Document:

Exhibit
10.34

 

AGREEMENT OF SALE

 

THIS AGREEMENT
OF SALE (this “Agreement”)
is made as of this 19th day of December, 2002 (the “Effective Date”),
by and between JOLLY KNOLLS, LLC,
a Maryland limited liability company (“Seller”), and CORPORATE OFFICE PROPERTIES, L.P., a Delaware limited partnership (“Buyer”).

 

Background

 

Seller is the owner in
fee simple of that certain parcel of land known as “Cedar Knolls” (the “Land”), located in Anne Arundel County,
Maryland (the “County”), within
“The National Business Park” (“National
Business Park”), and containing
approximately 108.183 acres.  The Land
is more particularly shown on the plats entitled “The National Business Park
Phase 4 Formerly Cedar Knolls Property Previously Recorded in Liber 9138, folio
677”, consisting of plats 1 through 7 and recorded among the Land Records at
Plat Book 246, pp. 23 through 29, plats 12850 through 12856 (collectively, the
“Subdivision Plat”).

 

Under
the Subdivision Plat, the Land has been divided into two phases.  The first phase is that portion of the Land
which has been subdivided into eight (8) Lots, numbered 21 through 25 and 30
through 32, inclusive, on the Subdivision Plat.  Lots Nos. 21-25 and 30-32 are herein referred to collectively as
the “Lots” and individually, as a
“Lot”.  The second phase is that portion of the Land which is shown on
plat 5 of the Subdivision Plat as the “Reserve
Parcel”.  The Land, as described on the Subdivision Plat, also contains (i)
roadways to be dedicated to the County with an aggregate acreage of
approximately 3.784 acres (the “Roadways”);
(ii) three (3) open space parcels with an aggregate acreage of approximately
17.339 acres (each individually, an “Open
Space Parcel”, and collectively the “Open Space  Parcels”);
and (iii) a flood plain area comprising approximately 1.192 acres (the “Flood Plain Area”).

 

All
of the Land has been annexed and is subject to the Declaration (as hereinafter
defined).  The Lots as now subdivided
will be permitted under applicable law to have a total FAR (as hereinafter
defined) of approximately 900,000 square feet. 
It is anticipated that if the Reserve Parcel is subdivided it will have
a total FAR of not less than 350,000 square feet.

 

Seller
desires to sell the Property (as hereinafter defined in Section 2) to Buyer and
Buyer desires to purchase the Property from 

 

1

 

Seller,
upon the terms, covenants and conditions set forth in this Agreement.

 

Agreements

 

NOW, THEREFORE, in consideration
of the foregoing, the mutual covenants and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by Seller and Buyer, the parties hereto covenant and agree
as follows:

 

SECTION 1.  DEFINITIONS.  As used herein, the following
terms shall have the meanings indicated:

 

“Additional Guaranty” is defined in Subsection 3.1.2.

 

“Alternative Sale Structure” is defined in Section 2.

 

“Assignment Agreement” means the agreement by and among Seller,
Arbitrage Land Limited Partnership “(“Arbitrage”),
Jolly Acres Limited Partnership (“Jolly Acres”)
and Corporate Office Properties, L.P., in recordable form, in which Seller,
Arbitrage and Jolly Acres shall assign to Corporate Office Properties, L.P.,
jointly and severally and non-exclusively with Seller, their rights as
“Declarant” under the Declaration, and Arbitrage and Jolly Acres, the remaining
two Declarants under the Declaration. 
The Assignment Agreement shall be in the form attached hereto as Exhibit G-1.

 

“Assignment of Member Interests” is defined in Section 2.

 

“Association” means the Maryland nonprofit corporation
organized or to be organized pursuant to the Declaration.

 

“Closing Dates” means, collectively, the First Closing Date and
the Second Closing Date.

 

“Closing Statement” is defined in Subsection 5.3.5.

 

“Closings” means, collectively, the First Closing and the
Second Closing.

 

“Completion of the
Ponds” means the Seller’s completion of the three ponds referenced
in the Mass Grading Permit for purposes of sediment control, two of which ponds
have been completed as sediment
control ponds as of the Effective Date and the third of which ponds will be
completed by Seller as a sediment control pond and may be located offsite on
Lot 17R.

 

“COPT” means Corporate Office Properties Trust, a Maryland real
estate investment trust.

 

2

 

“County” is defined above in the Background Section.

 

“Declaration” means the Declaration of Covenants, Conditions and Restrictions dated
April 21, 2000 and recorded among the Land Records of the County at Liber 9853,
folio 591, as amended by a First Amendment to Declaration of Covenants,
Conditions and Restrictions dated July 6, 2001 and recorded among the Land
Records of the County at Liber 11048, folio 310.

 

“Deed of Trust” is defined in Subsection 3.1.2.

 

“Default Rate” means an annual interest rate equal to the
greater of (i) fifteen percent (15%); and (ii) eight percent (8%) in excess of
the prime rate as announced from time to time in the “Money Rates” section of
the Wall Street Journal.

 

“Easement Agreement” means that easement agreement in
recordable form, granting to Seller, its successors and assigns, a
non-exclusive perpetual easement for vehicular and pedestrian access, ingress
and egress over the Roadways to allow for access to and from the Reserve Parcel
to public roadways.  In addition, the
Easement Agreement shall grant to Seller, its successors and assigns, an
easement to install, maintain, operate and replace utility lines, cables,
conduits and other utility lines for utility service for any portion of the
Reserve Parcel.  The Easement Agreement
shall be in the form attached hereto as Exhibit
E.

 

“EDUs” are defined in Subsection 6.2.

 

“Environmental Feasibility Period” means that period of time
commencing on the Effective Date and ending thirty (30) days thereafter.

 

“Existing Title Information” means the Commonwealth Land Title
Insurance Policy No. 207-875508, dated April 23, 1999, as updated by a letter
dated November 15, 2002 from Commonwealth Land Title Insurance Company, copies
of which are attached as Exhibit F.

 

“FAR” means the square footage of floor area of a Structure
determined in accordance with Article 28, Section 1-106 (a) of the Anne Arundel
County Zoning Code in effect from time to time.  As of the Effective Date, the “floor area” is defined by such
section to mean “the sum of the gross horizontal areas, other than
parking areas not part of the structure, of all stories of a structure measured
from the exterior faces of the exterior walls or from the centerline of party
walls, including all basement floors, interior balconies or mezzanines,
elevator shafts, stairwells, and enclosed porches and the floor area of each
accessory structure located on the same lot....”

 

“FAR Covenant” means a covenant in the form attached as Exhibit C-1 hereto which shall provide
that from and after the First Closing Date, except as otherwise provided in the
FAR Covenant, the total FAR for Phase One may not be increased in excess of 900,000
(the “Cumulative FAR Amount”).

 

3

 

“Financing Statement” means a UCC-1 financing statement in form
and content reasonably satisfactory to Seller, perfecting Seller’s security
interest in those items secured by the Deed of Trust or IDOT, as applicable,
and required or permitted to be perfected by a financing statement.

 

“First  Closing” is
defined in Subsection 5.1.1.

 

“First  Closing Date”
means January 24, 2003, or on such
earlier date and time designated by Buyer by written notice to Seller given not less than
five (5) days prior to such date.

 

“Flood Plain Area” is defined above in the Background Section.

 

“Guaranty” is defined in Subsection 3.1.2.

 

“Hotel Covenant” means a covenant to be included in each deed
for the Property (whether a deed to the Buyer or, if the Alternative Sale
Structure is used, any Deed to Newco1 or Newco2) which provides that prior to
December 29, 2005, the portion of the Property conveyed by such deed shall not
be developed or used for hotel uses.

 

“IDOT” is defined in Section 3.1.2.

 

“Land” is defined above in the Background Section.

 

“Land Records” means the Land Records of Anne Arundel County,
Maryland.

 

“Lot” and “Lots”
are defined above in the Background Section.

 

“Mass  Grading
Permit” means the mass grading permit NBR 302008668 from Anne
Arundel County Planning and Code Enforcement to Seller (listed as Jolly Knolls
Ltd Liability Company) in connection with the installation
of three (3) ponds and mass grading, a copy of which permit is attached hereto
as Exhibit L.

 

“Mass  Grading
Permit  Holder” means
the Seller (listed as Jolly Knolls Ltd Liability Company on the Mass Grading Permit).

 

“Mass  Grading
Permit  Collateral”
means all bonds and letters credit posted or delivered by Seller to the County to secure the obligations under the Mass
Grading Permit, including, but not limited to, the Grading & Sediment
Control Bond No. 929203095  dated
November 20, 2001 from Seller, as principal, and National Fire Insurance
Company of Hartford, as surety, in the amount of $1,001,784.10 for the benefit
of the County.

 

“Modification
Agreement” means an agreement modifying the Cumulative FAR Amount under the FAR Covenant, which is entered
into pursuant to the provisions of Section 3 of the FAR Covenant.

 

“National Business Park” is defined above in the Background
Section.

 

4

 

“Newco1” is defined in Section 2.

 

“Newco1 Deed” means the deed from Seller to Newco1, which will
be used only if the Alternative Sale Structure is utilized with respect to the
First Closing.  The Newco1 Deed shall be
in the form attached hereto as Exhibit K.

 

“Newco2” is defined in Section 2.

 

“Non-Feasibility Notice” is defined in Subsection 4.1.

 

“Note” is defined in Subsection 3.1.2.

 

“Open Space Parcel” is defined above in the Background Section.

 

“Permitted Exceptions” means the
following:  (a) all real estate taxes
and assessments, both general and special, not yet due and payable as of the
First Closing Date or Second Closing Date, as applicable, (b) zoning
ordinances and subdivision regulations, (c) all matters of public record,
including all matters set forth on the Existing Title Information except for
Title Defects that Seller agrees to correct pursuant to Subsection 5.2.3 below;
(d) all matters that would be revealed by a true and accurate survey, including
all matters set forth on the Existing Title Information, except for Title
Defects that Seller agrees to correct pursuant to Subsection 5.2.3 below; (e)
the FAR Covenant, (f) any other title matters approved or deemed approved by
Buyer in accordance with this Agreement; (g) the Hotel Covenant, (h) the
Easement Agreement, (i) matters that result from acts of Buyer, (j) the
Declaration, (k) such other matters as may reasonably be required by the County
or other applicable governmental authorities, including but not limited to a
subdivision plat, in connection with the subdivision of the Reserve Parcel, (l)
easements, covenants and other matters of title entered into after the
Effective Date by Seller and/or by the Association that are reasonably
necessary in connection with the subdivision, development, construction,
operation or ownership of the Property, provided such matters of title do not
materially and adversely affect the use of any Lot for its intended purpose,
and (m) the Second FAR Covenant.

 

“Phase 1 Environmental Assessment” is defined in Subsection
4.1.

 

“Phase One” means, collectively, the Lots, the Roadways, the
Open Space Parcel and the Floodplain Area.

 

“Phase One Deed” means the deed to Buyer referred to in Section
5.3.1 or the Newco1 Deed, as applicable.

 

“Phase One  Loan Documents”
means the Note, the Guaranty, Financing Statement, Deed of Trust, the FAR
Covenant, the Second FAR Covenant, and any certificates, assignments, and other
documents executed in connection herewith or therewith, and all current and
future supplements, amendments and attachments thereto.  If the Alternative Sale Structure is used,
the Loan Documents shall include the Additional Guaranty and IDOT.

 

5

 

“Phase One  Opinion Letter”
means an opinion of counsel with respect to the existence of the Buyer and
COPT, the Buyer’s and COPT’s authorization of the Phase One Loan Documents, the
due execution and enforceability of the Phase One Loan Documents.  The Phase One Opinion Letter shall be in the
form attached hereto as Exhibit I-1.

 

“Phase One Purchase Price” is Twenty Million Nine Hundred
Ninety-Three Thousand One Hundred Forty-Six Dollars ($20,993,146).

 

“Phase One Purchase Price Balance” means Eighteen Million Four
Hundred Thirty-Three Thousand Eighty-Three Dollars and Zero Cents
($18,433,083.00), which is the balance of the Phase One Purchase Price, after
payment by Buyer to Seller of the Phase One Purchase Price Initial Payment.

 

“Phase One Purchase Price Initial Payment” is Two Million Five
Hundred Sixty Thousand Sixty-Three Dollars and Zero Cents ($2,560,063.00).

 

“Property” is defined in Section 2.

 

“Reserve Parcel” is defined above in the Background Section.

 

“Reserve Parcel Additional Guaranty” is defined in Subsection
3.2.2.

 

“Reserve Parcel Deed of Trust” is defined in Subsection 3.2.2.

 

“Reserve Parcel Financing Statement” means a UCC-1 financing
statement in form and content reasonably satisfactory to Seller, perfecting
Seller’s security interest in those items secured by the Reserve Parcel Deed of
Trust or Reserve Parcel IDOT, as applicable, and required or permitted to be
perfected by a financing statement.

 

“Reserve Parcel Guaranty” is defined in Subsection 3.2.2.

 

“Reserve Parcel IDOT” is defined in Subsection 3.2.2.

 

“Reserve Parcel  Loan
Documents” means the Reserve Parcel Note, the Reserve Parcel
Guaranty, Reserve Parcel Financing Statement, Reserve Parcel Deed of Trust, the
FAR Covenant, the Second FAR Covenant and any certificates, assignments, and
other documents executed in connection herewith or therewith, and all current
and future supplements, amendments and attachments thereto.  If the Alternative Sale Structure is used,
the Reserve Parcel Loan Documents shall include the Reserve Parcel Additional
Guaranty and Reserve Parcel IDOT.

 

“Reserve Parcel Note” is defined in Subsection 3.2.2.

 

“Reserve Parcel  Opinion
Letter” means an opinion of counsel with respect to the existence of
the Buyer and COPT, the Buyer’s and COPT’s authorization of the Reserve Parcel

 

6

 

Loan Documents, the due execution and
enforceability of the Reserve Parcel Loan Documents.  The Reserve Parcel Opinion Letter shall be in the form attached
hereto as Exhibit I-2.

 

“Reserve Parcel Purchase Price” is Eight Million Seven Hundred
Fifty Thousand Dollars ($8,750,000.00), which dollar amount shall increase at
the rate of 3% per annum after October 1, 2002.  As an example, if the Second Closing occurs on June 2, 2003, then
the Reserve Parcel Purchase Price shall be $8,925,479.45, calculated as
follows:  (a) $8,750,000.00, plus (b)
$8,750,000.00 multiplied by three percent (3%) times 244/365 days.

 

“Reserve Parcel Purchase Price Balance” is the sum of the
Reserve Parcel Purchase Price less the Reserve Parcel Purchase Price Initial
Payment.

 

“Reserve Parcel Purchase Price Initial Payment” is that product
which equals twenty percent (20%) of the Reserve Parcel Purchase Price.  As an example, if the Reserve Parcel
Purchase Price is $8,925,479.45, then the Reserve Parcel Purchase Price Initial
Payment shall be $1,785,095.89.

 

“Roadways” is defined above in the Explanatory Statement.

 

“Second  Assignment Agreement”
means the agreement by and among Seller, Arbitrage, Jolly Acres and Corporate
Office Properties, L.P. in recordable form, in which Seller, Arbitrage and
Jolly Acres shall assign to Corporate Office Properties, L.P., all their
remaining rights as “Declarant” under the Declaration.  The Assignment Agreement shall be in the
form attached hereto as Exhibit G-2.

 

“Second  Closing”
is defined in Subsection 5.1.1.

 

“Second  Closing Date”
means that date which is sixty (60) days after the recordation of a subdivision
plat by the County for the Reserve Parcel or on such earlier date and time designated by Buyer by written notice
to Seller given not less than five (5) days prior to such date.  The
subdivision plat for the Reserve Parcel shall subdivide the Reserve Parcel into
one or more lots.  The Second Closing
Date is anticipated to occur in June of 2003.

 

“Second FAR Covenant” means a covenant in the form attached as Exhibit C-2 hereto which shall provide
that from and after the First Closing Date until the day immediately
prior to the twentieth (20th) anniversary of the First Closing Date, except as otherwise provided in the Second FAR
Covenant, the total FAR for Phase One and the Reserve Parcel in the aggregate
may not be increased in excess of 1,300,000.

 

“Structure” means a building or other structure that, under
applicable law, is included for purposes of determining the floor area ratio or
other density calculation for allowable buildings on a Lot.

 

“Subdivision Plat” is defined above in the Background Section.

 

“Termination Notice” is defined in Subsection 4.3.

 

7

 

SECTION 2.  SALE AND PURCHASE.  Subject to the terms and
conditions set forth in this Agreement, Seller hereby agrees to sell to Buyer,
and Buyer hereby agrees to purchase from Seller, the Land, and all improvements
thereon, and any and all rights, alleys, ways, waters, privileges,
appurtenances and advantages, to the same belonging or in anyway appertaining
(all of which are sometimes hereinafter collectively referred to as the “Property”).  The
parties agree that in order to reduce the amount of transfer and recordation
taxes which may be payable in connection with the transfer of the Property,
Buyer may require that the sale be structured (herein, the “Alternative
Sale Structure”) as a contribution of Phase One by the Seller to a
newly formed limited liability company to be named Jolly COPT I, LLC (“Newco1”) pursuant to a deed in the form
attached hereto as Exhibit K
and as the contribution of the Reserve Parcel by the Seller to a newly formed
limited liability company to be named Jolly COPT II, LLC (“Newco2”) pursuant to a deed
substantially similar to the form attached hereto as Exhibit K immediately prior to the
applicable Closing, and at the applicable Closing the Buyer shall purchase one
hundred percent (100%) of the membership interests in Newco1 or Newco2, as
applicable, from the Seller for the Phase One Purchase Price or Reserve Parcel
Purchase Price, as applicable. The total cost of transfer and recordation taxes
for transferring the Property to Newco1 and Newco2 shall be divided equally
between Seller and Buyer and paid by them at the time of transfer.  If Buyer elects to use the Alternative Sale
Structure, Buyer shall notify Seller at least ten (10) business days prior to
the First Closing Date or Second Closing Date, as applicable, and the parties
shall, in good faith and with all due diligence, negotiate and prepare the
forms of the documents to be used in connection with the Alternative Sale
Structure, which the parties anticipate being Articles of Organization, an
Operating Agreement to be prepared by Buyer and an Assignment of Member
Interests in the form attached hereto as Exhibit
H (“Assignment of Member
Interests”).  In the event the
County, the State of Maryland or any other governmental authority attempts to
impose, or imposes, any transfer, recordation or other taxes or charges on the
transfer to Buyer of the membership interests in Newco1 or Newco2, or on the
deed to Newco1 or Newco2, or on the recordation of the IDOT (whether at the
time of recordation or thereafter), Seller and Buyer shall share and promptly
pay equally, fifty percent (50%) by Seller and fifty percent (50%) by Buyer,
any costs and expenses of defending such matter and paying any such transfer,
recordation or other taxes or charges. 
The provisions of this Section shall survive the Closings.

 

SECTION 3.  PURCHASE
PRICE AND PAYMENT.

 

3.1.                              Payment of Phase One Purchase Price.  At the
First Closing, the Phase One Purchase Price shall be payable by Buyer to Seller
as follows:

 

3.1.1.                     Payment.  The Phase One Purchase Price
Initial Payment shall be paid by a wire transfer of immediately available
federal funds.

 

3.1.2.                     Note, Financing Statement, Guaranty and Deed of
Trust.  The balance of the
Phase One Purchase Price shall be paid by way of a Note (“Note”) from Buyer in the
amount of the Phase One Purchase Price Balance, which Note shall provide for
interest at the rate of three percent (3%), interest to begin accruing from
October 1, 2002 (which date the parties acknowledge precedes the First Closing
Date by more than three months), shall have a maturity date of December 31,
2007, and shall be in the form attached hereto as Exhibit A-1.  The Note shall be 

 

8

 

guaranteed by a Guaranty to Seller from COPT (the
“Guaranty”),
which Guaranty shall be in the form attached hereto as Exhibit A-2 and shall
be secured by a Purchase Money Deed of Trust, Assignment of Leases and Rents
and Security Agreement from the Buyer (the “Deed of Trust”) and by the
Financing Statement.  The Deed of Trust
shall be a first lien on Phase One, exclusive of Lot No. 21, and shall be in
the form attached hereto as Exhibit A-3.  If the Alternative Sale Structure is used, the Note shall also be
guaranteed by an additional guaranty (the “Additional
Guaranty”) from Newco1 (following Seller’s transfer of its member
interests therein), which Additional Guaranty shall be in substantially the
same form as the Guaranty.  The
Additional Guaranty shall be secured by an Indemnity Deed of Trust (“IDOT”) from Newco1, which IDOT shall be in
substantially the same form as the Deed of Trust, except for any necessary
changes to re-draft the Deed of Trust from a purchase money deed of trust to an
IDOT and by a Financing Statement (and in the event of the IDOT structure,
appropriate changes shall be made to the Guaranty).

 

3.2.                              Payment of Reserve Parcel Purchase Price.  At the
Second Closing, the Reserve Parcel Purchase Price shall be payable by Buyer to
Seller as follows:

 

3.2.1.                     Payment.  The Reserve Parcel Purchase
Price Initial Payment shall be paid by a wire transfer of immediately available
federal funds.  Any payment of monies to
Seller under Section 3.2 of the FAR Covenant, after crediting such payment
first against any monies unpaid under the Note or Deed of Trust shall be credited
against the Reserve Parcel Purchase Price Initial Payment and any remaining
balance shall be credited against the payments due under the Reserve Parcel
Note.

 

3.2.2.                     Reserve Parcel Note, Reserve Parcel Financing
Statement, Reserve Parcel Guaranty and Reserve Parcel Deed of Trust.  The
balance of the Reserve Parcel Purchase Price shall be paid by way of a Note (“Reserve Parcel  Note”) from Buyer in the
amount of the Reserve Parcel Purchase Price Balance, which Reserve Parcel Note
shall provide for interest at the rate of three percent (3%), interest to begin
accruing from the Second Closing Date, shall have a maturity date of December
31, 2007, and shall be in the form attached hereto as Exhibit A-4.  The Reserve Parcel Note shall provide for
principal and interest payments on each anniversary of the Second Closing Date
that will occur prior to the maturity date of December 31, 2007, and shall provide
for the final payment being due on the maturity date of December 31, 2007.  The principal payment for each of the annual
installments due on each anniversary date and for the principal payment due on
the aforementioned maturity date shall be determined by dividing the Reserve
Parcel Purchase Price Balance by the number of annual installments to be made
plus one (for the maturity date payment). 
As an example, if the Second Closing Date occurs on June 2, 2003, then
equal annual installments of principal shall be due on June 2, 2004, June 2,
2005, June 2, 2006, June 2, 2007 and on the maturity date of December 31, 2007,
and the amount of each installment shall be determined by dividing the Reserve
Parcel Purchase Price Balance by 5 (which is the total of the four annual
payments plus the one final payment on the maturity date).  As an example, if the Second Closing Date
occurs on June 2, 2003, then the Reserve Parcel Note shall be in the amount of
$7,140,383.56, and each of the annual payments of principal will be
$1,428,076.71 (plus all outstanding interest due on such dates) and the final
maturity date payment of principal will be $1,428,076.72 (plus all outstanding
interest due on the maturity date of December 31, 2007).  The Reserve Parcel Note shall be guaranteed
by a Guaranty to Seller from COPT (the “Reserve
Parcel 

 

9

 

Guaranty”),
which Reserve Parcel Guaranty shall be in the form attached hereto as Exhibit
A-5 and shall be secured by a Purchase Money Deed of Trust,
Assignment of Leases and Rents and Security Agreement from the Buyer (the “Reserve Parcel  Deed of Trust”) and by the
Reserve Parcel Financing Statement.  The
Reserve Parcel Deed of Trust shall be a first lien on the Reserve Parcel, and
shall be in the form attached hereto as Exhibit A-6.  If the Alternative Sale Structure is used, the Reserve Parcel
Note shall also be guaranteed by an additional guaranty (the “Reserve Parcel  Additional Guaranty”) from Newco2 (following Seller’s transfer
of its member interests therein), which Reserve Parcel Additional Guaranty
shall be in substantially the same form as the Reserve Parcel Guaranty.  The Reserve Parcel Additional Guaranty shall
be secured by an Indemnity Deed of Trust (“Reserve
Parcel  IDOT”) from
Newco2, which Reserve Parcel IDOT shall be in substantially the same form as
the Reserve Parcel Deed of Trust, except for any necessary changes to re-draft
the Reserve Parcel Deed of Trust from a purchase money deed of trust to an IDOT
and by a Financing Statement (and in the event of the IDOT structure,
appropriate changes shall be made to the Reserve Parcel Guaranty).

 

SECTION 4.  FEASIBILITY PERIOD, ENTRY ON THE PROPERTY AND BOARD
APPROVAL.

 

4.1.                              Feasibility Period.  During the Environmental Feasibility Period and
thereafter until the applicable Closing unless Buyer issues the Non-Feasibility
Notice, and subject to Seller’s
prior reasonable approval, Buyer, its
agents, employees, contractors and engineers may enter upon the Property at its
own risk and, while thereon, conduct such surveys, tests, studies,
investigations and the like as Buyer, in Buyer’s sole and absolute discretion,
may deem necessary or appropriate. 
Seller acknowledges that Buyer shall have the right to perform standard
testing of the Property, including standard environmental testing as is
customarily done in connection with a Phase I assessment (the “Phase 1 Environmental Assessment”) for the
type of Land.  Buyer acknowledges that a
representative of Seller may accompany Buyer and Buyer’s agents during such
testing.  Notwithstanding anything
contained herein to the contrary, no intrusive testing or destructive sampling
on or within the Property shall be performed without the prior written consent
of the Seller in its reasonable discretion. 
Unless prohibited by law, Buyer shall provide, in any contract
with a consultant or other agent for work pertaining to a site assessment or
environmental inspection of the Property, a confidentiality clause limiting
disclosure of all results to Buyer and Seller, and a clause requiring that a
similar confidentiality clause be included in each subcontract related
thereto.  Buyer agrees to deliver to Seller, within five (5) days after receipt
thereof copies of all surveys, test results, analyses, reports and similar
material generated with respect to the Property, or any portion thereof.  In the event that the Phase I Environmental
Assessment discloses any environmental conditions at the Property which are not
acceptable to Buyer, Buyer shall have the right to terminate this Agreement by
giving written notice (the “Non-Feasibility
Notice”) of such conclusion to Seller on or before the last day of
the Environmental Feasibility Period. 
If Buyer timely delivers to Seller its Non-Feasibility Notice, this
Agreement shall thereupon automatically terminate, in which event neither party
hereto shall have any further obligation hereunder to the other party hereto,
except to the extent that any obligation set forth herein expressly survives
termination of this Agreement.  If, on
the other hand, Buyer fails to deliver the Non-Feasibility Notice to Seller
within the Environmental Feasibility Period, then: (a) Buyer shall be deemed to
have concluded that the environmental condition of the Property is acceptable;
and (b) the parties shall proceed with the Closings under this Agreement.   The

 

10

 

provisions of this Subsection 4.1 shall survive the Closings and the
termination of this Agreement.

 

4.2.                              Repair and Insurance.  Buyer agrees
to indemnify, defend and hold Seller harmless from any and all losses,
liabilities, claims, costs, damages and expenses (including reasonable
attorneys’ fees) arising as a result of Buyer’s (or any of its agents) entry
and activities on the Property.  If the Property shall be damaged as a result of
Buyer’s activities, Buyer shall repair such property to substantially the same condition in which it
existed immediately before Buyer’s entry thereon.  Buyer shall keep the Property free of any liens or third party
claims resulting from Buyer’s (or its agents, employees, contractors and
engineers) activities thereon.  Prior to
Buyer’s (or its agents, employees, contractors and engineers) entry upon the
Property, Buyer shall (i) obtain and maintain commercial general
liability insurance in the amount of $5,000,000 combined single limit, covering
personal injury, bodily injury and property damage, which policy of insurance
shall name Seller as an additional insured; and (ii) deliver to Seller a
Certificate of Insurance evidencing such coverage.  Buyer shall cease or cause its subcontractors and agents to
cease, promptly upon Seller’s request, any activity or work, that in Seller’s
reasonable judgment, shall increase the cost to Seller or otherwise interfere
with or delay completion by Seller of the performance of its obligations under
this Agreement.  The provisions of this
Subsection 4.2 shall survive the Closings and the termination of this
Agreement.

 

4.3.                              Board Approval.  If COPT’s Board of Trustees
does not approve the Buyer’s execution of this Agreement, Buyer shall have the right to terminate this
Agreement by giving written notice of such to Seller (“Termination Notice”) on or before the last
day of the Environmental Feasibility Period. 
If Buyer timely delivers to Seller its Termination Notice, this
Agreement shall thereupon automatically terminate, in which event neither party
hereto shall have any further obligation hereunder to the other party hereto,
except to the extent that any obligation set forth herein expressly survives
termination of this Agreement.  If, on
the other hand, Buyer fails to deliver the Termination Notice to Seller within
the Environmental Feasibility Period, then the parties shall proceed with the
Closings under this Agreement.

 

SECTION 5.  CLOSINGS,
TITLE, DELIVERIES AND POSSESSION.

 

5.1.                              Closings and Guaranty.

 

5.1.1.                     Closings.  Subject to the provisions of Section 7, the
consummation of the transactions contemplated by this Agreement shall take
place in two closings.  The first
closing (the “First Closing”)
shall be for the purchase of Phase One and shall be held on the First Closing
Date.  The second closing (the “Second Closing”) shall be for the purchase
of the Reserve Parcel and shall be held on the Second Closing Date.  The
Closings shall be held at a location designated by Buyer in Columbia, Maryland
or elsewhere within the Baltimore metropolitan area.  Notwithstanding anything contained herein to the contrary, if the
Second Closing Date has not occurred on or before the seventh (7th)
anniversary of the Effective Date for reasons other than a failure of Buyer or
Seller to close in breach of its obligation to do so, then this Agreement shall
automatically terminate with respect to Buyer’s obligation to purchase and
Seller’s obligation to sell the Reserve Parcel without the necessity of any
action on the part of Seller or Buyer, in which event the parties hereto shall thereafter be relieved of
any and all further rights, 

 

11

 

liabilities and obligations under this Agreement,
except to the extent that any right, obligation or liability set forth herein
expressly survives termination of this Agreement.

 

5.1.2.                     Guaranty.  COPT guarantees to Seller,
its successors and assigns, the due and punctual performance by Buyer of its
obligations under this Agreement to purchase the Reserve Parcel (or the
membership interests in Newco2 if the Alternative Sale Structure is used) on
the Second Closing Date.  If, in breach
of its obligation to do so, Buyer fails to close on its purchase of the Reserve
Parcel (or the purchase of the membership interests in Newco2 if the
Alternative Sale Structure is used) on the Second Closing Date, COPT shall
promptly purchase the Reserve Parcel (or membership interests in Newco2, if
applicable) within three (3) business days after Buyer’s default, for the
Reserve Parcel Purchase Price and otherwise in accordance with the terms of
this Agreement.  The liability of COPT
under this Subsection shall be primary, direct and immediate and not
conditional or contingent on pursuit by Seller of any remedies it may have
against Buyer, its successors and assigns. 
COPT agrees that Seller may, without affecting COPT’s rights hereunder,
modify, waive, amend or terminate any of the provisions of this Agreement.  COPT shall pay to Seller all costs and
expenses (including reasonable attorneys’ fees and court costs) incurred by
Seller in enforcing this guaranty.  The
provisions of this Subsection shall survive the First Closing.

 

5.2.                              Title.

 

5.2.1.                     Title and Title Commitment.  Within
twenty (20) days after the Effective Date, Buyer may, at its sole cost and
expense, cause a title insurance company acceptable to Buyer (the “Title
Company”) to issue and deliver to Buyer a title commitment for the
Property (the “Title Commitment”). Following Buyer’s receipt of the Title
Commitment, Buyer shall determine whether the condition of title of the
Property as set forth in the Title Commitment is acceptable to Buyer.

 

5.2.2.                     Title Notice and Survey Title Notice.  In the
event that the condition of title of the Property as set forth in the Title
Commitment or on a survey which Buyer may obtain is not acceptable to Buyer,
Buyer shall, on or before that date which is twenty (20) days after
the Effective Date, give Seller written notice (the “Title Notice”) that the
condition of title of the Property as set forth in the Title Commitment is not
acceptable (which Title Notice shall enumerate the unacceptable aspects of the
Title Commitment (the “Title Defects”)).  Buyer agrees that Title Defects shall not include any Permitted
Exceptions.

 

5.2.3.                     Curing Title Defects.  In the
event that the condition of title of the Property as set forth in the Title
Commitment is not acceptable to Buyer, and Buyer gives the Title Notice to
Seller, Seller shall, within five (5) days after receipt of the Title Notice, notify
Buyer in writing (the “Seller’s Title Notice”) as to which of the
Title Defects, if any, Seller, at Seller’s sole cost and expense, will
undertake promptly to eliminate to the reasonable satisfaction of Buyer.  In the event Seller elects not to eliminate
all such Title Defects to the reasonable satisfaction of Buyer, or if Seller
fails to respond to Buyer within such five (5) day period, then, in any of such
events, Buyer shall, at its option, within three (3) days after the earlier of
(i) receipt of Seller’s Title Notice or (ii) expiration of the five (5) day
period if Seller has failed to respond, elect in writing either to (a) proceed
to the applicable Closing subject to the Title Defects which Seller 

 

12

 

has not agreed to cure, in which event said
objections shall be deemed to be waived for all purposes, or (b) terminate this
Agreement by giving notice thereof to Seller and the parties hereto shall
thereafter be relieved of any and all further rights, liabilities and
obligations under this Agreement except to the extent that any right,
obligation or liability set forth herein expressly survives termination of this
Agreement.  If Buyer does not notify
Seller of its election within such three (3) day period, Buyer shall be deemed
to have waived its objections and shall proceed to the applicable Closing
subject to the Title Defects which Seller has not agreed to cure.

 

5.2.4.                     Owner’s Affidavit.  Upon request by Buyer, at each of the Closings
Seller shall execute an Owner’s affidavit for the benefit of the Title Company
in the form attached hereto as Exhibit B.  Seller shall not be required to execute any
other affidavits, including, but not limited to, any non-imputation affidavit
if the parties use the Alternative Sale Structure.

 

5.2.5.                     Liens and Similar Encumbrances.  Notwithstanding
the foregoing, any deeds of trust, mortgages, judgment liens, mechanics or materialmen’s liens against the Property
which were placed or caused by Seller shall be deemed Title Defects, whether
Buyer gives written notice of such or not, and shall be removed by Seller, at
its cost and expense, at or before the applicable Closing.

 

5.3.                              Deliveries by Seller at the Closings.  At each
Closing (unless indicated otherwise), Seller shall take those actions, and
deliver to Buyer those documents, hereinafter referred to in this Subsection (all of which documents
shall, unless hereinafter expressly provided otherwise, be dated as of the
First Closing Date or Second Closing Date, as applicable):

 

5.3.1.                     Conveyance of Property. 
Assuming that the Alternative Sale Structure is used, (i) prior to the
applicable Closing, Seller shall
convey to Newco1 or Newco2 the title to Phase One or the Reserve Parcel, as applicable, subject to the provisions of Subsection 5.2 above and subject to the Permitted Encumbrances, by a
special warranty deed in the form attached hereto as Exhibit K; and (ii) at the applicable
Closing, Seller shall execute an Assignment of Member Interests in the form
attached hereto as Exhibit H
with respect to the member interests in Newco1 or Newco2, as applicable.  If the Alternative Sale Structure is not used, Seller shall convey to Buyer the title to Phase One or the Reserve
Parcel, as applicable, subject to the provisions of Subsection 5.2 above and
subject to the Permitted Encumbrances, by a special warranty deed substantially
in the form attached hereto as Exhibit K.

 

5.3.2.                     Easement Agreement.  In the
event that the Alternative Sale Structure is used with respect to Phase One,
then prior to the First Closing the Easement Agreement shall be executed by
Seller (i) in its capacity as owner of the Reserve Parcel, and (ii) as owner of
Jolly COPT I, LLC, which shall own Phase One after the conveyance of Phase One
pursuant to the Newco1 Deed, and the Easement Agreement shall be recorded prior
to the transfer of membership interests in Newco1 to Buyer.  In the event that the Alternative Sale
Structure is not used with respect to Phase One, the form of the Easement
Agreement shall be revised to be a declaration to be executed solely by Seller
and shall be recorded immediately prior to the Phase One Deed.  The parties acknowledge that all easements
granted in the Easement Agreement are appurtenant to the Reserve Parcel and
that upon the Second Closing Date, the then owner of the Reserve Parcel
(including Jolly COPT I, LLC if the Alternative Sale Structure is used) shall
have the sole right to 

 

13

 

use and enjoy such easements and Seller shall
have no such easement rights (except in its capacity as beneficiary of the
Reserve Parcel Deed of Trust).

 

5.3.3.                     FIRPTA.  Seller shall execute and
deliver to Buyer a FIRPTA Non-Foreign Person Certification, in form and
substance reasonably satisfactory to
Buyer.

 

5.3.4.                     Certificate.  Seller shall execute and
deliver to Buyer a certificate to the effect that all representations made by
Seller to Buyer are true and correct in all material respects on and as of the
First Closing Date or Second Closing Date, as applicable, with the same effect
as if such representations and warranties had been made on and as of such
applicable Closing Date, which certificate and the certifications therein shall
survive each Closing and not merge into the deed or other closing documents.

 

5.3.5.                     Closing Statement.  Seller
shall execute and deliver a Closing Statement (“Closing Statement”) that shall, among other items, set forth
the Phase One Purchase Price or Reserve Parcel Purchase Price, as applicable,
all credits against such Phase One Purchase Price or Reserve Parcel Purchase Price, as applicable, the amounts of
all prorations and other adjustments to such Phase One Purchase Price or
Reserve Parcel Purchase Price, as applicable, and all disbursements made at
each Closing on behalf of Buyer and Seller.

 

5.3.6.                     FAR Covenant and Hotel Use.  At the
First Closing, Seller shall execute and deliver the FAR Covenant which shall be
recorded prior to the Easement Agreement and the Phase One Deed (or prior to
the Newco1 Deed) and immediately prior to the Second FAR Covenant.  Buyer hereby covenants that it shall not
develop or use any portion of the Property for hotel use prior to December 29,
2005.

 

5.3.7.                     Assignment Agreement.  At the
First Closing, Seller shall execute and deliver the Assignment Agreement.  Seller shall execute and deliver the Second
Assignment Agreement at the later of (i) the Second Closing Date; and (ii)
payment in full of the Note and the
Reserve Parcel Note.  The obligations of
Seller under this Subsection 5.3.7 shall survive the Closings.

 

5.3.8.                     FAR Covenant Termination, Assignment of FAR
Covenant.  In addition to the termination date set out
in the FAR Covenant, the FAR Covenant shall terminate and Seller shall execute
such documents as Buyer may reasonably request to effectuate such termination, if either one of the following
occurs: (i) Buyer complies with the terms of Section 3 of the FAR Covenant and
the Cumulative FAR Covenant is increased to 1,250,000, or (ii) after the Second
Closing, and after payment in full of the Note and the Reserve Parcel
Note.  The provisions of this Subsection
5.3.8 shall survive the Closings. 
Additionally, prior to exercising its rights of assignment under Section
10 of the FAR Covenant, the Declarant thereunder shall provide evidence
reasonably satisfactory to Buyer that the assignee has knowledge of and will
agree to the foregoing provisions of this Section 5.3.8.

 

5.3.9                        Second FAR Covenant.  At the
First Closing, Seller shall execute and deliver the Second FAR Covenant which
shall be recorded after the FAR
Covenant and prior to the Easement Agreement.

 

14

 

5.3.10.               Other Documents.  Seller shall execute and/or
deliver to Buyer such other documents and materials as are reasonably necessary
to consummate the transactions contemplated hereby.  The provisions of this Subsection 5.3.10 shall survive the Closings.

 

5.4.                              Deliveries by Buyer at or Prior to Closings.  At each
Closing (unless indicated otherwise), Buyer shall take those actions, and
deliver to Seller those documents, hereinafter referred to in this Subsection
(all of which documents shall, unless hereinafter expressly provided otherwise,
be dated as of the First Closing Date or Second Closing Date, as applicable):

 

5.4.1.                     Execution of Note, Guaranty and Deed of Trust.  At the
First Closing, Buyer shall execute the Note and Deed of Trust and COPT shall
execute the Guaranty.  If the
Alternative Sale Structure is used, Buyer shall also deliver originals of the
Additional Guaranty and IDOT, executed by Newco1.

 

5.4.2.                     Execution of Reserve Parcel Note, Reserve Parcel
Guaranty and Reserve Parcel Deed of Trust.  At the Second Closing, Buyer
shall execute the Reserve Parcel  Note and Reserve Parcel Deed of Trust
and COPT shall execute the Reserve Parcel Guaranty.  If the Alternative Sale Structure is used, Buyer shall also
deliver originals of the Reserve Parcel  Additional Guaranty and Reserve
Parcel IDOT, executed by Newco2.

 

5.4.3.                     Assignment of Member Interests.  If the
Alternative Sale Structure is used with respect to the First Closing, then at
the First Closing, Buyer shall execute and deliver to Seller the Assignment of
Member Interests with respect to the member interests in Newco1.  If the Alternative Sale Structure is used
with respect to the Second Closing, then at the Second Closing, Buyer shall
execute and deliver to Seller the Assignment of Member Interests with respect
to the member interests in Newco2.

 

5.4.4.                     Assignment.  At the First Closing,
Corporate Office Properties, L.P. shall execute and deliver to Seller the
Assignment Agreement.  Corporate Office
Properties, L.P. shall execute and deliver to Seller the Second Assignment
Agreement at the later of (i) the Second Closing Date; and (ii) payment in full
of the Note and the Reserve Parcel Note. 
The obligations of Corporate Office Properties, L.P. under this Subsection
5.4.4 shall survive the Closings.

 

5.4.5.                     Certificate.  Buyer shall execute and
deliver to Seller a certificate to the effect that all representations made by
Buyer to Seller are true and correct in all material respects on and as of the
First Closing Date or Second Closing Date, as applicable, with the same effect
as if such representations and warranties had been made on and as of such
Closing Date, which certificate and the certifications therein shall survive
each Closing and not merge into the deed or other closing documents.

 

5.4.6.                     Closing Statement.  Buyer
shall execute and deliver to Seller the Closing Statement.

 

15

 

5.4.7.                     Title Policy.  At the First Closing, Buyer
shall deliver to Seller, at Buyer’s expense, a 1992 ALTA Loan Title Insurance
Policy written by a title insurance company reasonably acceptable to Seller,
insuring a first deed of trust lien on Phase One, in an amount equal to the
amount of the Note, listing the Seller as a named insured, deleting all
standard exceptions and removing (by endorsement or written waiver) any
creditor’s rights exception or exclusion from the Loan Title policy, with
affirmative insurance over any claim of fraudulent conveyance.  At the Second Closing, Buyer shall deliver
to Seller, at Buyer’s expense, a 1992 ALTA Loan Title Insurance Policy written
by a title insurance company reasonably acceptable to Seller, insuring a first
deed of trust lien on the Reserve Parcel, in an amount equal to the amount of
the Reserve Parcel Note, listing the Seller as a named insured, deleting all
standard exceptions and removing (by endorsement or written waiver) any
creditor’s rights exception or exclusion from the Loan Title policy, with
affirmative insurance over any claim of fraudulent conveyance.

 

5.4.8.                     Resolutions.  At the First Closing, COPT
shall deliver to Seller a certificate from the secretary of COPT, certifying
that the transactions contemplated hereby, including, but not limited to, any
confession of judgment provisions contained in the Note, Deed of Trust (or
IDOT, if the Alternative Sale Structure is used) or any other Loan Documents,
were approved by COPT, acting on behalf of itself and as the general partner of
Buyer.  At the Second Closing, COPT
shall deliver to Seller a certificate from the secretary of COPT, certifying
that the transactions contemplated hereby, including, but not limited to, any
confession of judgment provisions contained in the Reserve Parcel Note, Reserve
Parcel Deed of Trust (or Reserve Parcel IDOT, if the Alternative Sale Structure
is used) or any other Loan Documents, were approved by COPT, acting on behalf
of itself and as the general partner of Buyer.

 

5.4.9.                     Opinion of Counsel.  At the
First Closing, Buyer shall deliver to Seller the Phase One Opinion Letter.  At the Second Closing, Buyer shall deliver
to Seller the Reserve Parcel Opinion Letter.

 

5.4.10.               Other Documents.  Buyer shall execute and/or
deliver to Seller such other documents and materials as are reasonably
necessary to consummate the transactions contemplated hereby.

 

5.5.                              Possession.  At each Closing, Seller shall
deliver to Buyer possession of Phase
One or the Reserve Parcel, as applicable, free of any and all tenancies and
other rights or claims of right to its use or occupancy.

 

SECTION 6.  CLOSING
COSTS; ADJUSTMENTS.

 

6.1.                              Closing Costs.  Buyer shall pay the costs of
examination of title and title insurance premiums, and each party shall pay its
own attorneys’ fees.  Buyer and Seller
shall divide equally all transfer and recordation taxes, documentary stamp
taxes, recording fees and other similar taxes and fees associated with the transfer of the Property
from Seller to Buyer or to Newco1 and Newco2. 
Seller shall pay any agricultural land transfer tax which may be
payable with respect to the Property and this transaction.

 

16

 

6.2.                              Prorations and Adjustments.  Seller
shall be responsible for all expenses allocable to the period prior to the
First Closing Date or Second Closing Date, as applicable.  Buyer shall be responsible for all expenses
for the period beginning at 12:01 a.m. on the First Closing Date or Second
Closing Date, as applicable.  At each
Closing, all items of expense shall be prorated in accordance with this
principle.  The term “expenses”
shall include but not be limited to real property taxes, assessments (including
but not limited to assessments under the Declaration), front foot benefit
charges, metropolitan charges and utility charges (water, electricity, etc.).  At each Closing, Buyer shall reimburse Seller for all prepaid water and sewer
connection fees associated with the applicable Lot, in consideration of
obtaining vouchers from Seller to deliver to the County as part of the building
permit process sufficient for the proposed development.  The rate of reimbursement for such prepaid
water and sewer connection fees shall be Five Thousand Sixty-four Dollars
($5,064.00) per Equivalent Dwelling Units (“EDUs”),
which amount is based on the current (as of the Effective Date) County fee for
EDUs, and which amount shall be increased or decreased, as appropriate, if the
County fee for water and sewer connections is increased or decreased.  The reimbursement shall be based upon the
building contemplated by Buyer’s Building Permit.  If Buyer does not have a Building Permit at the time of each
Closing, then the reimbursement shall be delayed until ten (10) business days
after Buyer obtains a Building Permit for such Lot.  Notwithstanding the foregoing, Buyer shall have no obligation to
reimburse Seller for EDU’s if Seller does not provide vouchers to Buyer for
such EDUs; provided, however, that Buyer will be required to pay to the County
any water and sewer connection fees associated with such Lot.  The obligations under this Section 6.2 shall
survive the Closings.

 

6.3.                              Special Taxing District. 
Simultaneously with the execution of this Agreement, the parties hereto
have executed the disclosure regarding the National Business Park Disclosure of
Special Taxing District attached hereto as Exhibit
D.

 

SECTION 7.  CONDITIONS
PRECEDENT TO CLOSINGS.

 

7.1.                              Conditions to Buyer’s Obligations.  Buyer’s
obligation hereunder to complete each Closing shall be conditioned upon the
satisfaction (or Buyer’s written waiver thereof) of each of the following
conditions precedent:

 

7.1.1.                     Title.  The title to Phase One or the Reserve
Parcel, as applicable, shall at the respective Closing be as set forth in the
provisions of Subsection 5.2.

 

7.1.2.                     Performance of Seller’s Obligations.  Seller
shall have fully performed its obligations under this Agreement.

 

7.1.3.                     Representations.  Each of Seller’s
representations under the provisions of Subsection 8.1 shall be true and
accurate as of the First Closing Date or Second Closing Date, as applicable.

 

7.2.                              Benefit of Satisfaction.  Buyer
alone shall have the benefit of the satisfaction of the conditions precedent
set forth in the provisions of Subsection 7.1, and shall be entitled to waive
Buyer’s rights thereto.  In the event that any of the conditions are not
satisfied (or waived) by Buyer, then Buyer shall be entitled to terminate this
Agreement.

 

17

 

7.3.                              Conditions to Seller’s Obligations. 
Seller’s obligation hereunder to complete each Closing shall be
conditioned upon the satisfaction (or Seller’s written waiver thereof) of each
of the following conditions precedent:

 

7.3.1.                     Performance of Buyer’s Obligations.  Buyer
shall have fully performed its obligations under this Agreement.

 

7.3.2.                     Representations.  Each of Buyer’s representations
under the provisions of Subsection 8.2 shall be true and accurate as of the
First Closing Date or Second Closing Date, as applicable.

 

7.4.                              Benefit of Satisfaction.  Seller
alone shall have the benefit of the satisfaction of the conditions precedent
set forth in the provisions of Subsection 7.3, and shall be entitled to waive
Seller’s rights thereto.  In the event
that any of the conditions are not satisfied (or waived) by Seller, then Seller
shall not be obligated to proceed to the applicable Closing.

 

SECTION 8.  REPRESENTATIONS.

 

8.1.                              Seller’s Representations.  To
induce Buyer to enter into this Agreement, Seller represents to Buyer that the
following matters are true and correct as of the Effective Date and will be
true and correct on the Closing Dates:

 

8.1.1.                     Authority.  Seller is a Maryland limited
liability company, duly organized, validly existing and in good standing under
the laws of the State of Maryland. 
Seller has taken all action necessary to enable it to conduct its
business and consummate the transactions contemplated by this Agreement, has
duly authorized the execution and performance of this Agreement and the person executing this Agreement on behalf of
the sole member of Seller has been authorized to so act, and such execution and
performance will not violate the terms of Seller’s organizational documents.

 

8.1.2.                     Breach of Other Agreements.  Seller
has no knowledge of any contract, agreement, undertaking, law, order,
regulation or instrument to which Seller is a party or by which Seller is bound
that would be violated by the Seller’s execution of this Agreement.

 

8.1.3.                     Other Agreements.  Other
than this Agreement, Seller has not entered into any contract of sale, option
agreement, right of first refusal or other agreement for the sale of the
Property.

 

8.1.4.                     Zoning.  To the best of Seller’s
knowledge, as of the Effective Date the Property is zoned W-1.

 

8.1.5.                     Hazardous Materials.  To the
best of Seller’s actual knowledge, and except as may be disclosed to Buyer in
the Phase I Environmental Assessment or any other environmental reports
obtained by Buyer pursuant to Subsection 4.1, Seller has not used, generated,
stored or disposed, and from and after the Effective Date, except to the extent
consistent

 

18

 

with current real estate industry practices for
such type of property and permitted under governmental regulations, will not
use, generate, store or dispose on, under or about the Property any hazardous
waste toxic materials or any friable asbestos or substance containing
asbestos.  Notwithstanding the
foregoing, Seller hereby notifies Buyer that Seller has demolished structures
containing a residential detention facility on a portion of the Property.  Seller shall have no liability to Buyer with
respect to such rubble and makes no representations or warranties regarding the
contents of such rubble.

 

8.1.6.                     Underground Storage Tanks.  To the
best of Seller’s knowledge, there are no underground storage tanks located on
the Property.

 

8.1.7.                     As Is.  Buyer hereby agrees and acknowledges that,
except as set forth in Subsections 8.1.1 though 8.1.6 above, neither Seller nor
any agent, attorney, employee or representative of Seller has made any
representation whatsoever regarding
the subject matter of this transaction, or any part thereof, including (without
limiting the generality of the foregoing) representations as to the physical
nature or physical condition of the Property or the capabilities thereof, and
that Buyer, in executing, delivering and/or performing this Agreement, does not
rely upon any statement and/or information to whomever made or given, directly
or indirectly, orally or in writing, by any individual, firm or corporation
unless such statement or information is expressly incorporated herein.  Buyer agrees that the Property shall be
(directly or indirectly) sold to Buyer “as is, where is” as of the date hereof.

 

EXCEPT AS SPECIFICALLY PROVIDED HEREIN TO THE
CONTRARY, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES AS TO THE PHYSICAL
CONDITION OF THE PROPERTY OR THE SUITABILITY THEREOF FOR ANY PURPOSE.  SELLER HEREBY EXPRESSLY DISCLAIMS ANY
WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE AND ANY
OTHER WARRANTIES OR REPRESENTATIONS AS TO THE PHYSICAL CONDITION OF THE
PROPERTY.  BUYER, BY EXECUTION OF THIS
AGREEMENT AGREES THAT IT HAS INSPECTED THE PROPERTY AND THAT BUYER SHALL ACCEPT
SAME “AS IS” AND “WITH ALL FAULTS”.

 

8.2.                              Buyer’s Representations.  To
induce Seller to enter into this Agreement, Buyer represents to Seller that the
following matters are true and correct
as of the Effective Date and will be true and correct on the Closing Dates:

 

8.2.1.                     Authority.  Buyer is a limited
partnership, duly organized and validly existing under the laws of the State of
Delaware, qualified to do business in the State of Maryland and in good
standing under the laws of the State of Delaware and the State of Maryland. 
Buyer has taken all action necessary to enable it to conduct its
business and consummate the transactions contemplated by this Agreement, has
duly authorized the execution and performance of this Agreement, and such
execution and performance will not violate the terms of Buyer’s organizational
documents.

 

19

 

8.2.2.                     Breach of Other Agreements.  Buyer
has no knowledge of any contract, agreement, undertaking, law, order,
regulation or instrument to which Buyer is a party or by which Buyer is bound
that would be violated by the Buyer’s
execution of this Agreement.

 

8.3.                              Survival of Representations.  The
representations set out in Subsections 8.1 and 8.2 above shall terminate on the
first anniversary of the First Closing Date and Second Closing Date, as
applicable.

 

SECTION 9.  COOPERATION.  Buyer agrees to cooperate with Seller with
respect to the subdivision of the Reserve Parcel into one or more lots,
including, but not limited to, the execution of subdivision plats or any
revisions thereto.  Buyer shall promptly
review and respond to all materials supplied to it by or on behalf of Seller in
connection with such subdivision. 
Seller shall use its best efforts in proceeding with the subdivision of
the Reserve Parcel.

 

SECTION
10.  MASS GRADING PERMIT.  Seller shall give Buyer
notice of Seller’s Completion of the Ponds. 
Seller shall proceed with due
diligence and use commercially reasonable efforts to pursue Completion of the
Ponds, subject to being prevented or delayed, retarded or hindered by
act of God, weather of unusual severity, fire, earthquake, flood, explosion, action
of the elements, war (declared or undeclared), invasion, insurrection, riot,
mob violence, sabotage, malicious mischief, inability to procure or general
shortage of labor, equipment, facilities, materials or supplies in the open
market, failure of transportation, strikes, lockouts, action of labor unions,
condemnation, public requisition, laws, order of government or civil defense
authorities, or any other cause, whether similar or dissimilar to the
foregoing, not within the reasonable control of the Seller.  Within sixty (60) days after the earlier to
occur of (i) Seller’s notice to Buyer of Seller’s Completion of the Ponds, or
(ii) the date that Buyer commences grading or construction activities of any
kind on any portion of the Property, Seller will cause the Mass Grading Permit
to be transferred to Buyer (or Buyer’s designee) and all of the obligations of
the Mass Grading Permit Holder to be released in writing, the documentation for
which shall be satisfactory to Seller in its sole discretion, and Buyer shall
cooperate with Seller with respect thereto. 
Additionally, within such sixty (60) day time period, Buyer shall cause
to be substituted all of the Mass Grading Permit Collateral with its own bond,
letter of credit or other collateral as may be required by the County to the
end and effect that the Seller and the Mass Grading Permit Holder shall have no
further obligations to the County under the Mass Grading Permit.  Upon the transfer of the Mass Grading Permit
to Buyer, Buyer shall complete or cause the completion of the work required
under the Mass Grading Permit under the name of Buyer or Buyer’s designee,
including the conversion of all of the sediment control ponds to stormwater
management ponds.  Notwithstanding the
foregoing, if the transfer of the permit occurs prior to the date of Seller’s
Completion of the Ponds, then Seller shall continue its Completion of the Ponds
under the permit held by Buyer, except that Buyer shall be responsible for any
work caused by Buyer’s grading activities. 
The provisions of this Section shall survive the Closings.

 

SECTION 11.  CONDEMNATION.  Notwithstanding anything
contained in this Agreement to the contrary, if before either Closing any of
the respective Property is taken by condemnation or the exercise of any power
of eminent domain, or if any formal or informal notice or advice of such
condemnation or an intention so to condemn is issued or becomes known to

 

20

 

Seller, Seller shall promptly notify Buyer thereof,
and Buyer may, at Buyer’s sole discretion, terminate this Agreement by giving
Seller notice thereof, in which event the parties hereto shall thereafter have
no liability to each other hereunder
except to the extent that any right, obligation or liability set forth herein
expressly survives termination of this Agreement.  If Seller gives such notice to
Buyer, and Buyer does not terminate this Agreement, as aforesaid: (a) the Phase
One Purchase Price or Reserve Parcel Purchase Price, as applicable, shall
remain the same, and at such Closing (i) Seller shall pay to Buyer any award
made for such condemnation which is received by Seller before the applicable
Closing, and (ii) Seller shall assign to Buyer all of Seller’s right, title and
interest in and to any award made for such condemnation with respect to such
portion of the Land after the applicable Closing; and (b) Buyer may thereafter
receive all of the proceeds of such condemnation and contest, in Seller’s
and/or Buyer’s names, the validity of such condemnation and/or the amount of
the proceeds offered or awarded therein.

 

SECTION 12.  DEFAULT.

 

12.1.                        Buyer’s Default  In the event Buyer defaults in
its obligations to purchase the Property (or to purchase the membership
interests in Newco1 or Newco2, as applicable, if the Alternative Sale Structure
is used), Seller shall be entitled after such default to exercise any and all
rights and seek any and all remedies which Seller may hold or to which Seller
may be entitled at law or in equity, including, but not limited to, the right
to (i) terminate this Agreement; and (ii) pursue an action in equity for the
specific performance of this Agreement. 
Buyer specifically acknowledges and agrees that Seller’s right to
enforce specific performance of Buyer’s obligations under this Agreement
constitutes a fundamental condition and material inducement to Seller’s
entering into this Agreement.  The
exercise of any one of Seller’s rights or remedies under this Agreement shall not be deemed to be in lieu of, or a waiver of,
any other right or remedy available to Seller.

 

12.2.                        Seller’s Default.  In the
event Seller defaults in any of the terms, provisions, covenants or agreements
to be performed by Seller hereunder, Buyer’s only remedies shall be to terminate this Agreement or to pursue an
action in equity for the specific performance of this Agreement.  In no event shall Seller be liable to Buyer
for any damages.

 

SECTION 13.  NOTICES.  Any notice to be provided hereunder to a
party hereto shall be in writing and shall be sent (i) as certified mail in the
United States mails, postage prepaid, return receipt requested, to the address
of such party or person which is set forth hereinafter, (ii) via overnight delivery with a nationally recognized carrier,
(iii) if such party’s or person’s receipt thereof is acknowledged in writing,
given by hand or other actual delivery to such party or person, or (iv) by
telecopier to the telecopy number set forth below (provided that a copy shall
also be sent via ordinary mail, deposited with the postal service on the day
the telecopy is sent).  The addresses of
the parties for the receipt of notices shall be as follows:

 

21

 

	
  if to Seller:

  	
   

  	
  Jolly Knolls, LLC

  c/o Constellation Real Estate, Inc.

  8815 Centre Park Drive, Suite 104

  Columbia, Maryland 21045

  Attn:   Managing Director

  Telecopier No.  (410) 992-5573

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Constellation Energy Group

  250 W. Pratt Street

  23rd floor

  Baltimore, MD  21201

  Attention: Donna M. Levy, Esq.

  Telecopier No.  (410) 783-3079

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Richard Rubin, Esq.

  Neuberger, Quinn, Gielen, Rubin &

  Gibber, P.A.

  One South Street, 27th Floor

  Baltimore, MD  21202

  Telecopier No.  (410) 332-8562

  
	
   

  	
   

  	
   

  
	
  if to Buyer:

  	
   

  	
  Corporate Office Properties,
  L.P.

  8815 Centre Park Drive

  Columbia, Maryland 21045

  Attn:   General Counsel 

  Telecopier No.  (410) 992-7534

  

 

subject to the right of any party to designate a different address by
notice similarly given.  Any notice,
demand, request, consent, approval, designation or other communication so sent
shall be deemed to have been given, made or communicated as the case may be, on
the second day after the date the same was deposited in the United States mail
as certified mail with postage thereon fully prepaid, on the first business day
after the date the same was delivered to a nationally recognized overnight
carrier, on the same day as sent by hand delivery or in the case of telecopy,
then the time of transmission.

 

SECTION 14.  COMMISSIONS.  Each party hereto hereby
represents and warrants to the other that in connection with the sale and
purchase of the Property, the party so representing and warranting has not
dealt with any real estate broker, agent or finder, and there is no commission,
charge or other compensation due on
account thereof.  Each party hereto
shall indemnify and hold harmless the other against and from any inaccuracy in
such party’s representation.

 

22

 

SECTION 15.  GENERAL.

 

15.1.                        Complete Understanding.  This Agreement
represents the complete understanding between the parties hereto as to the
subject matter hereof, and supersedes all prior written or oral negotiations,
representations, guaranties, warranties, promises, statements or agreements
between the parties hereto as to the Property, the condition thereof or any
other matter whatsoever, made or furnished by any real estate broker, agent,
employee or other person representing or purporting to represent either party
hereto.

 

15.2.                        Amendment.  This Agreement may be amended
by and only by an instrument executed and delivered by each party hereto.

 

15.3.                        Waiver.  No party hereto shall be
deemed to have waived the exercise of any right which it holds hereunder unless
such waiver is made expressly and in
writing (and no delay or omission by any party hereto in exercising any such
right shall be deemed a waiver of its future exercise). No such waiver made as
to any instance involving the exercise of any such right shall be deemed a
waiver as to any other such instance, or any other such right.

 

15.4.                        Applicable Law.  This Agreement shall be given
effect and construed by application of the laws of Maryland, and any action or
proceeding arising hereunder shall
be brought in the courts of Maryland.

 

15.5.                        Headings.  The headings of the sections,
subsections, paragraphs and subparagraphs hereof are provided herein for and
only for convenience of reference, and shall not be considered in construing
their contents.

 

15.6.                        Assignment; Guaranty by Buyer.  Except
as hereinafter provided in this Subsection, Buyer may not transfer and assign, in whole or in part, its rights and
interests under this Agreement
without the prior written consent of Seller, which consent shall not be
unreasonably withheld or delayed.  Buyer
may assign this Agreement in whole or in part without the consent of Seller to
(i) any entity controlled by, controlling, or under common control with Buyer
or COPT (where control shall mean owning directly or indirectly fifty percent
(50%) or more of the voting stock or voting interest of such entity), or (ii)
any purchaser or transferee, or any entity controlled by, controlling, or under
common control with any purchaser or transferee, of all or a portion of Buyer’s
real property within National Business Park. 
Buyer shall notify Seller of any permitted transfer or assignment at
least ten (10) days prior to such transfer or assignment.  Buyer acknowledges that Seller is relying on
the expertise and financial ability of Buyer. 
Therefore, in the event of an assignment by Buyer, Corporate Office
Properties, L.P. shall, by virtue of such assignment, automatically be deemed
to guaranty to Seller, its successors and assigns, all the obligations of the
assignee, as buyer, under this Agreement. 
If such assignee defaults under this Agreement, Corporate Office
Properties, L.P. shall promptly perform such assignee’s obligations
hereunder.  The liability of the
Corporate Office Properties, L.P. under this Subsection shall be primary, direct
and immediate and not conditional or contingent on pursuit by Seller of any
remedies it may have against the assignee buyer.  Corporate Office Properties, L.P. agrees that Seller may, without
affecting Corporate Office Properties, L.P. rights hereunder, modify, waive,
amend or terminate any of the provisions of this Agreement.  Corporate Office Properties, L.P. shall

 

23

 

pay to Seller all costs and expenses (including
reasonable attorneys’ fees and court costs) incurred by Seller in enforcing this
guaranty .  The provisions of this
Subsection shall survive the Closings.

 

15.7.                        Survival. The respective representations, warranties, covenants,
indemnifications, obligations and agreements made by the parties hereto in this
Agreement or in any certificate or other writing delivered pursuant to this
Agreement shall be deemed to be material to, and to have been relied upon by, the party to whom they are made, and
shall survive the Closings or any termination of this Agreement.

 

15.8.                        Severability.  No determination by any
court, governmental or administrative entity or otherwise that any provision of
this Agreement or any amendment hereof is invalid or unenforceable in any
instance shall affect the validity or enforceability of (a) any other such
provision, or (b) such  provision in any
circumstance not controlled by such determination. Each such provision shall be
valid and enforceable to the fullest extent allowed by, and shall be construed
wherever possible as being consistent
with, applicable law.

 

15.9.                        Time of Essence.  Time shall be of the essence in the performance of
all terms of this Agreement.

 

15.10.                  Attorneys’ Fees.  In the event of any
litigation arising out of this Agreement, the prevailing party shall be
entitled to reasonable attorneys’ fees and court costs.

 

15.11.                  Binding Effect.  This Agreement shall be
binding upon and inure to the benefit of Seller and Buyer and their respective
heirs, personal representatives,
successors and assigns.

 

15.12.                  Disclaimer of Partnership Status.  Nothing
in the provisions of this Agreement shall be deemed in any way to create
between the parties hereto any relationship of partnership, joint venture or
association, and the parties hereto hereby disclaim the existence of any such relationship.

 

15.13.                  Interpretation.  Both parties to this
Agreement have been represented by counsel and all provisions of this Agreement
have been fully negotiated.  No
provision of this Agreement shall be interpreted against either party merely
because such provision was drafted
by such party or such party’s counsel.

 

15.14.                  Rule Against Perpetuities.  If
the rule against perpetuities or any other rule of law would invalidate this
Agreement or any portion hereof or
would limit the time during which this entire Agreement or any portion hereof
shall be effective due to the potential failure of an interest in property
created herein to vest within a particular time, then each such interest in
property shall be effective only from the date hereof until the passing of
twenty-one (21) years after the death of the last survivor of the members of
the Senate of the United States of America representing the State of Maryland
who are serving on the date hereof, but each such interest in property shall be
extinguished after such time, and all other interests in property created
herein and all other provisions hereof shall remain valid and effective without
modification.

 

24

 

15.15.                  Performance Dates.  If any
date for the performance of any obligation shall fall on a weekend or a legal
banking holiday, then the date for the performance of such
obligation shall be extended to the next weekday which is not a legal banking
holiday.

 

15.16.                  Counterparts.  This Agreement may be
executed in any number of counterparts, each of which shall be deemed an original and all of which together shall
comprise but one and the same instrument.

 

15.17.                  Recitals.  The
parties agree that the Background
section of this Agreement shall be an integral part of this Agreement and not
merely prefatory thereto.

 

15.18.                  Exhibits.  Each document
referred to herein as being annexed hereto as an exhibit or schedule or
otherwise designated herein as an exhibit or schedule hereto is hereby made a part hereof.

 

	
  Listing of Exhibits

  
	
   

  
	
   

  	
  A-1.

  	
   

  	
  Form of Note

  
	
   

  	
  A-2.

  	
   

  	
  Form of Guaranty

  
	
   

  	
  A-3.

  	
   

  	
  Form of Deed of Trust

  
	
   

  	
  A-4

  	
   

  	
  Form of Reserve Parcel Note

  
	
   

  	
  A-5

  	
   

  	
  Form of Reserve Parcel Guaranty

  
	
   

  	
  A-6

  	
   

  	
  Form of Reserve Parcel Deed of
  Trust

  
	
   

  	
  B.

  	
   

  	
  Form of Owner’s Affidavit

  
	
   

  	
  C-1.

  	
   

  	
  Form of FAR Covenant

  
	
   

  	
  C-2.

  	
   

  	
  Form of Second FAR Covenant

  
	
   

  	
  D.

  	
   

  	
  Special Taxing District Form

  
	
   

  	
  E.

  	
   

  	
  Form of Easement Agreement

  
	
   

  	
  F.

  	
   

  	
  Existing Title Information

  
	
   

  	
  G-1.

  	
   

  	
  Form of Assignment Agreement
  (Declarant)

  
	
   

  	
  G-2.

  	
   

  	
  Form of Second Assignment
  Agreement (Declarant)

  
	
   

  	
  H.

  	
   

  	
  Form of Assignment of Member
  Interests

  
	
   

  	
  I-1.

  	
   

  	
  Form of Opinion Letter-Phase
  One

  
	
   

  	
  I-2

  	
   

  	
  Form of Opinion Letter-Reserve
  Parcel

  
	
   

  	
  J.

  	
   

  	
  Intentionally Deleted

  
	
   

  	
  K.

  	
   

  	
  Form of Deed

  
	
   

  	
  L.

  	
   

  	
  Copy of Mass Grading Permit

  

 

Signatures begin
on next page

 

25

 

IN WITNESS WHEREOF, each party hereto has executed
this Agreement, or caused it to be executed on its behalf by its duly
authorized representatives, with the intention of creating a document under
seal on the date first above written.

 

	
  WITNESS:

  	
  SELLER:

  
	
   

  
	
   

  	
  JOLLY KNOLLS,
  LLC

  
	
   

  
	
   

  	
  By:

  	
  CPI Jolly
  Knolls, Inc., sole
  member

  
	
   

  
	
   

  
	
  /s/ Steven D. Kesler

  	
   

  	
  By:

  	
   /s/ Steven S. Koren

  	
  (SEAL)

  
	
   

  	
   

  	
  Steven S. Koren, Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CORPORATE
  OFFICE PROPERTIES, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Corporate
  Office Properties Trust,
  general

  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ John H. Gurley

  	
   

  	
  By:

  	
   /s/ Randall M. Griffin

  	
  (SEAL)

  
	
   

  	
   

  	
  Name:

  	
  RANDALL M. GRIFFIN

  	
   

  
	
   

  	
   

  	
  Title:

  	
  PRESIDENT & COO

  	
   

  
	
   

  	
   

  	
   

  
	
  Corporate Office
  Properties Trust joins in the execution of this Agreement for purposes of
  agreeing to the provisions of Subsections 3.1.2, 3.2.2, 4.3, 5.1.2, 5.4.1,
  5.4.2 and 5.4.8 above.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Corporate
  Office Properties Trust

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ John H. Gurley

  	
   

  	
  By:

  	
   /s/ Randall M. Griffin

  	
  (SEAL)

  
	
   

  	
   

  	
  Name:

  	
  RANDALL M. GRIFFIN

  	
   

  
	
   

  	
   

  	
  Title:

  	
  PRESIDENT & COO

  	
   

  
								

 

26Exhibit
10.35

 

INDEMNITY DEED OF TRUST NOTE

 

	
  $18,433,083.00

  	
  Columbia,  Maryland

  
	
   

  	
  January 24, 2003

  

 

FOR VALUE RECEIVED, CORPORATE OFFICE
PROPERTIES, L.P., a Delaware limited partnership (“Borrower”),
promises to pay to the order of JOLLY KNOLLS, LLC, a Maryland limited
liability company (“Lender”; the Lender and any assignee or
other lawful owner of this Note being hereinafter called the “Holder”),
at its principal office in Columbia, Maryland, or at such other place or to
such other party as the holder hereof may from time to time designate, the
principal sum of Eighteen Million Four
Hundred Thirty-Three Thousand Eighty-Three Dollars and Zero Cents
($18,433,083.00) (the “Principal Sum”), together with interest on
the unpaid Principal Sum, on the terms set forth in this Note.  Every word or term in this Note that is
capitalized for the purpose of indicating a particular meaning and not
specifically defined herein has the meaning set forth in the Deed of Trust
(hereinafter defined).

 

BORROWER FURTHER PROMISES, COVENANTS
AND AGREES AS FOLLOWS:

 

1.                                       Definitions,
Rules of Construction.

 

1.1                                 Definitions.  As used in this Note, the terms defined in
the preamble hereto shall have the respective meanings specified therein, and
the following terms, when used in this Note, shall have the definitions
provided in this Section 1:

 

“Additional  Guaranty” means a Guaranty of
even date herewith from COPT I, as guarantor, to Lender, which is secured, in
part, by the Deed of Trust.

 

“Business Day” means a day
other than a Saturday, Sunday or legal holiday.

 

“COPT I” means Jolly COPT I, LLC, a Maryland
limited liability company, which has the Borrower as its sole member.

 

“County” means Anne Arundel County,
Maryland.

 

“Deed of Trust” means the
Indemnity  Deed of Trust,
Assignment of Leases and Rents and Security Agreement from COPT I, recorded or
intended to be recorded in the Land Records of the County from Borrower to
Richard Rubin and Susan M. Wilkins, Trustees, covering, inter alia, certain
real property located in the County, as described therein (the “Property”).

 

1

 

“Default Rate” means an annual
interest rate equal to the greater of (i) fifteen percent (15%); and (ii) the
rate of eight percent (8%) in excess of the “prime rate” as announced from time
to time in the “Money Rates” section of the Wall Street Journal.

 

“Financing Statement” means the UCC-1
financing statement, perfecting Lender’s security interest in those items
secured by the Deed of Trust and required or permitted to be perfected by a
financing statement.

 

“Guaranty” means a Guaranty of
even date herewith from Corporate Office Properties Trust, as guarantor, to
Lender.

 

“Loan Documents” means this
Note, the Guaranty, the Additional Guaranty, the Deed of Trust, the Financing
Statement, the Declaration Regarding FAR and the Master FAR Declaration
recorded or intended to be recorded prior to the Deed of Trust, and any
certificates, assignments, and other documents executed in connection herewith
or therewith, and all current and future supplements, amendments and
attachments thereto.

 

“Maturity Date” means December
31, 2007.

 

“Note” means this Indemnity
Deed of Trust Note.

 

“Payment Address” is defined in Section 4
below.

 

1.2                                 Capitalized
Terms.  Any capitalized term used
herein and not otherwise defined herein shall have the meaning given to such
term in the Deed of Trust.

 

1.3                                 Rules
of Construction.  All references
made (a) in the neuter, masculine or feminine gender shall be deemed to have
been made in all such genders, and (b) in the singular or plural number shall
be deemed to have been made, respectively, in the plural or singular number as
well.

 

2.                                       Interest.  Commencing as of October 1, 2002 (which
date is prior to the date hereof) and continuing until repayment in full of all
sums due hereunder, the unpaid Principal Sum shall bear interest and be payable
at the rate of three percent (3 %) per annum. 
All interest payable under the terms of this Note shall be calculated on
the basis of a 365-day year and the actual number of days elapsed.

 

2

 

3.                                       Payments,
Maturity Date.

 

3.1                                 Payments.  The unpaid Principal Sum, together with
interest thereon at the rate provided above, shall be payable by Borrower to
the Holder in five (5) yearly installments in the following manner:

 

(i)                                     On
or before January 10, 2004, a principal payment in the amount of Three Million
Six Hundred Eighty-Six Thousand Six Hundred Sixteen Dollars and Sixty Cents
($3,686,616.60), together with accrued and unpaid interest on the Principal
Sum;

 

(ii)                                  On
or before January 10, 2005, a principal payment in the amount of Three Million
Six Hundred Eighty-Six Thousand Six Hundred Sixteen Dollars and Sixty Cents
($3,686,616.60), together with accrued and unpaid interest on the unpaid
Principal Sum;

 

(iii)                               On
or before January 10, 2006, a principal payment in the amount of Three Million
Six Hundred Eighty-Six Thousand Six Hundred Sixteen Dollars and Sixty Cents
($3,686,616.60), together with accrued and unpaid interest on the unpaid
Principal Sum;

 

(iv)                              On
or before January 10, 2007, a principal payment in the amount of Three Million
Six Hundred Eighty-Six Thousand Six Hundred Sixteen Dollars and Sixty Cents
($3,686,616.60), together with accrued and unpaid interest on the unpaid
Principal Sum; and

 

(v)                                 On
or before the Maturity Date, the remaining unpaid balance of the Principal Sum,
together with accrued and unpaid interest on the unpaid Principal Sum, shall be
due and payable.

 

3.2                                 Principal
Curtailment.  If Borrower makes a
principal payment to Holder in excess of that required under Subsection 3.1
above, then such excess principal payment shall be credited against the next
principal payment installment.

 

4.                                       Place and
Time of Payment.  All
payments of principal and interest shall be made during regular business hours
at the principal office of Lender at 8815 Centre Park Drive, Suite 104,
Columbia, Maryland 21045, or at such other place as the Holder may from time to
time designate in writing (the “Payment Address”) and shall be made in coin
or currency of the United States of America, which at the time of payment is
legal tender for the payment of public or private debts.

 

5.                                       Security
for Note.  This Note is
given to evidence a loan in the amount of the Principal Sum made to the
Borrower by the Lender (the Borrower’s receipt of which is hereby
acknowledged), and is secured by the Guaranty and the Additional Guaranty.

 

3

 

6.                                       Application
of Payments.  All
payments made hereunder shall be applied first to late charges or other sums
owing to the Holder, next to accrued interest, and then to principal.

 

7.                                       Prepayment.                            The
Borrower may prepay the unpaid Principal Sum in whole or in part, at any time
or from time to time, without premium or penalty.

 

8.                                       Default.  If default be made in the payment of the
whole or any part of the debt evidenced hereby beyond any applicable notice and
cure period, or if an Event of Default (as defined in the Deed of Trust) be
made in the performance of any of the terms, agreements, covenants, or
conditions contained herein or contained in the Guaranty, Additional Guaranty
or in any Loan Document, then, in any of these events, the entire unpaid
balance of the Principal Sum due hereunder, plus all accrued interest, together
with all other sums evidenced hereby or secured by the Guaranty and/or
Additional Guaranty, shall, at the option of the holder hereof, at once become
and be due and payable, without notice to Borrower or any other person.

 

9.                                       Default
Rate of Interest.  On
default for ten (10) days after written notice to Borrower in the payment of
any installment of principal or interest, or either (provided that Borrower
shall not be entitled to more than two notices of monetary default in any twelve
month period), the entire unpaid principal balance shall bear interest
thereafter at the Default Rate. 
Interest at the Default Rate shall be payable with the payment of the
overdue amount, and otherwise shall be compounded on the first day of each and every
calendar month until paid in full.  Such
interest calculation shall be made on the basis of a 365 day year.

 

10.                                 Late
Charge.  Borrower
covenants and agrees that if any sum required hereunder or under the Deed of
Trust should not be received by the holder hereof within ten (10) days from its
due date, a late charge of five percent (5%) of such overdue payment, including
principal and interest, may (in addition to any other remedies provided for
hereunder) be charged for the purpose of defraying expenses incident to
handling such delinquent payments.

 

11.                                 Payment
of Costs.  If, after any
default hereunder or under the Deed of Trust, the Guaranty or the Additional
Guaranty which continues beyond any applicable notice and cure period, the
Holder retains an attorney with respect to any enforcement action which the
Holder may be entitled to take, including but not limited to, any suit or
action, which is instituted to collect any or all of the Principal Sum, any
interest accrued thereon or any other sum falling due under the provisions of
this Note, or if this Note is placed in the hands of an attorney for
collection, the Borrower hereby agrees to pay all reasonable costs thereby
incurred by the Holder, including reasonable attorneys’ fees, all of which shall
be added to and become part of the debt evidenced hereby.

 

4

 

12.                                 Confessed
Judgment. Upon the
occurrence of a default in the payment of the whole or any part of the
debt evidenced hereby beyond any applicable notice and cure period, or if an
Event of Default (as defined in the Deed of Trust) be made in the performance
of any of the terms, agreements, covenants, or conditions contained herein or
contained in the Additional Guaranty, the Deed of Trust or in any Loan Document, Borrower authorizes and empowers any attorney
or any clerk of any court of record in the United States of America to appear
on behalf of Borrower in any court having jurisdiction, in one or more
proceedings, or before any clerk thereof or other court official, and TO CONFESS
JUDGMENT AGAINST BORROWER, WITHOUT PRIOR NOTICE OR OPPORTUNITY OF BORROWER FOR
PRIOR HEARING, in favor of Lender or the Holder for and in the
amount of the unpaid Principal Sum, all interest accrued and unpaid thereon,
all other amounts due and payable by Borrower to Lender or the Holder under the
terms of this Note, court costs, expenses, and attorneys’ fees of five percent
(5%) of the total amount then due hereunder. Notwithstanding the Lender’s right
to the attorneys’ fees described above in connection with any confession of
judgment proceeding, the Lender may only collect such actual reasonable
attorneys’ fees and expenses that are incurred by its counsel in connection
therewith, and upon payment of the amount of the judgment, including such
actual reasonable attorneys’ fees and expenses, the judgment shall be
considered satisfied.  Borrower waives
and releases, to the extent permitted by applicable law, the benefit of any and
every statute, ordinance, rule of court and all errors and all rights of
exemption, appeal, stay of execution, inquisition, other relief from the
enforcement or immediate enforcement of a judgment or related proceedings on a
judgment, and other rights to which Borrower may otherwise be entitled under
the laws of the United States of America or of any state or possession of the
United States of America now in force or which may hereafter be enacted.  The authority and power to appear for and
enter judgment against Borrower shall not be exhausted by one or more exercises
thereof, or by any imperfect exercise thereof, and shall not be extinguished by
any judgment entered pursuant thereto. 
Such authority and power may be exercised on one or more occasions, from
time to time, in the same or different jurisdictions as often as Lender or the
Holder shall deem necessary or advisable, for all of which this Note shall be
sufficient authority.

 

13.                                 Commercial
Loan.  Borrower
stipulates and warrants that (a) the loan evidenced hereby is a “commercial
loan” within the meaning of Section 12-101(c) of the Commercial Law Article of
the Annotated Code of Maryland, and (b) all loan proceeds will be used for such
commercial loan purpose.

 

14.                                 Severability.  If any provision (or any part of any
provision) contained in this Note shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision (or remaining part of the
affected provision) of this Note, but this Note shall be construed as if such
invalid, illegal or unenforceable provision (or part thereof) had never been
contained herein, but only to the extent it is invalid, illegal, or
unenforceable.

 

15.                                 Governing
Law; Jurisdiction; Service of Process.  Borrower hereby acknowledges, consents and agrees (a) that the
provisions of this Note

 

5

 

and the rights of all parties mentioned herein shall be governed by
Maryland law and interpreted and construed in accordance with such laws
(excluding Maryland conflict of laws), and (b) that the United States District
Court for the Northern District of Maryland, or any Maryland court of competent
jurisdiction, shall have jurisdiction in any proceeding instituted to enforce
this Note, and any objections to venue are hereby waived.  Borrower hereby consents to process being
served in any suit, action, or proceeding instituted in connection with this
Note by (a) the mailing of a copy thereof by certified mail, postage prepaid,
return receipt requested, to it at its address designated herein and (b)
serving a copy thereof upon John H. Gurley, Esquire, the agent hereby
designated and appointed by Borrower as Borrower’s agent for service of
process. Borrower irrevocably agrees that such service shall be deemed in every
respect to be effective service of process in any such suit, action, or
proceeding. Nothing in this Note shall affect the right of Lender to serve
process in any manner otherwise permitted by law and nothing in this Note will
limit the right of Lender otherwise to bring proceedings against Borrower in
the courts of any other appropriate jurisdiction or jurisdictions.

 

16.                                 Time of
the Essence.  The
Borrower agrees that time is strictly of the essence hereof.

 

17.                                 Extensions.
 The Maturity Date and/or any other date
by which payment is required to be made hereunder may be extended by the Holder
from time to time in its sole discretion, without in any way altering or
impairing the Borrower’s liability hereunder.

 

18.                                 Estoppel
Certificates.  The
Borrower agrees to furnish to the Holder at any time and from time to time,
within fifteen (15) days after written request therefor, a written estoppel
certificate, duly executed and acknowledged, setting forth the amount then due
under this Note, and whether any claim, offset or defense then exists
hereunder.

 

19.                                 Remedies
Cumulative.  Each right,
power, and remedy of Lender as provided for in this Note or any of the other
Loan Documents, or now or hereafter existing under any applicable law or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy provided for in this Note or any of the other Loan
Documents or now or hereafter existing under any applicable law.  The exercise or beginning of the exercise by
Lender of any one or more of such rights, powers, or remedies shall not
preclude the simultaneous or later exercise by Lender of any or all such other
rights, powers or remedies.  No failure
or delay by Lender to insist on the strict performance of any term, condition,
covenant or agreement of this Note or any of the other Loan Documents, or to
exercise any right, power or remedy consequent on a breach thereof, shall
constitute a waiver of any such term, condition, covenant, or agreement or of
any such breach, or preclude Lender from exercising any such right, power or
remedy at a later time or times.  No
provision hereof may be waived or modified orally, but all such waivers or
modifications shall be in writing, expressly waiving or modifying such
provision and signed by the party against whom enforcement of any waiver or
modification is sought.

 

6

 

20.                                 Assignability.  This Note may be assigned by the Lender or
any subsequent Holder at any time and from time to time, and shall inure to the
benefit of and shall be enforceable by the Lender and its successors and
assigns and any other person to whom the Lender may grant an interest in the
Borrower’s obligations to the Lender, and shall be binding and enforceable
against the Borrower and the Borrower’s successors and assigns.

 

21.                                 Waiver of
Jury Trial.  BORROWER, ON BEHALF OF ITSELF AND ITS SUCCESSORS AND
ASSIGNS, WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ALL RIGHT TO TRIAL BY
JURY OF ANY AND ALL CLAIMS ARISING UNDER THIS NOTE, THE DEED OF TRUST, OR ANY
OTHER DOCUMENTS AND AGREEMENTS EXECUTED IN CONNECTION, DIRECTLY OR INDIRECTLY,
WITH THIS LOAN TRANSACTION, AND ANY AND ALL CLAIMS ARISING UNDER COMMON LAW OR
UNDER ANY STATUTE OF ANY STATE OR THE UNITED STATES OF AMERICA, WHETHER ANY
SUCH CLAIMS BE NOW EXISTING OR HEREAFTER ARISING, NOW KNOWN OR UNKNOWN.  IN MAKING THIS WAIVER BORROWER ACKNOWLEDGES
AND AGREES THAT ANY AND ALL CLAIMS MADE BY THE HOLDER OF THIS NOTE AGAINST THE
BORROWER AND ALL CLAIMS MADE BY BORROWER AGAINST THE HOLDER OF THIS NOTE SHALL
BE HEARD BY A JUDGE OF A COURT OF PROPER JURISDICTION AND SHALL NOT BE HEARD BY
A JURY.  THIS WAIVER IS KNOWINGLY, WILLINGLY AND
VOLUNTARILY MADE BY THE BORROWER, AND THE BORROWER HEREBY REPRESENTS AND
WARRANTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY
INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR
NULLIFY ITS EFFECT.  THE BORROWER
FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF
THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS
THIS WAIVER WITH COUNSEL.

 

Signature
Appears on Next Page

 

7

 

IN WITNESS WHEREOF,
Borrower has executed this Deed of Trust Note on the day and year first above
written, intending it to be a sealed instrument.

 

	
  WITNESS:

  	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CORPORATE
  OFFICE PROPERTIES, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Corporate Office Properties Trust,

  general partner

  
	
   

  	
   

  	
   

  
	
  /s/ Stephanie L. Shack

  	
   

  	
  By:

  	
   /s/ Roger A. Waesche, Jr.

  	
  (SEAL)

  
	
   

  	
   

  	
  Name:

  	
   Roger A. Waesche, Jr.

  	
   

  
	
   

  	
   

  	
  Title:

  	
   Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
  STATE OF MARYLAND

  	
   

  	
  )

  	
   

  
	
   

  	
   

  	
  )

  	
  TO WIT:

  
	
  COUNTY OF HOWARD

  	
   

  	
  )

  	
   

  
									

 

I HEREBY CERTIFY that on January 24, 2003, before me, a Notary
Public of the State of Maryland, personally appeared Roger A. Waesche, Jr., who
acknowledged himself to be the Sr. Vice President of Corporate Office
Properties Trust, a Maryland corporation, general partner of Corporate Office Properties, L.P., a
Delaware limited partnership, and that he as such officer, being authorized so
to do, executed the foregoing instrument on behalf of the corporation acting in
its capacity as general partner of the limited partnership.

 

WITNESS my hand and Notarial Seal.

 

	
   

  	
  /s/ M. C. Powel

  
	
   

  	
  Notary Public

  
	
   

  	
  My Commission Expires:  6/  /06

  

 

8

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