)Assist in the preparation of cost line budgets and
cash flow projections for the development of the Properties.
(f) Prepare and monitor compliance with development
schedules approved by Owner.
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(g) Coordinate the securing of all appropriate and
necessary governmental approvals relating to the development plans for the
Properties.
(h) Consult with respect to the management of the
Properties which are not in development at any one time.
(i) Consult with engineers, lenders and attorneys the
securing of all permits and the posting of all security required for the
development of the Properties.
(j) Consult with respect to the issuance of all
construction bid documents, provide analysis of bids and recommendations on
awards of contracts, and assist in the issuance of contracts for all
construction work.
(k) Assist in the coordination of construction
activities relating to the Project by visiting the site during critical phases
of construction and by meeting with County officials, inspectors, contractors,
subcontractors and construction supervisors.
(l) Coordinate land development documentation with
marketing programs including, but not limited to, the preparation of any
homeowner's association documents, cross-easements, declarations of covenants
and restrictions and deeds to governmental bodies for roads, recreation spaces
and open spaces.
(m) Advise on the status of all construction/building
permits and the release of all security posted in connection with the
development of the Properties.
(n) Provide advice on the overall marketing and
publicity program for the Properties including advertising, signage, promotional
brochures and model homes parks.
(o) Meet regularly with designated representatives of
Owner and furnish summary reports on at least a monthly basis reflecting the
status of overall development.
With regard to the above enumerated services to be performed by Manager
hereunder it is agreed that the parties will regularly consult and mutually and
reasonably agree upon the scope, timing, order of importance and overall
direction of the services.
Notwithstanding anything herein to the contrary, with respect to the
Under Development Projects, Manager shall provide all those management services
reasonably required by Owner (or Owner's subsidiary or affiliate which holds
title to each of the Under Development Projects) in connection with bringing
each of the Under Development Projects to completion as evidenced by the
obtaining for each Under Development Project of a certificate of use and
occupancy or similar governmental permit. The work of Manager shall generally be
described as the performance of all those managerial and oversight functions
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reasonably required so as to bring each Under Development Project to physical
completion on a timely basis and in line with budgeted costs.
5. Costs and Expenses. Owner shall pay, and Manager shall have
no responsibility whatsoever for, the payment of any independent costs or
out-of-pocket expenses incurred in connection with the work to be performed by
it hereunder. Manager shall be responsible only for its own overhead expenses
incurred in the performance of its obligations under this Agreement. Manager
shall not authorize or incur outside costs in excess of $5,000 for any one item
or service without the prior written approval of Owner. Notwithstanding anything
herein to the contrary, with regard to the Under Development Projects, in
performing its management services hereunder Manager shall use its good faith,
commercially reasonable efforts to consult with Owner to save costs and to bring
each Under Development Project to completion at a cost within prior approved
budgeted sums. Under no circumstances shall Manager authorize or permit
additional costs above budget or changes to any Under Development Project that
would increase costs without same being approved in advance and in writing by
the Owner of the particular Under Development Project.
6. Owner's Responsibility. Owner shall:
(a) Reimburse Manager for all independent costs and out-of-pocket
expenses properly incurred and approved (if required) by Owner in
accordance with the terms hereof.
(b) Pay to Manager for its services as rendered hereunder the
total sum of $2,000,000. This sum shall be paid as follows on a
monthly basis:
(i) $250,000 per month from the date hereof through the last day
of the third (3rd) calendar month after the date hereof;
(ii) $150,000 per month from the first day of the fourth (4th)
calendar month after the date hereof through the last day of the sixth
(6th) calendar month after the date hereof;
(iii) $100,000 per month from the first day of the seventh (7th)
calendar month after the date hereof through the last day of the tenth
(10th) calendar month after the date hereof;
(iv) $50,000 per month from the first day of the eleventh (11th)
calendar month after the date hereof through the last day of the
eighteenth (18th) calendar month after the date hereof.
(c) Indemnify and hold Manager and all of its officers, agents,
servants and employees, harmless from and against any claims, actions,
damages, losses and expenses (including attorney's fees) of any kind
whatsoever arising out of or in connection with the work and services
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<PAGE>
performed by Manager hereunder, except Owner shall not be liable under
this clause if said liability shall arise by reason of the gross
negligence or intentional misconduct of Manager. Owner agrees that it
will have Manager added as a named insured on the public liability
policies acquired by the various owners of the Properties.
(d) Cooperate with Manager in expediting the performance of its
work hereunder. Owner shall cooperate with Manager by (i) providing
information, (ii) providing funds required pursuant to invoices from
and contract with providers of services and suppliers of materials
with respect to the various Properties, (iii) rendering decisions on
matters affecting the development of the various Properties, all
within the timeframes and in the form reasonably recommended by
Manager.
7. Limitation on Manager's Responsibility. It is expressly
understood and agreed between the parties hereto, that notwithstanding anything
to the contrary in this Agreement, (i) Manager does not warrant, or guarantee
the performance of any professional or contractor employed in connection with
the Properties or warrant or guarantee the performance of under any construction
contracts relating to the Properties. Moreover the consulting development,
management and administrative services rendered by Manager hereunder will
involve recommendations as to how the various Properties might be developed and
estimates made by Manager as part of its development management services, and
the assumptions upon which they are based, represent Manager's judgment based
upon available information as of the date of preparation. No such
recommendation, estimate or assumption is intended to constitute a warranty,
guarantee or promise by Manager that the stated objectives can be achieved in
the manner described. Manager shall not be liable to Owner if any of Owner's
objectives with respect to the Properties are not achieved either in whole or in
part or in a timely manner or otherwise.
8. Default. If either party to this Agreement defaults in the
performance of its obligations under this Agreement after notice and opportunity
to cure set forth below in Section 8, the non-defaulting party shall have all
rights and remedies available to it at law or in equity on account of such
default, provided, however, that Owner shall not have the right to seek the
remedy of termination of this Agreement unless and until Manager has been given
the notice and opportunity to cure set forth below in this Section 8, and
thereafter, a court of competent jurisdiction has rendered a final,
non-appealable decision holding that the Manager has committed a material breach
of this Agreement. Anything contained in this Agreement to the contrary
notwithstanding, any act or omission which would otherwise be a default under
this Agreement by either party shall not be a default unless the non-defaulting
party shall have given the defaulting party notice of such alleged default, and
the defaulting party shall have failed to cure such alleged default within
thirty (30) days after such notice, or if the alleged default is one which
cannot with due diligence be cured within thirty (30) days, the defaulting party
shall have failed to commence curing such default within such thirty (30) day
period.
9. Notices. All notices required or provided for in this
Agreement, if hand delivered shall be deemed to have been given and received on
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the date hand delivered to the party receiving same. If the United States mails
are used, notices shall be sent certified or registered mail, return receipt
requested, postage prepaid, and shall be deemed to have been given and received
on the second (2nd) business day from the date deposited in the United States
mails addressed as follows:
If to Owner:
Constellation Properties, Inc.
Attention: Mr. Steven S. Koren
8815 Centre Park Drive - Suite 100
Columbia, MD 21045
and
Dan R. Skowronski, Esquire
Constellation Holdings, Inc.
250 W. Pratt Street
23rd Floor
Baltimore, MD 21201
If to Manager:
Corporate Office Management, Inc.
Attention: Mr. Dan R. Skowronski
8815 Centre Park Drive - Suite 400
Columbia, MD 21045
and
Mr. Clay W. Hamlin, III
Corporate Office Properties Trust
401 City Avenue. Suite 615
Bala Cynwyd, PA 19004
Each party shall have the right to designate a different address,
provided the party's new address is contained in a written notice to the other
party.
10. Miscellaneous.
(a) This Agreement contains the final understanding of the terms
and provisions between the parties and supersedes any prior agreement
among the parties.
(b) This Agreement shall be interpreted under the laws of the
State of Maryland.
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(c) If any provision of this Agreement is found to be
unenforceable or void, the remaining provisions of this Agreement
shall be enforceable between the parties.
(d) This Agreement may not be assigned by either party hereto
without the consent of the other party, which shall not be
unreasonably withheld or delayed, except that either party may assign
to a subsidiary or affiliate of it without the prior written consent
of the other party.
(e) Nothing in the provisions of this Agreement shall be deemed
in any way to create between the parties hereto any relationship of
partnership, joint venture or association, and the parties hereto
hereby disclaim the existence thereof.
(f) Each party hereto warrants and represents that the person who
has signed this Agreement on its behalf is duly authorized to so sign,
and this Agreement is the legal, valid and binding agreement of such
party, enforceable against such party, in accordance with its terms.
(g) Manager agrees that it will not disclose confidential
information furnished to it by Owner as a consequence of its
employment under this Agreement.
IN WITNESS WHEREOF, the parties hereto sign and seal this Agreement on
the day and year first above written.
WITNESS CONSTELLATION PROPERTIES, INC.
________________________________ By: _____________________________(SEAL)
CORPORATE OFFICE MANAGEMENT, INC.
________________________________ By: _____________________________(SEAL)
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EXHIBIT "OPTION PROJECTS"
All documents listed below are attached.
1. National Business Park
5 Year Option and Right of First Refusal
2. Brown's Wharf adjacent land - Right of First Refusal
3. Constellation Centre Unit 2 and 7 - Right of First Refusal
SERVICE COMPANY ASSET CONTRIBUTION AGREEMENT
SERVICE COMPANY ASSET CONTRIBUTION AGREEMENT, entered into as of the
14th day of May, 1998, by and among Constellation Real Estate, Inc., a Maryland
corporation ("Seller"), KMS Oldco, Inc. a Maryland corporation ("KMS") and
Constellation Real Estate Group, Inc. a Maryland corporation ("CREG"), (KMS and
CREG are collectively referred to herein as the "Shareholders"), and Corporate
Office Properties, L.P., a Delaware limited partnership ("COP") and Corporate
Office Properties Trust, a Maryland real estate investment trust ("COPT"). COP
and COPT are collectively referred to herein as "Buyer."
W I T N E S S E T H:
Seller is engaged directly, and indirectly through its controlling
ownership interest in Constellation Realty Management, LLC, a Maryland limited
liability company ("CRM") in the business of managing real property.
Shareholders are the owners of all the issued and outstanding capital stock of
Seller.
COPT is the sole General Partner of COP. COP and COPT have this day
entered into a certain Contribution Agreement and certain Development Agreements
which provide, inter alia, for the transfer to Buyer of certain ownership
interests in entities which are Affiliates of Seller and the Shareholders and
which own real property, some of which real property has been managed by Seller
or CRM.
Seller wishes to sell and Buyer wishes to buy certain assets owned by
Seller, including all of Seller's interest as a member in CRM, and Buyer wishes
to assume certain of Seller's liabilities.
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and each intending to be legally bound hereby,
the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" as to a Person shall mean a Person that controls, is controlled by
or under common control with such Person.
"Accredited Investor" shall have the meaning set forth in Regulation D
promulgated under the Securities Act of 1933, as amended.
<PAGE>
"Agreement" means this Service Company Asset Contribution Agreement.
"Assets" has the meaning set forth in Section 2.1 (a) of the Agreement.
"Assumed Liabilities" has the meaning set forth in Section 2.5 (b) of the
Agreement.
"Authorizations" has the meaning set forth in Section 8.3 of the Agreement.
"Balance Sheet Date" means April 30, 1998.
"Business" means the operations and activities of Seller insofar as they relate
to the real properties which are owned by the entities whose interests are being
transferred to Buyer pursuant to the terms of the Contribution Agreement and the
Development Agreements.
"Buyer" means COP and COPT together.
"Closing"means the closing of the purchase and sale of the Assets and the CRM
Interest pursuant to the terms of this Agreement.
"Closing Date" means the date on which the Closing shall occur.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" has the meaning set forth in Section 2.1 (a) (iii)of the Agreement.
"Contribution Agreement" means that Contribution Agreement dated as of May __,
1998 by and between Buyer and the Persons identified therein as "Sellers".
"COP" means Corporate Office Properties, L.P.
"COPT" means Corporate Office Properties Trust.
"CREG" means Constellation Real Estate Group, Inc.
"CRM" means Constellation Realty Management, LLC.
"CRM Balance Sheet" means the balance sheet of CRM as of April 30, 1998 included
on Schedule 4.8 to the Agreement.
"CRM Financial Statement" has the meaning set forth in Section 4.8 of the
Agreement.
"CRM Interest" means the seventy five percent (75%) ownership interest in CRM,
comprising all the issued and outstanding Class A Units of CRM, owned by Seller
as a member of CRM.
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"CRM Operating Agreement" means that Operating Agreement dated April 17,1996
between Seller and KLNB, LLC, attached hereto as Exhibit "A".
"Deficiencies" has the meaning set forth in Section 9.2 of the Agreement.
"Development Agreements" means those two Development Properties Acquisition
Agreements each dated as of May __, 1998 by and between Buyer and the Persons
identified therein as "Sellers".
"Employee Benefit Plan" means employee benefit plans as defined in Section 3(3)
of ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Excluded Assets" has the meaning set forth in Section 2.1 (c) of the Agreement.
"GAAP" means generally accepted accounting principles, consistently applied.
"Informational Materials" shall have the meaning set forth in Section 4.30 of
the Agreement.
"KMS" means KMS Oldco, Inc.
"Law" means any law, including, without limitation, any (i) principle of common
law, (ii) federal, state or local statute, ordinance, rule or regulation, (iv)
federal, state or local permit, license or certificate, or (iv) judgment, order,
decree, award or other decision or requirement of any arbitrator, court,
government or governmental agency or instrumentality (domestic or foreign).
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, organization, trust or other entity.
"Purchase Price" has the meaning set forth in Section 2.2 of the Agreement.
"SEC Reports" means the following documents filed to date by COPT with the
Securities and Exchange Commission pursuant to either the Securities Exchange
Act of1934, as amended or the Securities Act of 1933, as amended: Annual report
on Form 10- K for the year ended December 31, 1997; Proxy Statement dated
February 11, 1998; Prospectus dated April 22, 1998 included in registration
statement number 333-47465 filed pursuant to Rule 424(b); and, Quarterly Report
on Form 10_Q for the three months ended March 31, 1998.
"Seller" means Constellation Real Estate, Inc.
"Shares" has the meaning set forth in Section 2.2 of the Agreement.
"Shareholders" means, collectively, KMS and CREG, and "Shareholder" means any
one of the Shareholders.
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"Taxes" means all Federal, state, local and foreign income, property, sales,
excise and other taxes or governmental charges of any nature whatsoever.
"Transaction Documents" has the meaning set forth in Section 4.2 of the
Agreement.
ARTICLE 2. TERMS OF ASSET PURCHASE; CLOSING.
2.1 Sale and Purchase of Assets and CRM Interest.
(a) In reliance on the representations, warranties, covenants
and agreements herein, and subject to the terms and conditions hereof, Seller
shall sell, convey, transfer and assign to Buyer, and Buyer shall purchase from
Seller, all of Seller's right, title and interest in and to substantially all of
the tangible and certain intangible assets owned or used by Seller in the
Business as of the Closing Date (the "Assets"). It is understood and agreed that
all or a portion of the Assets may be contributed to, and owned by, single
member limited liability companies in which Seller is the sole member, in which
case Seller shall sell and Buyer shall purchase (or cause to be purchased) all
of the interests of such entities. The Assets include, without limitation, the
following:
(i) all trade fixtures, fixed and movable equipment, and
office equipment (including, without limitation, all repair and
replacement parts), furniture, all useable inventory of office
supplies, and all other items of tangible personal property used
or employed in the conduct and operation of its business as of
the date of Closing;
(ii) all files and other documents and records and all
books, ledgers, files and business records related to the
Business;
(iii) all rights existing under management service
agreements, equipment leases, contracts, real property leases,
supply agreements, purchase orders, and all other agreements,
commitments and understandings, to the extent the same relate to
the Business and are assignable (collectively, the "Contracts");
(iv) all telephone numbers of Seller related to the
Business;
(v) all permits, licenses, registrations, filings,
authorizations and approvals (and pending applications for any
thereof) to the extent the same relate to the Business and are
assignable by Seller to Buyer;
(vi) all prepaid items, utility and other deposits related
to the Business and to which Seller is entitled, supplier lists
related to the Business, and to the extent assignable, all
present and future causes of action and claims against third
parties related to the Business;
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(vii) all rights to operate as a going concern, to hire any
past or present employees, and to do business with all present
customers and suppliers, and all right and title to and interest
in all goodwill of its business;
(viii) all computer equipment, databases, software and
software licenses related to the Business (it being understood
and agreed that all such equipment and information, both hard
copy and computer-based, which is not related to the Business
shall not be part of the Assets); and
(ix) an amount of cash which shall be no less than the
aggregate amount of all accrued but unpaid payroll, incentive
pay, vacation and associated payroll taxes and benefit payments
which Seller is required to pay for the current payroll period in
which the Closing occurs (and any other unpaid amounts from prior
periods) but only to the extent such amounts relate to the
employees of Seller that will be employed by Buyer or an
Affiliate of Buyer immediately after Closing.
(b) In reliance on the representations, warranties, covenants
and agreements herein, and subject to the terms and conditions hereof, Seller
shall sell, convey, transfer and assign to Buyer, and Buyer shall purchase from
Seller, all of Seller's right, title and interest in and to the CRM Interest.
(c) The following are not included in the Assets (the
"Excluded Assets"):
(i) all right, title and interest in and to Seller's name
and the service marks, trade names, trademarks and copyrights,
including all registrations and variances thereof, logos used in
connection therewith, the right to sue for past infringements
thereof, and all goodwill associated with such marks and rights;
(ii) intercompany and other accounts receivable of Seller;
(iii) trade fixtures, fixed and movable equipment, and
office equipment (including, without limitation, a reasonable
amount of repair and replacement parts), furniture, a reasonable
amount of useable inventory of office supplies, and all other
items of tangible personal property used or employed in the
conduct and operation of its business as of the date of Closing
by those employees who will not be employed by Buyer or an
Affiliate of Buyer immediately after Closing; and,
(iv) other items of personal property set forth on Schedule
2.1(c).
2.2 Purchase Price and Payment. As consideration for the Assets and the
CRM Interest, COPT shall deliver to Seller the aggregate number of shares of
COPT Common Shares and COPT Convertible Preferred Shares (collectively, the
"Shares") set forth on Schedule 2.2. (the "Purchase Price"). It is agreed that
the value of the Purchase Price is Two Million Five Hundred Thousand Dollars
($2,500,000). The Purchase Price shall be allocated among the Assets and the CRM
Interest in the manner required by Section 1060 of the Code, and as set forth on
Schedule 2.2 hereto. Seller and Buyer hereby agree to timely file Internal
Revenue Service Form 8594 and any other required Federal or State tax form with
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respect to such allocation. No party hereto shall take, for income tax purposes,
any position inconsistent with such allocation.
2.3 Expenses. Seller, the Shareholders, COP and COPT will each bear
their respective legal, accounting and other expenses incurred in connection
with the investigation, negotiation, preparation, review, execution, performance
and enforcement of this Agreement, and in connection with the transactions
contemplated hereby.
2.4 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall be held immediately following, and at the same
place as the closing of the transactions contemplated by the Contribution
Agreement, or at such other time and place as may be mutually agreed upon by
Buyer and Seller.
2.5 Assumption of Liabilities.
(a) Buyer assumes no liabilities of, or related to, CRM.
Except as expressly set forth in Section 2.5(b), neither the execution of this
Agreement nor the consummation of the transactions contemplated herein shall
obligate Buyer to pay any fixed or contingent, known or unknown, secured or
unsecured obligation, debt or liability of Seller or any Shareholder, whether
arising before or after the Closing, it being the express intention of the
parties that Seller and the Shareholders shall be responsible for the payment of
all their respective obligations, debts and liabilities, including, but not
limited to, indebtedness to banks and other financial institutions, indebtedness
to current and former employees, officers, directors or shareholders of Seller,
and, liability for payment of any and all accrued and unpaid salaries and wages,
sick pay, vacation pay, time off or pay in lieu thereof, and any employee
benefit due any employee.
(b) Notwithstanding the foregoing, Buyer agrees to assume the
following obligations of Seller, and no others (the "Assumed Liabilities"):
(i) obligations of Seller under the Contracts set forth on
Schedule 2.5(b) hereto, but only to the extent that performance
of such obligations is to occur after Closing, or payment of sums
due thereunder are in consideration for products or services
rendered to Buyer after the Closing Date;
(ii) accounts payable then current and as agreed to in
writing by Buyer and Seller at or prior to Closing; and
(iii) accrued payroll for the employees of Seller that will
be employed by Buyer or an Affiliate of Buyer immediately after
the Closing, and associated payroll taxes for the Seller's
current payroll period in which the Closing Date occurs, as
agreed to in writing by Buyer and Seller at or prior to Closing.
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ARTICLE 3. COVENANTS OF SELLER AND THE SHAREHOLDERS.
Seller and the Shareholders jointly and severally covenant and agree to
and with Buyer as follows:
3.1 Activities Pending Closing. Except as expressly provided herein,
between the date hereof and Closing, unless Seller shall have received the prior
written consent of Buyer to the contrary, Seller shall, and Seller and the
Shareholders shall cause each of Seller and CRM to use their commercially
reasonable best efforts to:
(i) maintain its existence, pay and discharge all debts,
liabilities and obligations as they become due, and operate solely in the
ordinary course of business in a manner consistent with past practice and the
provisions of this Agreement and in compliance in all material respects with all
applicable Law and all contracts and agreements to which Seller or CRM is a
party or by which its assets are bound;
(ii) maintain its facilities and assets in the same state of
repair, order and condition as they were on the date hereof, reasonable wear and
tear excepted;
(iii) maintain its books and records in accordance with past
practice, and use maintain in full force and effect all insurance policies and
binders;
(iv) preserve intact its present organization and maintain its
relations and goodwill with suppliers, customers, employees and others having
relationships with it;
(v) promptly advise Buyer in writing of the threat or
commencement against Seller or CRM of any dispute, claim, action, suit,
proceeding, arbitration or investigation that could materially adversely affect
Seller or CRM, or the assets of any Shareholder, or that challenges, or may
affect the validity of, this Agreement or any other Transaction Document or any
action taken or to be taken in connection with this Agreement or any other
Transaction Document or the ability of any party hereto to consummate the
transactions contemplated herein or therein; and
(vi) promptly advise Buyer in writing of any event or the
existence of any fact which makes untrue, or will make untrue as of the Closing,
any representation or warranty of Seller or the Shareholders set forth in this
Agreement or in any Transaction Document.
3.2 Negative Covenants. Except as expressly provided herein, between
the date hereof and the Closing, without the prior written consent of Buyer,
Seller shall not, and Seller and the Shareholders shall cause each of Seller and
CRM not to:
(i) take any action (regardless of whether such action might
otherwise be permitted hereunder), or (through inaction) permit to occur any
event, that would, or could reasonably be expected to, result in any
representation of Seller or a Shareholder contained in this Agreement being
untrue in any material respect or the breach or nonfulfillment of any warranty,
covenant or other obligation of Seller or a Shareholder in this Agreement;
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(ii) amend its Articles of Incorporation or Bylaws (in the
case of Seller) or the CRM Operating Agreement (in the case of CRM) or any other
instrument regulating its conduct, including but not limited to agreements among
its owners;
(iii) fail to pay or discharge when due any liability or
obligation of Seller related to the Business or CRM;
(iv) enter into or renew, extend, amend or terminate any
agreement, commitment or transaction, which entry, renewal, extension, amendment
or termination is not in the ordinary course of business and consistent with
past practice, or which is material to Seller's operations or financial
condition or CRM's operations or financial condition;
(v) settle or compromise any material pending or
threatened litigation or proceeding related to the Business or to CRM;
(vi) other than transactions in the ordinary course of
business consistent with prior practice, sell, lease, license, encumber or
otherwise dispose of, or agree to sell, lease, license, encumber or otherwise
dispose of, any assets that are material, individually or in the aggregate, to
it;
(vii) except in the ordinary course of business, incur or
guaranty any indebtedness or make any loan;
(viii) acquire any other business or interest therein;
(ix) create, enter into, adopt, amend (except as may be
required by Law) or terminate any employee benefit plan or any compensatory or
benefit agreement, arrangement, plan or policy with respect to any employee or,
except for normal increases in the ordinary course of business consistent with
past practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense, increase in any manner the compensation or
fringe benefits of any employee or consultant or pay any benefit not required by
any plan and arrangement as in effect as of the date hereof or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing; or
(x) agree to do any of the foregoing.
3.3 Access to Information. Prior to the Closing, Seller shall, during
ordinary business hours and at mutually convenient times, give Buyer and its
authorized representatives reasonable access to all of its and CRM's personnel,
books, records, offices and other facilities and properties, and permit Buyer to
make such inspections thereof as Buyer may reasonably request, and cause its and
CRM's officers and advisors to furnish Buyer with such financial, operating and
other information regarding the Business and CRM as Buyer may reasonably
request.
3.4 Confidentiality. Seller and the Shareholders will keep confidential
and use their best efforts to cause their affiliates and instruct its and their
respective officers, managers, directors, employees and advisors to keep
confidential all nonpublic information relating to the transactions
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contemplated hereby, except as required by law or administrative process and
except for information which becomes public other than as a result of a breach
of this Section 3.4.
3.5 Other Transactions. Prior to the Closing neither Seller nor any of
the Shareholders shall, nor shall they permit any of their Affiliates, officers,
directors, advisors or other representatives to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any Person other than Buyer and its
representatives concerning any merger, sale of securities, sale of assets or
similar transactions involving the Seller or CRM In the event Seller or any of
the Shareholders receive an inquiry or proposal relating to any such
transaction, it or he will promptly notify Buyer thereof.
3.6 Supplemental Disclosure. Seller and the Shareholders shall promptly
supplement or amend each Schedule hereto with respect to any material matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in such
Schedule; provided, however, that any such supplemental or amended disclosures
shall not be deemed to have been disclosed as of the date of this Agreement
unless so agreed to in writing by Buyer.
3.7 Employees and Contractors. Seller and the Shareholders shall use
their best efforts to assist Buyer in retaining the services of those employees
of Seller and independent contractors with Seller that are identified by Buyer
for such purpose.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
SHAREHOLDERS.
Seller and each of the Shareholders jointly and severally represent and
warrant to Buyer as follows:
4.1 Status. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland, and has all
requisite corporate power and authority to conduct its business as it has been
and is now conducted, to own and lease the assets it owns and leases and to
perform its obligations pursuant to each agreement and instrument by which it is
bound. CRM is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Maryland, and has all requisite
power and authority to conduct its business as it has been and is now conducted,
to own and lease the assets it owns and leases and to perform its obligations
pursuant to each agreement and instrument by which it is bound. Neither Seller
nor CRM is required to be qualified to do business as a foreign corporation or
company in any jurisdiction except as follows: CRM is qualified to do business
in Virginia, Delaware, New Jersey, West Virginia, North Carolina, the District
of Columbia and Pennsylvania; and, Seller is qualified to do business in
Maryland and the District of Columbia.
4.2 Power and Authority. Seller and each Shareholder has full legal
right, power and authority to enter into and perform its and his obligations
under this Agreement and under the other agreements and documents required to be
delivered by it hereunder prior to or at the Closing, if any (the "Transaction
Documents"). The execution, delivery and performance by Seller of this Agreement
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and the other Transaction Documents have been duly authorized by all necessary
corporate action. This Agreement has been duly and validly executed and
delivered by the Seller and by each Shareholder and constitutes the legal, valid
and binding obligation of each of them, enforceable against each of them in
accordance with its terms. When executed and delivered as contemplated herein,
each of the Transaction Documents shall constitute the legal, valid and binding
obligation of Seller and each Shareholder, as the case may be, enforceable
against each of them in accordance with its terms, subject to bankruptcy and
insolvency laws, and to equitable principles which may be imposed by courts.
4.3 No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents do not and will not (with or
without the passage of time or the giving of notice): (i) violate or conflict
with Seller's Articles of Incorporation or Bylaws, the CRM Operating Agreement
or any Law binding upon Seller or CRM; (ii) violate or conflict with, result in
a breach of, or constitute a default or otherwise cause any loss of benefit
under, any agreement or other obligation to which CRM, Seller or any Shareholder
is a party or by which any of them (or the assets of any of them) is bound, or
give to any other party any rights (including, without limitation, rights of
termination, foreclosure, cancellation or acceleration) in, or with respect to,
Seller, the CRM Interest or any of the Assets; or (iii) result in, require, or
permit the creation or imposition of, any restriction, mortgage, deed of trust,
pledge, lien, security interest or other charge, claim or encumbrance upon, or
with respect to, Seller, the CRM Interest or any of the Assets.
4.4 Shareholders. The Shareholders are the registered and beneficial
owners of one hundred percent (100%) of the issued and outstanding capital stock
of the Seller free and clear of any claims, liens, encumbrances, security
interests, options, charges or restrictions whatever. No shares of the capital
stock of the Seller are subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding restricting or otherwise
relating to the voting, dividend rights or disposition of the capital stock.
There are no outstanding options, warrants, rights, puts, calls, commitments, or
other contracts, arrangements (including "phantom" stock arrangements), or
understandings with respect to its capital stock issued by or binding upon the
Seller. There are no obligations or agreements, written or otherwise, requiring
or otherwise providing for the Seller to (x) make any dividend or other
distribution, direct or indirect, on or account of any shares of any class of
stock, now and hereafter outstanding, of the Seller or pursuant to any "phantom"
stock arrangement; or (y) make any redemption, purchase or other acquisition,
direct or indirect, of any shares of any class of stock of the Seller now or
hereafter outstanding or of any warrants or rights to purchase any such stock
(including, without limitation, the repurchase of any such stock or warrant or
any refund of the purchase price thereof in connection with the exercise by the
holder thereof of any right of rescission or similar remedies with respect
thereto).
4.5 Investments, Subsidiaries and Controlled Entities. Except as set
forth on Schedule 4.5, neither Seller nor CRM directly or indirectly owns,
controls or has any investment or membership or other interest in any other
Person.
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4.6 Compliance with Law and Other Requirements. Each of Seller and CRM
is, and at all times since its inception has been, in compliance in all material
respects with all applicable Law, and has not received any notice, order or
other communication from any governmental agency or instrumentality of any
alleged, actual, or potential violation of, or failure to comply with, any Law.
All federal, foreign, state, local and other governmental consents, licenses,
permits, franchises, grants, approvals and authorizations required for the
activities of Seller and CRM as currently conducted are in full force and effect
without any default or violation thereunder by Seller or CRM or by any other
party thereto, except where such default or violation would not have a material
adverse effect on the activities, financial condition or results of operations
of Seller or CRM.
4.7 Employee and Labor Relations. Schedule 4.7 hereto includes a
complete and correct list of each of Seller's and CRM's employees, job titles,
dates of employment with Seller. Seller has previously furnished Buyer with a
complete and correct list of the current rates and terms of compensation of all
such persons.. All employees are employed by Seller and CRM "at will". Except as
set forth in Schedule 4.7 hereto:
(i) Each of Seller and CRM is in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice;
(ii) no charges with respect to or relating to Seller or CRM
are pending before the Equal Employment Opportunity Commission or any state or
local agency responsible for the prevention of unlawful employment practices,
and neither Seller nor CRM has received notice of the intent of any Federal,
state or local agency responsible for the enforcement of labor or employment
laws to conduct an investigation with respect to or relating to the Seller or
CRM and no such investigation is in progress;
(iii) none of Seller, CRM, the Shareholders or their
respective Affiliates has been the subject of an order, judgment or decree of
any court, government agency or regulatory body that has enjoined, barred or
suspended the Seller, CRM or any Shareholder, or any Affiliate of Seller, CRM or
any Shareholder from engaging in any type of practice or activity; and
(iv) all services performed by Seller and CRM have been
provided in accordance with all applicable Laws in all material respects.
4.8 Financial Information. Attached hereto as Schedule 4.8 are the CRM
Balance Sheet and the income statement of CRM as at and for the four months
ended April 30, 1998 (collectively, including the notes thereto, the "CRM
Financial Statement") and the balance sheets as of December 31, 1996 and 1997
and related statements of income, shareholders equity and cash flows for the
eight and twelve month periods then ended, respectively, including the notes
thereto. The books and records of CRM accurately and fairly reflect its
activities and results of CRM, and the financial statements and notes specified
above accurately and fairly present the financial condition, cash flows and
results of CRM, as at the respective dates thereof and for the periods referred
to therein, all in accordance with GAAP. The CRM Balance Sheet reflects all
liabilities of CRM as of the Balance Sheet Date, whether absolute, accrued or
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contingent, of the type required to be reflected or disclosed in a balance sheet
(or the notes thereto) prepared in accordance with GAAP. CRM has no liabilities
or obligations of any nature that are not reflected on the CRM Balance Sheet,
other than current liabilities (within the meaning of GAAP) incurred since the
Balance Sheet Date in the ordinary course of business consistent in nature and
amount with past practice, and that are neither material in amount nor
inconsistent with any of the representations and warranties contained herein.
4.9 Accounts Receivable. All accounts receivable of CRM reflected on
its books and records represent valid obligations for services rendered or sales
made in the ordinary course of business and are, to the best knowledge of
Seller, collectible in the ordinary course of business.
4.10 Absence of Changes. Since the Balance Sheet Date, except as
otherwise set forth in Schedule 4.10, each of Seller and CRM has not:
(i) undergone or experienced any material adverse change in
its business or financial condition, properties, assets, liabilities, business
or other aspect of operations;
(ii) suffered any damages, destruction or loss (insured or
uninsured) materially and adversely affecting its ability to conduct business;
(iii) sold, transferred, encumbered or granted any security
interest in any of its business, properties or assets (or agreed to do so),
except in the ordinary course of its business;
(iv) merged or consolidated with or been acquired by any
Person (or agreed to do so);
(v) suffered or permitted any material change in the manner
of conducting business;
(vi) agreed to any waiver or settlement of any material
lawsuit or dispute;
(vii) made or authorized any loan or advance to any Person
except for normal travel and other reasonable expense advances to employees ;
(viii) other than in the ordinary course of business, granted
or authorized any salary increases, bonuses or other benefits payable to
employees or consultants;
(ix) incurred (or agreed to) any actual, contingent or
otherwise, indebtedness or liability, except current liabilities in the ordinary
and usual course of business;
(x) made (or agreed to) any purchase or lease of capital
assets;
(xi) paid, declared or authorized any redemption, distribution
or dividend with respect to any member or otherwise with respect to any
ownership interest; and
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(xii) lost, or suffered cancellation, termination or cessation
of, any customer(s) or client relationship(s) which accounted for seven and
one-half percent (7.5%) or more of gross revenues, in the aggregate, from its
business (in the case of CRM) or the Business (in the case of the Seller) for
the twelve month period ended on the Balance Sheet Date.
4.11 Undisclosed Liabilities. CRM has no material liabilities or
material obligations of any nature (whether accrued, absolute, contingent,
unasserted or otherwise) other than as set forth on the CRM Balance Sheet and
except as incurred in the ordinary course of business consistent with past
practice since the Balance Sheet Date.
4.12 Taxes. Each of Seller and CRM has filed all tax returns required
to be filed by it and has paid or has established an adequate reserve for the
payment of, all Taxes required to be paid in respect of the periods covered by
such returns. Neither Seller nor CRM is delinquent in the payment of any tax,
assessment or governmental charge. No deficiencies for any Taxes have been
proposed, asserted or assessed against the Seller or CRM and no requests for
waivers of the time to assess any Taxes are pending. There are no liens for
Taxes upon any of the Assets. None of the Seller, CRM or the Shareholders is a
Person other than a United States Person within the meaning of the Code.
4.13 Litigation. Except as set forth on Schedule 4.13 attached hereto,
there is no suit, action or proceeding pending against or (to Seller's
knowledge) threatened against or affecting Seller or CRM that could reasonably
be expected to have a material adverse effect on Seller or CRM. Neither Seller
nor any Shareholder is aware of any basis for any such suit, action or
proceeding, nor is there any judgment, decree, injunction, rule or order of any
governmental entity or arbitrator outstanding against any Seller or CRM having,
or which in the future would have, any such effect. Neither Seller nor CRM, or
any Person employed by Seller or CRM, has reported a claim or potential claim to
Seller's, CRM's or such Person's professional liability insurance carrier.
4.14 Contracts. Neither Seller nor CRM is in default under any
document, contract, agreement or other commitment to which it is a party or by
which it or any of its assets is bound where such default would have a material
adverse effect on the activities, financial condition or results of operations
of Seller or CRM. Each contract or agreement to which the Seller or CRM is a
party is in full force and effect in accordance with its terms and there is no
outstanding notice of cancellation or termination in connection therewith.
4.15 Effect of Transaction. No creditor, employee, client or other
customer or other Person having a material business relationship with Seller or
CRM has informed Seller, CRM or any Shareholder that such Person intends to
change the relationship because of the transactions contemplated by this
Agreement.
4.16 Intangible Assets. Schedule 4.16 hereto includes a true and
complete list of all fictitious names, trademarks, service marks, trade names,
copyrights and patents owned by CRM on the date hereof, or for which application
is pending. All such fictitious names, trademarks, service marks, trade names,
copyrights and patents are free and clear of all assignments, restrictions,
encumbrances, charges or claims of infringement by third parties.
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4.17 Consents. No consent, order, approval or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign, is
required by or with respect to the Seller, CRM or a Shareholder in connection
with the execution, delivery and performance of this Agreement and the other
Transaction Documents. Set forth on Schedule 4.17 hereto are names of each
Person whose consent is required in order to permit the transfer of an Asset to
Buyer, the assumption by Buyer of Seller's rights pursuant to a Contract, and
the transfer to Buyer of the CRM Interest.
4.18 Further Assurances. From and after the date of this Agreement (and
from and after the date of Closing for a period of two years to the extent that
Seller shall thereafter retain any of the following), Seller shall give to Buyer
and to Buyer's representatives, auditors and counsel full access during normal
hours to all of the properties, books, files, records, contracts, licenses and
all other documents maintained by Seller and related to the Business and shall
furnish to Buyer all information with respect to the Business prior to the
Closing Date as Buyer may from time to time reasonably request. Seller and the
Shareholders shall use their commercially reasonable best efforts to obtain all
consents necessary to consummate the sale, assignment, conveyance and delivery
of the Assets and the CRM Interest contemplated by this Agreement and to
otherwise consummate the transactions contemplated hereby, and to enable Buyer
to continue to conduct the businesses conducted by Seller and CRM in a manner
similar to the manner in which they have previously been conducted. From time to
time after the Closing, at Buyer's request and without additional consideration,
Seller and each of the Shareholders agree to execute and deliver such other
instruments of assignment and transfer and take such other action as Buyer
reasonably may require to more effectively assign, transfer to, and vest in
Buyer absolutely, and to put Buyer in possession of, any property to be sold,
assigned, transferred and delivered hereunder.
4.19 [intentionally left blank]
4.20 Leases and Subleases. Each lease or sublease pursuant to which the
Seller or CRM leases or subleases any real or personal property, either as
lessor or lessee, is valid and binding in accordance with its terms, and there
is not under such lease or sublease any existing default or breach of covenant
by the Seller or CRM or by the other party thereto, or any condition, event, or
act that with notice or lapse of time or both would constitute default. Schedule
2.5(b) hereto contains a true, correct and complete list of each lease of real
property and personal property to which the Seller or CRM is a party and in
which capacity.
4.21 Title to Assets. Except as set forth on Schedule 4.21 hereto,
Buyer will receive at Closing good and marketable title to the Assets, free and
clear of all liens, claims, encumbrances and security interests of any kind or
nature. None of the Assets is the subject of any pending or threatened
litigation.
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4.22 Title to CRM Interest. Buyer will receive at Closing good and
marketable title to the CRM Interest, free and clear of all liens, claims,
encumbrances and security interests of any kind or nature. Buyer acknowledges
that as the owner of the CRM Interest, it will be subject to the terms of the
CRM Operating Agreement.
4.23 Employee Benefits. Schedule 4.23 contains a complete and correct
list of all benefit plans, arrangements, commitments and payroll practices of
CRM (whether or not Employee Benefit Plans under ERISA), including, without
limitation, sick leave, vacation pay, severance pay, salary continuation or
disability, consulting or other compensation arrangements, retirement, deferred
compensation, bonus, incentive compensation, stock purchase, stock option,
health including hospitalization, medical, dental and pharmacy, life insurance
and scholarship programs maintained for the benefit of any present or former
employees of CRM. Each Employee Benefit Plan of CRM has been administered in
compliance with its terms, and is in compliance in all material respects with
the applicable provisions of ERISA, the Code and all other applicable Law
(including, without limitation, funding, filing, termination, reporting and
disclosure and continuation coverage obligations pursuant to Title V of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended).
4.24 No Investigation. None of Seller, CRM, any Shareholder or their
respective Affiliates nor (to the best of Seller's knowledge) any Person
employed by Seller or CRM is currently under investigation or prosecution for,
nor has Seller, CRM, any Shareholder or their respective Affiliates nor any such
Person been convicted of a criminal offense related to fraud, theft,
embezzlement or other financial or unlawful manufacture, distribution,
prescription or dispensing of a controlled substance.
4.25 Copies of Documents. Seller has furnished Buyer with true,
complete and correct copies of: Seller's Articles of Incorporation and Bylaws;
all contracts, agreements and understandings to which Seller is a party and
related to the Business; the CRM Operating Agreement; all contracts, agreements
and understandings to which CRM is a party (other than routine maintenance and
similar agreements which are not individually or in the aggregate material in
amount or substance to CRM or its operations); and, all contracts agreements and
understandings to which Seller is a party in its capacity as a member of CRM.
4.26 Proper Licensing. Seller and CRM and each Person employed or
retained as an independent contractor by Seller and CRM are qualified and
licensed to engage in providing the service provided by such Person without
restriction or limitation in the State of Maryland and in each other
jurisdiction in which such Person engages in such services.
4.27 Insurance Coverages. Each of Seller and CRM has maintained in full
force and effect insurance policies which are adequate in coverage amounts and
types of risks covered for the conduct of its business, and all premiums
necessary to maintain such insurance policies have been paid or accrued in full
and are reflected on the Seller Balance Sheet and the CRM Balance Sheet.
4.28 Prohibited Payments. None of Seller, CRM or the Stockholders, nor
any of the officers, directors, employees, agents or affiliates of Seller or CRM
has offered, paid or agreed to pay to any person or entity, including any
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governmental official, or solicited, received or agreed to receive from any such
person or entity, directly or indirectly, any money or anything of value for the
purpose or with the intent of obtaining or maintaining business or otherwise
affecting the operations, prospects, properties or condition (financial or
otherwise) of the Seller or CRM and which is or was in violation of any law,
rule or regulation, or is not properly and correctly recorded or disclosed on
the books and records of the Seller or CRM.
4.29 CRM Operating Agreement. The CRM Operating Agreement in the form
attached hereto as Exhibit "A" is in full force and effect, and there is no
current breach or violation of its terms by any party thereto, or the existence
of any condition which would, if continued, result in a breach or violation
thereof by any party thereto. Seller has complied with all the terms and
conditions of the CRM Operating Agreement, including but not limited to all
obligations with respect to capital contributions set forth in Article III. No
consent of any person is required for the transfer of the CRM Interest to Buyer.
4.30 Investment Representation. Seller and each Shareholder has such
knowledge and experience in financial and business matters so as to be fully
capable of evaluating the merits and risks of an investment in the Shares. No
Shares will be issued, delivered or distributed to any person or entity who
either (i) is a resident of the State of California or New York or (ii) is other
than an Accredited Investor with respect to whom there has been delivered to
Buyer satisfactory information confirming the status of such person or entity as
an Accredited Investor. Seller and each Shareholder has been furnished with the
informational materials described in Section 4.2 of the Contribution Agreement
(collectively, the "Informational Materials"), and has read and reviewed the
Informational Materials and understands the contents thereof. Seller and the
Shareholders have been afforded the opportunity to ask questions of those
persons they consider appropriate and to obtain any additional information they
desire in respect of the Shares and the business, operations, conditions
(financial and otherwise) and current prospects of the Buyer. Seller and the
Shareholders have consulted their own financial, legal and tax advisors with
respect to the economic, legal and tax consequences of delivery of the Shares
and have not relied on COP, COPT, or any of their officers, directors,
affiliates or professional advisors for such advice as to such consequences.
Seller and each of the Shareholders is an Accredited Investor. Seller and each
of the Shareholders is formed under the law of the State of Maryland.
4.31 United States Person. Each Entity and each Seller is a "United
States Person" within the meaning of Section 1445(f)(3) of the Code, as amended,
and shall execute and deliver an "Entity Transferor" certification (as defined
in ther Contribution Agreement) at Closing.
4.32 Full Disclosure. All documents and other papers delivered by or on
behalf of Seller and each Shareholder in connection with the transactions
contemplated by this Agreement are accurate and complete in all material
respects and are authentic. No representation or warranty of Seller or a
Shareholder contained in this Agreement or any other Transaction Document
contains any untrue statement of a material fact or omits to state a fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. Except as described in
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this Agreement, there is no fact known to Seller or any of the Shareholders or
(other than proposed or enacted legislation, proposed or enacted regulation, or
general economic or real estate industry conditions and changes) that materially
adversely affects or, so far as Seller and the Shareholders can reasonably
foresee, materially threatens, the assets, activities, prospects, financial
condition or results of Seller or CRM.
ARTICLE 5. COVENANTS OF BUYER.
Buyer covenants and agrees to and with Seller as follows:
5.1 Confidentiality. Buyer acknowledges that the information being
provided by the Seller and Shareholders is for the sole purpose of the
transactions contemplated hereby and that Buyer will keep confidential and
instruct Buyer's Affiliates, officers, directors, employees and advisors to keep
confidential all nonpublic information relating to the Seller, except as
required by Law and except for information which becomes public other than as a
result of a breach of this Section 5.1.
5.2 Financial Information. Buyer agrees to (x) retain all of the books
and records of the Seller acquired by Buyer hereunder and not to destroy or
dispose of any thereof for a period of three (3) years from the Closing Date or
such longer time as may be required by Law, and (y) provide to the Shareholders
financial information in its possession or control with respect to the Seller
requested by Seller or the Shareholders in order to comply with tax, financial
reporting and accounting requirements.
5.3 Proxy Statement. As promptly as practicable after the execution of
this Agreement, COPT shall prepare and file with the Securities Exchange
Commission a Proxy Statement (the "Proxy Statement") which shall solicit the
votes of COPT's shareholders with respect to the transactions contemplated
hereby and by the Contribution Agreement. The Proxy Statement shall include the
recommendation of COPT's Board of Trustees in favor of this Agreement and the
transactions contemplated hereby; provided, however, that the Board of Trustees
may modify or withdraw such recommendation if it believes in good faith after
consultation with legal counsel that the modification or withdrawal of such
recommendation is necessary for the Board of Trustees to comply with its
fiduciary obligations under applicable law.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF BUYER.
COP and COPT, jointly and severally, represent and warrant to Seller as
follows:
6.1 Status, Power and Authority.
COP is a limited partnership validly existing under the laws of the
State of Delaware and has all requisite power to carry on its business as now
conducted. COPT is the sole general partner of COP and is a duly formed and
validly existing Maryland real estate investment trust. Each of COP and COPT has
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full power and authority and possesses all material authorizations and approvals
necessary to enable it to execute and deliver this Agreement and the other
Transaction Documents to be executed by it, and perform its obligations
hereunder and thereunder. This Agreement and the other Transaction Documents
when executed and delivered by COP and COPT will, subject to approval by the
shareholders of COPT prior to Closing, constitute valid and legally binding
obligations of each of COP and COPT, enforceable against them in accordance with
their respective terms, subject to bankruptcy and insolvency laws, and to
equitable principles which may be imposed by courts.
6.2 No Conflicts. Subject to approval by the shareholders of COPT, the
execution, delivery and performance of this Agreement and the other Transaction
Documents do not and will not (with or without the passage of time or the giving
of notice): (i) violate or conflict with COP's Partnership Agreement or COPT's
Amended and Restated Declaration of Trust, or any Law binding upon COP or COPT;
(ii) violate or conflict with, result in a breach of, or constitute a default or
otherwise cause any loss of benefit under, any agreement or other obligation to
which COP or COPT is a party or by which either of them (or the assets of either
of them) is bound, or give to any other party any rights (including, without
limitation, rights of termination, foreclosure, cancellation or acceleration)
in, or with respect to COP or COPT; or (iii) result in, require, or permit the
creation or imposition of, any restriction, mortgage, deed of trust, pledge,
lien, security interest or other charge, claim or encumbrance upon, or with
respect to, COP or COPT or the assets of either of them.
6.3 Litigation. There are no actions, suits, claims, proceedings,
investigations or inspections, pending or (to COPT's knowledge) threatened,
against or affecting COPT or its Affiliates which could have a material adverse
affect on COPT and its Afiliates considered as a whole, and to COPT's knowledge
there are no matters of litigation or governmental proceedings expected to be
brought against it or its Affiliates which could have a material adverse affect
on the financial condition of COPT and its Affiliates considered as a whole.
6.3 Consents. No consent, order, approval or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign, is
required by or with respect to the COP or COPT in connection with the execution,
delivery and performance of this Agreement and the other Transaction Documents.
6.4 SEC Reports and Financial Statements. The SEC Reports did not, as
of their respective dates of filing, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading. There has not been any material adverse
change in the business of COPT since March 31, 1998. Except as may otherwise be
set forth therein, the financial statements (including the notes thereto) of
COPT set forth in the SEC Reports present fairly the consolidated financial
position of COPT as at the dates set forth therein and its results of
operations, changes in consolidated stockholder equity and cash flows for
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periods covered thereby, all in conformity with United States generally accepted
accounting principles applied on a consistent basis for such periods.
6.5. The Shares. The Shares to be issued at Closing will, when issued
and delivered, be duly authorized, validly issued, fully paid, non-assessable
shares of COPT free from all claims of preemptive rights.
6.6 Tax Status. COP has been at all times, and presently intends to
continue to be, classified as a partnership for federal income tax purposes and
not an association taxable as a corporation or a publicly traded partnership
taxable as a corporation. COPT is now, and presently intends to continue to be
classified, as a real estate investment trust under Section 856 of the Internal
Revenue Code of 1986, as amended.
6.7 Full Disclosure. All documents and other papers delivered by or on
behalf of COP or COPT in connection with the transactions contemplated by this
Agreement are accurate and complete in all material respects and are authentic.
No representation or warranty of COP or COPT contained in this Agreement or any
other Transaction Document contains any untrue statement of a material fact or
omits to state a fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. Except as described in this Agreement or in the SEC Reports there is
no fact known to COP or COPT or (other than proposed or enacted legislation,
proposed or enacted regulation, or general economic or real estate industry
conditions and changes) that materially adversely affects or, so far as COP and
COPT can reasonably foresee, materially threatens, the assets, activities,
prospects, financial condition or results of COP or COPT.
6.8 Condition of Tangible Assets. COP and COPT acknowledge that the
tangible assets comprising a portion of the Assets are being transferred "as-is,
where-is", and that Seller makes no representation or warranty, express or
implied, about the condition or fitness for any particular purpose, of any of
the tangible assets included as a part of the Assets.
ARTICLE 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
Seller's obligation to complete the Closing shall be conditioned on
the following, any of which may be waived by Seller.
7.1 Representations and Warranties. The representations and warranties
made by Buyer in this Agreement and all other Transaction Documents, or in any
exhibit, schedule, statement, list or certificate furnished pursuant thereto,
shall be true and correct when made and shall be true and correct in all
material respects at and as of the time of the Closing.
7.2 Performance by Buyer. Buyer shall have performed and complied in
all material respects with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing.
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7.3 Other Matters. The transactions contemplated hereby shall
be approved by all necessary action on the part of Buyer.
7.4 Deliveries at Closing. All instruments, documents, certificates and
other items required to be delivered to Seller pursuant to Section 10.2 of the
Agreement shall have been delivered to Buyer at or prior to the Closing Date.
7.5 Shareholder Approval and Other Closings. The Shareholders of COPT
shall have approved the transactions contemplated hereby and by the Contribution
Agreement and the Development Agreements. Immediately preceding Closing
hereunder, there shall be a closing pursuant to the Contribution Agreement.
ARTICLE 8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
Buyer's obligation to complete the Closing shall be conditioned on the
following, any of which may be waived by Buyer.
8.1 Representations and Warranties. The representations and warranties
made by Seller and the Shareholders in this Agreement and all other Transaction
Documents, or in any exhibit, schedule, statement, list or certificate furnished
pursuant thereto, shall be true and correct when made and shall be true and
correct in all material respects at and as of the time of the Closing.
8.2 Performance by Seller and the Shareholders. Seller and the
Shareholders shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed or complied
with by them prior to or at the Closing.
8.3 Federal and State Licenses, Permits and Authorizations. Buyer shall
have received or have been granted any and all necessary licenses, permits and
authorizations by the appropriate local, state and federal government agencies
in order for Buyer to purchase the Assets and the CRM Interest (the
"Authorizations"). Seller and the Shareholders shall cooperate and employ their
best efforts to assist Buyer in receiving the Authorizations.
8.4 Other Matters. The transactions contemplated hereby shall be
approved by all necessary corporate action on the part of the Seller, and there
shall have been no material change in any Law or regulation affecting Seller or
CRM.
8.5 Deliveries at Closing. All instruments, documents, certificates and
other items required to be delivered to Buyer pursuant to Section 10.1 of the
Agreement shall have been delivered to Buyer at or prior to the Closing Date.
8.6 Buyer's Rights With Respect to CRM Interest. Buyer shall have the
right not to purchase the CRM Interest at Closing, if Buyer is not satisfied for
any reason whatsoever with the documents, agreements and instruments relating to
such transfer. Buyer may exercise this right, in its sole discretion, by
notifying Seller in writing of its intention not to purchase the CRM Interest at
any time up to completion of the closing of the Contribution Agreement. If Buyer
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elects not to purchase the CRM Interest: (i) the Purchase Price shall be reduced
to Shares representing an aggregate value of Seven Hundred Fifty Thousand
Dollars ($750,000.00); (ii) the amount set forth in Section 9.7 below shall be
changed to Twenty Thousand Dollars ($20,000.00); and (iii) this Agreement shall
otherwise continue in full force and effect.
8.7 Shareholder Approval and Other Closings. The Shareholders of COPT
shall have approved the transactions contemplated hereby and by the Contribution
Agreement and the Development Agreement. Immediately preceding Closing
hereunder, there shall be a closing pursuant to the Contribution Agreement.
ARTICLE 9. INDEMNIFICATION.
9.1 Basic Provision. The Sellers and the Shareholders hereby jointly
and severally agree to indemnify, defend and hold harmless Buyer, its Affiliates
and their respective partners, directors, officers, shareholders, employees and
agents and the successors and assigns of each of the foregoing (individually, an
"Indemnitee" and collectively, the "Indemnitees"), from, against and in respect
of the amount of any and all Deficiencies.
9.2 Definitions of "Deficiencies. As used herein, "Deficiencies"
means:
(i) any and all losses, damages, costs and expenses resulting from any
misrepresentation, breach of warranty or representation, or any non-fulfillment
of any warranty, representation, covenant or agreement on the part of Seller or
any Shareholder contained herein;
(ii) any and all losses, damages, costs and expenses resulting from any
misrepresentation contained in any statement, report, certificate or other
document or instrument delivered to Buyer pursuant to this Agreement or
contained in any Schedule or Exhibit hereto;
(iii) any and all losses, damages, costs and expenses resulting to
Indemnitee by reason of any claim, debt, liability or obligation or any alleged
claim, debt, liability or obligation of CRM, Seller or any Shareholder
(including but not limited to any claim for malpractice or professional
liability), whether known or unknown, accrued or contingent, except for the
Assumed Liabilities;
(iv) any and all losses, damages, costs and expenses resulting from all
actions and conduct occurring on or prior to the Closing Date by or on behalf of
CRM, Seller or the Shareholders, including but not limited to actions and
conduct of Seller and its employees, customers or agents; and
(v) any and all actions, suits, proceedings, demands, assessments,
judgments, reasonable attorneys' fees, costs and expenses incident to any of the
foregoing.
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9.3 Procedures for Third Party Claims. In the event that any claim
shall be asserted by any individual or entity against Buyer which, if sustained,
would result in a Deficiency, Buyer, within a reasonable time after learning of
such claim, shall notify Seller and the Shareholders of such claim, and shall
extend to Seller and the Shareholders a reasonable opportunity to defend against
such claim, at the Sellers' and the Shareholders' sole expense and through legal
counsel acceptable to Buyer, provided that Seller and the Shareholders proceed
in good faith, expeditiously and diligently to defend such claim. Buyer shall,
at its option and expense, have the right to participate in any defense
undertaken by Seller and the Shareholders with legal counsel of its own
selection. No settlement or compromise of any claim which may result in a
Deficiency may be made by Seller or any Shareholder without the prior written
consent of Buyer unless prior to such settlement or compromise (i) Seller and
the Shareholders acknowledge in writing their obligation to pay in full the
amount of the settlement and all associated expenses, (ii) Buyer is furnished
with security reasonably satisfactory to Buyer that Seller and the Shareholders
will in fact pay such amount and expenses and (iii) Seller and the Shareholders
obtain a written release from the claimant, in a form reasonably satisfactory to
Buyer, of the Buyer from all liability, past, present and future, arising from
or in connection with the claim.
9.4 Payment of Deficiencies. In the event that Buyer discovers any
Deficiency, Buyer shall give written notice to Seller and the Shareholders of
the nature and amount of the Deficiency. Seller and the Shareholders hereby
agree to pay the amount of such Deficiency to Buyer in cash within thirty (30)
days after written notice from Buyer which reasonably details the nature and
amount of the Deficiency. Any amounts required to be paid which are not paid by
Seller and the Shareholders when due under this Article 9 shall bear interest
from the due date thereof until the date paid at a rate of interest per annum
that is equal to the Prime Rate. At Buyer's option, Buyer may off-set any unpaid
Deficiency or portion thereof against any obligation Buyer may have to any party
hereto.
9.5 Provisions Not Exclusive. The indemnification obligations of
Seller, the Shareholders and Buyer contained herein, including any rights of set
off as described herein, are not intended to waive or preclude any other claims,
rights or remedies which may exist at law (whether statutory or otherwise) or in
equity with respect to the matters covered by the indemnifications described
herein.
9.6 Time Limit on Certain Claims. No claim for indemnification may be
asserted pursuant to a Deficiency described in Section 9.2, unless notice of
such claim shall have been given within eighteen months after the Closing Date
to the person from whom such indemnification may be sought (except that the cost
of items described in Section 9.2(v) which are based on claims for which notice
has been given in such eighteen month period shall be payable regardless of when
incurred); provided, however, that if the Deficiency is based on a
misrepresentation or breach contained in Sections 4.12, 4.21, 4.22 or 4.30, the
claim for indemnification with respect thereto shall have been given within the
later of three years after the Closing Date or the statute of limitations
applicable to such underlying claim.
9.7 Limit on Amounts. No claim for indemnification may be asserted
pursuant to this Article 9 against Seller and the Shareholders until the
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aggregate amount of Deficiencies for claims which then may be asserted hereunder
exceeds Fifty thousand Dollars ($50,000.00), whereupon all such Deficiencies may
be claimed.
9.8 Indemnification by COP and COPT. COP and COPT shall jointly and
severally indemnify, protect, defend and hold Seller and each of the
Shareholders (the "Seller Indemnified Parties") harmless from and against any
claims, losses, demands, liabilities, suits, costs and damages suffered by the
Seller Indemnified Parties incurred, arising against, or suffered by, the Seller
Indemnified Parties as a consequence of (i) any breach of any representation,
warranty or covenant made in this Agreement by COP or COPT, or (ii) the failure
of COP or COPT to satisfy any of the Assumed Liabilities.
ARTICLE 10. DELIVERIES AT CLOSING.
10.1 Deliveries by Seller and the Shareholders at Closing. If not
previously delivered, at Closing Seller and the Shareholders shall deliver or
cause to be delivered to Buyer each of the following:
(a) all contractual assignments, third-party consents, permits, waivers
and governmental approvals, as well as evidence of the completion of all other
transactions necessary or appropriate for consummation by Buyer of the
transactions contemplated by this Agreement and the other Transaction Documents,
in form and substance reasonably satisfactory to Buyer;
(b) resolutions of Seller's Board of Directors and the Shareholders
authorizing the execution, delivery and performance of this Agreement and the
other Transaction Documents to be executed and performed by Seller;
(c) duly executed bills of sale, articles of transfer, assignments and
other documents evidencing the transfer of the Assets and the CRM Interest to
Buyer, in form reasonably satisfactory to Buyer;
(d) an opinion of Daniel R. Skowronski, counsel for the Seller,
addressed to Buyer and dated the date of the Closing, in the same form as
provided for in Section 16.1.3 of the Contribution Agreement, except that no
opinion will be rendered with respect to the transfer of the interest in CRM
without obtaining the consent of KLNB Inc.;
(e) a certificate executed by the chief executive officer of Seller and
by each Shareholder to the effect that all conditions precedent to the
obligation of the Seller to close hereunder have been satisfied or waived, and
that the representations and warranties of the Seller in the Agreement are true
and correct as of the Closing Date;
(f) Good Standing Certificates reflecting each of Seller's and CRM's
good standing issued by the State of Maryland as of a date immediately prior to
the Closing; and
(g) such other certificates, instruments, documents, agreements, etc.
as may be reasonably necessary or appropriate to effect the transactions
contemplated hereby.
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10.2 Deliveries by Buyer at Closing. If not previously delivered, at
Closing Buyer shall deliver or cause to be delivered to Seller each of the
following:
(a) the Shares;
(b) a resolution of COPT's Trustees, for COPT and as sole general
partner of COP, authorizing the execution, delivery and performance of this
Agreement and the other Transaction Documents to be executed and performed by
COPT and COP;
(c) a certificate executed by COPT, for COPT and as sole general
partner of COP, to the effect that all conditions precedent to the obligation of
the COP to close hereunder have been satisfied or waived, and that the
representations and warranties of COP and COPT in the Agreement are true and
correct as of the Closing Date;
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(d) an opinion of counsel for COP and COPT addressed to Seller and
dated the date of the Closing, as to the matters described in Sections 6.1, 6.2,
6.3 and 6.5 hereof in form and substance reasonably satisfactory to Seller; and
(e) such other certificates, instruments, documents, agreements,
etc. as may be reasonably necessary or appropriate to effect the transactions
contemplated hereby.
ARTICLE 11. TERMINATION; REMEDIES.
11.1 Termination by Buyer. This Agreement may be terminated and
canceled at any time prior to the Closing by the Buyer, upon written notice to
the Seller, if any of the following circumstances or events continues for more
than ten (10) business days after Buyer has provided written notice thereof to
Seller of its intention to terminate this Agreement:
(a) any of the representations or warranties of the Seller or
the Shareholders contained herein or in any other Transaction Document shall be
inaccurate or untrue in any material respect;
(b) any material obligation, term or condition to be
performed, kept or observed by Seller or any Shareholder hereunder has not been
performed, kept or observed in any material respect at or prior to the time
specified in this Agreement; or
(c) any one of the conditions precedent to Buyer's obligations
to complete Closing hereunder as set forth in Article 7 has not been satisfied,
or waived by Buyer in writing, at or before the Closing unless the failure of
condition is the result of a material breach of this Agreement by Buyer.
11.2 Termination by Seller. This Agreement may be terminated and
canceled at any time prior to the Closing by the Seller, upon written notice to
the Buyer, if any of the following circumstances or events continues after
Seller has provided ten (10) business days' written notice thereof to Buyer of
its intention to terminate this Agreement:
(a) any of the representations or warranties of the
Buyer contained herein or in any Transaction Document shall be inaccurate or
untrue in any material respect;
(b) any material obligation, term or condition to be
performed, kept or observed by Buyer hereunder has not been performed, kept or
observed in any material respect at or prior to the time specified in this
Agreement; or
(c) any one of the conditions precedent to Seller's
obligations to complete Closing hereunder as set forth in Article 6 has not been
satisfied, or waived by Seller in writing, at or before the Closing unless the
failure of condition is the result of a material breach of this Agreement by
Seller or a Shareholder.
11.3 Termination by Agreement. This Agreement may be terminated at any
time by mutual written agreement of Buyer and Seller, and shall be automatically
terminated upon termination of the Contribution Agreement.
11.4 Effect of Termination. All obligations of the Parties hereunder
shall cease upon any termination pursuant to Sections 11.1, 11.2 or 11.3,
provided, however, that (x) the provisions of this Article 11, Section 2.3,
Section 3.4 and Section 5.1 hereof shall survive any termination of this
Agreement; and (y) nothing herein shall relieve any party from any liability (at
law or in equity) for a material error or omission in any of its representations
or warranties contained herein or a material failure to comply with any of its
covenants, conditions or agreements contained herein, if such error, omission or
failure was willful or deliberate, but if such error, omission or failure was
not willful or deliberate, the liability of the responsible party shall be
limited to out-of-pocket expenses incurred by the other party(ies) in connection
with negotiating, preparing and entering into this Agreement and carrying out
the transactions contemplated hereby.
ARTICLE 12. NOTICES. Any notice, demand or request which may be permitted,
required or desired to be given in connection therewith shall be given in
writing and directed to Seller and the Shareholders and Buyer as follows:
Seller and the Shareholders:
Constellation Real Estate, Inc.
8815 Centre Park Drive - Suite 400
Columbia, MD 21045
Attention: General Counsel
Telecopy: 410-740-1174
and
Constellation Holdings, Inc.
250 West Pratt Street
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Baltimore, MD 21201-2423
Attention: Dan R. Skowronski, Esquire
Telecopy: 410-783-3632
With a copy to its attorneys:
Stephen L. Owen, Esquire
Piper & Marbury LLP
36 South Charles Street
Baltimore, MD 21201-3018
Telecopy: 410-539-0489
Buyer:
Corporate Office Properties Trust
One Logan Square, Suite 1105
Philadelphia, PA 19103
Attention: Clay W. Hamlin, III
President and Chief
Executive Officer
Telecopy: 215-567-1907
With a copy to its attorneys:
F. Michael Wysocki, Esquire
Saul, Ewing, Remick & Saul LLP
Centre Square West
1500 Market Street - 38th Floor
Philadelphia, PA 19102
215-972-7139
Notices shall be deemed properly delivered and received when and if either (i)
personally delivered, including via facsimile; or (ii) on the first business day
after deposit with a commercial overnight courier for delivery on the next
business day. Any party may change its address for delivery of notices by
properly notifying the others pursuant to this Article 12.
ARTICLE 13. MISCELLANEOUS PROVISIONS.
13.1 Entire Agreement; Counterparts. This Agreement is the entire
agreement between the parties hereto with respect to the sale of the Assets and
the CRM Interest and supersedes all prior and contemporaneous communications,
representations, agreements, discussions and understandings, whether oral or
written, between the parties hereto, including, without limitation, any
financial or other projections, valuations or predictions regarding the Seller,
the Assets or the CRM Interest. There are no oral or written agreements,
understandings, representations or warranties between the parties hereto with
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respect to the subject matter hereof other than those set forth or contemplated
in this Agreement. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13.2 Headings. The headings contained in this Agreement and the
Schedules and Exhibits are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement. Reference to Sections, Schedules or
Exhibits are to portions of this Agreement unless the context requires
otherwise.
13.3 Assignment and Amendment of Agreement. This Agreement shall be
binding on and inure to the benefit of the parties hereto, their heirs,
executors, administrators, successors and assigns; provided, however, that this
Agreement shall not be assignable or transferable by Seller or a Shareholder
without the prior written consent of Buyer, or by Buyer without the written
consent of Seller, except that Buyer may assign some or all of Buyer's rights
and obligations under this Agreement without such prior written consent to any
Affiliate of Buyer. Neither this Agreement nor any provisions hereof may be
waived, modified, amended, discharged or terminated except by an instrument in
writing signed by the party against which the enforcement of such waiver,
modification, amendment, discharge or termination is sought, and then only to
the extent set forth in such instrument.
13.4 Commercially Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement each party will use its commercially reasonable
best efforts to cause the Closing to occur. Seller and Buyer shall use their
commercially reasonable, diligent and good faith efforts, and shall cooperate
with and assist each other in their efforts, to obtain any and all consents and
approvals of third parties (including, but not limited to, governmental
authorities) to the transaction contemplated hereby, and to otherwise perform as
may be necessary or otherwise reasonably requested by the other party to
effectuate and carry out the purposes of, this Agreement.
13.5 Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of Maryland without regard to principles of conflicts
of law.
13.6 No Third Party Rights. This Agreement is not intended and shall
not be construed to create any rights in any persons other than Seller, the
Shareholders and Buyer and their permitted assignees, and no Person shall assert
any rights as third party beneficiary hereunder.
13.7 Incorporation of Schedules and Exhibits. The Schedules and
Exhibits attached hereto are incorporated into this Agreement and shall be
deemed a part hereof as if set forth herein in full. Reference herein to "this
Agreement" and the words "herein," "hereof' and words of similar import refer to
this Agreement including its Schedules and Exhibits as an entirety. In the event
of any conflict between provisions of this Agreement and any such Schedule or
Exhibit, the provisions of this Agreement shall control.
13.8 Survival. The covenants, rights, obligations, representations and
warranties of each of the parties hereunder shall survive the Closing subject to
the limitations set forth in this Agreement.
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13.9 Waiver. The failure of any party at any time or times to enforce
its rights under such provisions, strictly in accordance with the same, shall
not be construed as having created a custom in any way or manner contrary to the
specific provisions of this Agreement or as having in any way or manner modified
or waived the same.
13.10 Enforcement. Each of the Parties hereto shall have the right at
all times to enforce the provisions of this Agreement in strict accordance with
its terms and to pursue remedies for breach by any legal and equitable means,
including by an action for specific performance, notwithstanding any conduct or
custom on its part in refraining from doing so at any time or times.
13.11 Litigation. Seller, the Shareholders and Buyer waive all rights
to a jury trial with respect to any disputes relating to this Agreement, whether
arising before or after Closing. In the event of litigation between the parties
with respect to this Agreement, the performance of their respective obligations
hereunder or the effect of a termination under this Agreement, the losing party
shall pay all costs and expenses incurred by the prevailing party in connection
with such litigation, including, but not limited to, reasonable attorneys' fees
of counsel selected by the prevailing party. The parties hereby further
acknowledge and agree that in the event of litigation between them, as
contemplated above, and the resolution of that litigation through compromise,
settlement, or partial judgment, the court before which such litigation is
initially brought shall have the right to allocate responsibility, between
Seller and the Shareholders on the one hand, and Buyer on the other, for all
costs and expenses (including, but not limited to, attorneys' reasonable fees)
incurred by all parties in the pursuit of that litigation resolved through
compromise, settlement or partial judgment. Notwithstanding any provision of
this Agreement to the contrary, the obligations of the parties under this shall
survive termination of this Agreement and the Closing, if applicable.
13.12 Publicity. Seller, the Shareholders and Buyer agree that no
public release or announcement concerning the transactions contemplated hereby
shall be issued by either party without the prior written consent of both Buyer
and Seller, but in no event shall financial terms be disclosed, except as such
release or announcement may be required by law or court order, in which case the
party required to make the release or announcement shall allow the other party
reasonable time to comment on such release or announcement in advance of such
issuance.
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13.13 Brokerage. Seller and the Shareholders represent and warrant to
Buyer that none of them, and Buyer represents and warrants to Seller and the
Shareholders that neither of them, has dealt with any brokers or finders in
connection with this transaction and that no broker, finder or other party is
entitled to a commission, finder's fee or other similar compensation as a result
hereof, except Legg Mason Real Estate Services, Inc. under separate agreement
with Buyer. Buyer shall pay to Legg Mason Real Estate Services, Inc. the
compensation payable to it with respect to this transaction pursuant to such
agreement. Seller and the Shareholders hereby indemnify, protect and defend and
hold Buyer harmless from and against all losses, claims, costs, expenses,
damages (including, but not limited to, attorneys' fees of one counsel selected
by Buyer) resulting or arising from the claims of any broker, finder or other
such party, claiming by, through or under the acts or agreements of Seller or a
Shareholder. Buyer hereby indemnifies, defends and holds Seller and the
Shareholders harmless from and against all losses, claims, costs, expenses,
damages (including, but not limited to, attorneys' fees of one counsel selected
by the Seller and Shareholders) resulting or arising from the claims of any
broker, finder or other such party claiming by, through or under acts or
agreements of Buyer. This Section 13.13 shall survive any termination of this
Agreement and the Closing, if applicable.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal as of the date first written above.
CORPORATE OFFICE PROPERTIES TRUST
By: /s/ Clay W. Hamlin, III
Clay W. Hamlin, III, President and
Chief Executive Officer:
CORPORATE OFFICE PROPERTIES, L.P.
By: Corporate Office Properties Trust,
its sole general partner
By: /s/ Clay W. Hamlin, III
Clay W. Hamlin, III, President and
Chief Executive Officer:
CONSTELLATION REAL ESTATE, INC.
By: /s/ Randall M. Griffin
Title: Randall M. Griffin
President
SHAREHOLDERS:
KMS OLDCO,INC.
By: /s/ Randall M. Griffin
Title: Randall M. Griffin
President
CONSTELLATION REAL ESTATE GROUP, INC.
By: /s/ Randall M. Griffin
Title: Randall M. Griffin
President
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SCHEDULES AND EXHIBITS
SCHEDULES:
2.1(c) Excluded Assets
2.2 Allocation of Purchase Price
2.5(b) Agreements, Leases and Equipment Leases to be Assumed by Buyer
4.5 Subsidiaries, Joint Ventures, etc.
4.7 Employees and Labor Matters
4.8 Financial Statements
4.10 Changes Since Balance Sheet Date
4.13 Litigation
4.16 Intangible Assets
4.17 Third Party Consents Required
4.21 Encumbrances
4.23 Employee Benefit Plans
EXHIBITS:
"A" CRM Operating Agreement
"B" Form of Opinion of counsel to Seller
31
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of September28, 1998 by Corporate Office Properties Trust,
a Maryland real estate investment trust (the "Company"), for the benefit of (x)
persons issued shares of Common Stock of the Company ("Common Stock") pursuant
to the Contribution Agreement, the Asset Contribution Agreement and the
Development Agreements (each, as defined below), (y) persons issued shares of
Convertible Preferred Stock of the Company ("Preferred Stock") pursuant to the
Contribution Agreement, the Asset Contribution Agreement and the Development
Agreements, and (z) the respective successors, assigns, transferees and estates
of the persons identified in clauses (x) and (y) (herein referred to
collectively as the "Holders" and individually as a "Holder"). The Common Stock
and Preferred Stock issued and to be issued to the Holders pursuant to the
Contribution Agreement, the Asset Contribution Agreement and the Development
Agreements are herein sometimes collectively called the "Stock."
WHEREAS, on the date hereof certain Holders have become the owner of
Stock upon the transfer of certain partnership interests and other assets
pursuant to the Contribution Agreement dated as of May 14, 1998 by and among the
Company, Corporate Office Properties, L.P. ("COP") and the Persons identified
therein as "Sellers", as the same may at any time be amended, modified and
supplemented and in effect (the "Contribution Agreement");
WHEREAS, on the date hereof certain Holders have become the owner of
Stock upon the transfer of certain membership interests and other assets
pursuant to the Service Company Asset Contribution Agreement dated as of May 14,
1998 by and among COP and the Persons identified therein as "Seller" and
"Shareholders", as the same may at any time be amended, modified and
supplemented and in effect (the "Asset Contribution Agreement");
WHEREAS, after the date hereof certain Holders may become the owner of
Stock upon the transfer of certain partnership interests and other assets
pursuant to two Development Properties Acquisition Agreements each dated as of
May 14, 1998 by and among the Company, COP and the Persons identified therein as
"Sellers", as the same may at any time be amended, modified and supplemented and
in effect (the "Development Agreements");
WHEREAS, pursuant to the Company's Amended and Restated Declaration of
Trust, the Holders of shares of Preferred Stock have the right to convert them
into shares of Common Stock;
WHEREAS, on the date hereof, the Common Stock is publicly held and
traded and the Company is an issuer which is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended from time to
time (the "Exchange Act");
WHEREAS, in connection with the foregoing, the Company has agreed,
subject to the terms, conditions and limitations set forth in this Agreement, to
provide the Holders with certain registration rights in respect of shares of
Common Stock issued either (x) pursuant to the Contribution Agreement, the Asset
Contribution Agreement or the Development Agreements, or (y) upon conversion of
shares of Preferred Stock issued pursuant to the Contribution Agreement, the
Asset Contribution Agreement or the Development Agreements.
<PAGE>
NOW, THEREFORE, the Company for the benefit of the Holders agrees as
follows:
Section 1. DEFINITIONS.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
Asset Contribution Agreement: As set forth in the preamble.
Commission: The Securities and Exchange Commission.
Common Stock: Shares of common stock, $.01 par value, of the Company.
Contribution Agreement: As set forth in the preamble.
Development Agreements: As set forth in the preamble.
Exchange Act: As set forth in the preamble.
Holder or Holders: As set forth in the preamble.
Majority Holders: At any time, Holders of Registrable Securities and
shares of Preferred Stock then convertible into Registrable Securities who, if
all such Preferred Stock were converted, would then hold a majority of the
Registrable Securities.
Minimum Registrable Amount: At any date of determination, Registrable
Securities having an aggregate fair market value of at least $3 million.
NASD: The National Association of Securities Dealers, Inc.
Person: Any individual, partnership, corporation, trust or other legal
entity.
Preferred Stock:[Shares of Convertible Preferred Stock, par value ____]
of the Company.
Prospectus: A prospectus included in a Registration Statement,
including any preliminary prospectus, and any such prospectus as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
Registrable Securities: The shares of Common Stock (i) issued pursuant
to the terms of the Contribution Agreement, the Asset Contribution Agreement and
the Development Agreements, and (ii) issued and issuable upon conversion of the
shares of Preferred Stock issued pursuant to the terms of the Contribution
Agreement, the Asset Contribution Agreement and the Development Agreements.
Registrable Securities shall not include (x) Common Stock as to which a
Registration Statement shall have become effective under the Securities Act
pursuant to Section 2, 3 or 4 of this Agreement and which shall have been
disposed of under such Registration Statement, (ii) Common Stock sold or
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otherwise distributed pursuant to Rule 144 under the Securities Act and (iii)
Common Stock as to which registration under the Securities Act is not required
to permit the sale thereof to the public by a Holder at any time and without
application of any volume or other limitations imposed by Rule 144 under the
Securities Act.
Sale Period: The 60-day period immediately following the filing with
the Commission by the Company of an annual report of the Company on Form 10-K or
a quarterly report of the Company on Form 10-Q or such other period as the
Company may determine.
Securities Act: The Securities Act of 1933, as amended from time to
time.
Shelf Registration Statement: shall mean a "shelf" registration
statement of the Company and any other entity required to be a registrant with
respect to such shelf registration statement pursuant to the requirements of the
Securities Act which covers all of the Registrable Securities then issued and
outstanding or which may thereafter be issued pursuant to the Contribution
Agreement, the Asset Contribution Agreement or the Development Agreements on an
appropriate form under Rule 415 under the Securities Act, or any similar rule
that may be adopted by the Commission, and all amendments and supplements to
such registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
materials incorporated by reference therein.
Section 2. SHELF REGISTRATION UNDER THE SECURITIES ACT.
(a) Filing of Shelf Registration Statement. Within six months
following, the date hereof, the Company shall cause to be filed a Shelf
Registration Statement providing for the sale by the Holders of all of the
Registrable Securities in accordance with the terms hereof and will use its
reasonable best efforts to cause such Shelf Registration Statement to be
declared effective by the SEC as soon as reasonably practicable. The Company
agrees to use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective under the Securities Act until such time as the
aggregate number of Registrable Securities outstanding (computed for this
purpose as if all outstanding shares of Preferred Stock have been converted into
Common Stock) is less than 5% of the aggregate number of Registrable Securities
outstanding on the date hereof (assuming all Stock issuable pursuant to the
Development Agreements has been issued), and further agrees to supplement or
amend the Shelf Registration Statement, if and as required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the Securities Act or by any
other rules and regulations thereunder for Shelf Registration. Each Holder who
sells shares of Common Stock as part of the Shelf Registration shall be deemed
to have agreed to all of the terms and conditions of this Agreement and to have
agreed to perform any and all obligations of a Holder hereunder.
(b) Inclusion in Shelf Registration Statement. Not later than
30 days prior to filing the Shelf Registration Statement with the Commission,
the Company shall notify each Holder of its intention to make such filing and
request advice from each such Holder as to whether such Holder desires to have
Registrable Securities held by it or which it is entitled to receive not later
than the last day of the first Sale Period occurring in whole or in part after
the date of such notice included in the Shelf Registration Statement at such
time. Any such Holder who does not provide the information reasonably requested
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<PAGE>
by the Company in connection with the Shelf Registration Statement as promptly
as practicable after receipt of such notice, but in no event later than 20 days
thereafter, shall not be entitled to have its Registrable Securities included in
the Shelf Registration Statement at the time it becomes effective, but shall
have the right thereafter to deliver to the Company a Registration Notice as
contemplated by Section 3(b) to have such Registrable Securities included in the
Shelf Registration Statement by post effective amendment.
Section 3. SHELF REGISTRATION PROCEDURES.
In connection with the obligations of the Company with respect to the
Shelf Registration Statement pursuant to Section 2 hereof, the Company shall:
(a) prepare and file with the SEC, within the time period set
forth in Section 2(a) hereof, a Shelf Registration Statement, which Shelf
Registration Statement (i) shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of distribution by
the selling Holders thereof and (ii) shall comply as to form in all material
respects with the requirements of the applicable form.
(b) subject to the last three sentences of this Section 3(b)
and to Section 3(i) hereof, (i) prepare and file with the Commission such
amendments and post-effective amendments to the Shelf Registration Statement as
may be necessary to keep the Shelf Registration Statement effective for the
applicable period; (ii) cause each Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
or any similar rule that may be adopted under the Securities Act, (iii) respond
promptly to any comments received from the Commission with respect to the Shelf
Registration Statement, or any amendment, post-effective amendment or supplement
relating thereto; and (iv) comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by the Shelf Registration
Statement during the applicable period in accordance with the intended method or
methods of distribution by the selling Holders thereof. Notwithstanding anything
to the contrary contained herein, the Company shall not be required to take any
of the actions described in clauses (i), (ii) or (iii) above with respect to
each particular Holder of Registrable Securities unless and until the Company
has received either a written notice (a "Registration Notice") from a Holder
that such Holder intends to make offers or sales under the Shelf Registration
Statement as specified in such Registration Notice or a written response from
such Holder of the type contemplated by Section 2(b); provided, however, that
the Company shall have 7 business days to prepare and file any such amendment or
supplement after receipt of a Registration Notice. Once a Holder has delivered
such a written response or a Registration Notice to the Company, such Holder
shall promptly provide to the Company such information as the Company reasonably
requests in order to identify such Holder and the method of distribution in a
post-effective amendment to the Shelf Registration Statement or a supplement to
a Prospectus. Unless otherwise approved in writing by the Company in its sole
discretion, offers or sales under the Shelf Registration Statement may be made
only during a Sale Period. Such Holder also shall notify the Company in writing
upon completion of such offer or sale or at such time as such Holder no longer
intends to make offers or sales under the Shelf Registration Statement.
(c) furnish to each Holder of Registrable Securities that has
delivered a Registration Notice to the Company, without charge, as many copies
of each applicable Prospectus, including each preliminary Prospectus, and any
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<PAGE>
amendment or supplement thereto and such other documents as such Holder may
reasonably request, in order to facilitate the public sale or other disposition
of the Registrable Securities; the Company consents to the use of such
Prospectus, including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by such Prospectus or the preliminary Prospectus.
(d) use its reasonable best efforts to register or qualify the
Registrable Securities by the time the Shelf Registration Statement is declared
effective by the SEC under all applicable state securities or "blue sky" laws of
such jurisdictions as any Holder of Registrable Securities covered by the Shelf
Registration Statement shall reasonably request in writing, keep each such
registration or qualification effective during the period the Shelf Registration
Statement is required to be kept effective or during the period offers or sales
are being made by a Holder that has delivered a Registration Notice to the
Company, whichever is shorter, and do any and all other acts and things may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in each such jurisdiction of such Registrable Securities owned by
such Holder, provided, however, that the Company not be required (i) to qualify
generally to do business in any jurisdiction or to register as a broker or
dealer in such jurisdiction where it would not be required so to qualify or
register but for this Section 3(d), (ii) to subject itself to taxation in any
such jurisdiction or (iii) to submit to the general service of process in any
such jurisdiction.
(e) notify each Holder when the shelf Registration Statement
has become effective and notify each Holder that has delivered a Registration
Notice to the Company promptly and, if requested by such Holder, confirm such
advice in writing (i) when any post-effective amendments and supplements to the
Shelf Registration Statement become effective, (ii) of the issuance by the
Commission or any state securities authority of any stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of any
proceedings for that purpose, (iii) if the Company receives any notification
with respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation of any proceeding for
such purpose and (iv) of the happening of any event during the period the Shelf
Registration Statement is effective as a result of which the Shelf Registration
Statement or a related Prospectus contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading.
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Shelf Registration Statement at
the carried possible moment.
(g) furnish to each Holder that has delivered a Registration
Notice to the Company, without charge, at least one conformed copy of the Shelf
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested).
(h) cooperate with the selling Holders to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any Securities Act legend; and enable
certificates for such Registrable Securities to be issued for such numbers of
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<PAGE>
shares and registered in such names as the selling Holders may reasonably
request at least two business days prior to any sale of Registrable Securities.
(i) subject to the last three sentences of Section 3(b)
hereof, upon the occurrence of any event contemplated by Section 3(e)(iv)
hereof, use its reasonable best efforts promptly to prepare and file a
supplement or prepare, file and obtain effectiveness of a post-effective
amendment to the Shelf Registration Statement or a related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(j) make available for inspection by representatives of the
selling Holders and any counsel or accountant retained by such Holders, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the respective officers, directors and employees of the
Company to supply all information reasonably requested by any such
representative, counsel or accountant in connection with the Shelf Registration
Statement; provided, however, that such records, documents or information which
the Company determines in good faith to be confidential and notifies such
representatives, counsel or accountants in writing that such records, documents
or information are confidential, shall not be disclosed by the representatives,
counsel or accountants unless (i) the disclosure of such records, documents or
information is necessary to avoid or correct a material misstatement or omission
in the Shelf Registration Statement, (ii) the release of such records, documents
or information is ordered pursuant to a subpoena or outer order from a court of
competent jurisdiction or (iii) such records, documents or information have been
generally made available to the public otherwise than in violation of this
Agreement.
(k) within a reasonable time prior to the filing of any
Prospectus, any amendment to the Shelf Registration Statement or amendment or
supplement to a Prospectus, provide copies of such document (not including any
documents incorporated by reference therein unless requested) to the Holders of
Registrable Securities that have provided a Registration Notice to the Company.
(l) use its reasonable best efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar securities
issued by the Company are then listed.
(m) obtain a CUSIP number for all Registrable Securities, not
later than the effective date of the Shelf Registration Statement.
(n) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering at least 12 months which shall satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder.
(o) use its reasonable best efforts to cause the Registrable
Securities covered by the Shelf Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of the Company to enable Holders that
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have delivered Registration Notices to the Company to consummate the disposition
of such Registrable Securities.
The Company may require each Holder to furnish to the Company
in writing such information regarding the proposed distribution by such Holder
of such Registrable Securities as the Company may from time to time reasonably
request in writing.
In connection with and as a condition to the Company's
obligations with respect to the Shelf Registration Statement pursuant to Section
2 hereof and this Section 3, each Holder agrees that (i) it will not offer or
sell its Registrable Securities under the Shelf Registration Statement until (A)
it has either (1) provided a Registration Notice pursuant to Section 3(b) hereof
or (2) had Registrable Securities included in the Shelf Registration Statement
at the time it became effective pursuant to Section 2(b) hereof and (B) it has
received copies of the supplemented or amended Prospectus contemplated by
Section 3(b) hereof and receives notice that any required post-effective
amendment has become effective; (ii) upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(e)(iv) hereof,
such Holder will forthwith discontinue disposition of Registrable Securities
pursuant to the Shelf Registration Statement until such Holder receives copies
of the supplemented or amended Prospectus contemplated by Section 3(i) hereof
and receives notice that any post-effective amendment has become effective, and,
if so directed by the Company, such Holder will deliver to the Company (at the
expense of the Company) all copies in its possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
registrable Securities current at the time of receipt of such notice; and (iii)
all offers and sales under the Shelf Registration Statement shall be completed
during the first available Sale Period when offers or sales can be made pursuant
to clause (i) above, and upon expiration of such Sale Period the Holder will not
offer or sell its Registrable Securities under the Shelf Registration Statement
until it has again complied with the provisions of clauses (i)(A)(1) and (B)
above, provided, however, that if the entirety of a Sale Period is for any
reason not available to the Holder, the Holder shall also be entitled to make
offers and sales during the next succeeding Sale Period.
Section 4. PIGGYBACK REGISTRATION.
(a) Whenever (x) the Company proposes to register any shares
of its Common Stock (or securities convertible into or exchangeable or
exercisable for such Common Stock) under the Securities Act for its own account
or the account of any shareholder of the Company (other than offerings pursuant
to employee plans, or non-cash offerings in connection with a proposed
acquisition, exchange offer, recapitalization or similar transaction), and (y)
the registration form otherwise to be used by the Company may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
will give prompt written notice to all Holders of its intention to effect such a
registration and will, subject to Section 4(b) and Section 10 hereof, include in
such registration all Registrable Securities with respect to which such Holders
request in writing to be so included within 20 days after the receipt of the
Company's notice.
(b) If a registration pursuant to this Section 4 involves an
underwritten offering and the managing underwriter advises the Company in good
faith that in its opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in such offering without
having an adverse effect on such offering, including the price at which such
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securities can be sold, then the Company will be required to include in such
registration the maximum number of shares that such underwriter advises can be
so sold, allocated (x) first, to the securities the Company proposes to sell,
(y) second, among the shares of Common Stock requested to be included in such
registration by the Holders, considered in the aggregate (if such registration
was initiated by the Company), and any other shareholder of the Company with
shares of Common Stock eligible for registration, pro rata, on the basis of the
number of shares of Common Stock such holder requests be included in such
registration, and (z) third, among other securities, if any, requested and
otherwise eligible to be included in such registration.
(c) Nothing contained herein shall prohibit the Company from
determining, at any time, not to file a registration statement or, if filed, to
withdraw such registration or terminate or abandon the registration related
thereto.
Section 5. REQUESTED REGISTRATION.
(a) Right to Request Registration. Upon the written request of
Holders owning 10% or more of the outstanding Registrable Securities then owned
in the aggregate by such Holders (the "Requesting Holders') (computed for these
purposes as if all outstanding shares of Preferred Stock and all shares of
Preferred Stock thereafter issuable pursuant to the Development Agreements have
been converted into shares of Common Stock), requesting that the Company effect
the registration under the Securities Act of at least the Minimum Registration
Amount, the Company shall use its best efforts to effect, as expeditiously as
possible, following the prompt (but in no event later than 15 days following the
receipt of such written request) delivery of notice to all Holders, the
registration under the Securities Act of such number of shares of Registrable
Securities owned by the Requesting Holders and requested by the Requesting
Holders to be so registered (subject to Section 5(c) hereof), together with (x)
all other shares of Common Stock entitled to registration, and (y) securities of
the Company which the Company elects to register and offer for its own account,
provided, however, that the Company shall not be required to (i) subject to
Section 5(b) below, effect more than a total of three such registrations
pursuant to this Agreement or (ii) file a registration statement relating to a
registration request pursuant hereto within a period of six months after the
effective date of any other registration statement of the Company requested
hereunder (other than pursuant to Section 2) or pursuant to which the Requesting
Holders shall have been given an opportunity to participate pursuant to Section
4 hereof and which opportunity they declined or which registration statement
under Section 4 hereof included shares of Registrable Securities (so long as
such registration statement became and was effective for sufficient time to
permit the sales contemplated thereby); provided, further, that the Company
shall not be required to file a registration statement relating to an offering
of Common Stock on a delayed or continuous basis pursuant to Rule 415 (or any
successor to similar effect) promulgated under the Securities Act if the Company
is not, at the time, eligible to register shares of Common Stock on form S-3 (or
a successor form).
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in its good faith judgment, (x) after consultation with a nationally
recognized investment banking firm, that there will be an adverse effect on a
then contemplated public offering of the Company's securities, (y) that the
disclosures that would be required to be made by the Company in connection with
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such registration would be materially harmful to the Company because of
transactions then being considered by, or other events then concerning the
Company, or (z) the registration at the time would require the inclusion of pro
forma or other information, which requirements the Company is reasonably unable
to comply with, then the Company may defer the filing (but not the preparation)
of the registration statement which is required to effect any registration
pursuant to this Section 5 for a reasonable period of time, but not in excess of
90 calendar days (or any longer period agreed to by the Holders), provided that
at all times the Company is in good faith using all reasonable efforts to file
such registration statement as soon as practicable.
(b) Effective Registration. A registration requested pursuant
to this Section 5 shall not be deemed to have been effected (and, therefore, not
requested for purposes of Section 5(a) above) (w) unless the registration
statement relating thereto has become effective under the Securities Act, (x) if
after it has become effective such registration is interfered with by any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason other than a misrepresentation or an
omission by a Holder and, as a result thereof, the shares of Registrable
Securities requested to be registered cannot be completely distributed in
accordance with the plan of distribution, (y) if the conditions to closing
specified in the purchase agreement or underwriting agreement entered into in
connection with such registration are not satisfied or waived other than by
reason of some act or omission by a participating Holder or (z) if with respect
to what would otherwise be deemed the third, or last, request under Section 5(a)
hereof, less than all of the shares of Common Stock that the Holders requested
be registered were actually registered due to the operation of Section 5(c)
hereof, provided that clause (z) above may not be invoked by the Holders unless
(I) such request includes at least the Minimum Registrable Amount, or (II) if
such request includes an amount that is less than the Minimum Registrable
Amount, Rule 144 under the Securities Act is not available to the Holders for
the sale in any three (3) month period of all of the shares of Common Stock
owned by the Holders; and provided further that clause (z) above may be invoked
only at the request of Holders meeting the foregoing requirements and owning
more than 10% of the shares of Registrable Securities then owned (computed as
aforesaid) in the aggregate by the Holders.
(c) Priority. If a requested registration pursuant to this
Section 5 involves an underwritten offering and the managing underwriter shall
advise the Company that in its opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in such
offering without having an adverse effect on such offering, including the price
at which such securities can be sold, then the Company will be required to
include in such registration the maximum number of shares that such underwriter
advises can be so sold, allocated (x) first, among all shares of Common Stock
requested by Holders to be included in such registration, pro rata on the basis
of the number of shares of Common Stock then owned by each of them (or, if such
holder requests that less than all of the shares of Common Stock owned by such
holder be included in such registration such lesser number of shares) (y)
second, to any securities requested to be included in such registration by any
other shareholder of the Company having registration rights and (z) third, to
any securities the Company proposes to sell.
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Section 6. REGISTRATION PROCEDURES.
If and whenever the Company is required to use its best efforts to
effect or cause the registration of any Registrable Securities under the
Securities Act as provided in this Agreement pursuant to Section 4 or 5 hereof,
the Company shall:
(a) prepare and file with the Commission as expeditiously as
possible but in no event later than 90 days after receipt of a request for
registration with respect to such Registrable Shares, a registration statement
on any form for which the Company then qualifies or which counsel for the
Company shall deem appropriate, which form shall be available for the sale of
the Registrable Securities in accordance with the intended methods of
distribution thereof, and use its best efforts to cause such registration
statement to become effective; provided that before filing with the Commission a
registration statement or prospectus or any amendments or supplements thereto,
including documents incorporated by reference after the initial filing of any
registration statement, the Company shall (x) furnish to each participating
Holder and to one firm of attorneys selected collectively by the participating
Holders and the holders of other securities covered by such registration
statement, but in no event to more than one such counsel for all such selling
securityholders, copies of all such documents proposed to be filed, which
documents shall be subject to the review of the participating Holders and such
counsel, and (y) notify the participating Holders of any stop order issued or
threatened by the Commission and take all reasonable actions required to prevent
the entry of such stop order or to remove it if entered;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than 180 days or such shorter period which shall terminate
when all Registrable Securities covered by such registration statement have been
sold (but not before the expiration of the 90-day period referred to in Section
4(3) of the Securities Act and Rule 174 thereunder, or any successor thereto, if
applicable), and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish, without charge, to the participating Holders and
each underwriter, if any, such number of copies of such registration statement,
each amendment and supplement thereto (including one conformed copy to each
participating Holder and one signed copy to each managing underwriter and in
each case including all exhibits thereto), and the prospectus included in such
registration statement (including each preliminary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as the
participating Holders may reasonably request in order to facilitate the
disposition of the Registrable Securities registered thereunder;
(d) use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdiction as the participating Holders,
and the managing underwriter, if any, reasonably requests and do any and all
other acts and things which may be reasonable necessary or advisable to enable
the participating Holders and each underwriter, if any to consummate the
disposition in such jurisdiction of the Registrable Securities registered
thereunder, provided that the Company shall not be required to (x) qualify
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generally to do business in any jurisdiction where it would not otherwise be
required to quality but for this Section 6(d), (y) subject itself to taxation in
any such jurisdiction or (z) consent to general service of process in any such
jurisdiction;
(e) immediately notify the managing underwriter, if any, and
the Holders at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event which comes to
the Company's attention if as a result of such event the prospectus included in
such registration statement contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company shall promptly
prepare and furnish to the participating Holders and any other holder of
securities covered by such registration statement and prospectus a supplement or
amendment to such prospectus so that as thereafter delivered, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however. that if the Company determines in
good faith that the disclosure that would be required to be made by the Company
would be materially harmful to the Company because of transactions then being
considered by, or other events then concerning, the Company, or a supplement or
amendment to such prospectus at such time would require the inclusion of pro
forma or other information, which requirement the Company is reasonably unable
to comply with, then the Company may defer for a reasonable period of time, not
to exceed 90 days, furnishing to the participating Holders and any other holder
of securities covered by such registration statement and prospectus a supplement
or amendment to such prospectus, provided, further, that at all times the
Company is in good faith using all reasonable efforts to file such amendment as
soon as practicable;
(f) use its best efforts to cause all such securities being
registered to be listed on each securities exchange on which similar securities
issued by the Company are then listed, and enter into such customary agreements
including a listing. application and indemnification agreement in customary form
(provided that the applicable listing requirements are satisfied), and to
provide a transfer agent and register for such Registrable Shares covered by
such registration statement no later than the effective date of such
registration statement;
(g) make available for inspection by any of the participating
Holders and any holder of securities covered by such registration statement, any
underwriter participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by such persons
(collectively, the "Inspectors"), all financial and other records of the Company
and its subsidiaries (collectively, 'Records'), if any, as shall be reasonably
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's and its subsidiaries' officers, directors and employees to
supply all information and respond to all inquiries reasonably requested by any
such Inspector in connection with such registration statement. Notwithstanding
the foregoing, the Company shall have no obligation to disclose any Records to
the Inspector in the event the Company determines that such disclosure is
reasonably likely to have an adverse effect on the Company's ability to asset
the existence of an attorney-client privilege with respect thereto;
(h) if requested use its best efforts to obtain a "cold
comfort" letter and a "bring-down cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by such letters;
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(i) enter into a form of underwriting agreement that contains
customary terms and provisions for similar securities offerings;
(j) make available senior management personnel to participate
in. and cause them to cooperate with the underwriters in connection with. "road
show" and other customary marketing activities, including "one-on-one" meetings
with prospective purchasers of the Registrable Securities; and
(k) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders. as soon as reasonably practicable. an earning statement
covering a period of at least 12 months, beginning with the first: month after
the effective date of the registration statement (as the term "effective date"
is defined in Rule 158(c) under the Securities Act), which earning statement
shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
It shall be a condition precedent to the obligation of the Company to
take any action pursuant to this Agreement in respect of Registrable Securities
which are to be registered at the request of any of the participating Holders
that the participating Holders shall furnish to the Company such information
regarding the securities held by the participating Holders and the intended
method of disposition thereof as the Company shall reasonably request and as
shall be required in correction with the action taken by the Company.
Each of the Holders agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 6(e)
hereof, the Holders shall discontinue disposition of Registrable Shares pursuant
to the registration statement covering such Registrable Securities until receipt
of the copies of the supplemented or amended prospectus contemplated by Section
6(c) hereof or until otherwise notified by the Company, and, if so directed by
the Company, the participating Holders shall deliver to the Company (at the
Company's expense) all copies (including, without limitation, any and all
drafts), other than permanent file copies, then in any participating Holder's
possession, of the prospectus coveting such Registrable Securities at the time
of receipt of such notice. In the event the Company shall give any such notice,
the period specified in Section 6(b) hereof shall be extended by the greater of
(x) three months and (y) the number of days during the period from and including
the date of the giving of such notice pursuant to Section 6(e) hereof to and
including the date when each of the participating Holders shall have received
the copies of the supplemented or amended prospectus contemplated by Section
6(e) hereof.
Section 7. SELECTION OF UNDERWRITERS.
If any offering pursuant to a registration statement is to be an
underwritten offering, the Company will select a managing underwriter or
underwriters to administer the offering; provided that in the case of a
registration statement pursuant to Section 5 hereof, the Holders holding more
than 50% of the shares of Registrable Securities held by the Holders to be
included in such underwritten offering shall select the managing underwriter or
underwriters, subject to the consent of the Company which shall not be
unreasonably withheld.
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Section 8. REGISTRATION EXPENSES.
The Company shall pay, in connection with any registration pursuant to
Section 2. 4 or 5, the following registration expenses incurred in connection
therewith: (i) all Commission, stock exchange or NASD registration and filing
fees, (ii) all fees and expenses. of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with the
blue sky qualifications of the Registrable Securities), (iii) printing expenses,
(iv) internal expenses (including without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), (v) the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any national securities exchange or interdealer quotation system,
(vi) the reasonable fees and disbursements of counsel for the Company and
customary fees and expenses for independent certified public accountants
retained by the Company (including the expenses of any comfort letters or costs
associated with the delivery by independent certified public accountants of a
comfort letter or comfort letters), (vii) the reasonable fees and disbursements
of not more than one firm of attorneys acting as legal counsel for (x) all of
the selling shareholders, collectively, in respect of a registration pursuant to
Section 2 hereof or (y) all of the participating Holders, collectively, in
respect of a registration pursuant to Sections 4 or 5 hereof, (viii) the fees
and expenses of any registrar and transfer agent for the Common Stock, (ix) the
underwriting fees, discounts and commissions applicable to any shares of Common
Stock sold for the account of the Company and (x) all expenses of any Person in
preparing or assisting in preparing, word processing, printing and distributing
any registration statement, prospectus, certificates and other documents
relating to the performance of and compliance with this Agreement. Except as
otherwise provided in clause (ix) of this Section 8, the Company shall have no
obligation to pay any underwriting fees, discounts or commissions attributable
to the sale of Registrable Shares.
Section 9. INDEMNIFICATION; CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
seller of Registrable Securities covered by a Registration Statement filed
pursuant to this Agreement, and such seller's partners, directors, officers,
employees and any Person who controls such seller under the Securities Act
(each, an "Indemnitee") from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any prepricing prospectus, registration statement or
prospectus or in any amendment or supplement thereto, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses rise out
of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to a participating
Holder furnished in writing to the Company by or on behalf of a participating
Holder expressly for use in connection therewith. The foregoing indemnity
agreement shall be in addition to any liability which the Company may otherwise
have.
(b) If any action, suit or proceeding shall be brought against
an Indemnitee in respect of which indemnity may be sought against the Company,
such Indemnitee shall promptly notify the Company, and the Company shall assume
the defense thereof, including the employment of counsel and payment of all fees
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and expenses. The Indemnitee shall have the right to employ separate counsel in
any such action, suit or proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnitee unless (x) the Company has agreed in writing to pay such fees and
expenses, (y) the Company has failed to assume the defense and employ counsel,
or (z) the named parties to any such action, suit or proceeding (including any
impleaded parties) include both such Indemnitee and the Company, and such
Indemnitee shall have been advised by its counsel that representation of such
Indemnitee and the Company by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them (in which case the Company shall not have the right to
assume the defense of such action, suit or proceeding on behalf of such
Indemnitee). It is understood, however, that the Company shall, in connection
with any one such action, suit or proceeding or separate but substantially
similar or related actions, suits or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of only one separate firm of attorneys (in addition
to any local counsel) at any time for all such Indemnitees not having actual or
potential differing interests among themselves, and that all such fees and
expenses shall be reimbursed as they are incurred. The Company shall not be
liable for any settlement of any such action, suit or proceeding effected
without its written consent, but if settled with such written consent, or if
them be a final judgment for the plaintiff in any such action, suit or
proceeding, the Company agrees to indemnify and hold harmless such Indemnitee,
to the extent provided in the preceding paragraph, from and against any loss,
claim, damage, liability or expense by reason of such settlement or judgment.
(c) Each of the participating Holders, severally and not
jointly, agree to indemnify and hold harmless the Company, its directors, its
officers who sign the registration statement, and any person who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, to the same extent as the foregoing indemnity from the Company
to an Indemnitee, but only with respect to information relating to such Holder
furnished in writing by or on behalf of such Holder expressly for use in the
registration statement, prospectus or any prepricing prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors, any such officer, or any such
controlling person based on the registration statement, prospectus or any
prepricing prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against any Holder pursuant to this Section 9(c),
such Holder shall have the rights and duties given to the Company by Section
9(b) hereof (except that if the Company shall have assumed the defense thereof
such Holder shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the Holder's expense), and the Company, its directors,
any such officer, and any such controlling person shall have the rights and
duties given to an Indemnitee by Section 9(b) hereof. The foregoing indemnity
agreement shall be in addition to any liability which the participating Holders
may otherwise have.
(d) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Company and of
the participating Holders in connection with the statements or omissions that
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resulted in such losses, claims, damages, liabilities or expenses. The relative
fault of the Company on the one hand and a participating Holder on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
- - -omission to state a material fact relates to information supplied by the
Company on the one hand or by such participating Holder on the other hand and
the parties' relative intent, knowledge, access or information and opportunity
to correct or prevent such statement or omission.
(e) The Company and the participating Holders agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by a pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in Section
9(d) hereof. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities and expenses referred to in Section
9(d) hereof shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 9, no participating
Holder shall be required to contribute any amount in excess of the amount by
which the proceeds to such participating Holder exceeds the amount of any
damages which such participating Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(f) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an-unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified parry is entitled to indemnification or contribution under
this Section 9 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of an Indemnitee, the Company, its directors or officers, or any
person controlling the Company, and (ii) any termination of this Agreement.
Section 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
A Holder may not participate in any underwritten offering pursuant to
Section 4 or 5 hereof unless such Holder (i) agrees to sell its Registrable
Securities on the basis provided in any underwriting arrangements which, to the
extent applicable solely to the participating Holders, are approved by the
participating Holders in their reasonable discretion or which, to the extent
applicable to the Company and the participating Holders, are approved by the
Company in its reasonable discretion and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents (including lock-up agreements) reasonably required under the
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terms of such underwriting arrangements which are not in consistent with the
terms of this Agreement.
Section 11. OTHER REGISTRATION RIGHTS.
The Company agrees that it shall not enter into any agreement which
provides registration rights to any Person that are inconsistent with the
provisions contained in this Agreement. If the Company does become a party to
such an agreement, the Company agrees that to the extent that the provisions of
such agreement conflict with this Agreement, the provisions of this Agreement
shall control.
Section 12. RULE 144 SALES.
(a) The Company covenants that it will file the reports
required to be filed by the Company under the Securities Act and the Exchange
Act, so as to enable any Holder to sell Registrable Securities pursuant to Rule
144 under the Securities Act.
(b) In connection with any sale, transfer or other disposition
by any Holder of any Registrable Securities pursuant to Rule 144 under the
Securities Act, the Company shall cooperate with such Holder to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any Securities Act legend, and enable
certificates for such Registrable Securities to be for such number of shares and
registered in such names as the selling Holders may reasonably request at least
two business days prior to any sale of Registrable Securities.
Section 13. MISCELLANEOUS.
(a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereto
may not be given without the written consent of the Company and Holders
constituting Majority Holders; provided, however, that no amendment,
modification or supplement or waiver or consent to the departure with respect to
the provisions of Sections 1 through 12, inclusive, hereof or which would impair
the rights of any Holder under such provisions, shall be effective as against
any Holder. Notice of any amendment, modification or supplement to this
Agreement adopted in accordance with this Section 13(a) shall be provided by
Company to each Holder at least thirty (30) days prior to the effective date of
such amendment, modification or supplement.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier or any courier guaranteeing overnight
delivery, (i) if to a Holder, at the most current address given by such Holder
to the Company by of a notice given in accordance with the provisions of this
Section 13(b), which address initially is, with respect to each Holder, the
address set forth in the Contribution Agreement, the Asset Contribution
Agreement or the Development Agreements, or (ii) if to the Company, at One Logan
Square, Suite 1105, Philadelphia, PA 19103.
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All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed: when
answered back, if telexed; when receipt is acknowledged, if telecopied; or at
the time delivered if delivered by an air courier guaranteeing overnight
delivery.
(c) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the Company and the Holders, including without limitation and without the
need for an express assignment, subsequent Holders. If any successor, assignee
or transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such Person shall be entitled to receive the
benefits hereof and shall be conclusively deemed to have agreed to be bound by
all of the terms and provisions hereof.
(d) Headings. The headings in this Agreement are for the
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
(f) Specific Performance. The Company and the Holders
acknowledge that there would be no adequate remedy at law if any party fails to
perform any of its obligations hereunder, and accordingly agree that the Company
and each Holder, in addition to any other remedy to which it may be entitled at
law or in equity, shall be entitled to compel specific performance of the
obligations of another under this Agreement in accordance with the terms and
conditions of this Agreement in any court of the United States or any State
thereof having jurisdiction.
(g) Entire Agreement. This Agreement is intended by the
Company as a final expression of its agreement and is intended to be a complete
and exclusive statement of the agreement and understanding of the Company in
respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings of the Company with respect to such subject
matter.
(h) Notwithstanding any other provision of this Agreement to
the contrary, the total number of days that the Holders shall be precluded from
the disposition of Registrable Securities under an effective Registration
Statement coupled with the total number of days that the Company may defer the
filing of the registration statement hereunder shall not exceed 180 in any
12-month period during the first two years from the date of this Agreement, and
shall not exceed 120 days in any 12-month period thereafter.
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IN WITNESS WHEREOF, the Company has executed this Agreement as of the
date first written above.
CORPORATE OFFICE PROPERTIES TRUST
By: /s/ Clay W. Hamlin, III
Clay W. Hamlin, III
President and Chief Executive Officer
18
ARTICLES SUPPLEMENTARY
OF
CORPORATE OFFICE PROPERTIES TRUST
SERIES A CONVERTIBLE PREFERRED SHARES
ARTICLE ONE
CORPORATE OFFICE PROPERTIES TRUST (the "Trust"), pursuant to the
provisions of Section 8-203(b) of Title 8 of the Corporations and Associations
Article of the Annotated Code of Maryland, as amended (the "Maryland REIT Law"),
hereby files these Articles Supplementary classifying its Series A Convertible
Preferred Shares of Beneficial Interest of the Trust (the "Articles") prior to
the issuance of any shares of Series A Convertible Preferred Shares of
Beneficial Interest, such series of unissued shares having been established by a
resolution duly adopted by all necessary action on the part of the Trust and the
Board of Trustees of the Trust (the "Board of Trustees"), as provided for in the
Amended and Restated Declaration of Trust, as amended (the "Declaration of
Trust").
ARTICLE TWO
The name of the Trust is Corporate Office Properties Trust.
ARTICLE THREE
Pursuant to the authority conferred upon the Board of Trustees by the
Declaration of Trust and Section 8-203(a)(6) of the Maryland REIT Law, the Board
of Trustees adopted a resolution establishing the Series A Convertible Preferred
Shares of Beneficial Interest of the Trust and designating the series and fixing
and determining the preferences, limitations, and relative rights thereof, as
set forth in the true and correct copy of the resolution attached hereto as
Exhibit A (the "Designating Resolution").
ARTICLE FOUR
The Designating Resolution was adopted effective as of September 28,
1998.
ARTICLE FIVE
The Designating Resolution has been duly adopted by all necessary
action on the part of the Trust.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned officer has executed these Articles
effective as of September 28, 1998.
CORPORATE OFFICE PROPERTIES TRUST
By: /s/ Clay W. Hamlin, III
Clay W. Hamlin, III
President and Chief Executive Officer
Attest:
/s/ Denise Liszewski
Name: Denise Liszewski
Title: Assistant Secretary
2
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EXHIBIT A
DESIGNATING RESOLUTION
BOARD OF TRUSTEES
CORPORATE OFFICE PROPERTIES TRUST
September 28, 1998
AUTHORIZATION OF SERIES A CONVERTIBLE PREFERRED SHARES
OF BENEFICIAL INTEREST
WHEREAS, the Board of Trustees of Corporate Office Properties Trust
(the "Trust") has deemed it to be in the best interest of the Trust and its
shareholders for the Trust to establish a series of preferred shares pursuant to
the authority granted to the Board of Trustees in the Amended and Restated
Declaration of Trust, as amended (the "Declaration of Trust"), of the Trust:
NOW, THEREFORE, BE IT RESOLVED, that, pursuant to the authority vested
in the Board of Trustees by the Declaration of Trust, a series of preferred
shares is hereby established, and the terms of the same shall be as follows:
Section 1. Number of Shares and Designation. This series of Preferred
Shares of Beneficial Interest shall be designated as Series A Convertible
Preferred Shares of Beneficial Interest, $.01 par value per share (the "Series A
Preferred Shares") and up to 1,025,000 shall be the number of such Preferred
Shares of Beneficial Interest constituting such series.
Section 2. Definitions. For purposes of the Series A Preferred
Shares, the following terms shall have the meanings indicated:
"Affiliate" shall mean, with respect to a particular Person, any other
Person controlling, controlled by or under common control with such
particular Person, including any directors and majority-owned entities
of that Person and of its other Affiliates.
"Change of Control" shall mean (i) a sale or other transfer of more
than 50% of the then outstanding Common Shares to an Unrelated Third
Party or its Affiliates, (ii) a merger or consolidation of the Trust
with an Unrelated Third Party where the Trust is not the surviving
entity, (iii) the sale of all or substantially all of the assets of the
Trust or (iv) the voluntary or involuntary liquidation, dissolution and
winding up of the Trust.
"Common Shares" shall mean Common Shares of Beneficial Interest, $.01
par value per share, of the Trust or such shares of the Trust's capital
shares into which such Common Shares of Beneficial Interest shall be
reclassified.
<PAGE>
"Common Share Dilution Price" shall have the meaning set forth in
Section 8(c).
"Constellation" shall mean Constellation Real Estate Group, Inc. or any
of its Affiliates.
"Conversion Rate" shall mean 1.8748 Common Shares for each Series A
Preferred Share, subject to adjustment as provided in paragraph (f) of
Section 6 hereof.
"Current Market Price" of publicly traded Common Shares or any other
class or series of capital shares or other security of the Trust or of
any similar security of any other issuer for any day shall mean the
last reported sales price, regular way settlement on such day, or, if
no sale takes place on such day, the average of the reported closing
bid and asked prices regular way on such day, in either case as
reported on the New York Stock Exchange ("NYSE") or, if such security
is not listed or admitted for trading on the NYSE, on the principal
national securities exchange on which such security is listed or
admitted for trading or, if not listed or admitted for trading on any
national securities exchange, on the National Market of the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or, if such security is not quoted on such National Market,
the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, if bid and asked
prices for such security on such day shall not have been reported
through NASDAQ, the average of the bid and asked prices on such day as
furnished by any NYSE member firm regularly making a market in such
security selected for such purpose by the Chief Executive Officer or
the Trustees or if any class or series of securities are not publicly
traded, the fair value of the shares of such class as determined
reasonably and in good faith by the Trustees.
"Declaration of Trust" shall have the meaning set forth in the
Preamble.
"Dilutive Transaction" shall have the meaning set forth in Section
8(c).
"Junior Shares" shall mean the Common Shares and any other class or
series of capital shares of the Trust over which the Series A Preferred
Shares have preference or priority in the payment of dividends or in
the distribution of assets on any liquidation, dissolution or winding
up of the Trust.
"Person" shall mean any individual, firm, partnership, corporation or
other entity and shall include any successor (by merger or otherwise)
of such entity.
"Series A Preferred Shares" shall have the meaning set forth in Section
1 hereof.
"Standstill Period" shall mean the period ending on the earliest of (i)
September 28, 2000, (ii) five business days prior to the effective date
of any Change of Control or (iii) a date established by resolution of
the Board of Trustees.
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"Tendered Non-Converted Shares" shall have the meaning set forth in
Section 6(a).
"Trading Day", as to any Common Shares, shall mean any day on which
such Common Shares are traded on the NYSE or, if such Common Shares are
not listed or admitted for trading on the NYSE, on the principal
national securities exchange on which such Common Shares are listed or
admitted or, if such Common Shares are not listed or admitted for
trading on any national securities exchange, on the National Market of
NASDAQ or, if such Common Shares are not quoted on such National
Market, in the Common Shares market in which such Common Shares are
traded.
"Transaction" shall have the meaning set forth in paragraph (d) of
Section 6 hereof.
"Transfer Agent" means Norwest Banks (or its Affiliates) or any U.S.
bank with aggregate capital, surplus and undivided profits, as shown on
its last published report, of at least $30,000,000 as may be designated
by the Trustees or their designee as the transfer agent for the Series
A Preferred Shares.
"Trust" shall have the meaning set forth in the Preamble.
"Trustees" shall mean the Trustees of the Trust or any committee
authorized by such Trustees to perform any of its responsibilities with
respect to the Series A Preferred Shares.
"Unrelated Third Party" shall mean a Person other than the Trust or any
Affiliate of the Trust and other than Constellation.
"45% Ceiling Requirement" shall have the meaning set forth in Section
6(a).
Section 3. Dividends. Except as provided in paragraph (a) of Section 6,
the holders of each Series A Preferred Share shall be entitled to receive
cumulative dividends and distributions payable from the date of issuance of such
Series A Preferred Stock quarterly and in preference and priority to the
dividends and distributions payable on each Junior Share, when, as and if
declared by the Board of Trustees of the Trust out of funds legally available
therefor, at the annual rate of $1.375 per share. Cumulative dividends will
accrue whether or not there are profits, surplus or other funds of the Trust
legally available for payment of dividends. The record and payment dates for the
Common Shares, if any, shall be the same as the record and payment dates for the
Series A Preferred Shares. If such cumulative dividends in respect of any prior
or current quarterly dividend period shall not have been declared and paid or if
there shall not have been a sum sufficient for the payment thereof set apart,
the deficiency shall first be fully paid before (i) any dividend or other
distribution (other than dividends payable in Common Shares) shall be paid or
declared and set apart with respect to the Junior Shares or (ii) any Junior
Shares shall be repurchased or redeemed by the Trust. Dividends shall be payable
pro rata for partial quarterly periods. In the event that any Series A Preferred
Share is converted into Common
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Shares pursuant to Section 6 below, holders of
Series A Preferred Shares whose conversion is deemed effective before the close
of business on a dividend payment record date will not be entitled to receive
any portion of the dividend payable on such Series A Preferred Shares on the
corresponding dividend payment date for the current quarter to which that record
date pertains but will, however, be entitled to receive the entire dividend for
such quarterly period payable, if any, on the Common Shares issuable upon
conversion provided that any conversion of Series A Preferred Shares becomes
effective prior to the close of business on the record date for such dividend
payable on such Common Shares. A holder of Series A Preferred Shares on a
dividend payment record date who (or whose transferee) tenders such shares for
conversion into Common Shares after such dividend payment record date will be
entitled to receive the dividend payable on such Series A Preferred Shares on
the corresponding dividend payment date. Except as provided above, the Trust
will pay at the time of conversion all accrued and unpaid dividends, whether or
not declared, on converted Series A Preferred Shares.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Trust, whether voluntary or involuntary, before any payment or distribution of
the assets of the Trust (whether capital or surplus) shall be made to or set
apart for the holders of Junior Shares, the holders of Series A Preferred Shares
shall be entitled to receive $25.00 per Series A Preferred Share plus an amount
equal to all accrued and unpaid dividends thereon to the date fixed for
distribution whether or not declared; but such holders shall not be entitled to
any further payment. Until the holders of the Series A Preferred Shares have
been paid the liquidation preference in full, no payment will be made to any
holder of Junior Shares upon the liquidation, dissolution or winding up of the
Trust. If, upon any liquidation, dissolution or winding up of the Trust, the
assets of the Trust, or proceeds thereof, distributable among the holders of
Series A Preferred Shares shall be insufficient to pay in full the preferential
amount aforesaid, then such assets, or the proceeds thereof, shall be
distributed among the holders of Series A Preferred Shares ratably in the same
proportion as the respective amounts that would be payable on such Series A
Preferred Shares if all amounts payable thereon were paid in full. For the
purposes of this Section 4, (i) a consolidation or merger of the Trust with one
or more corporations or (ii) a statutory share exchange shall not be deemed to
be a liquidation, dissolution or winding up, voluntary or involuntary, of the
Trust. A sale or transfer of all or substantially all of the Trust's assets
shall be deemed to be a liquidation, dissolution or winding up of the Trust.
(b) Upon any liquidation, dissolution or winding up of the Trust, after
payment shall have been made in full to the holders of Series A Preferred
Shares, as provided in this Section 4, any other series or class or classes of
Junior Shares shall, subject to the respective terms thereof, be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Series A Preferred Shares shall not be entitled to share therein.
Section 5. Shares To Be Retired. All Series A Preferred Shares which
shall have been issued and reacquired in any manner by the Trust shall be
restored to the status of
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authorized, but unissued Preferred Shares, without
designation as to series. The Trust may also retire any unissued Series A
Preferred Shares, and such shares shall then be restored to the status of
authorized but unissued Preferred Shares, without designation as to series.
Section 6. Conversion.
Holders of Series A Preferred Shares shall have the right to convert
all or a portion of such shares into Common Shares, as follows:
(a) Subject to and upon compliance with the provisions of this Section
6, a holder of Series A Preferred Shares shall have the right, at such holder's
option, at any time after the end of the Standstill Period to convert such
shares, in whole or in part, into the number of fully paid and nonassessable
shares of authorized but previously unissued Common Shares obtained by
multiplying the Conversion Rate by the number of Series A Preferred Shares to be
converted by surrendering such shares to be converted, such surrender to be made
in the manner provided in paragraph (b) of this Section 6; provided, however,
that no holder of such shares shall convert such shares if such holder and its
Affiliates would hold after such conversion 45% or more of the outstanding
Common Shares (the "45% Ceiling Requirement"). If such conversion would exceed
the 45% Ceiling Requirement, then upon surrendering the Series A Preferred Share
certificates pertaining to such excess Common Shares as provided in paragraph
(b) of this Section 6, the holder shall continue to be a holder of Series A
Preferred Shares (the "Tendered Non-Converted Shares") pertaining to such excess
Common Shares except that, in lieu of the dividends otherwise payable on such
Tendered Non-Converted Shares (but not in lieu of accrued and unpaid dividends
applicable to quarterly periods prior to such delivery) the holder of Tendered
Non-Converted Shares shall receive the dividends on the Common Shares into which
such Tendered Non-Converted Shares would have been convertible but for the 45%
Ceiling Requirement, and such Tendered Non-Converted Shares shall convert
thereafter to Common Shares without further action by such holder as of the last
day of each calendar quarter to the extent then permitted by the 45% Ceiling
Requirement.
(b) In order to exercise the conversion right, the holder of each
Series A Preferred Share to be converted shall surrender the certificate
representing such shares, duly endorsed or assigned to the Trust or in blank, at
the office of the Transfer Agent, accompanied by written notice to the Trust
that the holder thereof elects to convert such Series A Preferred Shares. Unless
the shares issuable on conversion are to be issued in the same name as the name
in which such Series A Preferred Shares are registered, each share surrendered
for conversion shall be accompanied by instruments of transfer, in form
reasonably satisfactory to the Trust, duly executed by the holder or such
holder's duly authorized attorney and an amount sufficient to pay any transfer
or similar tax (or evidence reasonably satisfactory to the Trust demonstrating
that such taxes have been paid) as required by paragraph (j) of this Section 6.
As promptly as practicable after the surrender of certificates for Series A
Preferred Shares as aforesaid, the Trust shall issue and shall deliver at such
office to such holder, or send on such holder's written order, a certificate or
certificates for the number of full Common Shares issuable upon the conversion
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of such Series A Preferred Shares in accordance with provisions of this Section
6, and any fractional interest in respect of a Common Share arising upon such
conversion shall be settled as provided in paragraph (c) of this Section 6. If
all Series A Preferred Shares evidenced by any certificate are not converted,
the Trust shall issue and deliver at such office to such holder a certificate
for the remaining Series A Preferred Shares not converted. Each conversion shall
be deemed to have been effected immediately prior to the close of business on
the date on which the certificates for Series A Preferred Shares shall have been
surrendered and such notice received by the Trust as aforesaid, and the Person
or Persons in whose name or names any certificate or certificates for Common
Shares shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby at such time on
such date unless the share transfer books of the Trust shall be closed on that
date, in which event such Person or Persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such transfer books are open, provided that such closure of the share
transfer books shall not delay the date on which such Person shall become a
holder of such shares by more than two business days.
(c) No fractional Common Share or scrip representing fractions of a
Common Share shall be issued upon conversion of the Series A Preferred Shares.
Instead of any fractional interest in a Common Share that would otherwise be
deliverable upon the conversion of Series A Preferred Shares, the Trust shall
pay to the holder of such share an amount in cash based upon the Current Market
Price of the Common Shares on the Trading Day immediately preceding the date of
conversion. If more than one share shall be surrendered for conversion at one
time by the same holder, the number of full Common Shares issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
Series A Preferred Shares so surrendered.
(d) If the Trust shall be a party to any transaction (including without
limitation a merger, consolidation, statutory share exchange or reclassification
of the Common Shares (each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which Common Shares shall be
converted into the right to receive shares, securities or other property
(including cash or any combination thereof), each Series A Preferred Share which
is not converted into the right to receive shares, securities or other property
in connection with such Transaction shall thereupon be convertible into the kind
and amount of shares, securities and other property (including cash or any
combination thereof) receivable upon such consummation by a holder of that
number of Common Shares into which one Series A Preferred Share was convertible
immediately prior to such Transaction. The Trust shall not be a party to any
Transaction unless the terms of such Transaction are consistent with the
provisions of this paragraph (d), and it shall not consent or agree to the
occurrence of any Transaction until the Trust has entered into an agreement with
the successor or purchasing entity, as the case may be, for the benefit of the
holders of the Series A Preferred Shares that will contain provisions enabling
the holders of the Series A Preferred Shares that remain outstanding after such
Transaction to convert into the consideration received by holders of Common
Shares at the Conversion Rate. The provisions of this paragraph (d) shall
similarly apply to successive Transactions.
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(e) If there shall be any reclassification of the Common Shares or any
consolidation or merger to which the Trust is a party and for which approval of
any shareholders of the Trust is required, or a statutory share exchange, or the
voluntary or involuntary liquidation, dissolution and winding up of the Trust,
then the Trust shall cause to be mailed to each holder of Series A Preferred
Shares at such holder's address as shown on the records of the Trust, as
promptly as possible, but at least 15 days prior to the applicable date
hereinafter specified, a notice stating the date on which such reclassification,
consolidation, merger, statutory share exchange or liquidation, dissolution and
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Shares of record shall be entitled to exchange
their Common Shares for securities or other property, if any, deliverable upon
such event. Failure to give or receive such notice or any defect therein shall
not affect the legality or validity of the proceedings described in this Section
6.
(f) (i) In the event the Trust should at any time or from time to time
after the date of issuance of the Series A Preferred Shares fix a record date
for the effectuation of a split or subdivision of the outstanding Common Shares
or the determination of holders of Common Shares entitled to receive a dividend
or other distribution payable in additional Common Shares without payment of any
consideration by such holder for the additional Common Shares, then, as of such
record date (or the date of such dividend distribution, split or subdivision if
no record date is fixed), the Conversion Rate shall be appropriately increased
so that the number of Common Shares issuable on conversion of each Series A
Preferred Share shall be increased in proportion to such increase of outstanding
Common Shares and the Common Shares Dilution Price shall be correspondingly
decreased. If the number of Common Shares outstanding at any time after the date
of issuance of the Series A Preferred Shares is decreased by a combination of
the then outstanding Common Shares, then, following the record date of such
combination (or the date of such combination if no record date is fixed), the
Conversion Rate for the Series A Preferred Shares shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each Series A Preferred Share shall be decreased in proportion to such decrease
in outstanding Common Shares and the Common Share Dilution Price shall be
correspondingly increased. Whenever the Conversion Rate and Common Share
Dilution Price are adjusted as herein provided, the Trust shall promptly file
with the Transfer Agent an officer's certificate setting forth the Conversion
Rate and Common Share Dilution Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment which certificate shall
be conclusive evidence of the correctness of such adjustment absent manifest
error. Promptly after delivery of such certificate, the Trust shall prepare a
notice of such adjustment setting forth the adjusted Conversion Rate and Common
Share Dilution Price and the effective date such adjustment becomes effective
and shall mail such notice of such adjustment to each holder of Series A
Preferred Shares at such holder's last address as shown on the share records of
the Trust.
<PAGE>
(ii) In the event the Trust at any time, or from time to time,
shall make or issue, or fix a record date for the determination of holders of
Common Shares entitled to receive, a dividend or other distribution payable in
securities of the Trust other than Common Shares, then
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and in each such event,
provision shall be made so that the holders of Series A Preferred Shares shall
receive upon conversion thereof, in addition to the number of Common Shares
receivable thereupon, the amount of securities of the Trust which they would
have received had their Series A Preferred Shares been converted into Common
Share on the date of such event and had thereafter, during the period from the
date of such event to and including the date of conversion, retained such
securities receivable by them as aforesaid during such period, giving
application to all adjustments called for during such period under this Section
6(f) with respect to the rights of the holders of Series A Preferred Shares.
(g) In any case in which paragraph (f) of this Section 6 provides that
an adjustment shall become effective on the day next following the record date
for an event, the Trust may defer until the occurrence of such event (A) issuing
to the holder of any Series A Preferred Share converted after such record date
and before the occurrence of such event the additional Common Shares issuable
upon such conversion by reason of the adjustment required by such event over and
above the Common Shares issuable upon such conversion before giving effect to
such adjustment and (B) paying to such holder any amount of cash in lieu of any
fraction pursuant to paragraph (c) of this Section 6; provided, however, that
the holder of such Series A Preferred Shares shall be entitled to such
additional Common Shares and cash, as applicable, upon such event.
(h) There shall be no adjustment of the Conversion Rate in case of the
issuance of any capital shares of the Trust, including issuance in connection
with a reorganization, acquisition or other similar transaction except as
specifically set forth in this Section 6. If any action or transaction would
require adjustment of the Conversion Rate pursuant to more than one paragraph of
this Section 6, only one adjustment shall be made and such adjustment shall be
the amount of adjustment that has the highest absolute value to the holder of
Series A Preferred Shares.
(i) The Trust shall at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued Common
Shares solely for the purpose of effecting conversion of the Series A Preferred
Shares, the full number of Common Shares deliverable upon the conversion of all
outstanding Series A Preferred Shares not theretofore converted into Common
Shares. For purposes of this paragraph (i), the number of Common Shares that
shall be deliverable upon the conversion of all outstanding Series A Preferred
Shares shall be computed as if at the time of computation all such outstanding
shares were held by a single holder. The Trust covenants that any Common Shares
issued upon conversion of the Series A Preferred Shares shall be validly issued,
fully paid and non-assessable. The Trust shall list the Common Shares required
to be delivered upon conversion of the Series A Preferred Shares, prior to such
delivery, upon each national securities exchange, if any, upon which the
outstanding Common Shares are listed at the time of such delivery.
(j) The Trust will pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of Common Shares
or other securities or property
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on conversion of Series A Preferred Shares
pursuant hereto; provided, however, that the Trust shall not be required to pay
any tax that may be payable in respect of any transfer involved in the issue or
delivery of Common Shares or other securities or property in a name other than
that of the holder of the Series A Preferred Shares to be converted, and no such
issue or delivery shall be made unless and until the Person requesting such
issue or delivery has paid to the Trust the amount of any such tax or
established, to the reasonable satisfaction of the Trust, that such tax has been
paid.
Section 7. Additional Parity and Junior Shares. Without vote or consent
of the holders of Series A Preferred Shares, the Trust may issue any class or
series of capital shares of the Trust with voting rights, if any, as determined
by the Trust which may rank:
(a) on a parity with the Series A Preferred Shares, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution or
winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof be different from those of
the Series A Preferred Shares, if the holders of such class of Shares or series
and the Series A Preferred Shares shall be entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other;
(b) junior to the Series A Preferred Shares, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution or
winding up, if such Shares or series shall be Common Shares or other Junior
Shares; and
(c) prior or senior to the Series A Preferred Shares as to the payment
of dividends or distributions of assets upon liquidation, dissolution or winding
up; provided, however, that the vote of the holders of Series A Preferred Shares
required by paragraph (b) of Section 8 has been obtained, where applicable.
Section 8. Voting.
(a) Except as otherwise provided in paragraphs (b) and (c) of this
Section 8, the holders of Series A Preferred Shares shall have no right to vote
on any matter to be voted on by the shareholders of the Trust (including,
without limitation, any election or removal of a Trustee), and the Series A
Preferred Shares shall not be included in the number of shares voting or
entitled to vote on such matters.
(b) So long as any Series A Preferred Shares are outstanding, in
addition to any other vote or consent of shareholders required by law or by the
Declaration of Trust, the affirmative vote of at least 66 2/3% of the votes
entitled to be cast by the holders of the Series A Preferred Shares at the time
outstanding, acting as a single class, given in person or by proxy, either in
writing without a meeting or by vote at any meeting called for the purpose,
shall be necessary for
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(i) an increase in the number of authorized shares of
Series A Preferred Shares, (ii) effecting or validating any amendment,
alteration or repeal of any of the provisions of these Articles, the Declaration
of Trust or the Bylaws of the Trust that adversely affects the voting powers,
rights or preferences of the holders of the Series A Preferred Shares or (iii)
consummating a Dilutive Transaction (as defined in paragraph (c) below) during
the Standstill Period. So long as not less than 100,000 Series A Preferred
Shares are outstanding excluding in such calculation the Tendered Non-Converted
Shares, the affirmative vote of at least 66_% of the votes entitled to be cast
by the holders of the Series A Preferred Shares at the time outstanding
(including the Tendered Non-Converted Shares), acting as a single class, given
in person or by proxy, either in writing or without a meeting or by vote at any
meeting called for the purpose, shall be necessary to create or authorize any
class or series of capital shares of the Trust ranking prior or senior to the
Series A Preferred Shares (or any class or series of partnership units of
Corporate Office Properties, L.P. of which the Trust is the general partner
ranking prior or senior to the Series A Preferred Units to be issued to the
Trust in connection with the issuance of the Series A Preferred Shares to
Constellation) as to the payment of dividends or as to distributions of assets
upon liquidation, dissolution or winding up. Notwithstanding the foregoing
provisions of this paragraph (b) of Section 8, any amendment of the provisions
of the Declaration of Trust (or the partnership agreement of Corporate Office
Properties, L.P.) so as to authorize or create, or to increase the authorized
amount of, any Junior Shares (or units of partnership interest with or without
voting rights junior as to the payment of dividends and as to asset
distributions to the Series A Units) or any shares of any class with or without
voting rights ranking on a parity with the Series A Preferred Shares (or Series
A Preferred Units) shall not be deemed to adversely affect the voting powers,
rights or preferences of the holders of Series A Preferred Shares (or Series A
Preferred Units). For the purpose of this paragraph, the holder of Series A
Preferred Shares shall have the right to one vote for each such Series A
Preferred Share.
(c) For the purpose of paragraph (b) above, the term "Dilutive
Transaction" shall mean any transaction or series of related transactions during
the Standstill Period in which the Trust shall issue or sell Common Shares with
an aggregate then Current Market Price in excess of $50.0 million with a Common
Share price per share less than the Common Share Dilution Price. The term
"Common Share Dilution Price" shall mean $9.50 per share, subject to adjustment
as provided in paragraph (f) of Section 6. For the purpose of calculating the
aggregate Current Market Price of the Common Shares, securities convertible into
Common Shares or warrants, rights or options to purchase Common Shares at a
price less than the Common Share Dilution Price shall be deemed to have been
converted or exercised, as the case may be, into an additional number of Common
Shares at the time of the Dilutive Transaction, and the Trust shall be deemed to
have issued or sold such additional number of Common Shares at the time of, and
in connection with, the Dilutive Transaction.
(d) So long as any Series A Preferred Shares are owned of record and
beneficially by Constellation and Constellation also owns of record and
beneficially at least 30% of the outstanding Common Shares, Constellation shall
be entitled to vote for and elect two members of the Board of Trustees. So long
as any Series A Preferred Shares are owned of record and
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beneficially by
Constellation and Constellation also owns of record and beneficially less than
30% but more than 15% of the outstanding Common Shares, Constellation shall be
entitled to vote for and elect one member of the Board of Trustees. In
determining the percentage of the outstanding Common Shares for the purposes of
this paragraph, the Common Shares issuable upon conversion of any Series A
Preferred Shares owned by Constellation shall be deemed outstanding. If any
member of the Board of Trustees so elected by Constellation shall withdraw or be
removed from the Board for any reason, Constellation shall have the right to
elect the replacement for such member. Constellation shall have the right to
remove a Trustee elected by Constellation for any reason at any time. The term
of office of any Trustee elected by Constellation pursuant to this paragraph
shall expire on the date that Constellation no longer holds of record and
beneficially any Series A Preferred Shares and the percentage of Common Shares
required to elect that Trustee as provided in this paragraph. If two Trustees
have been elected by Constellation and the term of one Trustee expires by
operation of the preceding sentence, the Board of Trustees may determine which
Trustee shall have completed service on the Board absent a determination by
Constellation.
(e) If the Trust shall fail at any time or from time to time to pay
when due two consecutive quarterly dividend payments on the Series A Preferred
Shares, then the holders of the Series A Preferred Shares shall be entitled to
elect two additional members to the Board of Trustees of the Trust to serve
until all accrued and unpaid dividends on the Preferred Shares have been paid in
full.
Section 9. Record Holders. The Trust and the Transfer Agent may deem
and treat the record holder of any Series A Preferred Share as the true and
lawful owner thereof for all purposes, and neither the Trust nor the Transfer
Agent shall be affected by any notice to the contrary.
Ratification and Authorization
RESOLVED, that any and all acts and deeds of any officer or Trustee
taken prior to the date hereof on behalf of the Trust with regard to the
foregoing resolutions are hereby approved, ratified and confirmed in all
respects as and for the acts and deeds of the Trust.
FURTHER RESOLVED, that the officers of the Trust be, and each of them
hereby is, severally and without the necessity for joinder of any other Person,
authorized, empowered and directed to execute and deliver any and all such
further documents and instruments and to do and perform any and all such further
acts and deeds that may be necessary or advisable to effectuate and carry out
the purposes and intents of the foregoing resolutions, including, but not
limited to, the filing of Articles Supplementary pursuant to Maryland REIT Law
with the State Department of Assessments and Taxation of Maryland, setting forth
the designations, preferences, limitations and rights of Series A Preferred
Shares pursuant to Section 8-203(b) of the Maryland REIT Law, all such actions
to be performed in such manner, and all such documents and instruments to be
executed and delivered in such form, as the officer performing or executing the
same shall
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approve, the performance or execution thereof by such officer to be
conclusive evidence of the approval thereof by such officer and by the Board of
Trustees.
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