AMENDMENT TO
FORMATION/CONTRIBUTION AGREEMENT
THIS AMENDMENT TO FORMATION CONTRIBUTION AGREEMENT ("Amendment") dated as
of the 13th day of October, 1997 by and among ROYALE INVESTMENTS, INC., a
Minnesota corporation ("Royale"), H/SIC CORPORATION, a Delaware corporation
("H/SIC"), STRATEGIC FACILITY INVESTORS, INC., a Delaware corporation
("Strategic"), the sole general partner of BLUE ▇▇▇▇ INVESTMENT COMPANY, L.P., a
Delaware limited partnership ("Blue ▇▇▇▇"), SOUTH BRUNSWICK INVESTMENT COMPANY,
LLC, a New Jersey limited liability company ("SBIC"), a general partner of SOUTH
BRUNSWICK INVESTORS, L.P., a Delaware limited partnership ("South Brunswick"),
COMCOURT INVESTMENT CORPORATION, a Pennsylvania corporation ("ComCourt
Corporation"), the sole general partner of COMCOURT INVESTORS, L.P., a Delaware
limited partnership ("Comcourt"), and GATEWAY ▇▇▇▇▇▇▇ DEVELOPMENT CORPORATION, a
Pennsylvania corporation ("Gateway"), the sole general partner of ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, L.P., a Pennsylvania limited partnership ("Flank Drive") (collectively,
the "Parties").
BACKGROUND
The Parties are party to a certain Formation/Contribution Agreement dated
as of September 7, 1997 (the "Formation Agreement"), pursuant to which the
Parties agreed to pursue a series of transactions, the general structure of
which is set forth in the Formation Agreement. Capitalized terms used herein and
not otherwise defined shall have the meanings set forth in the Formation
Agreement.
Section 26 and Exhibit "Lease Guarantee Agreement" of the Formation
Agreement together outline terms calling for the funding of certain escrows by
the partners of Comcourt and South Brunswick (the "Partners") at Closing. The
Parties have agreed to modify these provisions in a manner intended to
facilitate the overall transaction.
The Parties also desire to amend the definition of H/SIC Assets, Section
9(d)(9) and Exhibit "UPREIT Agreement Terms" of the Formation Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree to the following
modifications of the terms of the Formation Agreement:
1. On the Closing Date, the Partners shall, in lieu of two escrows designed
to subsidize the lease income of Comcourt and South Brunswick (the "Receiving
Partnerships"), fund, or cause to be funded, a single rent escrow account (the
"Rent Escrow"). The Rent Escrow shall be in the amount set forth in the Exhibit
"Lease Income" attached hereto and shall be deposited in an account to be held
and disbursed by Bankers Trust Company pursuant to the provisions of that
certain Credit Agreement to be executed by Royale, FCO, L.P., FCO Holdings,
Inc., Blue ▇▇▇▇, Comcourt, South Brunswick, and Flank Drive in connection with
the H/SIC Properties Indebtedness (the "Credit Agreement"). The Rent Escrow
shall be delivered in its entirety to the Receiving Partnerships pursuant to the
schedule set forth in Exhibit "Lease Income", and the partners shall not be
entitled to the return of any portion of the Rent Escrow.
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2. On the Closing Date, the Partnerships (and not the Partners) shall, in
lieu of two escrows designed to finance certain tenant improvement obligations
of the Receiving Partnerships, fund a single tenant improvement escrow account
(the "Tenants Costs"). The TI Escrow shall be funded in the amount set forth in
the Exhibit "TI Escrow" attached hereto and shall be deposited in an account to
be held and disbursed by Bankers Trust Company pursuant to the provisions of the
Credit Agreement. The TI Escrow shall be delivered in its entirety to the
Receiving Partnerships pursuant to the schedule set forth in Exhibit "Tenants
Costs", and the Partners shall not be entitled to the return of any portion of
the TI Escrow.
3. The definition of H/SIC Assets in the Formation Agreement is amended to
read as follows:
"H/SIC Assets" shall mean H/SIC's furniture, fixtures, equipment and
proprietary assets.
4. Section 9(d)(9) of the Formation Agreement is hereby amended to read as
follows:
"(9) Except as otherwise provided in Section 7(f) and except to
the extent the UPREIT Agreement may provide for a shorter holding
period or for shorter holding periods, such Contributor acknowledges
and agrees that (A) the Common Units to be issued at Closing shall not
be exchangeable or exchanged for Royale Common Stock for a period of
thirteen (13) months from and after the date of Closing, and (B)
Preferred Units to be issued at Closing shall not be exchangeable or
exchanged for Royale Common Stock for a period of twenty-five (25)
months from and after the Closing Date. Common Units and Preferred
Units received by the Retained Partners at the Retained Interests
Closing shall not be subject to any holding period and the Retained
Partners shall have the right to exchange immediately for Royale
Common Stock such Common Units and Preferred Units received at the
Retained Interests Closing."
5. The paragraph captioned "Management Expenses" is hereby deleted from
Exhibit "UPREIT Agreement Terms" of the Formation Agreement. The Parties agree
that the Limited Partnership Agreement of FCO, L.P. to be executed at Closing
satisfies the requirements of Exhibit "UPREIT Agreement Terms."
6. This Amendment may not be amended except by an instrument in writing
signed by the parties to this Amendment.
7. This Amendment may be executed in several counterparts, each of which
will be deemed an original and all of which shall constitute one and the same
instrument and shall be governed in all respects by the laws of the Commonwealth
of Pennsylvania.
8. As amended by this Amendment, the Formation Agreement shall remain in
full force and effect.
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9. This Amendment shall be binding upon, and shall be enforceable by and
inure to the benefit of, the parties named herein and their respective
successors.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first set forth above.
H/SIC CORPORATION, a Delaware
corporation
By:
-------------------------------
STRATEGIC FACILITY INVESTORS, INC., a Delaware limited
partnership, the sole general partner of Blue ▇▇▇▇
Investment Company, L.P., a Delaware limited
partnership
By:
-------------------------------
SOUTH BRUNSWICK INVESTMENT COMPANY, LLC, a New Jersey
limited liability company, a general partner of South
Brunswick Investors, L.P., a Delaware limited
partnership
By:
-------------------------------
(SIGNATURES CONTINUED ON NEXT PAGE)
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COMCOURT INVESTMENT CORPORATION, a Pennsylvania
corporation, the sole general partner of ComCourt
Investors, L.P., a Delaware limited partnership
By:
-------------------------------
GATEWAY ▇▇▇▇▇▇▇ DEVELOPMENT CORPORATION, a
Pennsylvania corporation, the sole general partners
of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, L.P.
By:
-------------------------------
ROYALE INVESTMENTS, INC., a
Minnesota corporation
By:
-------------------------------
Crown Advisors, Inc. and its shareholders join in this Amendment.
CROWN ADVISORS, INC.
By:
-------------------------------
SHAREHOLDERS:
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▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Exhibit "TI Escrow"
Square Tenant Capital
Tenant Footage Improvements Commissions Improvements
Total
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
Teleport Communications Group 87,550 291,805 103,723 30,000 425,528
Initial Lease - Existing Obligations
Teleport Communications Group 26,425 0 359,450 359,450
First Option Space - already exercised
Teleport Communication Group 28,410 1,136,400 335,790 70,000 1,542,190
Second Option Space - already exercised
General Property Improvements 104,00 104,000
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Total Ridge Road 1,428,205 798,963 204,000 2,431,168
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Commerce Court
Ernst & Young 17,499 197,091 98,617 295,708
Penn State/▇▇▇▇▇▇▇▇▇ 17,665 247,310 143,565 390,875
Groundwater Sciences 4,702 8,528 0 8,528
Penn State/▇▇▇▇▇▇▇▇▇ 1st Floor 7,763 33,500 15,053 48,553
--------------------------------------------------------------------------------
Total Commerce Court 486,429 257,235 0 743,664
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Conrail Building
PEMA 51,161 51,161
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Total Conrail 51,161 0 0 51,161
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TOTAL 1,965,795 1,056,198 204,000
3,225,993
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Schedule 5.6
Lease Income
Oct-97 Nov-97 Dec-97 Jan-98
Total
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
TCG Option Payment Refund 92,333 92,333
Rent 24,222 41,715 41,715 41,715 149,368
Reimbursements 574 988 988 988 3,537
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Total Income 24,796 42,703 42,703 135,036 245,238
Less Expense Reduction (1,636) (2,817) (2,817) (2,817) (10,088)
Lease Income Reserve 23,160 39,886 39,886 132,218 235,150
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Commerce Court Oct-97 Nov-97 Dec-97 Thereafter Total
Rent - E &Y 4,140
Rent - Penn State 14,103
Rent - Penn State - 1st Fl 5,785
Rent - Vacant Space 321 553 553 10,695
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Total Income 34,349 553 553 10,695 46,150
Less Expense Reduction 0 0 0 0
0
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Lease Income Reserve 34,349 553 553 10,695 46,150
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Total Rent Reserve 57,509 40,439 40,439 142,913 281,300
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