-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VIsjNWBWNd4IUvrQ65UUsl99yA12E4EvyfgFZMUWwLzAPHiJDc26VAQ6XwrN6TQr fFs3nQmoGMyhpdUOlxT71Q== 0000009466-98-000048.txt : 19981015 0000009466-98-000048.hdr.sgml : 19981015 ACCESSION NUMBER: 0000009466-98-000048 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19981008 DATE AS OF CHANGE: 19981014 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BALTIMORE GAS & ELECTRIC CO CENTRAL INDEX KEY: 0000009466 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 520280210 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-40799 FILM NUMBER: 98722892 BUSINESS ADDRESS: STREET 1: 39 W LEXINGTON ST STREET 2: CHARLES CTR CITY: BALTIMORE STATE: MD ZIP: 21201 BUSINESS PHONE: 4102345511 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BALTIMORE GAS & ELECTRIC CO CENTRAL INDEX KEY: 0000009466 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 520280210 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 39 W LEXINGTON ST STREET 2: CHARLES CTR CITY: BALTIMORE STATE: MD ZIP: 21201 BUSINESS PHONE: 4102345511 SC 13D 1 SCHEDULE 13D 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 EX-1 2 CONTRIBTUION AGREEMENT 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. 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 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. 3 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. 4 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. 5 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. 6 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. 7 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 8 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. 9 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". 10 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 11 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 12 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. 13 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. 14 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. 15 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"). 16 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. 17 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 18 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 19 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 20 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 21 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 22 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". 23 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 24 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. 25 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 26 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. 27 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. 28 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, 29 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 30 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 31 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 32 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, 33 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. 34 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. 35 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 36 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. 37 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 38 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. 39 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 40 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." 41 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: 42 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; 43 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 44 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; 45 (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); 46 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. 47 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 48 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 49 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; 50 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 51 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 52 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 53 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. 54 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. 55 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. 56 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 57 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 58 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 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 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 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 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: 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" EXHIBIT "SELLERS" EXHIBIT "NET VALUE PERCENTAGE ALLOCATION" EXHIBIT "ENTITIES" EXHIBIT "REGISTRATION RIGHTS AGREEMENT" EXHIBIT "PROJECTS" EXHIBIT "CONSTELLATION LEASE" EXHIBIT "SHARE SCHEDULE" EXHIBIT "CASH COMPONENT ALLOCATION" EXHIBIT "ASSUMED INDEBTEDNESS" EXHIBIT "ASSUMED LOAN DOCUMENTS" EXHIBIT "SATISFIED INDEBTEDNESS" EXHIBIT "SATISFIED LOAN DOCUMENTS" EXHIBIT "TRED AVON LOAN DOCUMENTS" 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. (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 (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 (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 (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 (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 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 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. 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). 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"). 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 EXHIBIT "TENANT PURCHASE RIGHTS" EXHIBIT "SERVICE CONTRACTS" EXHIBIT "REAL ESTATE TAX MATTERS" EXHIBIT "LEASE CONTROVERSIES" 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; 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. 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. (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] EXHIBIT "USTS" 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. (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 - - -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. 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) 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 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) EXHIBIT "COMMISSIONS" 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 25. LIMITATION OF LIABILITY...................................................56 26. BROKERAGE.................................................................57 27. REASONABLE EFFORTS........................................................57 28. MISCELLANEOUS.............................................................57 EX-2 3 FIRST AMENDMENT TO CONTRIBUTION AGREEMENT 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 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 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 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 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 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 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 EX-3 4 SECOND AMENDMENT TO CONTRIBUTION AGREEMENT 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 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 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 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 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 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 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 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 3 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. 4 (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 5 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: 6 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 7 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 7 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. 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. 2 (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 3 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 4 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 5 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. 6 (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) 7 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 EX-4 5 SERVIE COMPANY ASSET AGREEMENT 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. "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. 2 "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. 3 "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; 4 (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 5 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. 6 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; 7 (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 8 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 9 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. 10 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 11 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 12 (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. 13 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. 14 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 15 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 16 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 17 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 18 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. 19 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 20 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. 21 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 22 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. 23 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; 24 (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 25 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 26 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. 27 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. 28 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. 29 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 30 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 EX-5 6 REGISTRATION RIGHTS AGREEMENT 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. 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 2 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 3 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 4 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 5 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 6 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 7 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 8 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. 9 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 10 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; 11 (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. 12 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 13 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 14 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 15 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. 16 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. 17 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 EX-6 7 ARTICLES SUPPLEMENTARY 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. 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 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. "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. 2 "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 3 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 4 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 5 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. 6 (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. (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 7 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 8 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 9 (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 10 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 11 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. 12 -----END PRIVACY-ENHANCED MESSAGE-----