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 ("XXXX"), (KMS and
XXXX 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.
"XXXX" means Constellation Real Estate Group, Inc.
"CRM" means Constellation Realty Management, LLC.
"CRM Balance Sheet" means the balance sheet of CRM as of April 30, 1998 included
on Schedule 4.8 to the Agreement.
"CRM Financial Statement" has the meaning set forth in Section 4.8 of the
Agreement.
"CRM Interest" means the seventy five percent (75%) ownership interest in CRM,
comprising all the issued and outstanding Class A Units of CRM, owned by Seller
as a member of CRM.
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"CRM Operating Agreement" means that Operating Agreement dated April 17,1996
between Seller and KLNB, LLC, attached hereto as Exhibit "A".
"Deficiencies" has the meaning set forth in Section 9.2 of the Agreement.
"Development Agreements" means those two Development Properties Acquisition
Agreements each dated as of May __, 1998 by and between Buyer and the Persons
identified therein as "Sellers".
"Employee Benefit Plan" means employee benefit plans as defined in Section 3(3)
of ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Excluded Assets" has the meaning set forth in Section 2.1 (c) of the Agreement.
"GAAP" means generally accepted accounting principles, consistently applied.
"Informational Materials" shall have the meaning set forth in Section 4.30 of
the Agreement.
"KMS" means KMS Oldco, Inc.
"Law" means any law, including, without limitation, any (i) principle of common
law, (ii) federal, state or local statute, ordinance, rule or regulation, (iv)
federal, state or local permit, license or certificate, or (iv) judgment, order,
decree, award or other decision or requirement of any arbitrator, court,
government or governmental agency or instrumentality (domestic or foreign).
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, organization, trust or other entity.
"Purchase Price" has the meaning set forth in Section 2.2 of the Agreement.
"SEC Reports" means the following documents filed to date by COPT with the
Securities and Exchange Commission pursuant to either the Securities Exchange
Act of1934, as amended or the Securities Act of 1933, as amended: Annual report
on Form 10- K for the year ended December 31, 1997; Proxy Statement dated
February 11, 1998; Prospectus dated April 22, 1998 included in registration
statement number 333-47465 filed pursuant to Rule 424(b); and, Quarterly Report
on Form 10_Q for the three months ended March 31, 1998.
"Seller" means Constellation Real Estate, Inc.
"Shares" has the meaning set forth in Section 2.2 of the Agreement.
"Shareholders" means, collectively, KMS and XXXX, and "Shareholder" means any
one of the Shareholders.
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"Taxes" means all Federal, state, local and foreign income, property, sales,
excise and other taxes or governmental charges of any nature whatsoever.
"Transaction Documents" has the meaning set forth in Section 4.2 of the
Agreement.
ARTICLE 2. TERMS OF ASSET PURCHASE; CLOSING.
2.1 Sale and Purchase of Assets and CRM Interest.
(a) In reliance on the representations, warranties, covenants
and agreements herein, and subject to the terms and conditions hereof, Seller
shall sell, convey, transfer and assign to Buyer, and Buyer shall purchase from
Seller, all of Seller's right, title and interest in and to substantially all of
the tangible and certain intangible assets owned or used by Seller in the
Business as of the Closing Date (the "Assets"). It is understood and agreed that
all or a portion of the Assets may be contributed to, and owned by, single
member limited liability companies in which Seller is the sole member, in which
case Seller shall sell and Buyer shall purchase (or cause to be purchased) all
of the interests of such entities. The Assets include, without limitation, the
following:
(i) all trade fixtures, fixed and movable equipment, and
office equipment (including, without limitation, all repair and
replacement parts), furniture, all useable inventory of office
supplies, and all other items of tangible personal property used
or employed in the conduct and operation of its business as of
the date of Closing;
(ii) all files and other documents and records and all
books, ledgers, files and business records related to the
Business;
(iii) all rights existing under management service
agreements, equipment leases, contracts, real property leases,
supply agreements, purchase orders, and all other agreements,
commitments and understandings, to the extent the same relate to
the Business and are assignable (collectively, the "Contracts");
(iv) all telephone numbers of Seller related to the
Business;
(v) all permits, licenses, registrations, filings,
authorizations and approvals (and pending applications for any
thereof) to the extent the same relate to the Business and are
assignable by Seller to Buyer;
(vi) all prepaid items, utility and other deposits related
to the Business and to which Seller is entitled, supplier lists
related to the Business, and to the extent assignable, all
present and future causes of action and claims against third
parties related to the Business;
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(vii) all rights to operate as a going concern, to hire any
past or present employees, and to do business with all present
customers and suppliers, and all right and title to and interest
in all goodwill of its business;
(viii) all computer equipment, databases, software and
software licenses related to the Business (it being understood
and agreed that all such equipment and information, both hard
copy and computer-based, which is not related to the Business
shall not be part of the Assets); and
(ix) an amount of cash which shall be no less than the
aggregate amount of all accrued but unpaid payroll, incentive
pay, vacation and associated payroll taxes and benefit payments
which Seller is required to pay for the current payroll period in
which the Closing occurs (and any other unpaid amounts from prior
periods) but only to the extent such amounts relate to the
employees of Seller that will be employed by Buyer or an
Affiliate of Buyer immediately after Closing.
(b) In reliance on the representations, warranties, covenants
and agreements herein, and subject to the terms and conditions hereof, Seller
shall sell, convey, transfer and assign to Buyer, and Buyer shall purchase from
Seller, all of Seller's right, title and interest in and to the CRM Interest.
(c) The following are not included in the Assets (the
"Excluded Assets"):
(i) all right, title and interest in and to Seller's name
and the service marks, trade names, trademarks and copyrights,
including all registrations and variances thereof, logos used in
connection therewith, the right to xxx for past infringements
thereof, and all goodwill associated with such marks and rights;
(ii) intercompany and other accounts receivable of Seller;
(iii) trade fixtures, fixed and movable equipment, and
office equipment (including, without limitation, a reasonable
amount of repair and replacement parts), furniture, a reasonable
amount of useable inventory of office supplies, and all other
items of tangible personal property used or employed in the
conduct and operation of its business as of the date of Closing
by those employees who will not be employed by Buyer or an
Affiliate of Buyer immediately after Closing; and,
(iv) other items of personal property set forth on Schedule
2.1(c).
2.2 Purchase Price and Payment. As consideration for the Assets and the
CRM Interest, COPT shall deliver to Seller the aggregate number of shares of
COPT Common Shares and COPT Convertible Preferred Shares (collectively, the
"Shares") set forth on Schedule 2.2. (the "Purchase Price"). It is agreed that
the value of the Purchase Price is Two Million Five Hundred Thousand Dollars
($2,500,000). The Purchase Price shall be allocated among the Assets and the CRM
Interest in the manner required by Section 1060 of the Code, and as set forth on
Schedule 2.2 hereto. Seller and Buyer hereby agree to timely file Internal
Revenue Service Form 8594 and any other required Federal or State tax form with
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respect to such allocation. No party hereto shall take, for income tax purposes,
any position inconsistent with such allocation.
2.3 Expenses. Seller, the Shareholders, COP and COPT will each bear
their respective legal, accounting and other expenses incurred in connection
with the investigation, negotiation, preparation, review, execution, performance
and enforcement of this Agreement, and in connection with the transactions
contemplated hereby.
2.4 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall be held immediately following, and at the same
place as the closing of the transactions contemplated by the Contribution
Agreement, or at such other time and place as may be mutually agreed upon by
Buyer and Seller.
2.5 Assumption of Liabilities.
(a) Buyer assumes no liabilities of, or related to, CRM.
Except as expressly set forth in Section 2.5(b), neither the execution of this
Agreement nor the consummation of the transactions contemplated herein shall
obligate Buyer to pay any fixed or contingent, known or unknown, secured or
unsecured obligation, debt or liability of Seller or any Shareholder, whether
arising before or after the Closing, it being the express intention of the
parties that Seller and the Shareholders shall be responsible for the payment of
all their respective obligations, debts and liabilities, including, but not
limited to, indebtedness to banks and other financial institutions, indebtedness
to current and former employees, officers, directors or shareholders of Seller,
and, liability for payment of any and all accrued and unpaid salaries and wages,
sick pay, vacation pay, time off or pay in lieu thereof, and any employee
benefit due any employee.
(b) Notwithstanding the foregoing, Buyer agrees to assume the
following obligations of Seller, and no others (the "Assumed Liabilities"):
(i) obligations of Seller under the Contracts set forth on
Schedule 2.5(b) hereto, but only to the extent that performance
of such obligations is to occur after Closing, or payment of sums
due thereunder are in consideration for products or services
rendered to Buyer after the Closing Date;
(ii) accounts payable then current and as agreed to in
writing by Buyer and Seller at or prior to Closing; and
(iii) accrued payroll for the employees of Seller that will
be employed by Buyer or an Affiliate of Buyer immediately after
the Closing, and associated payroll taxes for the Seller's
current payroll period in which the Closing Date occurs, as
agreed to in writing by Buyer and Seller at or prior to Closing.
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ARTICLE 3. COVENANTS OF SELLER AND THE SHAREHOLDERS.
Seller and the Shareholders jointly and severally covenant and agree to
and with Buyer as follows:
3.1 Activities Pending Closing. Except as expressly provided herein,
between the date hereof and Closing, unless Seller shall have received the prior
written consent of Buyer to the contrary, Seller shall, and Seller and the
Shareholders shall cause each of Seller and CRM to use their commercially
reasonable best efforts to:
(i) maintain its existence, pay and discharge all debts,
liabilities and obligations as they become due, and operate solely in the
ordinary course of business in a manner consistent with past practice and the
provisions of this Agreement and in compliance in all material respects with all
applicable Law and all contracts and agreements to which Seller or CRM is a
party or by which its assets are bound;
(ii) maintain its facilities and assets in the same state of
repair, order and condition as they were on the date hereof, reasonable wear and
tear excepted;
(iii) maintain its books and records in accordance with past
practice, and use maintain in full force and effect all insurance policies and
binders;
(iv) preserve intact its present organization and maintain its
relations and goodwill with suppliers, customers, employees and others having
relationships with it;
(v) promptly advise Buyer in writing of the threat or
commencement against Seller or CRM of any dispute, claim, action, suit,
proceeding, arbitration or investigation that could materially adversely affect
Seller or CRM, or the assets of any Shareholder, or that challenges, or may
affect the validity of, this Agreement or any other Transaction Document or any
action taken or to be taken in connection with this Agreement or any other
Transaction Document or the ability of any party hereto to consummate the
transactions contemplated herein or therein; and
(vi) promptly advise Buyer in writing of any event or the
existence of any fact which makes untrue, or will make untrue as of the Closing,
any representation or warranty of Seller or the Shareholders set forth in this
Agreement or in any Transaction Document.
3.2 Negative Covenants. Except as expressly provided herein, between
the date hereof and the Closing, without the prior written consent of Buyer,
Seller shall not, and Seller and the Shareholders shall cause each of Seller and
CRM not to:
(i) take any action (regardless of whether such action might
otherwise be permitted hereunder), or (through inaction) permit to occur any
event, that would, or could reasonably be expected to, result in any
representation of Seller or a Shareholder contained in this Agreement being
untrue in any material respect or the breach or nonfulfillment of any warranty,
covenant or other obligation of Seller or a Shareholder in this Agreement;
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(ii) amend its Articles of Incorporation or Bylaws (in the
case of Seller) or the CRM Operating Agreement (in the case of CRM) or any other
instrument regulating its conduct, including but not limited to agreements among
its owners;
(iii) fail to pay or discharge when due any liability or
obligation of Seller related to the Business or CRM;
(iv) enter into or renew, extend, amend or terminate any
agreement, commitment or transaction, which entry, renewal, extension, amendment
or termination is not in the ordinary course of business and consistent with
past practice, or which is material to Seller's operations or financial
condition or CRM's operations or financial condition;
(v) settle or compromise any material pending or
threatened litigation or proceeding related to the Business or to CRM;
(vi) other than transactions in the ordinary course of
business consistent with prior practice, sell, lease, license, encumber or
otherwise dispose of, or agree to sell, lease, license, encumber or otherwise
dispose of, any assets that are material, individually or in the aggregate, to
it;
(vii) except in the ordinary course of business, incur or
guaranty any indebtedness or make any loan;
(viii) acquire any other business or interest therein;
(ix) create, enter into, adopt, amend (except as may be
required by Law) or terminate any employee benefit plan or any compensatory or
benefit agreement, arrangement, plan or policy with respect to any employee or,
except for normal increases in the ordinary course of business consistent with
past practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense, increase in any manner the compensation or
fringe benefits of any employee or consultant or pay any benefit not required by
any plan and arrangement as in effect as of the date hereof or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing; or
(x) agree to do any of the foregoing.
3.3 Access to Information. Prior to the Closing, Seller shall, during
ordinary business hours and at mutually convenient times, give Buyer and its
authorized representatives reasonable access to all of its and CRM's personnel,
books, records, offices and other facilities and properties, and permit Buyer to
make such inspections thereof as Buyer may reasonably request, and cause its and
CRM's officers and advisors to furnish Buyer with such financial, operating and
other information regarding the Business and CRM as Buyer may reasonably
request.
3.4 Confidentiality. Seller and the Shareholders will keep confidential
and use their best efforts to cause their affiliates and instruct its and their
respective officers, managers, directors, employees and advisors to keep
confidential all nonpublic information relating to the transactions
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contemplated hereby, except as required by law or administrative process and
except for information which becomes public other than as a result of a breach
of this Section 3.4.
3.5 Other Transactions. Prior to the Closing neither Seller nor any of
the Shareholders shall, nor shall they permit any of their Affiliates, officers,
directors, advisors or other representatives to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any Person other than Buyer and its
representatives concerning any merger, sale of securities, sale of assets or
similar transactions involving the Seller or CRM In the event Seller or any of
the Shareholders receive an inquiry or proposal relating to any such
transaction, it or he will promptly notify Buyer thereof.
3.6 Supplemental Disclosure. Seller and the Shareholders shall promptly
supplement or amend each Schedule hereto with respect to any material matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in such
Schedule; provided, however, that any such supplemental or amended disclosures
shall not be deemed to have been disclosed as of the date of this Agreement
unless so agreed to in writing by Buyer.
3.7 Employees and Contractors. Seller and the Shareholders shall use
their best efforts to assist Buyer in retaining the services of those employees
of Seller and independent contractors with Seller that are identified by Buyer
for such purpose.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
SHAREHOLDERS.
Seller and each of the Shareholders jointly and severally represent and
warrant to Buyer as follows:
4.1 Status. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland, and has all
requisite corporate power and authority to conduct its business as it has been
and is now conducted, to own and lease the assets it owns and leases and to
perform its obligations pursuant to each agreement and instrument by which it is
bound. CRM is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Maryland, and has all requisite
power and authority to conduct its business as it has been and is now conducted,
to own and lease the assets it owns and leases and to perform its obligations
pursuant to each agreement and instrument by which it is bound. Neither Seller
nor CRM is required to be qualified to do business as a foreign corporation or
company in any jurisdiction except as follows: CRM is qualified to do business
in Virginia, Delaware, New Jersey, West Virginia, North Carolina, the District
of Columbia and Pennsylvania; and, Seller is qualified to do business in
Maryland and the District of Columbia.
4.2 Power and Authority. Seller and each Shareholder has full legal
right, power and authority to enter into and perform its and his obligations
under this Agreement and under the other agreements and documents required to be
delivered by it hereunder prior to or at the Closing, if any (the "Transaction
Documents"). The execution, delivery and performance by Seller of this Agreement
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and the other Transaction Documents have been duly authorized by all necessary
corporate action. This Agreement has been duly and validly executed and
delivered by the Seller and by each Shareholder and constitutes the legal, valid
and binding obligation of each of them, enforceable against each of them in
accordance with its terms. When executed and delivered as contemplated herein,
each of the Transaction Documents shall constitute the legal, valid and binding
obligation of Seller and each Shareholder, as the case may be, enforceable
against each of them in accordance with its terms, subject to bankruptcy and
insolvency laws, and to equitable principles which may be imposed by courts.
4.3 No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents do not and will not (with or
without the passage of time or the giving of notice): (i) violate or conflict
with Seller's Articles of Incorporation or Bylaws, the CRM Operating Agreement
or any Law binding upon Seller or CRM; (ii) violate or conflict with, result in
a breach of, or constitute a default or otherwise cause any loss of benefit
under, any agreement or other obligation to which CRM, Seller or any Shareholder
is a party or by which any of them (or the assets of any of them) is bound, or
give to any other party any rights (including, without limitation, rights of
termination, foreclosure, cancellation or acceleration) in, or with respect to,
Seller, the CRM Interest or any of the Assets; or (iii) result in, require, or
permit the creation or imposition of, any restriction, mortgage, deed of trust,
pledge, lien, security interest or other charge, claim or encumbrance upon, or
with respect to, Seller, the CRM Interest or any of the Assets.
4.4 Shareholders. The Shareholders are the registered and beneficial
owners of one hundred percent (100%) of the issued and outstanding capital stock
of the Seller free and clear of any claims, liens, encumbrances, security
interests, options, charges or restrictions whatever. No shares of the capital
stock of the Seller are subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding restricting or otherwise
relating to the voting, dividend rights or disposition of the capital stock.
There are no outstanding options, warrants, rights, puts, calls, commitments, or
other contracts, arrangements (including "phantom" stock arrangements), or
understandings with respect to its capital stock issued by or binding upon the
Seller. There are no obligations or agreements, written or otherwise, requiring
or otherwise providing for the Seller to (x) make any dividend or other
distribution, direct or indirect, on or account of any shares of any class of
stock, now and hereafter outstanding, of the Seller or pursuant to any "phantom"
stock arrangement; or (y) make any redemption, purchase or other acquisition,
direct or indirect, of any shares of any class of stock of the Seller now or
hereafter outstanding or of any warrants or rights to purchase any such stock
(including, without limitation, the repurchase of any such stock or warrant or
any refund of the purchase price thereof in connection with the exercise by the
holder thereof of any right of rescission or similar remedies with respect
thereto).
4.5 Investments, Subsidiaries and Controlled Entities. Except as set
forth on Schedule 4.5, neither Seller nor CRM directly or indirectly owns,
controls or has any investment or membership or other interest in any other
Person.
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4.6 Compliance with Law and Other Requirements. Each of Seller and CRM
is, and at all times since its inception has been, in compliance in all material
respects with all applicable Law, and has not received any notice, order or
other communication from any governmental agency or instrumentality of any
alleged, actual, or potential violation of, or failure to comply with, any Law.
All federal, foreign, state, local and other governmental consents, licenses,
permits, franchises, grants, approvals and authorizations required for the
activities of Seller and CRM as currently conducted are in full force and effect
without any default or violation thereunder by Seller or CRM or by any other
party thereto, except where such default or violation would not have a material
adverse effect on the activities, financial condition or results of operations
of Seller or CRM.
4.7 Employee and Labor Relations. Schedule 4.7 hereto includes a
complete and correct list of each of Seller's and CRM's employees, job titles,
dates of employment with Seller. Seller has previously furnished Buyer with a
complete and correct list of the current rates and terms of compensation of all
such persons.. All employees are employed by Seller and CRM "at will". Except as
set forth in Schedule 4.7 hereto:
(i) Each of Seller and CRM is in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice;
(ii) no charges with respect to or relating to Seller or CRM
are pending before the Equal Employment Opportunity Commission or any state or
local agency responsible for the prevention of unlawful employment practices,
and neither Seller nor CRM has received notice of the intent of any Federal,
state or local agency responsible for the enforcement of labor or employment
laws to conduct an investigation with respect to or relating to the Seller or
CRM and no such investigation is in progress;
(iii) none of Seller, CRM, the Shareholders or their
respective Affiliates has been the subject of an order, judgment or decree of
any court, government agency or regulatory body that has enjoined, barred or
suspended the Seller, CRM or any Shareholder, or any Affiliate of Seller, CRM or
any Shareholder from engaging in any type of practice or activity; and
(iv) all services performed by Seller and CRM have been
provided in accordance with all applicable Laws in all material respects.
4.8 Financial Information. Attached hereto as Schedule 4.8 are the CRM
Balance Sheet and the income statement of CRM as at and for the four months
ended April 30, 1998 (collectively, including the notes thereto, the "CRM
Financial Statement") and the balance sheets as of December 31, 1996 and 1997
and related statements of income, shareholders equity and cash flows for the
eight and twelve month periods then ended, respectively, including the notes
thereto. The books and records of CRM accurately and fairly reflect its
activities and results of CRM, and the financial statements and notes specified
above accurately and fairly present the financial condition, cash flows and
results of CRM, as at the respective dates thereof and for the periods referred
to therein, all in accordance with GAAP. The CRM Balance Sheet reflects all
liabilities of CRM as of the Balance Sheet Date, whether absolute, accrued or
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contingent, of the type required to be reflected or disclosed in a balance sheet
(or the notes thereto) prepared in accordance with GAAP. CRM has no liabilities
or obligations of any nature that are not reflected on the CRM Balance Sheet,
other than current liabilities (within the meaning of GAAP) incurred since the
Balance Sheet Date in the ordinary course of business consistent in nature and
amount with past practice, and that are neither material in amount nor
inconsistent with any of the representations and warranties contained herein.
4.9 Accounts Receivable. All accounts receivable of CRM reflected on
its books and records represent valid obligations for services rendered or sales
made in the ordinary course of business and are, to the best knowledge of
Seller, collectible in the ordinary course of business.
4.10 Absence of Changes. Since the Balance Sheet Date, except as
otherwise set forth in Schedule 4.10, each of Seller and CRM has not:
(i) undergone or experienced any material adverse change in
its business or financial condition, properties, assets, liabilities, business
or other aspect of operations;
(ii) suffered any damages, destruction or loss (insured or
uninsured) materially and adversely affecting its ability to conduct business;
(iii) sold, transferred, encumbered or granted any security
interest in any of its business, properties or assets (or agreed to do so),
except in the ordinary course of its business;
(iv) merged or consolidated with or been acquired by any
Person (or agreed to do so);
(v) suffered or permitted any material change in the manner
of conducting business;
(vi) agreed to any waiver or settlement of any material
lawsuit or dispute;
(vii) made or authorized any loan or advance to any Person
except for normal travel and other reasonable expense advances to employees ;
(viii) other than in the ordinary course of business, granted
or authorized any salary increases, bonuses or other benefits payable to
employees or consultants;
(ix) incurred (or agreed to) any actual, contingent or
otherwise, indebtedness or liability, except current liabilities in the ordinary
and usual course of business;
(x) made (or agreed to) any purchase or lease of capital
assets;
(xi) paid, declared or authorized any redemption, distribution
or dividend with respect to any member or otherwise with respect to any
ownership interest; and
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(xii) lost, or suffered cancellation, termination or cessation
of, any customer(s) or client relationship(s) which accounted for seven and
one-half percent (7.5%) or more of gross revenues, in the aggregate, from its
business (in the case of CRM) or the Business (in the case of the Seller) for
the twelve month period ended on the Balance Sheet Date.
4.11 Undisclosed Liabilities. CRM has no material liabilities or
material obligations of any nature (whether accrued, absolute, contingent,
unasserted or otherwise) other than as set forth on the CRM Balance Sheet and
except as incurred in the ordinary course of business consistent with past
practice since the Balance Sheet Date.
4.12 Taxes. Each of Seller and CRM has filed all tax returns required
to be filed by it and has paid or has established an adequate reserve for the
payment of, all Taxes required to be paid in respect of the periods covered by
such returns. Neither Seller nor CRM is delinquent in the payment of any tax,
assessment or governmental charge. No deficiencies for any Taxes have been
proposed, asserted or assessed against the Seller or CRM and no requests for
waivers of the time to assess any Taxes are pending. There are no liens for
Taxes upon any of the Assets. None of the Seller, CRM or the Shareholders is a
Person other than a United States Person within the meaning of the Code.
4.13 Litigation. Except as set forth on Schedule 4.13 attached hereto,
there is no suit, action or proceeding pending against or (to Seller's
knowledge) threatened against or affecting Seller or CRM that could reasonably
be expected to have a material adverse effect on Seller or CRM. Neither Seller
nor any Shareholder is aware of any basis for any such suit, action or
proceeding, nor is there any judgment, decree, injunction, rule or order of any
governmental entity or arbitrator outstanding against any Seller or CRM having,
or which in the future would have, any such effect. Neither Seller nor CRM, or
any Person employed by Seller or CRM, has reported a claim or potential claim to
Seller's, CRM's or such Person's professional liability insurance carrier.
4.14 Contracts. Neither Seller nor CRM is in default under any
document, contract, agreement or other commitment to which it is a party or by
which it or any of its assets is bound where such default would have a material
adverse effect on the activities, financial condition or results of operations
of Seller or CRM. Each contract or agreement to which the Seller or CRM is a
party is in full force and effect in accordance with its terms and there is no
outstanding notice of cancellation or termination in connection therewith.
4.15 Effect of Transaction. No creditor, employee, client or other
customer or other Person having a material business relationship with Seller or
CRM has informed Seller, CRM or any Shareholder that such Person intends to
change the relationship because of the transactions contemplated by this
Agreement.
4.16 Intangible Assets. Schedule 4.16 hereto includes a true and
complete list of all fictitious names, trademarks, service marks, trade names,
copyrights and patents owned by CRM on the date hereof, or for which application
is pending. All such fictitious names, trademarks, service marks, trade names,
copyrights and patents are free and clear of all assignments, restrictions,
encumbrances, charges or claims of infringement by third parties.
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4.17 Consents. No consent, order, approval or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign, is
required by or with respect to the Seller, CRM or a Shareholder in connection
with the execution, delivery and performance of this Agreement and the other
Transaction Documents. Set forth on Schedule 4.17 hereto are names of each
Person whose consent is required in order to permit the transfer of an Asset to
Buyer, the assumption by Buyer of Seller's rights pursuant to a Contract, and
the transfer to Buyer of the CRM Interest.
4.18 Further Assurances. From and after the date of this Agreement (and
from and after the date of Closing for a period of two years to the extent that
Seller shall thereafter retain any of the following), Seller shall give to Buyer
and to Buyer's representatives, auditors and counsel full access during normal
hours to all of the properties, books, files, records, contracts, licenses and
all other documents maintained by Seller and related to the Business and shall
furnish to Buyer all information with respect to the Business prior to the
Closing Date as Buyer may from time to time reasonably request. Seller and the
Shareholders shall use their commercially reasonable best efforts to obtain all
consents necessary to consummate the sale, assignment, conveyance and delivery
of the Assets and the CRM Interest contemplated by this Agreement and to
otherwise consummate the transactions contemplated hereby, and to enable Buyer
to continue to conduct the businesses conducted by Seller and CRM in a manner
similar to the manner in which they have previously been conducted. From time to
time after the Closing, at Buyer's request and without additional consideration,
Seller and each of the Shareholders agree to execute and deliver such other
instruments of assignment and transfer and take such other action as Buyer
reasonably may require to more effectively assign, transfer to, and vest in
Buyer absolutely, and to put Buyer in possession of, any property to be sold,
assigned, transferred and delivered hereunder.
4.19 [intentionally left blank]
4.20 Leases and Subleases. Each lease or sublease pursuant to which the
Seller or CRM leases or subleases any real or personal property, either as
lessor or lessee, is valid and binding in accordance with its terms, and there
is not under such lease or sublease any existing default or breach of covenant
by the Seller or CRM or by the other party thereto, or any condition, event, or
act that with notice or lapse of time or both would constitute default. Schedule
2.5(b) hereto contains a true, correct and complete list of each lease of real
property and personal property to which the Seller or CRM is a party and in
which capacity.
4.21 Title to Assets. Except as set forth on Schedule 4.21 hereto,
Buyer will receive at Closing good and marketable title to the Assets, free and
clear of all liens, claims, encumbrances and security interests of any kind or
nature. None of the Assets is the subject of any pending or threatened
litigation.
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4.22 Title to CRM Interest. Buyer will receive at Closing good and
marketable title to the CRM Interest, free and clear of all liens, claims,
encumbrances and security interests of any kind or nature. Buyer acknowledges
that as the owner of the CRM Interest, it will be subject to the terms of the
CRM Operating Agreement.
4.23 Employee Benefits. Schedule 4.23 contains a complete and correct
list of all benefit plans, arrangements, commitments and payroll practices of
CRM (whether or not Employee Benefit Plans under ERISA), including, without
limitation, sick leave, vacation pay, severance pay, salary continuation or
disability, consulting or other compensation arrangements, retirement, deferred
compensation, bonus, incentive compensation, stock purchase, stock option,
health including hospitalization, medical, dental and pharmacy, life insurance
and scholarship programs maintained for the benefit of any present or former
employees of CRM. Each Employee Benefit Plan of CRM has been administered in
compliance with its terms, and is in compliance in all material respects with
the applicable provisions of ERISA, the Code and all other applicable Law
(including, without limitation, funding, filing, termination, reporting and
disclosure and continuation coverage obligations pursuant to Title V of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended).
4.24 No Investigation. None of Seller, CRM, any Shareholder or their
respective Affiliates nor (to the best of Seller's knowledge) any Person
employed by Seller or CRM is currently under investigation or prosecution for,
nor has Seller, CRM, any Shareholder or their respective Affiliates nor any such
Person been convicted of a criminal offense related to fraud, theft,
embezzlement or other financial or unlawful manufacture, distribution,
prescription or dispensing of a controlled substance.
4.25 Copies of Documents. Seller has furnished Buyer with true,
complete and correct copies of: Seller's Articles of Incorporation and Bylaws;
all contracts, agreements and understandings to which Seller is a party and
related to the Business; the CRM Operating Agreement; all contracts, agreements
and understandings to which CRM is a party (other than routine maintenance and
similar agreements which are not individually or in the aggregate material in
amount or substance to CRM or its operations); and, all contracts agreements and
understandings to which Seller is a party in its capacity as a member of CRM.
4.26 Proper Licensing. Seller and CRM and each Person employed or
retained as an independent contractor by Seller and CRM are qualified and
licensed to engage in providing the service provided by such Person without
restriction or limitation in the State of Maryland and in each other
jurisdiction in which such Person engages in such services.
4.27 Insurance Coverages. Each of Seller and CRM has maintained in full
force and effect insurance policies which are adequate in coverage amounts and
types of risks covered for the conduct of its business, and all premiums
necessary to maintain such insurance policies have been paid or accrued in full
and are reflected on the Seller Balance Sheet and the CRM Balance Sheet.
4.28 Prohibited Payments. None of Seller, CRM or the Stockholders, nor
any of the officers, directors, employees, agents or affiliates of Seller or CRM
has offered, paid or agreed to pay to any person or entity, including any
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governmental official, or solicited, received or agreed to receive from any such
person or entity, directly or indirectly, any money or anything of value for the
purpose or with the intent of obtaining or maintaining business or otherwise
affecting the operations, prospects, properties or condition (financial or
otherwise) of the Seller or CRM and which is or was in violation of any law,
rule or regulation, or is not properly and correctly recorded or disclosed on
the books and records of the Seller or CRM.
4.29 CRM Operating Agreement. The CRM Operating Agreement in the form
attached hereto as Exhibit "A" is in full force and effect, and there is no
current breach or violation of its terms by any party thereto, or the existence
of any condition which would, if continued, result in a breach or violation
thereof by any party thereto. Seller has complied with all the terms and
conditions of the CRM Operating Agreement, including but not limited to all
obligations with respect to capital contributions set forth in Article III. No
consent of any person is required for the transfer of the CRM Interest to Buyer.
4.30 Investment Representation. Seller and each Shareholder has such
knowledge and experience in financial and business matters so as to be fully
capable of evaluating the merits and risks of an investment in the Shares. No
Shares will be issued, delivered or distributed to any person or entity who
either (i) is a resident of the State of California or New York or (ii) is other
than an Accredited Investor with respect to whom there has been delivered to
Buyer satisfactory information confirming the status of such person or entity as
an Accredited Investor. Seller and each Shareholder has been furnished with the
informational materials described in Section 4.2 of the Contribution Agreement
(collectively, the "Informational Materials"), and has read and reviewed the
Informational Materials and understands the contents thereof. Seller and the
Shareholders have been afforded the opportunity to ask questions of those
persons they consider appropriate and to obtain any additional information they
desire in respect of the Shares and the business, operations, conditions
(financial and otherwise) and current prospects of the Buyer. Seller and the
Shareholders have consulted their own financial, legal and tax advisors with
respect to the economic, legal and tax consequences of delivery of the Shares
and have not relied on COP, COPT, or any of their officers, directors,
affiliates or professional advisors for such advice as to such consequences.
Seller and each of the Shareholders is an Accredited Investor. Seller and each
of the Shareholders is formed under the law of the Xxxxx xx Xxxxxxxx.
0.00 Xxxxxx Xxxxxx Person. Each Entity and each Seller is a "United
States Person" within the meaning of Section 1445(f)(3) of the Code, as amended,
and shall execute and deliver an "Entity Transferor" certification (as defined
in ther Contribution Agreement) at Closing.
4.32 Full Disclosure. All documents and other papers delivered by or on
behalf of Seller and each Shareholder in connection with the transactions
contemplated by this Agreement are accurate and complete in all material
respects and are authentic. No representation or warranty of Seller or a
Shareholder contained in this Agreement or any other Transaction Document
contains any untrue statement of a material fact or omits to state a fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. Except as described in
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this Agreement, there is no fact known to Seller or any of the Shareholders or
(other than proposed or enacted legislation, proposed or enacted regulation, or
general economic or real estate industry conditions and changes) that materially
adversely affects or, so far as Seller and the Shareholders can reasonably
foresee, materially threatens, the assets, activities, prospects, financial
condition or results of Seller or CRM.
ARTICLE 5. COVENANTS OF BUYER.
Buyer covenants and agrees to and with Seller as follows:
5.1 Confidentiality. Buyer acknowledges that the information being
provided by the Seller and Shareholders is for the sole purpose of the
transactions contemplated hereby and that Buyer will keep confidential and
instruct Buyer's Affiliates, officers, directors, employees and advisors to keep
confidential all nonpublic information relating to the Seller, except as
required by Law and except for information which becomes public other than as a
result of a breach of this Section 5.1.
5.2 Financial Information. Buyer agrees to (x) retain all of the books
and records of the Seller acquired by Buyer hereunder and not to destroy or
dispose of any thereof for a period of three (3) years from the Closing Date or
such longer time as may be required by Law, and (y) provide to the Shareholders
financial information in its possession or control with respect to the Seller
requested by Seller or the Shareholders in order to comply with tax, financial
reporting and accounting requirements.
5.3 Proxy Statement. As promptly as practicable after the execution of
this Agreement, COPT shall prepare and file with the Securities Exchange
Commission a Proxy Statement (the "Proxy Statement") which shall solicit the
votes of COPT's shareholders with respect to the transactions contemplated
hereby and by the Contribution Agreement. The Proxy Statement shall include the
recommendation of COPT's Board of Trustees in favor of this Agreement and the
transactions contemplated hereby; provided, however, that the Board of Trustees
may modify or withdraw such recommendation if it believes in good faith after
consultation with legal counsel that the modification or withdrawal of such
recommendation is necessary for the Board of Trustees to comply with its
fiduciary obligations under applicable law.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF BUYER.
COP and COPT, jointly and severally, represent and warrant to Seller as
follows:
6.1 Status, Power and Authority.
COP is a limited partnership validly existing under the laws of the
State of Delaware and has all requisite power to carry on its business as now
conducted. COPT is the sole general partner of COP and is a duly formed and
validly existing Maryland real estate investment trust. Each of COP and COPT has
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full power and authority and possesses all material authorizations and approvals
necessary to enable it to execute and deliver this Agreement and the other
Transaction Documents to be executed by it, and perform its obligations
hereunder and thereunder. This Agreement and the other Transaction Documents
when executed and delivered by COP and COPT will, subject to approval by the
shareholders of COPT prior to Closing, constitute valid and legally binding
obligations of each of COP and COPT, enforceable against them in accordance with
their respective terms, subject to bankruptcy and insolvency laws, and to
equitable principles which may be imposed by courts.
6.2 No Conflicts. Subject to approval by the shareholders of COPT, the
execution, delivery and performance of this Agreement and the other Transaction
Documents do not and will not (with or without the passage of time or the giving
of notice): (i) violate or conflict with COP's Partnership Agreement or COPT's
Amended and Restated Declaration of Trust, or any Law binding upon COP or COPT;
(ii) violate or conflict with, result in a breach of, or constitute a default or
otherwise cause any loss of benefit under, any agreement or other obligation to
which COP or COPT is a party or by which either of them (or the assets of either
of them) is bound, or give to any other party any rights (including, without
limitation, rights of termination, foreclosure, cancellation or acceleration)
in, or with respect to COP or COPT; or (iii) result in, require, or permit the
creation or imposition of, any restriction, mortgage, deed of trust, pledge,
lien, security interest or other charge, claim or encumbrance upon, or with
respect to, COP or COPT or the assets of either of them.
6.3 Litigation. There are no actions, suits, claims, proceedings,
investigations or inspections, pending or (to COPT's knowledge) threatened,
against or affecting COPT or its Affiliates which could have a material adverse
affect on COPT and its Afiliates considered as a whole, and to COPT's knowledge
there are no matters of litigation or governmental proceedings expected to be
brought against it or its Affiliates which could have a material adverse affect
on the financial condition of COPT and its Affiliates considered as a whole.
6.3 Consents. No consent, order, approval or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign, is
required by or with respect to the COP or COPT in connection with the execution,
delivery and performance of this Agreement and the other Transaction Documents.
6.4 SEC Reports and Financial Statements. The SEC Reports did not, as
of their respective dates of filing, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading. There has not been any material adverse
change in the business of COPT since March 31, 1998. Except as may otherwise be
set forth therein, the financial statements (including the notes thereto) of
COPT set forth in the SEC Reports present fairly the consolidated financial
position of COPT as at the dates set forth therein and its results of
operations, changes in consolidated stockholder equity and cash flows for
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periods covered thereby, all in conformity with United States generally accepted
accounting principles applied on a consistent basis for such periods.
6.5. The Shares. The Shares to be issued at Closing will, when issued
and delivered, be duly authorized, validly issued, fully paid, non-assessable
shares of COPT free from all claims of preemptive rights.
6.6 Tax Status. COP has been at all times, and presently intends to
continue to be, classified as a partnership for federal income tax purposes and
not an association taxable as a corporation or a publicly traded partnership
taxable as a corporation. COPT is now, and presently intends to continue to be
classified, as a real estate investment trust under Section 856 of the Internal
Revenue Code of 1986, as amended.
6.7 Full Disclosure. All documents and other papers delivered by or on
behalf of COP or COPT in connection with the transactions contemplated by this
Agreement are accurate and complete in all material respects and are authentic.
No representation or warranty of COP or COPT contained in this Agreement or any
other Transaction Document contains any untrue statement of a material fact or
omits to state a fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. Except as described in this Agreement or in the SEC Reports there is
no fact known to COP or COPT or (other than proposed or enacted legislation,
proposed or enacted regulation, or general economic or real estate industry
conditions and changes) that materially adversely affects or, so far as COP and
COPT can reasonably foresee, materially threatens, the assets, activities,
prospects, financial condition or results of COP or COPT.
6.8 Condition of Tangible Assets. COP and COPT acknowledge that the
tangible assets comprising a portion of the Assets are being transferred "as-is,
where-is", and that Seller makes no representation or warranty, express or
implied, about the condition or fitness for any particular purpose, of any of
the tangible assets included as a part of the Assets.
ARTICLE 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
Seller's obligation to complete the Closing shall be conditioned on
the following, any of which may be waived by Seller.
7.1 Representations and Warranties. The representations and warranties
made by Buyer in this Agreement and all other Transaction Documents, or in any
exhibit, schedule, statement, list or certificate furnished pursuant thereto,
shall be true and correct when made and shall be true and correct in all
material respects at and as of the time of the Closing.
7.2 Performance by Buyer. Buyer shall have performed and complied in
all material respects with all agreements and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing.
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7.3 Other Matters. The transactions contemplated hereby shall
be approved by all necessary action on the part of Buyer.
7.4 Deliveries at Closing. All instruments, documents, certificates and
other items required to be delivered to Seller pursuant to Section 10.2 of the
Agreement shall have been delivered to Buyer at or prior to the Closing Date.
7.5 Shareholder Approval and Other Closings. The Shareholders of COPT
shall have approved the transactions contemplated hereby and by the Contribution
Agreement and the Development Agreements. Immediately preceding Closing
hereunder, there shall be a closing pursuant to the Contribution Agreement.
ARTICLE 8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.
Buyer's obligation to complete the Closing shall be conditioned on the
following, any of which may be waived by Buyer.
8.1 Representations and Warranties. The representations and warranties
made by Seller and the Shareholders in this Agreement and all other Transaction
Documents, or in any exhibit, schedule, statement, list or certificate furnished
pursuant thereto, shall be true and correct when made and shall be true and
correct in all material respects at and as of the time of the Closing.
8.2 Performance by Seller and the Shareholders. Seller and the
Shareholders shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed or complied
with by them prior to or at the Closing.
8.3 Federal and State Licenses, Permits and Authorizations. Buyer shall
have received or have been granted any and all necessary licenses, permits and
authorizations by the appropriate local, state and federal government agencies
in order for Buyer to purchase the Assets and the CRM Interest (the
"Authorizations"). Seller and the Shareholders shall cooperate and employ their
best efforts to assist Buyer in receiving the Authorizations.
8.4 Other Matters. The transactions contemplated hereby shall be
approved by all necessary corporate action on the part of the Seller, and there
shall have been no material change in any Law or regulation affecting Seller or
CRM.
8.5 Deliveries at Closing. All instruments, documents, certificates and
other items required to be delivered to Buyer pursuant to Section 10.1 of the
Agreement shall have been delivered to Buyer at or prior to the Closing Date.
8.6 Buyer's Rights With Respect to CRM Interest. Buyer shall have the
right not to purchase the CRM Interest at Closing, if Buyer is not satisfied for
any reason whatsoever with the documents, agreements and instruments relating to
such transfer. Buyer may exercise this right, in its sole discretion, by
notifying Seller in writing of its intention not to purchase the CRM Interest at
any time up to completion of the closing of the Contribution Agreement. If Buyer
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.
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9.3 Procedures for Third Party Claims. In the event that any claim
shall be asserted by any individual or entity against Buyer which, if sustained,
would result in a Deficiency, Buyer, within a reasonable time after learning of
such claim, shall notify Seller and the Shareholders of such claim, and shall
extend to Seller and the Shareholders a reasonable opportunity to defend against
such claim, at the Sellers' and the Shareholders' sole expense and through legal
counsel acceptable to Buyer, provided that Seller and the Shareholders proceed
in good faith, expeditiously and diligently to defend such claim. Buyer shall,
at its option and expense, have the right to participate in any defense
undertaken by Seller and the Shareholders with legal counsel of its own
selection. No settlement or compromise of any claim which may result in a
Deficiency may be made by Seller or any Shareholder without the prior written
consent of Buyer unless prior to such settlement or compromise (i) Seller and
the Shareholders acknowledge in writing their obligation to pay in full the
amount of the settlement and all associated expenses, (ii) Buyer is furnished
with security reasonably satisfactory to Buyer that Seller and the Shareholders
will in fact pay such amount and expenses and (iii) Seller and the Shareholders
obtain a written release from the claimant, in a form reasonably satisfactory to
Buyer, of the Buyer from all liability, past, present and future, arising from
or in connection with the claim.
9.4 Payment of Deficiencies. In the event that Buyer discovers any
Deficiency, Buyer shall give written notice to Seller and the Shareholders of
the nature and amount of the Deficiency. Seller and the Shareholders hereby
agree to pay the amount of such Deficiency to Buyer in cash within thirty (30)
days after written notice from Buyer which reasonably details the nature and
amount of the Deficiency. Any amounts required to be paid which are not paid by
Seller and the Shareholders when due under this Article 9 shall bear interest
from the due date thereof until the date paid at a rate of interest per annum
that is equal to the Prime Rate. At Buyer's option, Buyer may off-set any unpaid
Deficiency or portion thereof against any obligation Buyer may have to any party
hereto.
9.5 Provisions Not Exclusive. The indemnification obligations of
Seller, the Shareholders and Buyer contained herein, including any rights of set
off as described herein, are not intended to waive or preclude any other claims,
rights or remedies which may exist at law (whether statutory or otherwise) or in
equity with respect to the matters covered by the indemnifications described
herein.
9.6 Time Limit on Certain Claims. No claim for indemnification may be
asserted pursuant to a Deficiency described in Section 9.2, unless notice of
such claim shall have been given within eighteen months after the Closing Date
to the person from whom such indemnification may be sought (except that the cost
of items described in Section 9.2(v) which are based on claims for which notice
has been given in such eighteen month period shall be payable regardless of when
incurred); provided, however, that if the Deficiency is based on a
misrepresentation or breach contained in Sections 4.12, 4.21, 4.22 or 4.30, the
claim for indemnification with respect thereto shall have been given within the
later of three years after the Closing Date or the statute of limitations
applicable to such underlying claim.
9.7 Limit on Amounts. No claim for indemnification may be asserted
pursuant to this Article 9 against Seller and the Shareholders until the
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aggregate amount of Deficiencies for claims which then may be asserted hereunder
exceeds Fifty thousand Dollars ($50,000.00), whereupon all such Deficiencies may
be claimed.
9.8 Indemnification by COP and COPT. COP and COPT shall jointly and
severally indemnify, protect, defend and hold Seller and each of the
Shareholders (the "Seller Indemnified Parties") harmless from and against any
claims, losses, demands, liabilities, suits, costs and damages suffered by the
Seller Indemnified Parties incurred, arising against, or suffered by, the Seller
Indemnified Parties as a consequence of (i) any breach of any representation,
warranty or covenant made in this Agreement by COP or COPT, or (ii) the failure
of COP or COPT to satisfy any of the Assumed Liabilities.
ARTICLE 10. DELIVERIES AT CLOSING.
10.1 Deliveries by Seller and the Shareholders at Closing. If not
previously delivered, at Closing Seller and the Shareholders shall deliver or
cause to be delivered to Buyer each of the following:
(a) all contractual assignments, third-party consents, permits, waivers
and governmental approvals, as well as evidence of the completion of all other
transactions necessary or appropriate for consummation by Buyer of the
transactions contemplated by this Agreement and the other Transaction Documents,
in form and substance reasonably satisfactory to Buyer;
(b) resolutions of Seller's Board of Directors and the Shareholders
authorizing the execution, delivery and performance of this Agreement and the
other Transaction Documents to be executed and performed by Seller;
(c) duly executed bills of sale, articles of transfer, assignments and
other documents evidencing the transfer of the Assets and the CRM Interest to
Buyer, in form reasonably satisfactory to Buyer;
(d) an opinion of Xxxxxx X. Xxxxxxxxxx, counsel for the Seller,
addressed to Buyer and dated the date of the Closing, in the same form as
provided for in Section 16.1.3 of the Contribution Agreement, except that no
opinion will be rendered with respect to the transfer of the interest in CRM
without obtaining the consent of KLNB Inc.;
(e) a certificate executed by the chief executive officer of Seller and
by each Shareholder to the effect that all conditions precedent to the
obligation of the Seller to close hereunder have been satisfied or waived, and
that the representations and warranties of the Seller in the Agreement are true
and correct as of the Closing Date;
(f) Good Standing Certificates reflecting each of Seller's and CRM's
good standing issued by the State of Maryland as of a date immediately prior to
the Closing; and
(g) such other certificates, instruments, documents, agreements, etc.
as may be reasonably necessary or appropriate to effect the transactions
contemplated hereby.
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10.2 Deliveries by Buyer at Closing. If not previously delivered, at
Closing Buyer shall deliver or cause to be delivered to Seller each of the
following:
(a) the Shares;
(b) a resolution of COPT's Trustees, for COPT and as sole general
partner of COP, authorizing the execution, delivery and performance of this
Agreement and the other Transaction Documents to be executed and performed by
COPT and COP;
(c) a certificate executed by COPT, for COPT and as sole general
partner of COP, to the effect that all conditions precedent to the obligation of
the COP to close hereunder have been satisfied or waived, and that the
representations and warranties of COP and COPT in the Agreement are true and
correct as of the Closing Date;
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(d) an opinion of counsel for COP and COPT addressed to Seller and
dated the date of the Closing, as to the matters described in Sections 6.1, 6.2,
6.3 and 6.5 hereof in form and substance reasonably satisfactory to Seller; and
(e) such other certificates, instruments, documents, agreements,
etc. as may be reasonably necessary or appropriate to effect the transactions
contemplated hereby.
ARTICLE 11. TERMINATION; REMEDIES.
11.1 Termination by Buyer. This Agreement may be terminated and
canceled at any time prior to the Closing by the Buyer, upon written notice to
the Seller, if any of the following circumstances or events continues for more
than ten (10) business days after Buyer has provided written notice thereof to
Seller of its intention to terminate this Agreement:
(a) any of the representations or warranties of the Seller or
the Shareholders contained herein or in any other Transaction Document shall be
inaccurate or untrue in any material respect;
(b) any material obligation, term or condition to be
performed, kept or observed by Seller or any Shareholder hereunder has not been
performed, kept or observed in any material respect at or prior to the time
specified in this Agreement; or
(c) any one of the conditions precedent to Buyer's obligations
to complete Closing hereunder as set forth in Article 7 has not been satisfied,
or waived by Buyer in writing, at or before the Closing unless the failure of
condition is the result of a material breach of this Agreement by Buyer.
11.2 Termination by Seller. This Agreement may be terminated and
canceled at any time prior to the Closing by the Seller, upon written notice to
the Buyer, if any of the following circumstances or events continues after
Seller has provided ten (10) business days' written notice thereof to Buyer of
its intention to terminate this Agreement:
(a) any of the representations or warranties of the
Buyer contained herein or in any Transaction Document shall be inaccurate or
untrue in any material respect;
(b) any material obligation, term or condition to be
performed, kept or observed by Buyer hereunder has not been performed, kept or
observed in any material respect at or prior to the time specified in this
Agreement; or
(c) any one of the conditions precedent to Seller's
obligations to complete Closing hereunder as set forth in Article 6 has not been
satisfied, or waived by Seller in writing, at or before the Closing unless the
failure of condition is the result of a material breach of this Agreement by
Seller or a Shareholder.
11.3 Termination by Agreement. This Agreement may be terminated at any
time by mutual written agreement of Buyer and Seller, and shall be automatically
terminated upon termination of the Contribution Agreement.
11.4 Effect of Termination. All obligations of the Parties hereunder
shall cease upon any termination pursuant to Sections 11.1, 11.2 or 11.3,
provided, however, that (x) the provisions of this Article 11, Section 2.3,
Section 3.4 and Section 5.1 hereof shall survive any termination of this
Agreement; and (y) nothing herein shall relieve any party from any liability (at
law or in equity) for a material error or omission in any of its representations
or warranties contained herein or a material failure to comply with any of its
covenants, conditions or agreements contained herein, if such error, omission or
failure was willful or deliberate, but if such error, omission or failure was
not willful or deliberate, the liability of the responsible party shall be
limited to out-of-pocket expenses incurred by the other party(ies) in connection
with negotiating, preparing and entering into this Agreement and carrying out
the transactions contemplated hereby.
ARTICLE 12. NOTICES. Any notice, demand or request which may be permitted,
required or desired to be given in connection therewith shall be given in
writing and directed to Seller and the Shareholders and Buyer as follows:
Seller and the Shareholders:
Constellation Real Estate, Inc.
0000 Xxxxxx Xxxx Xxxxx - Xxxxx 000
Xxxxxxxx, XX 00000
Attention: General Counsel
Telecopy: 000-000-0000
and
Constellation Holdings, Inc.
000 Xxxx Xxxxx Xxxxxx
00
Xxxxxxxxx, XX 00000-0000
Attention: Xxx X. Xxxxxxxxxx, Esquire
Telecopy: 000-000-0000
With a copy to its attorneys:
Xxxxxxx X. Xxxx, Esquire
Piper & Marbury LLP
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Telecopy: 000-000-0000
Buyer:
Corporate Office Properties Trust
Xxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, III
President and Chief
Executive Officer
Telecopy: 000-000-0000
With a copy to its attorneys:
F. Xxxxxxx Xxxxxxx, Esquire
Saul, Ewing, Xxxxxx & Xxxx LLP
Centre Square West
0000 Xxxxxx Xxxxxx - 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
000-000-0000
Notices shall be deemed properly delivered and received when and if either (i)
personally delivered, including via facsimile; or (ii) on the first business day
after deposit with a commercial overnight courier for delivery on the next
business day. Any party may change its address for delivery of notices by
properly notifying the others pursuant to this Article 12.
ARTICLE 13. MISCELLANEOUS PROVISIONS.
13.1 Entire Agreement; Counterparts. This Agreement is the entire
agreement between the parties hereto with respect to the sale of the Assets and
the CRM Interest and supersedes all prior and contemporaneous communications,
representations, agreements, discussions and understandings, whether oral or
written, between the parties hereto, including, without limitation, any
financial or other projections, valuations or predictions regarding the Seller,
the Assets or the CRM Interest. There are no oral or written agreements,
understandings, representations or warranties between the parties hereto with
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respect to the subject matter hereof other than those set forth or contemplated
in this Agreement. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13.2 Headings. The headings contained in this Agreement and the
Schedules and Exhibits are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement. Reference to Sections, Schedules or
Exhibits are to portions of this Agreement unless the context requires
otherwise.
13.3 Assignment and Amendment of Agreement. This Agreement shall be
binding on and inure to the benefit of the parties hereto, their heirs,
executors, administrators, successors and assigns; provided, however, that this
Agreement shall not be assignable or transferable by Seller or a Shareholder
without the prior written consent of Buyer, or by Buyer without the written
consent of Seller, except that Buyer may assign some or all of Buyer's rights
and obligations under this Agreement without such prior written consent to any
Affiliate of Buyer. Neither this Agreement nor any provisions hereof may be
waived, modified, amended, discharged or terminated except by an instrument in
writing signed by the party against which the enforcement of such waiver,
modification, amendment, discharge or termination is sought, and then only to
the extent set forth in such instrument.
13.4 Commercially Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement each party will use its commercially reasonable
best efforts to cause the Closing to occur. Seller and Buyer shall use their
commercially reasonable, diligent and good faith efforts, and shall cooperate
with and assist each other in their efforts, to obtain any and all consents and
approvals of third parties (including, but not limited to, governmental
authorities) to the transaction contemplated hereby, and to otherwise perform as
may be necessary or otherwise reasonably requested by the other party to
effectuate and carry out the purposes of, this Agreement.
13.5 Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of Maryland without regard to principles of conflicts
of law.
13.6 No Third Party Rights. This Agreement is not intended and shall
not be construed to create any rights in any persons other than Seller, the
Shareholders and Buyer and their permitted assignees, and no Person shall assert
any rights as third party beneficiary hereunder.
13.7 Incorporation of Schedules and Exhibits. The Schedules and
Exhibits attached hereto are incorporated into this Agreement and shall be
deemed a part hereof as if set forth herein in full. Reference herein to "this
Agreement" and the words "herein," "hereof' and words of similar import refer to
this Agreement including its Schedules and Exhibits as an entirety. In the event
of any conflict between provisions of this Agreement and any such Schedule or
Exhibit, the provisions of this Agreement shall control.
13.8 Survival. The covenants, rights, obligations, representations and
warranties of each of the parties hereunder shall survive the Closing subject to
the limitations set forth in this Agreement.
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13.9 Waiver. The failure of any party at any time or times to enforce
its rights under such provisions, strictly in accordance with the same, shall
not be construed as having created a custom in any way or manner contrary to the
specific provisions of this Agreement or as having in any way or manner modified
or waived the same.
13.10 Enforcement. Each of the Parties hereto shall have the right at
all times to enforce the provisions of this Agreement in strict accordance with
its terms and to pursue remedies for breach by any legal and equitable means,
including by an action for specific performance, notwithstanding any conduct or
custom on its part in refraining from doing so at any time or times.
13.11 Litigation. Seller, the Shareholders and Buyer waive all rights
to a jury trial with respect to any disputes relating to this Agreement, whether
arising before or after Closing. In the event of litigation between the parties
with respect to this Agreement, the performance of their respective obligations
hereunder or the effect of a termination under this Agreement, the losing party
shall pay all costs and expenses incurred by the prevailing party in connection
with such litigation, including, but not limited to, reasonable attorneys' fees
of counsel selected by the prevailing party. The parties hereby further
acknowledge and agree that in the event of litigation between them, as
contemplated above, and the resolution of that litigation through compromise,
settlement, or partial judgment, the court before which such litigation is
initially brought shall have the right to allocate responsibility, between
Seller and the Shareholders on the one hand, and Buyer on the other, for all
costs and expenses (including, but not limited to, attorneys' reasonable fees)
incurred by all parties in the pursuit of that litigation resolved through
compromise, settlement or partial judgment. Notwithstanding any provision of
this Agreement to the contrary, the obligations of the parties under this shall
survive termination of this Agreement and the Closing, if applicable.
13.12 Publicity. Seller, the Shareholders and Buyer agree that no
public release or announcement concerning the transactions contemplated hereby
shall be issued by either party without the prior written consent of both Buyer
and Seller, but in no event shall financial terms be disclosed, except as such
release or announcement may be required by law or court order, in which case the
party required to make the release or announcement shall allow the other party
reasonable time to comment on such release or announcement in advance of such
issuance.
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13.13 Brokerage. Seller and the Shareholders represent and warrant to
Buyer that none of them, and Buyer represents and warrants to Seller and the
Shareholders that neither of them, has dealt with any brokers or finders in
connection with this transaction and that no broker, finder or other party is
entitled to a commission, finder's fee or other similar compensation as a result
hereof, except Xxxx Xxxxx Real Estate Services, Inc. under separate agreement
with Buyer. Buyer shall pay to Xxxx Xxxxx Real Estate Services, Inc. the
compensation payable to it with respect to this transaction pursuant to such
agreement. Seller and the Shareholders hereby indemnify, protect and defend and
hold Buyer harmless from and against all losses, claims, costs, expenses,
damages (including, but not limited to, attorneys' fees of one counsel selected
by Buyer) resulting or arising from the claims of any broker, finder or other
such party, claiming by, through or under the acts or agreements of Seller or a
Shareholder. Buyer hereby indemnifies, defends and holds Seller and the
Shareholders harmless from and against all losses, claims, costs, expenses,
damages (including, but not limited to, attorneys' fees of one counsel selected
by the Seller and Shareholders) resulting or arising from the claims of any
broker, finder or other such party claiming by, through or under acts or
agreements of Buyer. This Section 13.13 shall survive any termination of this
Agreement and the Closing, if applicable.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal as of the date first written above.
CORPORATE OFFICE PROPERTIES TRUST
By: /s/ Xxxx X. Xxxxxx, III
Xxxx X. Xxxxxx, III, President and
Chief Executive Officer:
CORPORATE OFFICE PROPERTIES, L.P.
By: Corporate Office Properties Trust,
its sole general partner
By: /s/ Xxxx X. Xxxxxx, III
Xxxx X. Xxxxxx, III, President and
Chief Executive Officer:
CONSTELLATION REAL ESTATE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Title: Xxxxxxx X. Xxxxxxx
President
SHAREHOLDERS:
KMS OLDCO,INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Title: Xxxxxxx X. Xxxxxxx
President
CONSTELLATION REAL ESTATE GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Title: Xxxxxxx X. Xxxxxxx
President
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SCHEDULES AND EXHIBITS
SCHEDULES:
2.1(c) Excluded Assets
2.2 Allocation of Purchase Price
2.5(b) Agreements, Leases and Equipment Leases to be Assumed by Buyer
4.5 Subsidiaries, Joint Ventures, etc.
4.7 Employees and Labor Matters
4.8 Financial Statements
4.10 Changes Since Balance Sheet Date
4.13 Litigation
4.16 Intangible Assets
4.17 Third Party Consents Required
4.21 Encumbrances
4.23 Employee Benefit Plans
EXHIBITS:
"A" CRM Operating Agreement
"B" Form of Opinion of counsel to Seller
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