OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is made and executed this 14th day
of May, 1998, by and between NBP-III, LLC ("Seller") and CORPORATE OFFICE
PROPERTIES L.P. its successors and assigns ("Buyer").
RECITALS
Seller is the owner of that parcel of land knows as Lot 11 within the
National Business Park (the "Property"), said parcel being more particularly
described in Exhibit A attached hereto and by this reference made a part hereof.
Seller is currently in the process of developing and constructing onto Lot 11 an
office building containing approximately 110,000 gross square feet to be known
as 134 National Business Park. Seller is willing to grant to Buyer an option to
purchase the Property on the terms and conditions as set forth herein. Buyer is
willing to accept said option on those terms and conditions and for the
considerations provided and described herein.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the adequacy of which is hereby acknowledged, Seller
hereby grants to Buyer the exclusive right and option (irrevocable except upon
the express terms and conditions of this Agreement) during the term hereof to
purchase from Seller, the Property upon the terms and subject to the conditions
hereinafter set forth.
1. Determination of Purchase Price. The Purchase Price for the Property
shall be determined as of the date of "Settlement" (hereinafter defined) and
shall be that sum which is equal to the "Seller's Book Value" (hereinafter
defined) of the Property. For purposes of this Agreement "Seller's Book Value"
shall mean that sum which is the net dollar amount shown as the value of the
Property as same appears as an asset on the balance sheet of the Seller, which
sum shall include all costs expended on the development and construction of
buildings on the Property through the date of Settlement. Seller will provide to
Buyer such access to Seller's books and accounting records as shall be
reasonably required for such a determination to be
made. The Purchase Price as so determined shall be paid as provided in Paragraph
4 herein. Seller has dedicated Two Million One Hundred Eight Thousand Dollars
($2,108,000.00) towards the development of the Property through August, 1998 and
Seller represents that as of the date hereof, Seller's Book Value is One Million
Nine Hundred Ninety-Three Thousand Seven Hundred Twenty-Six Dollars
($1,993,726.00). Seller shall maintain its books in accordance with generally
accepted accounting principles, consistently applied.
2. Term of Option; Exercise of Option; Settlement.
(a) The term of the Option as herein granted by Seller shall
commence as of the date hereof and without need of written notice automatically
terminate and expire on that date which is fifteen (15) days thereafter ("Option
Period").
(b) If Buyer at any time during the Option Period desires to
exercise the Option then Buyer shall give to Seller written notice to that
effect together with the date on which Settlement is to occur, subject to the
provisions of Section 2(c) below.
(c) Notwithstanding anything herein to the contrary, if Buyer
exercises its Option hereunder, Settlement shall be on or before that date which
is forty-five (45) days after the Closing under that certain Contribution
Agreement of even date herewith by and between Corporate Office Properties Trust
and Corporate Office Properties, L.P., as Buyer and various entities which are
subsidiaries and affiliates of Constellation Properties, Inc. (the "Contribution
Agreement").
3. Payment of Purchase Price; Deposit.
(a) It is hereby irrevocably acknowledged, confirmed and
agreed by Seller that the mutual obligations and covenants of the parties
hereunder and the entry by affiliates of Seller and Buyer into other agreements
as of even date herewith, constitute adequate consideration for the Option
herein granted.
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(b) The balance of the Purchase Price shall be paid as
provided in Paragraph 5 following.
4. Right to Inspect.
From and after execution of this Agreement by both Buyer and
Seller, Buyer and Buyer's consultants shall have the right to enter upon the
Property and conduct, at Buyer's sole expense, any engineering tests,
development and land use studies, environmental analysis, soil tests,
topographical and other surveys, wetlands and flood plain delineations, and
other surveys, tests and studies (collectively, "Site Investigations") as Buyer
deems necessary. All lands, trees, shrubs, grass and field areas shall be
restored as closely as possible to their pre-test conditions. Buyer and its
consultants shall enter and test the Property at their own risk; and Buyer
and/or its consultants shall carry adequate commercial general liability
insurance of not less than $1,000,000 combined single limit naming Seller as an
additional insured. Buyer and/or its consultants shall provide Seller with a
certificate evidencing such insurance promptly upon request. Further, Buyer
shall indemnify and save Seller harmless from any and all suits, claims of
injuries and judgements, and reasonable attorney's fees, in any way arising out
or such entry and testing of the Property, which indemnification and obligation
to hold the Seller harmless shall survive any termination of this Agreement.
5. Settlement.
(a) Settlement and transfer of title to the Property
("Settlement") shall be held in the Baltimore-Metropolitan area, at a location
selected by the Buyer, and shall occur on that date which shall be noted on
Buyer's notice of exercise of the Option.
(b) At Settlement, the Buyer shall pay Seller, in cash or by
certified, cashier's, treasurer or title company check, or by wire transfer, the
Purchase Price determined for the Property.
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(c) At Settlement, title to the Property shall be good and
merchantable, free of all liens, encumbrances, encroachments and easements other
than the Permitted Encumbrances (as hereinafter defined), and of the Property
shall be given to Buyer free of all tenancies or other rights of use or
occupancy. A deed containing covenants of special warranty and further
assurances shall be executed by Seller, at Buyer's expense, which shall convey
fee simple title to the Property together with all improvements, rights, alleys,
ways, waters, privileges, easements, appurtenances and advantage benefitting the
Property, and shall be delivered to Buyer at Settlement.
(d) As soon as possible after exercise of the Option the
Buyer, at Buyer's expense, shall have the title to the Property examined by a
reputable title insurance company and have such title insurance company issue a
title insurance commitment (the "Title Commitment") to assure Buyer that, as of
the examination date, title to the Property is good and merchantable and
insurable at ordinary prevailing title insurance rates and that any exceptions
to title contained in the Title Commitment are acceptable to Buyer. By the
thirtieth (30th) day after receipt by Seller of notice of any exercise of the
Option, Buyer shall provide to Seller a copy of the Title Commitment and either
advise Seller in writing that all exceptions to title contained in the Title
Commitment are acceptable to Buyer or advise Seller in writing of those
exceptions to title contained in the Title Commitment that are unacceptable to
Buyer; provided, however, that Buyer shall be required to accept (i) all matters
shown on that Subdivision Plat depicting the Property and any amendments
thereto. Failure of Buyer to examine title or to advise Seller of the
acceptability of title within the time periods required hereunder shall be
deemed an acceptance of all title matters. Within fifteen (15) days after
receipt of a notice from Buyer advising Seller that certain title exceptions are
unacceptable to Buyer, Seller shall notify Buyer whether Seller will cure any of
the unacceptable title exceptions. Failure of Seller to provide notice within
such time period shall be deemed an election by Seller not to cure the
unacceptable title exceptions. If Buyer has timely notified Seller of
unacceptable title matters then, unless Seller has timely elected to cure such
title exceptions as provided hereunder, Buyer, by written notice to Seller, may,
within fifteen (15) days after expiration of the time period for Seller to elect
to cure, either waive such unacceptable title exceptions (in which case such
exceptions shall be deemed acceptable to Buyer) or terminate the Option. Failure
of Buyer to notify Seller in such fifteen
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(15) days period shall be deemed an election by Buyer to waive the unacceptable
title exceptions. If Seller notifies Buyer that Seller will cure any
unacceptable title exception, then Seller shall be obligated to promptly and, in
all events, prior to Settlement, proceed to cure such title exception in such
manner that the defect or objection to the title will not appear in the Buyer's
title insurance policy. All exceptions to title accepted by Buyer or deemed to
be accepted by Buyer under the provisions of this paragraph (other than
mortgages, deeds of trust and other liens [excluding liens for taxes and
assessments to be adjusted under subparagraph (e)], all of which shall be
discharged by Seller at or prior to Settlement) shall constitute "Permitted
Encumbrances." Notwithstanding the foregoing, from and after the date hereof and
continuing until the expiration of the Option Period, Seller shall not change or
permit to be changed title to the Property or any portion thereof in a manner
which would materially prevent or interfere with the development of the
Property.
(e) All costs, including taxes, insurance and any and all
costs relating to the ownership of the Property shall be borne by Seller until
the time of any Settlement hereunder. All taxes, general or special, and all
other public, governmental or other assessments against the Property payable on
an annual basis are to be adjusted and apportioned as of the date of Settlement
and are to be assumed and paid after Settlement by Buyer. The costs, if any, of
all recordation taxes and transfer taxes shall be split and paid equally by
Buyer and Seller. All agricultural transfer tax or taxes, if any, shall be paid
by Seller. All other closing costs, including, without limitation, recording
charges, document preparation charges, notary fees and title insurance premiums
shall be paid by Buyer. Seller and Buyer shall each pay their respective legal
costs.
(f) At Settlement hereunder, the Seller shall, execute and
deliver to the Buyer an affidavit, in form sufficient to satisfy all Internal
Revenue Service requirements, stating that Seller is not a "foreign person" (as
defined by the Foreign Investment in Real Property Tax Act and the regulations
promulgated thereunder) so that Buyer is not legally required to withhold any
portion of the Purchase Price then being paid at Settlement hereunder.
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6. Potential Contribution of Member Interests in Lieu of Fee Simple
Transfer.
If Buyer exercises its option to purchase all of the lots owned by
Seller hereunder, Buyer shall have the right, exercisable by written notice to
Seller given at least ten (10) days prior to Settlement, to structure the
transfer as a purchase of 100% of the member interests of the Seller, rather
than as a transfer of the underlying Property. In such event, at the time of
Settlement, Seller(s) shall execute and deliver to Buyer:
(a) an Assignment and Assumption Agreement, an Amendment to the
Operating Agreement, and Amendment of the Articles of Organization setting forth
the assignment by each of the members of such member's membership interest and
his, her or its withdrawal from the Seller and the admission of the Buyer and/or
its designee(s) as members of the Seller, which amendment shall be executed and
acknowledged by all withdrawing members and the Buyer;
(b) a release from each withdrawing member releasing the Buyer (and its
designee(s)) as members of the limited liability company from any obligations
and liabilities with respect to the formation of such limited liability company,
and any other matter arising from business done, transactions entered into or
events occurring prior to the Settlement;
(c) customary representations and warranties as to the member
interests, consistent with those set forth in Section 11.1 of the Contribution
Agreement; and
(d) such other documents and items as may be reasonably required to be
delivered by Seller to Buyer under the terms of this Agreement or relating to
the Property and the membership interest to reasonably effect the purposes of
this Agreement.
All of such documentation shall be in substantially the same form as
the documentation being delivered under the terms of the Contribution Agreement.
7. Risk of Loss. The Property and is to be held at the risk
of the Seller until legal title has passed.
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8. Seller's Warranties and Representations. Seller warrants, represents
and covenants to Buyer that the following items are true in all material
respects and shall be deemed to have been restated at the time of Settlement
hereunder:
(a) As of the date hereof and as of Settlement, Seller will be
the owner of 100 percent fee simple interest in the Property and will not have
entered into any contract of sale, option agreement, right of first refusal or
other agreement for the sale of the Property.
(b) The Seller has full power and authority to execute,
deliver and perform this Agreement in accordance with its terms.
(c) As of the date of this Agreement, the Property is zoned to
permit its use for office and warehouse purposes and Seller, shall not join in
or consent to any change in the zoning of the Property which would prohibit its
use for office and warehouse purposes.
(d) To the best of Seller's knowledge, there are no
underground storage tanks on the Property.
(e) Seller has not used, generated, stored or disposed, and
from and after the date of this Agreement will not use, generate, store or
dispose, on, under or about the Property any hazardous waste, toxic substance or
related materials or any friable asbestos or substance containing asbestos.
The foregoing warranties shall terminate twelve (12) months after
Settlement hereunder.
9. Construction Costs and Obligations.If at the time of exercise of the
Option Seller is in the process of construction of buildings on the Property it
is agreed that:
(a) Seller will tender and transfer (as necessary) to Buyer
all plans, specifications, contracts, permits and other materials related to
such construction;
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(b) Seller will open its accounting records to Buyer and
cooperate with Buyer's takeover of the responsibility of such construction; and
(c) Seller will if necessary give to Buyer appropriate bills
of sale for personal property items then in the possession of Seller and related
to such construction.
10. Miscellaneous.
(a) Seller and Buyer warrant that, in connection with this
transaction, they have dealt with no broker, agent or other party who may be
entitled to a commission or finder's fee, and each party agrees to indemnify the
other from any claims or damages, including reasonable attorneys' fees, that the
other may incur as a result of the violation of this warranty, which warranty
and indemnification shall survive settlement and any termination of this
Agreement.
(b) Any written notices required under the terms of this
Agreement shall be sent by certified mail, return receipt requested and
addressed as follows:
TO BUYER: Corporate Office Properties L.P.
One Logan Square, Suite 1105
Philadelphia, PA 19103
Att.: Clay W. Hamlin, III
with copies to: F. Michael Wysocki, Esquire
Saul, Ewing, Remick & Saul LLP
1500 Market Street
38th Floor
Philadelphia, Pennsylvania 19102-2186
TO SELLER: NBP-III, LLC
c/o Constellation Properties, Inc.
250 West Pratt Street
Baltimore, Maryland 21201
Att.: Dan R. Skowronski, Esquire
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Any party hereto may change its notice address by giving notice of such change
in accordance with this paragraph.
(c) Time shall be the essence of this Agreement.
(d) If the last day of the Option Period or the date on which
Settlement is to occur, or the last day of any time period specified herein,
falls on a Saturday, Sunday or holiday, the period for the required action shall
be extended until 5:00 PM on the next business day.
(e) This Agreement contains the final and entire agreement
between the parties thereto, and neither party shall be bound by any terms,
condition, statement or representation not herein contained. The Agreement may
not be modified or changed orally, but only by agreement in writing, signed by
the party against whom enforcement of any such change is sought.
(f) The Agreement shall be governed by the laws of the State
of Maryland. The titles of the paragraphs are inserted as a matter of
convenience and for reference and in no way define, limit or describe the scope
of this Agreement or the intent of any provision hereof.
(g) Upon any expiration or termination of this Agreement, the
option to purchase the Property shall be deemed to expire and be null and void
and Buyer shall enter into such documentation in recordable form as may be
reasonably required to confirm such expiration as requested by Seller.
(h) Either party shall have the right to record a memorandum
of this Agreement in the Land Records of Anne Arundel County, Maryland, with the
prior written approval of the other party. The parties shall each pay one-half
(1/2) of the recordation taxes and transfer taxes and fees associated with the
recording of the memorandum.
10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Buyer shall have the
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right to freely assign this Agreement in whole or in part without the consent of
Seller, provided that no such assignment or collateral assignment shall be
effective unless and until Seller is given written notice thereof by Buyer.
IN WITNESS WHEREOF, each of the parties hereto has executed or caused
this Agreement to be executed by its duly authorized representative on the day
and year first above written.
WITNESS: NBP-III, LLC, a Maryland limited liability company
By: CPI National Business Park-III, Inc.
a Maryland corporation, Member
/s/ By: /s/ Roger A. Waesche, Jr.
- ------------------------ -----------------------------------
Name: Roger A. Waesche, Jr.
Title: Vice President
WITNESS: CORPORATE OFFICE PROPERTIES L.P.
by its sole general partner:
Corporate Office Properties Trust
/s/ By: /s/ Clay W. Hamlin, III
- --------------------------- -----------------------------
Clay W. Hamlin, III
President & Chief Executive Officer
Assented And Agreed To By
CONSTELLATION PROPERTIES, INC.
By: /s/ Roger A. Waesche, Jr.
-------------------------
Vice President
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STATE OF MARYLAND COUNTY OF ANNE ARUNDEL, TO WIT:
I HEREBY CERTIFY, that on this 14th day of May, 1998, before me,
undersigned Notary Public of said State, personally appeared ROGER A. WAESCHE,
JR., who acknowledged himself to be the Vice President of CPI National Business
Park-III, Inc., a Maryland corporation, and Member of NBP-III, LLC, a Maryland
limited liability company, 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 Vice
President of said corporation by signing the name of the corporation himself as
Vice President.
IN WITNESS WHEREOF, I have set my hand and Notarial Seal, the day and
year first above written.
/s/
--------------------------
Notary Public
My commission expires: 5/1/02
STATE OF MARYLAND COUNTY OF ANNE ARUNDEL, TO WIT:
I HEREBY CERTIFY, that on this 14th day of May, 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 Properties Trust, the
sole 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 trust company
by signing the name of the trust company 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.
/s/
--------------------------
Notary Public
My commission expires: 05/01/02
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STATE OF MARYLAND COUNTY OF ANNE ARUNDEL, TO WIT:
I HEREBY CERTIFY, that on this 14th day of May, 1998, before me,
undersigned Notary Public of said State, personally appeared ROGER A. WAESCHE,
JR., known to me or satisfactorily proven to be the person whose name is
subscribed to the within instrument, who acknowledged himself to be the Vice
President of Constellation Properties, Inc., a Maryland corporation and
acknowledged that he executed the same for the purposes therein contained as the
duly authorized Vice President of said corporation by signing the name of the
corporation himself as Vice President.
IN WITNESS WHEREOF, I have set my hand and Notarial Seal, the day and
year first above written.
/s/
--------------------------
Notary Public
My commission expires: 05/01/98
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.
/s/ John Harris Gurley
---------------------------------
John Harris Gurley, Attorney-at-Law
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EXHIBIT A
Description of the Property
Lot No. 11, as shown on those subdivision plats entitled, "Phase Three, An
Industrial Resubdivision of Lots 3, 4 and Reserved Parcel `D', NATIONAL BUSINESS
PARK," dated October, 1991, Sheets 1 thru 10 of 10, which subdivision plats are
recorded among the Land Records of Anne Arundel County, Maryland at Plat Book
143, Pages 28 thru 37, inclusive, Plat Nos. 7751 thru 7760, inclusive.
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