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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For fiscal year ended December 31, 1997
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file Number 0-22741
CARRAMERICA REALTY, L.P.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 52-1976308
------------------------------- ------------------------------------
(State or other Jurisdiction or (I.R.S. Employer Identification No.)
Incorporation or Organization)
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
--------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (202) 624-7500
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act: Units
of Partnership Interest
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No_____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|
As of March 4, 1998, assuming that each unit of partnership interest
has the same value as a share of common stock of CarrAmerica Realty Corporation
(into which such units may be redeemed) the aggregate market value of the
1,777,587 units of partnership Interest held by non-affiliates of the registrant
was approximately $52.9 million, based upon the closing price of a share of
common stock of CarrAmerica Realty Corporation of $29.75 on the New York Stock
Exchange composite tape on such date.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the proxy statement
for the Annual Shareholders Meeting of CarrAmerica Realty Corporation to be held
in 1998 and the Annual Report on Form 10-K of Carr America Realty Corporation
for the year ended December 31, 1997 are incorporated by reference herein.
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1
<PAGE>
PART 1
Item 1. BUSINESS
General
CarrAmerica Realty, L.P., a Delaware limited partnership (the
"Partnership"), was organized in March 1996 and its activities as of March 1,
1998 included the acquisition, development, ownership and operation of office
properties primarily in select suburban growth markets across the United States.
The Partnership's portfolio, as of March 1, 1998, consisted of (i) 54 operating
properties containing approximately 4.8 million rentable square feet of space
located in suburban Austin, Southeast Denver, suburban Dallas, suburban Salt
Lake City, suburban Chicago, suburban Seattle, San Francisco Bay Area and Orange
County/Los Angeles (the "Properties"), (ii) eight properties under construction
that will contain approximately 797,000 square feet of space, and (iii) land
that is expected to support the future development of up to 1.2 million square
feet of space. The Properties owned as of December 31, 1997 were 96.4% leased as
of that date. Each of the Properties is wholly owned by the Partnership.
The Partnership is managed indirectly by CarrAmerica Realty
Corporation, a Maryland corporation (together with its subsidiaries, including
the Partnership, "CarrAmerica"). CarrAmerica indirectly serves as the sole
general partner, of the Partnership and indirectly owned approximately 87% of
the units of partnership interest ("Units") in the Partnership as of December
31, 1997. CarrAmerica is a real estate investment trust (a "REIT") for federal
income tax purposes and its shares of common stock, $.01 par value per share
("Common Stock"), are listed on the New York Stock Exchange under the symbol
"CRE."
CarrAmerica is a fully integrated, self-administered and self-managed
REIT that focuses primarily on the acquisition, development, ownership and
operation of office properties in select suburban growth markets across the
United States. As of March 1, 1998, CarrAmerica owned a greater than 50%
interest in a portfolio of 256 operating office properties, and 41 properties
under construction. These 256 operating properties contain an aggregate of
approximately 19.9 million square feet and the 41 properties under construction
will contain approximately 3.7 million square feet. The operating properties as
of December 31, 1997 were 95.9% leased as of that date, with approximately 1,400
tenants.
CarrAmerica and its predecessor, The Oliver Carr Company ("OCCO"), have
developed, owned and operated office buildings in the Washington, D.C.
metropolitan area for more than 35 years. In November 1995, CarrAmerica
announced a strategic alliance with a wholly-owned subsidiary of Security
Capital U.S. Realty (together with Security Capital U.S. Realty, "SC-USREALTY"),
a European real estate operating Company which owns strategic positions in
selected real estate companies in the United States. As of February 28, 1998,
SC-USREALTY owned approximately 44.1% of the outstanding common stock of
CarrAmerica (39.3% on a fully diluted basis).
CarrAmerica organized and administers the Partnership as a means of
acquiring, developing, owning and operating certain properties within its
portfolio. All of the Partnership's properties, as well as its financial
condition and results of operations, are reported as part of the consolidated
properties, financial condition and results of operations of CarrAmerica. The
Partnership is required to report separately by means of this Annual Report on
Form 10-K and other periodic reports filed with the Securities and Exchange
Commission because it is the guarantor of certain publicly held debt of
CarrAmerica. As of December 31, 1997, approximately 23% of the total assets of
CarrAmerica were owned by the Partnership or its subsidiaries.
The Partnership is capitalized through the issuance of Units.
CarrAmerica, through its wholly owned subsidiary, CarrAmerica Realty GP
Holdings, Inc., a Delaware corporation ("GP Holdings"), serves as the sole
general partner of the Partnership and owned a 1.0% general partner interest (in
the form of Units) in the Partnership as of December 31, 1997. In addition,
CarrAmerica, through its wholly owned subsidiary, CarrAmerica Realty LP
Holdings, Inc., a Delaware corporation ("LP Holdings"), owned an approximate 86%
limited partnership interest (in the form of Units) in the Partnership as of
December 31, 1997. The remaining Units are owned by persons who received such
Units in connection with the contribution to the Partnership of interests in
certain Properties. The Partnership has approximately 90 employees, including
approximately 70 on-site employees.
2
<PAGE>
Business Strategy
The Partnership is an integral part of CarrAmerica, and its operations
and strategic direction are defined by CarrAmerica. CarrAmerica's primary
business objectives are to achieve long-term sustainable per share cash flow
growth and to maximize stockholder value through a strategy of (i) acquiring,
developing, owning and operating office properties primarily in suburban markets
throughout the United States that exhibit strong, long-term growth
characteristics and (ii) maintaining and enhancing a national operating system
that provides corporate users of office space with a mix of products and
services to meet their workplace needs at both the national and local level.
CarrAmerica has focused its investments primarily in suburban markets throughout
the United States because it believes that the suburban markets provide growth
oriented companies and their employees with workplace locations which have lower
operating costs, greater convenience and a higher quality of life than
traditional central business district locations.
Target Markets. CarrAmerica has focused its acquisition and development
activity in markets of the United States, which generally possess strong
long-term growth characteristics. Within these markets, CarrAmerica is targeting
specific submarkets in which (i) operating costs for businesses are relatively
low, (ii) long-term population and job growth generally are expected to exceed
the national average, (iii) large, well-educated employment pools exist, and
(iv) barriers to entry exist for new supplies of office space. CarrAmerica has
established a local presence in each of its existing target markets through its
investment activity and through relationships established by its experienced
market officers. CarrAmerica's target markets include the following: Suburban
Atlanta, Suburban Austin, Suburban Chicago, Suburban Dallas, Southeast Denver,
Tampa, Florida, Boca Raton, Florida, Orange County/Los Angeles, Suburban
Phoenix, Suburban Portland, Oregon, Sacramento, Suburban Salt Lake City, San
Diego, San Francisco Bay Area, Suburban Seattle and metropolitan Washington,
D.C.
For each identified target market, CarrAmerica has established a set of
general guidelines and physical characteristics to evaluate investment
opportunities. All investment decisions are driven by real estate research,
focusing on variables such as composition of economic base rate, and composition
of job growth and office space supply and demand fundamentals. During 1997,
CarrAmerica believes that it met its critical mass threshold in substantially
all of its target markets. By achieving such critical mass, CarrAmerica believes
that it is able to better serve its customers' needs, realize certain operating
efficiencies and achieve sustainable long-term per share cash flow growth and
maximize stockholder value.
Operating Property Acquisitions. In November 1995, CarrAmerica
implemented a major initiative to acquire operating office properties in order
to establish the operating platform for its national business strategy. Between
January 1, 1996 and March 1, 1998, CarrAmerica acquired 241 operating properties
containing approximately 16.7 million square feet, resulting in an approximate
500% increase in the total square footage of operating properties in which
CarrAmerica has a majority interest. These properties were acquired for an
aggregate purchase price of approximately $1.9 billion.
Development Program. Development of office properties is an
increasingly important component of CarrAmerica's growth strategy as attractive
acquisition opportunities diminish due to the influx of capital into the office
property market. CarrAmerica believes that long-term investment returns
resulting from properties it develops generally will exceed those from
properties it acquires, and CarrAmerica will not assume significantly increased
investment risks. CarrAmerica minimizes its development risk by employing
extensively trained and experienced development personnel, by avoiding the
assumption of entitlement risk in conjunction with land acquisitions and by
entering into guaranteed maximum price (GMP) construction contracts with
seasoned and credible contractors. Most importantly, CarrAmerica carefully
analyzes the supply and demand characteristics of a target market before
commencing inventory development in the market. In general, CarrAmerica will
only undertake inventory development (which excludes properties under
construction that have been substantially pre-leased) in markets with strong
real estate fundamentals, and then CarrAmerica generally will construct office
buildings attractive to a wide range of office users. CarrAmerica's
research-driven development program enables it to tailor its development
activities in each target market, from inventory development, to build-to-suit
projects, to holding land for future development. From January 1, 1997 to March
1, 1998, CarrAmerica placed in service nine development properties containing
approximately 780,000 square feet. The total cost of these development
properties was $99.1 million and CarrAmerica expects that the first year
stabilized unleveraged return of these properties will be 11.7%. In addition, as
of March 1, 1998, CarrAmerica had an additional 41 properties under construction
that will contain approximately 3.7 million square feet.
3
<PAGE>
Investments in Land Held for Future Development. CarrAmerica believes
that acquiring land to support future development provides it with a competitive
advantage in responding to customers' needs for office space in markets with low
vacancy rates, barriers to entry for new supplies of office space and increasing
rental rates. CarrAmerica also believes that the long-term investment returns
available to it on office properties it develops generally will exceed those of
office property acquisition opportunities currently available to CarrAmerica. In
addition to its portfolio of operating properties and projects currently under
development, CarrAmerica owned or controlled, as of March 1, 1998, land in 15 of
its target markets that is expected to support future development of up to 5.9
million square feet. CarrAmerica believes that acquiring land to support future
development provides it with a competitive advantage in responding to customers'
needs for office space in markets with low vacancy rates.
National Operating System. As part of its business strategy,
CarrAmerica has developed and will continue to enhance a national operating
system to provide nationally coordinated customer service, marketing and
development. CarrAmerica's national operating system consists of three
components: (i) a Market Officer Group, currently consisting of 11 market
officers focused on developing and maintaining strong local relationships with
CarrAmerica's customers and the brokerage community and identifying investment
opportunities for CarrAmerica; (ii) a Corporate Services Group, which is
dedicated to marketing CarrAmerica's office space to a targeted list of
companies; and (iii) a National Development Group, which is responsible for
developing office properties, build-to-suit facilities and business parks.
CarrAmerica's national operating system is designed to provide corporate users
of office space with a mix of products and services to meet their workplace
needs at both the national and local levels. CarrAmerica believes that through
its existing portfolio of operating properties, property development
opportunities and land acquired and currently held for future development,
CarrAmerica can generate incremental demand through the relocation and expansion
needs of many of its customers, both within a single target market and in
multiple target markets.
Market Officer Group. The Market Officer Group currently consists of 11
market officers who cover the 16 target markets in which CarrAmerica currently
owns properties. These market officers are responsible for maximizing the
performance of CarrAmerica's properties in their markets and ensuring that the
needs of CarrAmerica's customers are consistently being met. Because they meet
with CarrAmerica's customers on a regular basis, market officers are cognizant
of and responsive to customers' relocation or expansion needs. The market
officers have extensive knowledge of local conditions in their respective
markets and, therefore, are invaluable in identifying attractive investment
opportunities in their markets. In addition, through their contact with
customers, market officers are well positioned to help the Corporate Services
Group identify customers with new build-to-suit and multi-market requirements.
Corporate Services Group. CarrAmerica established the Corporate
Services Group in 1997. This group is responsible for marketing CarrAmerica's
properties, build-to-suit capabilities and the national scope of CarrAmerica's
operations to a targeted list of major corporate users . The Corporate Services
Group acts as a primary point of contact for national customers, coordinating
all of the office space CarrAmerica offers and giving corporate customers the
opportunity to address their national space requirements efficiently and
economically.
National Development Group. The National Development Group is
responsible for developing office properties, build-to-suit facilities and
business parks. CarrAmerica's development team currently has over 40
professionals consisting of architects, engineers and construction professionals
across the United States who have an average of over 15 years of experience
developing office properties. This team of development professionals oversees
every aspect of CarrAmerica's land planning, building design, construction and
development of office properties, ensuring that all projects meet the same high
standards and uniform specifications in building design and systems. CarrAmerica
believes that the National Development Group's expertise has given CarrAmerica a
competitive edge in marketing its facilities and services to customers.
4
<PAGE>
Asset Optimization. As a component of its business strategy,
CarrAmerica may dispose of assets that become inconsistent with its long-term
strategic or return objectives or where market conditions for disposition are
favorable. CarrAmerica would then redeploy the proceeds of such dispositions
into other office properties (utilizing tax-deferred exchanges where possible).
Consistent with this strategy, during 1997, CarrAmerica disposed of seven
properties containing approximately 664,000 square feet for approximately $68
million in value. CarrAmerica recognized a gain of $5.4 million in conjunction
with these transactions. In addition, in January 1998, CarrAmerica disposed of
an additional property containing 267,000 square feet for approximately $78
million in value, resulting in a gain of $43.8 million. CarrAmerica also may
consider disposing of additional properties or interests in properties, some of
which may be significant. CarrAmerica, however, has agreed with SC-USREALTY to
use its reasonable efforts to dispose of properties only through tax-deferred
exchanges (and CarrAmerica also is subject to other similar restrictions with
respect to certain properties acquired by the Partnership and Carr Realty,
L.P.).
Recent Developments
From January 1, 1997 to March 1, 1998, the Partnership invested
approximately $361.8 million ($188.2 million in cash, the assumption of $147.6
million of debt and the issuance of $26.0 million in Units) in 30 operating
properties containing approximately 2.6 million square feet and land which is
expected to support the development of approximately 1.1 million square feet.
The Partnership developed and placed into service two properties containing an
aggregate of approximately 290,000 square feet and placed under construction 8
properties which will contain an aggregate of approximately 797,000 square feet.
The table below provides certain information by market regarding the operating
properties acquired between January 1, 1997 and March 1, 1998:
Purchase
Price
Region/Market (in Number of Rentable
millions) Properties Square Feet
- ------------------------------------ ------------ ----------- -------------
PACIFIC REGION
San Francisco Bay Area $ 14.8 1 70,000
Orange County / Los Angeles 44.9 3 252,000
Suburban Seattle 12.7 1 95,000
CENTRAL REGION
Suburban Chicago 43.2 3 318,000
Suburban Austin 15.6 2 171,000
Suburban Dallas 69.8 8 717,000
MOUNTAIN REGION
Suburban Salt Lake City 50.1 8 463,000
Suburban Phoenix 92.1 4 533,000
------------ ----------- -------------
Total $ 343.2 30 2,619,000
============ =========== =============
The following table provides certain information regarding the
development activity on the Partnership's land (including land subject to
options), all of which was acquired between January 1, 1997 and March 1, 1998:
Square Feet Future
Under Buildable Square
Region/Market Construction Footage
------------------------------ --------------- ------------------
Suburban Salt Lake City 50,000 193,000
Suburban Dallas 250,000 605,000
--------------- ------------------
TOTAL 300,000 798,000
=============== ==================
In addition, CarrAmerica contributed three operating office properties
containing approximately 241,000 square feet, one office property under
construction which will contain approximately 101,000 square feet of office
space and options to acquire land which is expected to support the future
development of four office properties.
5
<PAGE>
Forward-Looking Statements
Certain statements contained herein involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of CarrAmerica and the Partnership or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: national and local economic, business and real
estate conditions that will, among other things, affect demand for office
properties, availability and creditworthiness of tenants, the level of lease
rents and the availability of financing for both tenants and CarrAmerica and the
Partnership, adverse changes in the real estate, including, among other things,
competition with other companies, risks of real estate acquisition and
development (including the failure of pending acquisitions to close and pending
developments to be completed on time and within budget), governmental approvals,
actions and initiatives, and environmental/safety requirements.
Item 2. PROPERTIES
General. As of December 31, 1997, the Partnership owned 53 operating
office properties ranging from two to 12 stories each, located in nine target
markets across the United States. As of December 31, 1997, the Partnership also
owned eight office properties under development. Except as disclosed in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources," the Partnership has no immediate
plans to renovate its operating office properties other than for routine capital
maintenance. The Partnership believes its properties are adequately covered by
insurance. The Partnership believes that, as a result of CarrAmerica's national
operating system, market research capabilities, access to capital, and
experience as an owner, operator and developer of office properties, the
Partnership will continue to be able to identify and consummate acquisition and
development opportunities and to operate its portfolio more effectively than
competitors without such capabilities. The Partnership, however, competes in
many of its target markets with other real estate operators, some of which may
have been active in such markets for a longer period than the Partnership.
6
<PAGE>
General
The following table sets forth certain information about each operating
property owned by the Partnership as of December 31, 1997:
<TABLE>
<CAPTION>
The
Partnership's Net Total
Effective Rentable Annualized Average Base
Property Area Percent Base Rent(3) Rent Per Leased
Property Ownership (square feet)(1) Leased(2) in thousands) Square Foot(4)
- -------- --------- ---------------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Consolidated Properties
Southern California,
Orange County/Los Angeles:
South Coast Executive Centre 100.0% 160,301 94.9% $ 3,078 $ 20.23
(2 Properties)
2600 W. Olive 100.0 145,304 100.0 3,051 21.00
Bay Technology Center (2 Properties) 100.0 107,481 100.0 1,570 14.61
Northern California,
San Francisco Bay Area:
San Mateo I 100.0 70,000 100.0 2,394 34.20
San Mateo II and III (2 Properties) 100.0 140,675 94.8 3,346 25.08
Suburban Seattle:
Canyon Park Business Plaza 100.0 95,290 100.0 1,358 14.25
(formerly Tract 17)
Austin, Texas:
Great Hills Plaza 100.0 135,333 100.0 2,155 15.92
Balcones Center 100.0 75,761 80.2 940 15.47
Park North (2 Properties) 100.0 132,923 88.4 1,775 15.11
City View Centre (formerly The Settings) 100.0 132,647 95.8 2,136 16.81
(3 Properties)
Tower of the Hills (2 Properties) 100.0 171,157 98.1 2,332 13.89
Suburban Chicago:
Bannockburn Lake Office Plaza I & II
(2 Properties) 100.0 209,860 100.0 3,248 15.48
Bannockburn Lake Office Plaza IV 100.0 108,470 98.7 1,681 15.70
<CAPTION>
Property Significant Tenants(5)
- -------- ---------------------
<S> <C>
Consolidated Properties
Southern California,
Orange County/Los Angeles:
South Coast Executive Centre State Compensation Insurance Fund (33%)
(2 Properties)
2600 W. Olive The Walt Disney Company (89%)
Bay Technology Center (2 Properties) AMRESCO (100%)
Northern California,
San Francisco Bay Area:
San Mateo I Franklin Resources (100%)
San Mateo II and III (2 Properties) Franklin Resources, Inc. (37%), Peoplesoft/Red
Pepper (20%)
Suburban Seattle:
Canyon Park Business Plaza Microsoft (100%)
(formerly Tract 17)
Austin, Texas:
Great Hills Plaza First USA Management, Inc. (48%), Blue Cross (24%),
Skjerven Morrill, Machpherson (13%), Businesssuites (12%)
Balcones Center Medianet (37%), Austin Diagnostic Clinic (15%), Amil
International Ins. (11%)
Park North (2 Properties) CSC Continuum Inc. (28%)
City View Centre (formerly The Settings) Holt, Rinehart & Winston (78%), Barter Exchange (13%)
(3 Properties)
Tower of the Hills (2 Properties) Texas Guaranteed Student (67%)
Suburban Chicago:
Bannockburn Lake Office Plaza I & II
(2 Properties) IMC Global (38%), Deutsche Credit Corp. (36%)
Bannockburn Lake Office Plaza IV Open Text (35%), Abbott Laboratories (11%), NY Life
Insurance (10%)
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
The
Partnership's Net Total
Effective Rentable Annualized Average Base
Property Area Percent Base Rent(3) Rent Per Leased
Property Ownership (square feet)(1) Leased(2) in thousands) Square Foot(4)
- -------- --------- ---------------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Dallas, Texas:
Greyhound 100.0% 92,890 100.0% $ 845 $ 9.10
Search Plaza 100.0 151,176 95.3 2,408 16.72
Quorum North 100.0 113,420 80.1 1,471 16.19
Quorum Place 100.0 176,260 91.9 2,413 14.91
Cedar Maple Plaza (3 Properties) 100.0 112,185 96.1 1,923 17.84
Tollhill East & West (2 Properties) 100.0 238,808 90.1 3,106 14.44
Two Mission Park 100.0 76,933 85.6 832 12.64
Southeast Denver:
Harlequin Plaza (2 Properties) 100.0 327,711 98.0 4,720 14.70
Quebec Court I & II (2 Properties) 100.0 287,041 100.0 2,887 10.06
Greenwood Center 100.0 75,866 75.6 971 16.93
Quebec Center (3 Properties) 100.0 106,849 97.7 1,467 14.05
Panorama Corporate Center I 100.0 100,542 98.7 2,019 20.34
JD Edwards Building 100.0 189,087 100.0 2,716 14.36
Phoenix, Arizona:
US West (4 Properties) 100.0 532,506 100.0 8,129 15.27
Salt Lake City, Utah:
Sorenson Research Park (5 Properties) 100.0 285,144 99.1 3,262 11.55
Wasatch Corporate Center (formerly Draper 100.0 178,098 100.0 1,961 11.01
Park North) (3 Properties) ------- ----- ----- -----
TOTAL CONSOLIDATED PROPERTIES: 4,729,718 $ 70,193
========= ========
WEIGHTED AVERAGE 96.4% $ 15.40
==== ========
<CAPTION>
Property Significant Tenants(5)
- -------- ----------------------
<S> <C>
Dallas, Texas:
Greyhound Greyhound Lines (100%)
Search Plaza Basic Capital Management (34%)
Quorum North Digital Matrix Systems (20%), HQ Dallas Quorum North
(14%), ElectronicTransmissions (10%)
Quorum Place VHASouthwest, Inc. (22%), Objectspace (16%)
Cedar Maple Plaza (3 Properties) Fidelity National Bank (12%)
Tollhill East & West (2 Properties) Digital Equipment Corporation (22%)
Two Mission Park Bland Garvey and Taylor (16%)
Southeast Denver:
Harlequin Plaza (2 Properties) Travelers Insurance (21%), Bellco First Federal
Credit Union (12%)
Quebec Court I & II (2 Properties) Time Warner Communications (45%), Alert Centre
(37%), TCI Digital Satellite (17%)
Greenwood Center General Motors Corp. (33%)
Quebec Center (3 Properties) Gordon Gumeeson & Associates (12%), Walberg & Dagner (11%)
Panorama Corporate Center I Teleport Communications Group (70%), Sprint
Spectrum, LP (11%)
JD Edwards Building JD Edwards (100%)
Phoenix, Arizona:
US West (4 Properties) US West Business Resources (100%)
Salt Lake City, Utah:
Sorenson Research Park (5 Properties) Foundation Health Corp (24%), Matrix Marketing, Inc.
(22%), Datachem Laboratories, Inc. (20%), Dayna
Communications, Inc. (14%), ITT Educational Services (12%)
Wasatch Corporate Center (formerly Draper Advanta Financial Corp (28%), Times Mirror Training,
Park North) (3 Properties) Inc. (23%), Fonix Corp. (14%), Keytex Corp (14%),
Novus Credit Services, Inc. (12%)
</TABLE>
- --------------------
(1) Includes office and retail space but excludes storage space.
(2) Includes space for leases that have been executed and have commenced as of
December 31, 1997.
(3) Total annualized base rent equals total original base rent, including
historical contractual increases and excluding (i) percentage rents, (ii)
additional rent payable by tenants such as common area maintenance, real
estate taxes and other expense reimbursements, (iii) future contractual or
contingent rent escalations, and (iv) parking rents.
(4) Calculated as total annualized base rent divided by net rentable area
leased.
(5) Includes tenants leasing 10% or more of rentable square footage (with the
percentage of rentable square footage in parentheses).
8
<PAGE>
Occupancy, Average Rentals and Lease Expirations. As of December 31,
1997, 96.4% of the aggregate net rentable square footage in the Partnership's 53
operating office properties was leased. The following table sets forth the
percent leased and average annualized rent per leased square foot (excluding
storage space) for office and retail space combined for the past two years at
each of the dates indicated:
<TABLE>
<CAPTION>
Average
Percent Annualized Rent Number of
Leased at Per Leased Consolidated
December 31, Year End Square Foot (1) Properties
---------------------- ----------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1997 96.4% $ 17.10 53
1996 89.7 13.93 25
</TABLE>
- ---------------------
(1) Calculated as total annualized building operating revenue, including tenant
reimbursements for operating expenses and excluding parking and storage
revenue, divided by the total square feet, excluding storage, in the
building under lease at year end.
The following table sets forth a schedule of the lease expirations for
leases in place as of December 31, 1997 in each of the next ten years beginning
with 1998 and thereafter for the Partnership's 53 operating office properties,
assuming that no tenants exercise renewal options:
<TABLE>
<CAPTION>
Net Annual Percent of
Rentable Area Base Rent Total Annual Base
Number of Subject to Under Rent
Year Tenants With Expiring Expiring Represented
of Lease Expiring Leases (1) Leases by Expiring
Expiration Leases (square feet) (in thousands) Leases
- --------------------------- ---------------- ------------------ ------------------- --------------------
<S> <C> <C> <C> <C>
1998 133 581,000 $ 9,315 13.3%
1999 107 549,000 8,259 11.8
2000 94 456,000 8,476 12.1
2001 83 781,000 10,653 15.2
2002 52 512,000 9,152 13.0
2003 19 232,000 3,134 4.5
2004 18 389,000 5,662 8.1
2005 1 2,000 38 0.1
2006 9 178,000 2,676 3.8
2007 7 611,000 9,056 12.8
2008 and thereafter 6 268,000 3,772 5.3
</TABLE>
- ----------------------
(1) Excludes 171,000 square feet of space that was vacant as of December 31,
1997.
US West. Because the aggregate gross revenues of the four properties
that constitute US West were in excess of 10% of the Partnership's total gross
revenues for 1997 and for the period from March 6, 1996 (the date of the
Partnership's inception) to December 31, 1996, additional information regarding
US West is provided below.
US West was developed in 1988. The complex includes four buildings,
three of which are located in suburban Phoenix and one in Tucson. The
Partnership has no immediate plans to renovate US West (other than for routine
capital maintenance) and believes that US West is adequately covered by
insurance.
As of December 31, 1997, approximately 100.0% of the rentable square
footage in the four buildings constituting US West was leased. The percent
leased and average annualized rent per leased square foot (excluding storage
space) for the past five years for US West is not available because US West was
purchased by the Partnership in December 1997 (or approximately 532,000 square
feet). At December 31, 1997, U.S. West Business Resources occupied 100% of the
space (or approximately 532,000 square feet) pursuant to a lease which expires
in 2007. U.S. West has two five-year options to extend their lease at the then
prevailing market rates, provided notice is given no later than July 1, 2006 on
the first option and July 1, 2011 on the second option. The current annual base
rent under this lease, excluding operating recoveries, is approximately
$8,129,000.
9
<PAGE>
The aggregate tax basis of depreciable real property of the office
properties constituting US West for federal income tax purposes was
approximately $58.0 million as of December 31, 1997. Depreciation is computed on
the Modified Accelerated Cost Recovery System (MACRS) over the estimated useful
lives of the real property over 39 years. No personal property was purchased
with these office properties.
The current realty tax rate for the four buildings that constitute US
West range from $4.8222 to $10.5124 per $100 assessed value. The annual tax for
the four buildings range from approximately $226,000 to $772,000 based on
assessed values ranging from $2,096,000 to $9,462,000.
Mortgage Financing. As of December 31, 1997, certain of the
Partnership's 53 operating office properties were subject to fixed rate mortgage
indebtedness in an aggregate principal amount of $186 million. The Partnership's
fixed rate mortgage debt bears an effective weighted average interest rate of
8.1% and a weighted average maturity of 6.6 years (assuming loans callable
before maturity are called as early as possible). Certain information regarding
fixed rate mortgage indebtedness is set forth in the table below as of December
31, 1997:
<TABLE>
<CAPTION>
Estimated
Principal Annual Debt Balance Due
Interest Balance Service Maturity at Maturity
Property Rate (in thousands) (in thousands) Date (in thousands)
- -------- ---- ------------ ------------ ---- ------------
<S> <C> <C> <C> <C> <C>
US West 6.50% $ 11,562 $ (1) 1/9/98 $ (2)
2600 W. Olive 7.52 19,517 1,994 6/1/98 19,264 (2)
South Coast Executive Center 9.01 10,226 1,015 5/31/99 10,103 (2)
Quorum Place 6.99 7,719 665 11/15/00 7,327 (2)
Bannockburn Lake Office Plaza I & II 9.52 20,464 2,801 8/31/01 16,835 (2)
Quorum North 8.27 6,658 640 12/1/01 6,258 (2)
Canyon Park Business Plaza
(formerly Tract 17) 9.13 5,822 713 12/1/04 4,071 (2)
US West 7.92 57,584 8,495 12/1/05 (3)
Wasatch Corporate Center
(formerly Draper Park North) 8.15 12,834 1,220 1/2/07 10,569 (3)
Sorenson Research Park 7.75 2,737 328 7/1/11 (3)
Harlequin Plaza and Quebec Court I & II 8.50 29,411 2,899 5/31/11 19,586 (2)
Sorenson Research Park 8.88 1,681 182 5/1/17 (3)
------- ---
Total $ 186,215 $ 20,952
======= ======
</TABLE>
- ------------------
(1) Note was repaid in full in January 1998.
(2) Currently prepayable at the rates stated in the loan documents.
(3) Note will be fully repaid at maturity.
For additional information regarding the Partnership's office
properties and their operation, see "Item 1, Business."
10
<PAGE>
Item 3. LEGAL PROCEEDINGS
The Partnership is party to a variety of legal proceedings arising in
the ordinary course of its business. All of these matters, taken together, are
not expected to have a material adverse impact on the Partnership.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Units. As of
December 31, 1997, there were 23 holders of record of Units. As of December 31,
1997, there were no options or warrants to purchase Units outstanding. In
addition, as of December 31, 1997, there were no Units that could be sold
pursuant to Rule 144 under the Securities Act of 1993, as amended (the
"Securities Act"), or that the Partnership has agreed to register under the
Securities Act for sale by Unit holders, and there were no Units that are being,
or have been publicly proposed to be, publicly offered by the Partnership.
Each Unit held by persons other than GP Holdings or LP Holdings is
(subject to certain holding period limitations) redeemable for cash equal to the
value of a share of common stock of CarrAmerica or, at the option of GP
Holdings, common stock of CarrAmerica on a one-for-one basis. For a presentation
of the high and low trading prices of CarrAmerica's common stock for the last
two years, see "Item 5 -- Market for Registrant's Common Equity and Related
Stockholder Matters" in CarrAmerica's Annual Report on Form 10-K for the year
ended December 31, 1997 (the "1997 CarrAmerica 10-K").
The Partnership has made regular quarterly distributions of $0.4375 per
Class A Unit (prorated where appropriate to reflect ownership of Units for less
than the full period to which such distribution relates) since the second
quarter of 1996. A distribution of $.4375 per Class B Unit also was made for
each of the second and third quarters of 1996. The Partnership's ability to make
distributions depends on a number of factors, including its net cash provided by
operating activities, capital commitments and debt repayment schedules. Holders
of Units are entitled to receive distributions when, as and if declared by the
Board of Directors of GP Holdings, its sole general partner, out of any funds
legally available for that purpose. For the fourth quarter 1997, the Partnership
increased its quarterly distribution, to be paid in the first quarter of 1998,
from $0.4375 to $0.4625.
11
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial and operating
information for the Partnership as of and for the year ended December 31, 1997,
as of December 31, 1996 and for the period from March 6, 1996 (date of
inception) to December 31, 1996.
The following selected financial and operating information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in this Form 10-K and the
financial statements and notes thereto included in this Form 10-K.
March 6, 1996
(date of
inception)
Year Ended through
December 31, December 31,
1997 1996
---- ----
(amounts in thousands
except Other Data)
Operating Data:
Real estate operating revenue $ 60,469 $ 13,376
Real estate operating expenses:
Property operating expenses 25,804 6,546
Interest expense 6,792 1,475
General and administrative expenses 3,473 680
Depreciation and amortization 13,146 3,148
Real estate operating income 11,254 1,527
Net income 16,693 1,556
Cash distributions paid to Unit holders 1,124 2,050
Balance Sheet Data (at period end):
Real estate, before accumulated depreciation $ 624,085 $ 238,073
Total assets 636,568 241,217
Mortgages and notes payable 241,715 51,744
Total Unit holders' (partners') capital 377,615 180,933
Other Data (at period end):
Units outstanding 13,694,260 7,520,401
Number of properties 53 25
Square footage 4,730,000 2,295,000
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is based primarily on the Consolidated
Financial Statements, of the Partnership as of December 31, 1997, and for the
year ended December 31, 1997 and the period from March 6, 1996 (Date of
Inception) to December 31, 1996. The comparability of the periods is
significantly impacted by acquisitions made during 1997 and 1996 and the
Partnership not having a full 12 months of operations for the period ended
December 31, 1996, since the Partnership did not acquire any assets until May
1996, with which to compare the 12 months ended December 31, 1997. As of
December 31, 1996 the Partnership owned 25 properties. This number grew to 53
properties by December 31, 1997. This information should be read in conjunction
with the accompanying consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS - 1997 TO 1996
Real Estate Operating Revenue. Total real estate operating revenue
increased $47.1 million, or 352.1%, to $60.5 million for 1997 as compared to
$13.4 million for 1996. The increase in revenue was primarily attributable to a
$44.4 million and a $2.7 million increase in rental revenue and real estate
service income, respectively. The Partnership experienced net growth in its
rental revenue as a result of its acquisitions and development properties placed
in service, which together contributed the additional rental revenue in 1997.
Other real estate operating income increased $2.7 million in 1997 as a result of
reimbursements from an affiliate, related to certain services the Partnership
personnel provided to the affiliate.
12
<PAGE>
Real Estate Operating Expenses. Total real estate operating expenses increased
$37.4 million for 1997, or 315.4%, to $49.2 million as compared to $11.8 million
for 1996. The net increase in operating expenses was attributable to a $19.3
million increase in property operating expenses, a $5.3 million increase in
interest expense, a $2.8 million increase in general and administrative
expenses, and a $10.0 million increase in depreciation and amortization.
Property operating expenses increased as a result of property acquisitions. The
increase in the Partnership's interest expense is primarily related to
borrowings for acquisitions. The increase in general and administrative expenses
is predominately a result of the addition of new staff. The increase in
depreciation and amortization is predominately a result of additional real
estate acquisitions.
Other Operating Income. Other operating income increased $5.4 million for 1997,
as compared to 1996, primarily due to an increase in interest income and gains
on the disposition of six operating office properties.
Net Income. Net income of $16.7 million was earned for 1997 as compared to $1.6
million during 1996. The comparability of net income between the two periods is
impacted by the acquisitions of operating properties, the Partnership not having
a full 12 months of operations for the period ended December 31, 1996 with which
to compare the 12 months ended December 31, 1997 and the other changes described
above.
Cash Flows. Net cash provided by operating activities increased $10.8 million,
or 114.7%, to $20.2 million for 1997 as compared to $9.4 million for 1996,
primarily as a result of the acquisitions of operating properties. Net cash used
by investing activities increased $15.4 million, to $215.5 million for 1997 as
compared to $200.1 million for 1996, primarily as a result of capital deployed
by the Partnership for acquisitions of office properties, land held for future
development and construction in progress. Net cash provided by financing
activities increased $3.3 million, to $196.4 million for 1997 as compared to
$193.1 million for 1996, primarily as a result of net borrowings on the
unsecured credit facility.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's total indebtedness at December 31, 1997 was $241.7
million, of which $55.5 million, or 23.0%, bears a LIBOR-based floating interest
rate. The Partnership's mortgage payable fixed rate indebtedness bears an
effective weighted average interest rate of 8.1% at December 31, 1997 and has a
weighted average term to maturity of 6.6 years. At December 31, 1997, the total
book value of the Partnership's assets was $650.4 million. The Partnership's
debt as a percentage of total book value of its assets was 37.2% at December 31,
1997. CarrAmerica has a $450.0 million unsecured credit facility with a current
borrowing capacity of $312.0 million under which the Partnership is jointly and
severally liable. As of March 16, 1998, CarrAmerica and the Partnership had
$217.5 million outstanding and $94.5 million available for draw under this
unsecured credit facility. The weighted average interest rate under the
unsecured credit facility for 1997 was 6.9%. Currently, the unsecured credit
facility bears interest at 90 basis points over LIBOR.
In the first quarter of 1998, the Partnership developed a plan to
address Year 2000 issues and began converting its computer systems to be Year
2000 compliant. The plan provides for the conversion efforts to be completed
prior to the end of 1999 for both the Partnership's financial and property
related systems. The Year 2000 issues are the result of computer programs being
written using two digits rather than four to define the applicable year. The
Partnership believes that through its commitment to maintaining the highest
level of systems support and by working closely with vendors providing services
to the Partnership's properties, it will, through the normal course of business,
convert all systems users to Year 2000 compliant equipment prior to the end of
1999. The Partnership estimates the costs associated with implementation of the
plan will not be significant to the Partnership's financial statements.
13
<PAGE>
The Partnership will require capital to invest in its existing
portfolio of operating assets for major capital projects such as large-scale
renovations, routine capital expenditures and deferred maintenance on certain
properties recently acquired and tenant related capital expenditures, such as
tenant improvements and allowances and leasing commissions. With respect to
major capital projects, the Partnership is planning renovations of three
properties containing 485,000 square feet during 1998 which is expected to cost
$11.2 million, or approximately $23.18 per square foot. With respect to routine
capital expenditures and deferred maintenance on certain properties recently
acquired, the Partnership anticipates spending approximately $3.0 million, or
approximately $0.63 per square foot, during 1998 on its portfolio of operating
assets owned as of December 31, 1997. The Partnership expects this amount to
decrease in subsequent years as deferred maintenance activities are completed on
recently acquired properties and as the emphasis of the Partnership's growth
shifts from acquiring existing office properties to developing new properties.
The Partnership's capital requirements for tenant related capital expenditures
are dependent upon a number of factors, including the square footage covered by
expiring leases and tenant retention. During 1998, the Partnership has 581,000
square feet of expiring leases. Tenant-related capital expenditures (tenant
improvements, cash allowances and leasing commissions) were $10.11 per square
foot for leases executed in 1997. The Partnership intends to use cash flow from
operations and its unsecured revolving credit facility to meet its working
capital needs for its existing portfolio of operating assets.
The Partnership will also require a substantial amount of capital for
development projects currently underway and planned for the future. As of March
1, 1998, the Partnership had eight development projects underway which are
expected to require a total investment by the Partnership of $94.9 million. The
Partnership intends to use cash flow from operations, its unsecured credit
facility and contributions from CarrAmerica via its access to public and private
equity and debt markets to meet its capital needs for development projects.
Net cash provided by operating activities was $20.2 million during
1997, compared to $9.4 million during 1996. The increase in net cash provided by
operating activities was primarily a result of acquisitions made by the
Partnership. The Partnership's investing activities used approximately $215.5
million and $200.1 million during 1997 and 1996, respectively. The Partnership's
investment activities included the acquisitions of office buildings and land
held for future development and additions to construction in process of
approximately $263.1 million during 1997, as compared to $200.0 million in
acquisitions during 1996. Additionally, the Partnership invested approximately
$9.9 million and $.1 million in its existing real estate assets during 1997 and
1996, respectively. Net of distributions to the Partnership's partners, the
Partnership's financing activities provided net cash of $197.5 million and
$195.2 million during 1997 and 1996, respectively. During 1997, the
Partnership's partners contributed $155.2 million to fund acquisitions. The
Partnership also drew amounts from its unsecured credit facility during 1997 to
finance its acquisitions and other investing activities. During 1997, the
Partnership's net borrowings of its unsecured credit facility were approximately
$53.5 million.
Rental revenue and real estate service revenue have been the principal
sources of capital to fund the Partnership's operating expenses, debt service
and capital expenditures, excluding non-recurring capital expenditures. The
Partnership believes that rental revenue and real estate service revenue will
continue to provide the necessary funds for its operating expenses and debt
service. The Partnership expects to fund capital expenditures, including tenant
concession packages, building renovations and construction costs, from (i)
available funds from operations, (ii) existing capital reserves, and (iii) if
necessary, credit facilities established with third party lenders. If these
sources of funds are insufficient, the Partnership's ability to make expected
distributions may be adversely impacted. As of December 31, 1997, the
Partnership had cash of $5.1 million, of which $1.5 million was restricted.
The Partnership's distributions are paid quarterly. Amounts accumulated
for distribution are primarily invested by the Partnership in short-term
investments that are collateralized by securities of the United States
Government or certain of its agencies. For the fourth quarter 1997, the
Partnership increased its quarterly distribution, to be paid in the first
quarter of 1998, from $0.4375 to $0.4625.
14
<PAGE>
Management believes that the Partnership will have access to the
capital resources necessary to expand and develop its business. The Partnership
may seek to obtain funds through contributions from CarrAmerica through its
ability to raise funds through contributions from CarrAmerica through its
ability to raise funds through equity offerings or debt offerings, in a manner
consistent with its intention to operate with a conservative borrowing policy.
The Partnership anticipates that adequate cash will be available to fund its
operating and administrative expenses, continuing debt service obligations, the
payment of dividends in accordance with REIT requirements in both the short term
and long term, and future acquisitions of office properties.
ACQUISITION AND DEVELOPMENT ACTIVITY
The following is a discussion of the Partnership's acquisition and
development activity during 1997. A more detailed discussion can be found in
"Item 1. Business--Recent Developments".
During 1997, the Partnership acquired the following properties: in its
Pacific region, five properties containing a total of approximately .4 million
square feet, for an aggregate purchase price of approximately $72.4 million; in
its Mountain region, 12 properties containing a total of approximately 1.1
million square feet, for an aggregate purchase price of approximately $142.2
million; and in its Central region, 13 properties containing a total of
approximately 1.2 million square feet for an aggregate purchase price of
approximately $128.6 million. The Partnership also acquired land for an
aggregate purchase price of $8.6 million that is expected to support the
development of up to .5 million square feet. In addition, CarrAmerica
contributed three operating office properties containing approximately 241,000
square feet, one office property under construction which will contain
approximately 101,000 square feet of office space and options to acquire land
which is expected to support the future development of four office properties.
As of December 31, 1997, the Partnership had nine office properties
under construction: 151,000 square feet in its Mountain region and 747,000
square feet in its Central region. Costs incurred during 1997 for properties
under construction were $56.8 million. An additional $62.6 million is expected
to be expended for completion of projects already under construction as of
December 31, 1997.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data included in this Annual
Report on Form 10-K are listed in Part IV. Item 14(a).
Item 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. The Partnership
is managed by GP Holdings, as the sole general partner of the Partnership. The
following table sets forth certain information with respect to the directors and
executive officers of GP Holdings:
<TABLE>
<CAPTION>
Name Age Positions and Offices Held
- ---- --- --------------------------
<S> <C> <C>
Thomas A. Carr.......................... 39 President and Director
Brian K. Fields......................... 38 Chief Financial Officer, Treasurer, Vice President and Director
Robert G. Stuckey....................... 36 Managing Director and Vice President
Philip L. Hawkins....................... 42 Managing Director, Vice President, and Director
</TABLE>
CarrAmerica is the sole stockholder of GP Holdings. The additional
information required by this item with respect to directors and executive
officers of CarrAmerica and GP Holdings is hereby incorporated by reference to
the material appearing under the heading "Election of Directors (Item 1)," in
CarrAmerica's definitive proxy statement for the annual meeting of its
stockholders to be held on May 7, 1998 (the "1997 CarrAmerica Proxy Statement")
and under the headings "Directors of the Company" and "Executive Officers and
Certain Key Employees of the Company," in the 1997 CarrAmerica 10-K.
15
<PAGE>
Item 11. EXECUTIVE COMPENSATION
The Partnership has no directors or executive officers. The Partnership
is managed by GP Holdings, as the sole general partner of the Partnership. GP
Holdings has not paid any compensation to its directors or officers. CarrAmerica
is the sole stockholder of GP Holdings. The information required by this item
with respect to CarrAmerica's executive officers is hereby incorporated by
reference to the material appearing in the 1997 CarrAmerica Proxy Statement
under the headings "Executive Compensation" and "Report on Executive
Compensation."
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of December 31, 1997,
regarding the beneficial ownership of Units by each person known by the
Partnership to be the beneficial owner of more than five percent of the
Partnership's outstanding Units. As of December 31, 1997, no director or
executive officer of GP Holdings or CarrAmerica beneficially owned any Units.
Each person named in the table has sole voting and investment power with respect
to all Units shown as beneficially owned by such person, except as otherwise set
forth in the notes to the table.
Name and Business Number of Percent of
Address of Beneficial Owner Units Units(1)
- --------------------------- ----- ---------
CarrAmerica Realty Corporation................. 11,916,673(2) 87.0%
CarrAmerica Realty LP Holdings, Inc............ 11,779,730 86.0%
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
- -----------------
(1) Based on 13,694,260 Units outstanding as of December 31, 1997.
(2) Includes 11,779,730 Units held by LP Holdings and 136,943 Units held by GP
Holdings, each of which is a wholly owned subsidiary of CarrAmerica.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CarrAmerica Realty Services, Inc. ("CARSI"), a wholly owned subsidiary
of CarrAmerica, provides management and leasing services to all of the office
properties owned by the Partnership. During 1997 and 1996, respectively, the
Partnership incurred management fees of $1.9 million and $.4 million,
respectively, for services performed by CARSI. Additionally, CARSI reimburses
the Partnership for certain services the Partnership personnel provide to CARSI.
These reimbursements amounted to $2.0 million in 1997. In addition, CarrAmerica
Development, Inc.("CADI"), also reimbursed the Partnership for certain services
the Partnership personnel provided to CADI. These reimbursements amounted to $.7
million in 1997.
CarrAmerica pays on behalf of the Partnership certain administrative
costs and certain costs related to the acquisitions of properties which are
billed to the Partnership, and makes working capital advances to the
Partnership. Amounts due to CarrAmerica and its subsidiaries were $1.4 million
at December 31, 1997 and $2.8 million at December 31, 1996.
During 1997, the Partnership sold land to CADI that will support the
future development of approximately four office properties for $5.9 million,
which is payable by a note between the Partnership and CADI.
16
<PAGE>
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
--------------------
Reference is made to the Index to Financial Statements and
Schedule on page F-1 of this Form 10.
(a)(2) Financial Statement Schedules
-----------------------------
Reference is made to the Index to Financial Statements and
Schedule on page F-1 of this Form 10-K.
(a)(3) Exhibits
--------
4.1 Second Amended and Restated Agreement of Limited
Partnership of the Partnership, dated May 9, 1997
(incorporated by reference to Exhibit 10.1 to
CarrAmerica's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997).
4.2 First Amendment to Second Amended and Restated Agreement
of Limited Partnership, dated October 6, 1997
(incorporated by reference to Exhibit 10.2 to
CarrAmerica's Annual Report on Form 10-K for the year
ended December 31, 1997).
4.3 Second Amendment to Second Amended and Restated
Agreement of Limited Partnership, dated October 6, 1997
(incorporated by reference to Exhibit 10.3 to
CarrAmerica's Annual Report on Form 10-K for the year
ended December 31, 1997).
4.4 Third Amendment to Second Amended and Restated Agreement
of Limited Partnership, dated October 6, 1997
(incorporated by reference to Exhibit 10.3 to
CarrAmerica's Annual Report on Form 10-K for the year
ended December 31, 1997).
4.5 Indenture, dated as of July 1, 1997, by and among
CarrAmerica, as Issuer, the Partnership, as Guarantor,
and Bankers Trust Company, as Trustee, relating to
CarrAmerica's 7.20% Notes due 2004 and 7.375% Notes due
2007 (incorporated by reference to Exhibit 4.1 to
CarrAmerica's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997).
4.6 Indenture, dated as of February 23, 1998, by and among
CarrAmerica, as Issuer, the Partnership, as Guarantor,
and Bankers Trust Company, as Trustee, relating to
CarrAmerica's 6.625% Notes due 2005 and 6.875% Notes due
2008 (incorporated by reference to Exhibit 4.2 to
CarrAmerica's Annual Report on Form 10-K for the year
ended December 31, 1997).
10.1 Stockholders Agreement, dated April 30, 1996, by and
among CarrAmerica, Carr Realty, L.P., Security Capital
Holdings, S.A. and Security Capital U.S. Realty
(incorporated by reference to Exhibit 2.2 of Security
Capital U.S. Realty's Schedule 13D dated April 30,
1996).
10.2 Third Amended and Restated Credit Agreement, dated
March 11, 1998, by and among CarrAmerica, Carr Realty,
L.P., the Partnership, Morgan Guaranty Trust Company of
New York, Commerzbank Aktiengesellschaft, New York
Branch, NationsBank, N.A., Wells Fargo Bank, National
Association, Bank of America National Trust and Savings
Association, and the other banks listed therein
(incorporated by reference to Exhibit 10.15 to
CarrAmerica's Annual Report on Form 10-K for the year
ended December 31, 1997).
17
<PAGE>
10.3 Agreements of Purchase and Sale and Contribution
Agreement dated September 30, 1997 by and among the
Partnership, Phoenixwest Associates, Ltd., Versailles
Associates Limited Partnership, Lakeview 436 Associates
Ltd., Pines Realty Associates, Ltd., and certain other
parties thereto.
21.1 List of Subsidiaries.
23.1 Consent of KPMG Peat Marwick LLP, dated March 31, 1998.
27 Financial Data Schedule.
99.1 Certificate of Incorporation of CarrAmerica GP Holdings,
Inc. (incorporated by reference to Exhibit 99.1 to the
Partnership's Registration Statement on Form 10/A, filed
on October 1, 1997 (File No. 0-22741)).
99.2 Bylaws of CarrAmerica GP Holdings, Inc. (incorporated by
reference to Exhibit 99.2 to the Partnership's
Registration Statement on Form 10/A, filed on October 1,
1997 (File No. 0-22741).
99.3 Amendment and Restatement of Articles of Incorporation
of CarrAmerica, as amended and as supplemented
(incorporated by reference to Exhibit 3.1 to
CarrAmerica's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997).
99.4 Articles Supplementary Relating to Series C Cumulative
Redeemable Preferred Stock dated October 30, 1997
(incorporated by reference to Exhibit 4.1 to
CarrAmerica's Current Report on Form 8-K dated and filed
on November 6, 1997).
99.5 Articles Supplementary Relating to Series D Cumulative
Redeemable Preferred Stock dated December 17, 1997
(incorporated by reference to Exhibit 4.1 to
CarrAmerica's Current Report on Form 8-K dated December
16, 1997 and filed on December 17, 1997).
99.6 Second Amendment and Restatement of By-laws of
CarrAmerica Realty Corporation (incorporated by
reference to Exhibit 3.1 to CarrAmerica's Current Report
on Form 8-K dated and filed February 12, 1997).
99.7 "Item 5 -- Market for Registrant's Common Equity and
Related Stockholder Matters," page 23, from
CarrAmerica's Annual Report on Form 10-K for the year
ended December 31, 1997.
18
<PAGE>
99.8 "Election of Directors (Proposal 1)," from CarrAmerica's
Proxy Statement to be delivered to CarrAmerica's
stockholders in connection with CarrAmerica's 1998
Annual Meeting of Stockholders.
99.9 "Item 1 -- Business -- The Company -- Directors of the
Company," pages 7-9, from CarrAmerica's Annual Report on
Form 10-K for the year ended December 31, 1997.
99.10 "Item 1 -- Business -- The Company -- Executive Officers
and Certain Key Employees of the Company," from
CarrAmerica's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997.
99.11 "Executive Compensation," from CarrAmerica's Proxy
Statement to be delivered to CarrAmerica's stockholders
in connection with CarrAmerica's 1998 Annual Meeting of
Stockholders.
99.12 "Report on Executive Compensation," from CarrAmerica's
Proxy Statement to be delivered to CarrAmerica's
stockholders in connection with CarrAmerica's 1998
Annual Meeting of Stockholders.
99.13 "Executive Compensation Committee Interlocks and Insider
Participation," from CarrAmerica's Proxy Statement to be
delivered to CarrAmerica's stockholders in connection
with CarrAmerica's 1998 Annual Meeting of Stockholders.
99.14 "Certain Relationships and Related Transactions," from
CarrAmerica's Proxy Statement to be delivered to
CarrAmerica's stockholders in connection with
CarrAmerica's 1998 Annual Meeting of Stockholders.
(b) Reports on Form 8-K
None
(c) Exhibits
The list of exhibits filed with this report is set forth
in response to Item 14(a)(3). The required exhibit index
has been filed with the exhibits.
(d) Financial Statements
None.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registration has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the District of Columbia on March 31, 1998.
CARRAMERICA REALTY, L.P.
a Delaware limited partnership
By: CarrAmerica Realty
GP Holdings, Inc.
General Partner
By: /s/ THOMAS A. CARR
------------------
Thomas A. Carr
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following person on behalf
of the registrant and in the capacities indicated on March 31, 1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ THOMAS A. CARR
---------------------------------- President, Chief Executive Officer and
Thomas A. Carr Director
/s/ BRIAN K. FIELDS
---------------------------------- Chief Financial Officer, Treasurer, Vice President
Brian K. Fields and Director
/s/ PHILIP L. HAWKINS
---------------------------------- Managing Director, Vice President and Director
Philip L. Hawkins
</TABLE>
20
<PAGE>
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
The following Consolidated Financial Statements and Schedule of
CarrAmerica Realty, L.P. and Subsidiary and the Independent Auditors' Reports
thereon are attached hereto:
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
<TABLE>
<S> <C>
Consolidated Balance Sheets as of December 31, 1997 and 1996.....................................F-2
Consolidated Statements of Operations for the Year Ended
December 31, 1997 and the Period from March 6, 1996 (Date of Inception)
to December 31, 1996....................................................................F-3
Consolidated Statements of Partners Capital for the Year Ended
December 31, 1997 and the Period from March 6, 1996 (Date of Inception)
to December 31, 1996....................................................................F-4
Consolidated Statements of Cash Flows for the Year Ended December 31, 1997 and
the Period from March 6, 1996 (Date of Inception) to December 31, 1996..................F-5
Notes to Consolidated Financial Statements.......................................................F-6
Independent Auditors' Report.....................................................................F-14
FINANCIAL STATEMENT SCHEDULE
Independent Auditors' Report.....................................................................S-1
Schedule III: Consolidated Real Estate and Accumulated Depreciation as of
December 31, 1997 for CarrAmerica Realty, L.P. and Subsidiary...........................S-2
</TABLE>
All other schedules are omitted because they are not applicable, or because the
required information is included in the financial statements or notes thereto.
F-1
<PAGE>
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Consolidated Balance Sheets As of December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands)
December 31, December 31,
1997 1996
---------------- ---------------
<S> <C> <C>
Assets
- ------
Rental property (notes 2 and 9):
Land $ 91,347 26,404
Buildings 465,276 182,856
Tenant improvements 12,496 7,068
Furniture, fixtures, and equipment 96 6
---------------- ---------------
569,215 216,334
Less - accumulated depreciation (13,360) (3,104)
---------------- ---------------
Total rental property 555,855 213,230
Land held for development 10,526 13,254
Construction in progress 44,344 8,485
Restricted and unrestricted cash and cash equivalents 5,085 2,478
Accounts and notes receivable 11,757 1,888
Accrued straight-line rents 3,317 733
Tenant leasing costs, net of accumulated amortization of $406
in 1997 and $35 in 1996 3,439 881
Prepaid expenses and other assets, net of accumulated
depreciation and amortization of $46 in 1997 and $9 in 1996 2,245 268
---------------- ---------------
$ 636,568 241,217
================ ===============
Liabilities and Partners' Capital
- ---------------------------------
Liabilities:
Mortgages and notes payable (note 2) $ 212,304 21,952
Note payable to affiliate (note 2) 29,411 29,792
Accounts payable and accrued expenses 12,591 4,441
Due to affiliates (note 6) 1,386 2,774
Rent received in advance and security deposits 3,244 1,325
---------------- ---------------
Total liabilities 258,936 60,284
Partners' capital (note 3):
General partner 3,787 1,809
Limited partners 373,845 179,124
---------------- ---------------
Total partners' capital 377,632 180,933
Commitments and contingencies (notes 4, 8 and 10)
---------------- ---------------
$ 636,568 241,217
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations for the Year Ended December 31, 1997
and for the period from March 6, 1996 (Date of Inception) to December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands)
March 6, 1996
(Date of
Inception)
December 31, through
1997 December 31, 1996
---------------- --------------------
<S> <C> <C>
Real estate operating revenue:
Rental revenue (note 4):
Minimum base rent $ 48,487 11,220
Recoveries from tenants 8,043 1,790
Other tenant charges 1,232 366
---------------- --------------------
Total rental revenue 57,762 13,376
---------------- --------------------
Cost reimbursements (note 6) 2,707 --
---------------- --------------------
Total revenue 60,469 13,376
---------------- --------------------
Real estate operating expenses:
Property operating expenses:
Operating expenses 19,102 4,873
Real estate taxes 6,702 1,673
Interest expense 6,792 1,475
General and administrative 3,473 680
Depreciation and amortization 13,146 3,148
---------------- --------------------
Total operating expenses 49,215 11,849
---------------- --------------------
Real estate operating income 11,254 1,527
Other operating income:
Interest income 372 29
Gain on sale of assets (note 7) 5,067 --
---------------- --------------------
Net income $ 16,693 1,556
================ ====================
Net income attributable to general partner $ 167 15
---------------- --------------------
Net income attributable to limited partners $ 16,526 1,541
================ ====================
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Consolidated Statements of Partner's Capital For the Year
Ended December 31, 1997 and the Period form
March 6, 1996 (Date of Inception) to December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
General Partner Limited Partners
------------------- ----------------------------------
CarrAmerica CarrAmerica
Realty GP Realty LP Other Limited
Holdings, Inc. Holdings, Inc. Partners Total
-------------- -------------- -------------- ------
<S> <C> <C> <C> <C>
Capital contributions $1,814 161,620 17,993 $181,427
Capital distributions (20) (1,924) (106) (2,050)
Net income for the period 15 1,318 223 1,556
------ ------- ------ --------
Partners' capital at December 31, 1996 1,809 161,014 18,110 180,933
Capital contributions 1,811 153,351 25,968 181,130
Capital distributions -- -- (1,124) (1,124)
Net income 167 14,312 2,214 16,693
------ ------- ------ --------
Partners' capital at December 31, 1997 $3,787 328,677 45,168 $377,632
====== ======= ====== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Consolidated Statements of Cash Flows for the Year Ended December 31, 1997
and for the Period from March 6, 1996 (Date of Inception) to December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
March 6, 1996
(Date of
Inception) through
1997 December 31, 1996
---- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 16,693 $ 1,556
---------- ---------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 13,146 3,148
Loss on write-off of assets 148 --
Increase in accounts receivable and notes receivable (9,869) (1,816)
Increase in accrued straight-line rents (2,584) (805)
Additions to tenant leasing costs (3,981) (916)
Increase in prepaid expenses and other assets (1,991) (277)
Increase in accounts payable and accrued expenses 8,150 4,441
Increase (decrease) in due to affiliates (1,388) 2,774
Increase in rent received in advance and security deposits 1,919 1,325
---------- ---------
Total adjustments 3,550 7,874
---------- ---------
Net cash provided by operating activities 20,243 9,430
---------- ---------
Cash flows from investing activities:
Additions to rental property (9,892) (98)
Acquisitions of rental property (196,295) (178,239)
Additions to land held for future development (10,049) (13,254)
Additions to construction in progress (56,761) (8,485)
Increase in restricted cash and cash equivalents (1,500) --
Proceeds from disposition of rental property and land
held for development 58,978 --
---------- ---------
Net cash used by investing activities (215,519) (200,076)
---------- ---------
Cash flows from financing activities:
Capital Contributions 155,162 163,433
Net borrowings on unsecured line of credit 53,500 2,000
Borrowings on notes payable to affiliates -- 30,000
Repayments on notes and mortgages payable (1,647) (259)
Disposition of mortgage payable from sale of rental property (9,508) --
Capital distributions (1,124) (2,050)
---------- ---------
Net cash provided by financing activities 196,383 193,124
---------- ---------
Increase in cash and cash equivalents 1,107 2,478
Cash and cash equivalents, beginning of the period 2,478 --
---------- ---------
Cash and cash equivalents, end of the period $ 3,585 2,478
---------- ---------
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $2,909 in 1997
and $431 for the period March 6, 1996 to December 31, 1996) $ 6,210 $ 1,619
========== =========
</TABLE>
Supplemental disclosure of noncash investing and financing activities:
(a) During 1997, the Partnership funded a portion of the aggregate purchase
price of its property acquisitions by assuming $147.6 million of debt and
liabilities and by issuing $26.0 million of minority units in the
Partnership.
(b) For the period from March 6, 1996 to December 31, 1996, the Partnership
funded a portion of the aggregate purchase price of its property
acquisitions by assuming $20.0 million of debt and liabilities and $18.0
million of minority units in the Partnership.
See accompanying notes to consolidated financial statements
F-5
<PAGE>
CARRAMERICA REALTY, L.P. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
(1) Description of Business and Summary of Significant Accounting Policies
(a) Business
CarrAmerica Realty, L.P. (the "Partnership") is a Delaware limited
partnership formed on March 6, 1996 to own, acquire, develop, and
operate office buildings across the United States. At December 31,
1997, the Partnership owned 53 operating properties and eight
properties under development. At December 31, 1996, the Partnership
owned 25 operating properties and one property under development. The
properties are located in suburban Austin, suburban Chicago, suburban
Dallas, Southeast Denver, Orange County/Los Angeles, San Francisco Bay
Area, suburban Salt Lake City and suburban Seattle.
The Partnership's general partner is CarrAmerica Realty GP Holdings,
Inc. (the "General Partner"), a wholly owned subsidiary of CarrAmerica
Realty Corporation ("CarrAmerica"), a self-administered and
self-managed real estate investment trust. The General Partner owned a
1% interest in the Partnership at December 31, 1997. The Partnership's
limited partners are CarrAmerica Realty LP Holdings, Inc., a wholly
owned subsidiary of CarrAmerica, which owned an approximate 86%
interest in the Partnership at December 31, 1997, and various other
individuals and entities which collectively owned an approximate 13%
interest in the Partnership at December 31, 1997.
(b) Basis of Presentation
The accounts of the Partnership and its wholly-owned subsidiary are
consolidated in the accompanying financial statements. Management of
the Partnership has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, revenues and
expenses, and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
(c) Rental Property
Rental property is recorded at cost less accumulated depreciation
(which is less than the net realizable value of the rental property).
Depreciation is computed on the straight-line basis over the estimated
useful lives of the assets, as follows:
Base Building...........................30 to 50 years
Building components.....................7 to 20 years
Tenant improvements.....................Terms of the leases or useful
lives, whichever is shorter
Furniture, fixtures and equipment.......5 to 15 years
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations are capitalized.
The Partnership reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset.
If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of
the assets exceed the fair value of the assets.
F-6
<PAGE>
(d) Development Property
Land held for development and construction in progress are carried at
cost. Specifically identifiable direct and indirect acquisition,
development and construction costs are capitalized including, where
applicable, salaries and related costs, real estate taxes, interest
and certain pre-construction costs essential to the development of a
property.
(e) Tenant Leasing Costs
Fees and costs incurred in the successful negotiation of leases have
been deferred and are being amortized on a straight-line basis over
the terms of the respective leases.
(f) Deferred Financing Costs
Deferred financing costs include fees and costs incurred to obtain
financing and are being amortized over the terms of the respective
loans on a basis which approximates the interest method.
(g) Fair Value of Financial Instruments
The carrying amount of the following financial instruments
approximates fair value because of their short-term maturity: cash and
cash equivalents; accounts and notes receivable; accounts payable and
accrued expenses.
(h) Revenue Recognition
The Partnership reports base rental revenue for financial statement
purposes straight-line over the terms of the respective leases.
Accrued straight-line rents represent the amount that straight-line
rental revenue exceeds rents collected in accordance with the lease
agreements. Management, considering current information and events
regarding the tenants' ability to fulfill their lease obligations,
considers accrued straight-line rents to be impaired if it is probable
that the Partnership will be unable to collect all rents due according
to the contractual lease terms. If accrued straight-line rents
associated with a tenant are considered to be impaired, the amount of
the impairment is measured based on the present value of expected
future cash flows. Impairment losses, if any, are recorded through a
loss on the write-off of assets. Cash receipts on impaired accrued
straight-line rents are applied to reduce the remaining outstanding
balance and as rental revenue, thereafter.
(i) New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 130, "Reporting Comprehensive Income," which requires an
enterprise to display comprehensive income and its components in a
financial statement to be included in an enterprise's full set of
financial statements. Comprehensive income represents a measure of all
changes in equity of an enterprise that result from recognized
transactions and other economic events for the period other than
transactions with owners in their capacity as owners. Comprehensive
income includes net income and such items as foreign currency items
and certain unrealized gains and losses. This standard is effective
for the Partnership's fiscal year 1998 and requires prior years'
comparative financial statements to be reclassified to reflect the
provisions of this standard.
Also in June 1997, the FASB issued SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information," which requires a
public entity to report selected information about operating segments
in financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services,
geographic areas and major customers. This standard is also effective
F-7
<PAGE>
for the Partnership's 1998 fiscal year. The Partnership is currently
in the process of evaluating the effect this new standard will have on
its financial statement presentation and disclosures and the required
information, if any, will be reflected in the Partnership's 1998
financial statements.
(j) Income and Other Taxes
No provision has been made for federal and state income taxes because
each partner reports his or her share of the Partnership's taxable
income or loss and any available tax credits on his or her income tax
return.
(k) Cash Equivalents
For the purposes of reporting cash flows, the Partnership considers
all highly liquid investments with a maturity of three months or less
at the time of purchase to be cash equivalents.
(l) Stock Option Plan
The Partnership is a participant in the CarrAmerica 1997 stock option
and incentive plan. Prior to January 1, 1996, CarrAmerica and the
Partnership accounted for its option plans in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expenses would be recorded only if the current
market price of the underlying unit or stock on the date of grant
exceeded the exercise price. As of January 1, 1996, CarrAmerica and
the Partnership adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense, over the
vesting period, the fair value of all unit-based and stock-based
awards on the date of grant. Alternatively, SFAS No. 123 allows
entities to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income and pro forma earnings per share
disclosures for employee option grants made in 1995 and future years
as if the fair-value-based method defined in SFAS No. 123 had been
applied. CarrAmerica and the Partnership has elected to continue to
apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosures permitted by SFAS No. 123.
(2) Mortgages Payable and Credit Facility
The Partnership's mortgages payable and credit facility are summarized as
follows (in thousands):
December 31, December 31,
1997 1996
---- ----
Fixed rate mortgages $156,804 19,952
Unsecured credit facility 55,500 2,000
-------- ------
$212,304 21,952
======== ======
Mortgages payable are collateralized by certain rental properties and
generally require monthly principal and/or interest payments. Mortgages
payable mature at various dates from June 1998 through July 2019. The
weighted average interest rate of mortgages payable was 8.1% and 8.4%, at
December 31, 1997 and December 31, 1996, respectively.
CarrAmerica and the Partnership also have a $450.0 million unsecured credit
facility with Morgan Guaranty Trust Company of New York (Morgan), as agent
for a group of banks. At December 31, 1997, the credit facility bore
interest, as selected by CarrAmerica, at either (i) the higher of the prime
rate or the Federal Funds Rate for such day or (ii) an interest rate equal
to 100 basis points above the 30 day London Interbank Offered Rate
F-8
<PAGE>
(LIBOR). CarrAmerica has predominately selected interest rates equal to 100
basis points above the 30 day LIBOR rate. The credit facility matures in
September 2000. The weighted average effective interest rate for 1997 was
6.9%.
The unsecured credit facility contains a number of financial and other
covenants with which the Partnership must comply including, but not limited
to, covenants relating to ratios of annual EBITDA (earning before interest,
taxes, depreciation and amortization) to interest expense, annual EBITDA to
debt service, and total debt to tangible fair market value of CarrAmerica
and CarrAmerica's assets, and restrictions on the ability of CarrAmerica to
make dividend distributions in excess of 90% of funds from operations.
Availability under the unsecured credit facility is also limited to a
specified percentage of the Partnership's unsecured properties.
On May 24, 1996, the Partnership entered into a $30 million loan agreement
with CarrAmerica. The note payable bears interest at 8.5% and requires
monthly principal and interest payments of $242 thousand. The loan matures
on May 31, 2011. The note is secured by certain office properties and other
assets of the Partnership. The outstanding balance of the note payable to
affiliate was $29.4 million and $29.8 million, at December 31, 1997 and
December 31, 1996, respectively.
The annual maturities of debt as of December 31, 1997 are summarized as
follows (in thousands):
1998 $ 37,431
1999 17,381
2000 71,003
2001 31,761
2002 8,796
2003 & thereafter 75,343
--------
$241,715
========
Restricted and unrestricted cash and cash equivalents includes $1.5 million
of restricted cash at December 31, 1997, consisting primarily of escrow
deposits required by lenders to be used for future building renovations,
tenant improvements or as collateral for letters of credit.
Based on the borrowing rates available to the Partnership for fixed rate
mortgages payable with similar terms and average maturities, the estimated
fair value of the Partnership's mortgages at December 31, 1997 and 1996 was
approximately $194.4 million and $20.3 million, respectively.
(3) Partners' Capital Contributions, Distributions, and Participation
Percentages
The Second Amended and Restated Agreement of Limited Partnership of the
Partnership (the "Partnership Agreement") details the rights of ownership
in the Partnership. Ownership in the Partnership is expressed in
partnership units ("Units"). Units currently are designated as Class A, B,
C, D or E Units. Class D Units have first preference, Class A and Class E
Units together have second preference and Class B Units have third
preference as to the allocation of Available Cash, as defined in the
Partnership Agreement. Class C units do not share in the allocation of
Available Cash. Upon the third anniversary of the date of issuance of Class
C Units, they may be converted to Class A Units based on a conversion
factor described in the Partnership Agreement. Class E Units have a special
allocation of Partnership losses.
Upon the first anniversary of the date of issuance (or two years from the
date of issuance, in the case of Class D Units), each holder of Class A
Units, Class D Units or Class E Units may, subject to certain limitations,
require that the Partnership redeem his or her Units. Upon redemption, such
holder will receive, at the option of the Partnership, with respect to each
Unit tendered, either (i) cash in an amount equal to the market value of
F-9
<PAGE>
one share of CARC common stock (subject to certain anti-dilution
adjustments) or (ii) one share of CARC common stock. In lieu of the
Partnership redeeming Class A, Class D or Class E Units for cash, CARC has
the right to assume directly and satisfy the redemption right of a Unit
holder. Holders of Class B Units and Class C Units are not entitled to
exercise this redemption right.
The following Units were outstanding:
December 31, December 31,
1997 1996
----------- ------------
Class A Units 950,111 361,677
Class B Units 11,916,673 6,619,131
Class C Units 539,593 539,593
Class D Units 271,363 --
Class E Units 16,520 --
---------- ---------
13,694,260 7,520,401
========== =========
(4) Lease Agreements
The following table summarizes future minimum base rent to be received
under noncancelable tenant leases and the percentage of total rentable
space under leases expiring each year, as of December 31, 1997 (in
thousands):
Future Percentage of
Minimum Total Space Under
Rent Leases Expiring
--------------- ----------------------
1998 $ 71,031 12.74%
1999 65,966 12.04
2000 58,372 10.01
2001 48,506 17.13
2002 42,179 11.23
2003 & thereafter 133,586 36.85
--------
$419,640
========
The leases also provide for additional rent based on increases in the
Consumer Price Index (CPI) and increases in operating expenses. These
increases are generally payable in equal installments throughout the year,
based on estimated increases, with any differences being adjusted in the
succeeding year.
(5) Stock Option Plans
As of December 31, 1997, the Partnership participated in the CarrAmerica
1997 Employee Stock Option and Incentive Plan for the purpose of attracting
and retaining executive officers and other key employees.
The 1997 Employee Stock Option and Incentive Plan ("Stock Option Plan")
allows for the grant of options to purchase CarrAmerica's common stock at
an exercise price which is equal to the fair market value of the common
stock at the date of grant. The Stock Option Plan was approved by
CarrAmerica's stockholders at its Annual Meeting of Stockholders on May 8,
1997. At December 31, 1997, CarrAmerica had 3,000,000 shares of common
stock
F-10
<PAGE>
reserved for issuance under the Stock Option Plan, of which 897,121 were
outstanding. All of these options have a 10-year term from the date of
grant and vest over a five-year period, 20% per year.
Number of Weighted Average
Shares Exercise Price
------------- ----------------
Balance at December 31, 1996 0 --
Granted 50,517 28.45
Exercised -- --
Forfeited 312 28.56
Expired -- --
------ ------
Balance at December 31, 1997 50,205 $28.45
====== ======
At December 31, 1997, the range of exercise prices for options issued to
employees of the Partnership was between $26.375 and $29.25 per Unit/share
and the weighted average remaining contractual life of outstanding options
was 9.26 years.
At December 31, 1997, none of the options were exercisable.
(6) Transactions With Affiliates
CarrAmerica Realty Services, Inc. ("CARSI"), a wholly owned subsidiary of
CarrAmerica, provides management and leasing services to all of the office
properties owned by the Partnership. During 1997 and 1996, respectively,
the Partnership incurred management fees of $1.9 million and $.4 million,
respectively, for services performed by CARSI. Additionally, CARSI
reimburses the Partnership for certain services the Partnership personnel
provide to CARSI. These reimbursements amounted to $2.0 million in 1997. In
addition, CarrAmerica Development, Inc.("CADI"), also reimbursed the
Partnership for certain services the Partnership personnel provided to
CADI. These reimbursements amounted to $.7 million in 1997.
CarrAmerica pays on behalf of the Partnership certain administrative costs
and certain costs related to the acquisitions of properties which are
billed to the Partnership, and makes working capital advances to the
Partnership. Amounts due to CarrAmerica and its subsidiaries were $1.4
million at December 31, 1997 and $2.8 million at December 31, 1996.
During 1997, the Partnership sold land to CADI that will support the future
development of approximately four office properties for $5.9 million, which
is payable by a note between the Partnership and CADI.
(7) Gain on Sale of Assets
The Partnership disposed of assets that are inconsistent with its long-term
strategic or return objectives or where market conditions for sale are
favorable. The proceeds were redeployed into other office properties
(utilizing tax-deferred exchanges where possible). As such, during 1997,
the Partnership disposed of six operating office properties and land which
will support the future development of approximately four office
properties. The land was sold to an affiliate of the Partnership. The
Partnership recognized gains totaling $5.1 million on these dispositions.
(8) Commitments and Contingencies
At December 31, 1997, the Partnership is contingently liable on letters of
credit amounting to approximately $1.4 million for various completion
escrows.
F-11
<PAGE>
The Partnership participates in CarrAmerica's 401(k) plan for employees.
The Plan will match 50% of employee contributions up to the first 4% of an
employee's pay and will make a base contribution of 3% of pay for
participants who remain employed on December 31 (the end of the plan year).
Partnership contributions to the plan are subject to a five-year graduated
vesting schedule. Partnership contributions to the plan amounted to $41
thousand in 1997.
In the course of the Partnership's normal business activities, various
lawsuits, claims and proceedings have been or may be instituted or asserted
against the Partnership. Based on currently available facts, management
believes that the disposition of matters that are pending or asserted will
not have a material adverse effect on the consolidated financial position,
results of operations or liquidity of the Partnership.
In June 1997, the Partnership unconditionally guaranteed unsecured notes by
CarrAmerica to institutional investors. The aggregate principal amount of
the unsecured notes is $275.0 million of long-term debt as of December 31,
1997.
(9) Acquisition and Development Activities
From January 1 to December 31, 1997, the Partnership acquired 30 operating
office properties for an aggregate purchase price of $343.2 million. Costs
incurred during 1997 for properties under construction were $56.8 million.
In addition, CarrAmerica contributed to the Partnership three operating
office properties, one office property under construction and options to
acquire land which will support the future development of approximately
four office properties.
During 1996, the Partnership acquired 25 operating office properties
containing approximately 2.3 million square feet for an aggregate purchase
price of $216.2 million. In addition, as of December 31, 1996, the
Partnership had one property under development and three properties held
for development. Land held for development was purchased for an aggregate
purchase price of $13.3 million. Costs incurred during 1996 for properties
under construction were $8.5 million.
All acquisitions have been accounted for as purchases. Operations of
acquired properties have been included in the accompanying financial
statements from their respective dates of acquisition.
The following unaudited pro forma summary presents information as if the
Partnership's acquisitions through December 31, 1997 had occurred on March
6, 1996 (Date of Inception of the Partnership). The pro forma information
is provided for informational purposes only. It is based on historical
information and does not necessarily reflect the actual results that would
have occurred nor is it necessarily indicative of future results of
operations of the Partnership.
Pro forma information (unaudited): 1997 1996
---- ----
(in thousands)
Total revenue $94,136 $94,475
Net income $30,760 $17,996
(10) Subsequent Events
In February 1998, CarrAmerica sold an aggregate principal amount of $200
million of its long-term debt, in the form of $100 million aggregate
principal amount of 6.625% unsecured notes due in 2005 and $100 million
aggregate principal amount of 6.875% unsecured due in 2008. The Partnership
is a guarantor of these notes.
From January 1, 1998, to March 1, 1998, the Partnership placed into service
one office building and has acquired land which is expected to support the
future development of .6 million square feet. The Partnership paid $10.0
million in cash to purchase the land.
F-12
<PAGE>
(11) Quarterly Financial Information (unaudited)
The following is a summary of quarterly results of operations for 1997 and
1996 (in thousands):
<TABLE>
<CAPTION>
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter
---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Real estate operating revenue $9,479 13,540 17,138 20,312
====== ====== ====== ======
Real estate operating income $1,749 2,690 3,908 2,907
====== ===== ===== =====
Net income $1,757 2,738 3,924 8,274
====== ===== ===== =====
<CAPTION>
First Second Third Fourth
1996 Quarter Quarter Quarter Quarter
---- ------- ------- ------- -------
Real estate operating revenue $-- 959 6,216 6,201
=== === ===== =====
Real estate operating income $-- (19) 236 1,310
=== ==== ===== =====
Net income $-- (18) 241 1,333
=== === ===== =====
</TABLE>
F-13
<PAGE>
INDEPENDENT AUDITORS' REPORTS
CarrAmerica Realty, L.P. and Subsidiary
- --------------------------------------------------------------------------------
The Partners
CarrAmerica Realty, L.P.:
We have audited the accompanying consolidated
balance sheets of CarrAmerica Realty, L.P. and
subsidiary as of December 31, 1997 and 1996
and the related consolidated statements of
operations, partners' capital, and cash
flows for the year ended December 31, 1997 and
the period from March 6, 1996 (date of
inception) to December 31, 1996. These
consolidated financial statements are the
responsibility of CarrAmerica Realty, L.P.'s
management. Our responsibility is to express
an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about
whether the financial statements are free of
material misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures in the
financial statements. An audit also includes
assessing the accounting principles used and
significant estimates made by management, as
well as evaluating the overall financial
statement presentation. We believe that our
audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial
statements referred to above present fairly,
in all material respects, the financial
position of CarrAmerica Realty, L.P. and
subsidiary as of December 31, 1997 and 1996,
and the results of their operations and their
cash flows for the year ended December 31,
1997 and the period from March 6, 1996 (date
of inception) to December 31, 1996, in
conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Washington, D.C.
February 6, 1998, except as to note 10 which is as
of March 1, 1998
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
CarrAmerica Realty, L.P. and Subsidiary
- --------------------------------------------------------------------------------
The Partners
CarrAmerica Realty, L.P.:
Under date of February 6, 1998, we reported
on the consolidated balance sheets of
CarrAmerica Realty, L.P. and subsidiary as
of December 31, 1997 and 1996, and the
related consolidated statements of
operations, partners' capital, and cash
flows for the year ended December 31, 1997
and the period from March 6, 1996 (date of
inception) to December 31, 1996, which are
included in this Form 10-K. In connection
with our audits of the aforementioned
consolidated financial statements, we also
audited the related consolidated financial
statement schedule in this Form 10-K. This
financial statement schedule is the
responsibility of CarrAmerica Realty, L.P.'s
management. Our responsibility is to express
an opinion on this financial statement
schedule based on our audits.
In our opinion, this financial statement
schedule, when considered in relation to the
basic consolidated financial statements
taken as a whole, presents fairly, in all
material respects, the information set forth
therein.
KPMG Peat Marwick LLP
Washington, D.C.
February 6, 1998
S-1
<PAGE>
CARRAMERCA REALTY, L.P. AND SUBSIDIARY
Consolidated Real Estate and Accumulated Depreciation as of December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Gross Amount at Which
Initial Cost Carried at Close of Period
------------------------- Costs Capitalized -------------------------------
Buildings and Subsequent to Buildings and
Properties Encumbrances Land Improvements Acquisition(2) Land Improvements Total
- ---------- ------------ ---- ------------ -------------- ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Orange County/Los Angeles:
South Coast Executive Center $10,226 3,324 17,212 365 3,372 17,529 20,901
2600 W. Olive 19,517 3,855 25,054 2,271 3,855 27,325 31,180
Bay Technology Center -- 2,442 11,164 -- 2,442 11,164 13,606
San Francisco Bay Area:
San Mateo II & III -- 9,723 15,556 100 9,755 15,624 25,379
San Mateo I -- 5,703 9,126 -- 5,703 9,126 14,829
Southeast Denver:
Quebec Center -- 1,423 5,659 419 1,423 6,078 7,501
Greenwood Center -- 289 6,619 151 289 6,770 7,059
Quebec Court I & II 29,411 (1) 2,368 19,819 564 2,371 20,380 22,751
Harlequin Plaza -- (1) 4,746 21,344 1,700 4,748 23,042 27,790
JD Edwards -- 3,006 5,479 19,173 3,242 24,416 27,658
Panorama Corporate Center I -- 1,325 6,486 1,712 1,325 8,198 9,523
Panorama Corporate Center II(3) -- 1,844 -- 8,190 -- 10,034 10,034
Suburban Seattle:
Canyon Park Business Plaza 5,822 2,375 9,958 -- 2,375 9,958 12,333
(formerly Tract 17)
Salt Lake City, Utah:
Sorenson Research Park 4,418 4,389 25,304 291 4,423 25,561 29,984
Wasatch Corporate Center 12,834 3,318 15,495 68 3,326 15,555 18,881
(formerly Draper Park North)
Wasatch Corporate Center -- 1,268 -- 878 -- 2,146 2,146
(formerly Draper Park North)(3)
Wasatch Corporate Center -- 1,368 -- -- 1,368 -- 1,368
(formerly Draper Park North)
Sorenson Research Park -- 2,262 -- 183 2,445 -- 2,445
Suburban Chicago:
Bannockburn Lake Office Plaza IV -- 1,914 12,729 160 1,924 12,879 14,803
Bannockburn Lake Office Plaza
I & II 20,464 3,448 22,928 694 3,472 23,598 27,070
Austin, Texas:
Balcones Center -- 949 7,649 128 949 7,777 8,726
Great Hills Plaza -- 1,680 13,545 393 1,680 13,938 15,618
Park North -- 1,671 13,471 442 1,671 13,913 15,584
City View Centre -- 1,718 13,854 631 1,718 14,485 16,203
(formerly The Setting I, II & III)
Tower of the Hills -- 1,633 13,625 22 1,633 13,647 15,280
Riata Buildings 4,5,8,9(3) -- 3,976 -- 10,384 -- 14,360 14,360
Riata -- 6,145 -- -- 6,145 -- 6,145
City View Centre(3) -- 1,890 -- 12,034 -- 13,924 13,924
Dallas, Texas:
Greyhound -- 1,312 7,999 90 1,321 8,080 9,401
Search Plaza -- 1,822 13,362 171 1,827 13,528 15,355
Quorum North 6,658 1,357 9,078 548 1,365 9,618 10,983
Quorum Place 7,719 1,941 14,234 902 1,954 15,123 17,077
Tollhill East & West -- 2,603 19,086 1,239 2,612 20,316 22,928
Two Mission Park -- 823 4,320 172 829 4,486 5,315
Cedar Maple Plaza -- 1,220 10,982 248 1,225 11,225 12,450
Cedar Maple Plaza-Land -- 520 -- 49 569 -- 569
Royal Ridge(3) -- 3,159 -- 721 -- 3,880 3,880
Phoenix, Arizona:
U.S. West 69,146 18,517 74,069 460 18,517 74,529 93,046
-------- ------- ------- ------ ------- ------- -------
Total $186,215 113,326 445,206 65,553 101,873 522,212 624,085
======== ======= ======= ====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Accumulated Date of Year of
Properties Depreciation Construction Acquisition
- ---------- ------------ ------------ -----------
<S> <C> <C> <C>
Orange County/Los Angeles:
South Coast Executive Center 680 1987 1996
2600 W. Olive 219 1986 1997
Bay Technology Center 16 1985 1997
San Francisco Bay Area:
San Mateo II & III 239 1985 1997
San Mateo I 63 1986 1997
Southeast Denver:
Quebec Center 432 1985 1996
Greenwood Center 375 1982 1996
Quebec Court I & II 1,474 1979/1980 1996
Harlequin Plaza 1,519 1981 1996
JD Edwards 371 N/A 1996
Panorama Corporate Center I 455 N/A 1996
Panorama Corporate Center II(3) -- N/A 1996
Suburban Seattle:
Canyon Park Business Plaza 62 1988 1997
(formerly Tract 17)
Salt Lake City, Utah:
Sorenson Research Park 604 1988,1989,1993,1995 1997
1997
Wasatch Corporate Center 281 1996 1997
(formerly Draper Park North)
Wasatch Corporate Center -- N/A 1997
(formerly Draper ParkNorth)(3)
Wasatch Corporate Center -- N/A 1997
(formerly Draper Park North)
Sorenson Research Park -- N/A 1997
Suburban Chicago:
Bannockburn IV 232 1988 1997
Bannockburn I & II 702 1980 1997
Austin, Texas:
Balcones Center 449 1985 1996
Great Hills Plaza 961 1985 1996
Park North 769 1981 1996
City View Centre 936 1985 1996
(formerly The Setting I, II & III)
Tower of the Hills 19 1986 1997
Riata Buildings 4,5,8,9(3) -- N/A 1997
Riata -- N/A 1996
City View Centre(3) -- N/A 1996
Dallas, Texas:
Greyhound 303 1962 1996
Search Plaza 469 1985 1996
Quorum North 274 1983 1997
Quorum Place 420 1981 1997
Tollhill East & West 502 1974 1997
Two Mission Park 71 1983 1997
Cedar Maple Plaza 367 1985 1997
Cedar Maple Plaza-Land -- N/A 1997
Royal Ridge (3) -- N/A 1997
Phoenix, Arizona:
U.S. West 96 1988 1997
Total ------
13,360
======
</TABLE>
S-2
<PAGE>
Depreciation and amortization of the investment in building and improvements
reflected in the statements of operations are calculated over the estimated
lives of the assets as follows:
<TABLE>
<S> <C>
Base Building 30 to 50 years
Building components 7 to 20 years
Tenant improvements Terms of leases or useful lives, whichever is shorter
Furniture, fixtures and equipment 5 to 15 years
</TABLE>
The aggregate cost for federal income tax purposes was approximately $555,616 at
December 31, 1997.
The changes in total real estate assets and accumulated depreciation and
amortization for 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Total Real Estate Asset Accumulated Depreciation
----------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $238,073 -- Balance, beginning of period $ 3,104 --
Acquisitions 393,275 232,092
Improvements 53,640 5,981 Depreciation for the period 12,961 3,104
Sales, Retirements and write-offs (60,903) -- Sales, Retirements and write-offs (2,705) --
-------- ------- ------- -----
$624,085 238,073 $13,360 3,104
======== ======= ======= =====
</TABLE>
- ---------------------
Notes:
(1) Secured by Quebec Court I & II and Harlequin Plaza.
(2) Costs capitalized are offset by retirements and write-offs.
(3) Under construction as of December 31, 1997. Construction costs are shown
under buildings and improvements until completion. At that time, costs will
be allocated between land and buildings and improvements.
S-3
Exhibit 10.3
AGREEMENT OF PURCHASE AND SALE
U.S. West Communication Group office portfolio, Phoenix and Tucson, Arizona
[HERRICK]
ARTICLE 1: CONTRIBUTED PROPERTY/CONTRIBUTION VALUE
1.1 Certain Basic Terms.
(a) Contributors and Notice Address
PHOENIXWEST ASSOCIATES, LTD.
VERSAILLES ASSOCIATES LIMITED PARTNERSHIP
LAKEVIEW 436 ASSOCIATES LTD.
PINES REALTY ASSOCIATES, LTD., all Florida
limited partnerships, together referred to
as "Contributors"
c/o Herrick Company
2295 Corporate Blvd. NW, Suite 222
Boca Raton, Florida 33431-0810
Telephone: 561/241-9880
Facsimile: 561/241-9887
With a copy to: Kelley Drye & Warren LLP
Attention: John A. Garraty, Jr.
101 Park Avenue
New York, New York 10178
Telephone: 212/808-7653
Facsimile: 212/808-7897
(b) Carr and Notice Address:
CARRAMERICA REALTY, L.P.
a Delaware limited partnership,
herein referred to as "Carr"
Attention: Karen Dorigan
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Telephone: 202/639-3843
Facsimile: 202/ 737-2147
With copies to: Mayer, Brown & Platt
Attention: George Ruhlen
141 East Palace Avenue
Santa Fe, New Mexico 87501
Telephone: 505/820-8185
Facsimile: 505/820-7334
Mayer, Brown & Platt
Attention: James A. Parker
190 South LaSalle Street
Chicago, Illinois 60603
Telephone: 312/701-7853
Facsimile: 312/706-8732
<PAGE>
(c) Date of this
Agreement: September 30, 1997.
(d) Contribution Value: $38,112,482
(e) Earnest Money: $327,150, and any other deposits of earnest
money made pursuant to the terms of this
Agreement, together with interest thereon.
(f) Intentionally Omitted.
(g) Closing Date: December 1, 1997, subject to extension as
provided in Paragraph 1.6(a)
or otherwise in this Agreement.
(h) Title Company: Chicago Title Company
Attention: Frank Jansen
700 South Flower Street, Suite 920
Los Angeles, California 90017
Telephone: 213/488-4346
Facsimile: 213/891-0834
(i) Escrow Agent: Chicago Title Company
Attention: Ken Buvala
2201 East Camelback Road, Suite 126B
Phoenix, Arizona 85016
Telephone: 602/468-6333
Facsimile: 602/468-6336
(j) Broker: CB Commercial
(k) Existing Mortgage
Loan: That certain loan in the aggregate
principal amount of $64,640,000, evidenced
by four promissory notes dated December 31,
1990, payable to UBS Mortgage Finance Inc.
("Lender") in the original principal
amounts of $28,441,600, $13,574,400,
$13,574,400 and $9,049,600, respectively.
(l) Loan Documents: All documents and instruments evidencing,
securing or otherwise related to the
Existing Mortgage Loan.
(m) Master Leases: Those four master leases, each dated
December 31, 1990 between PREFCO VII
Limited Partnership, as landlord, and U S
WEST Business Resources, Inc. ("Master
Tenant"), as tenant, as amended, each
covering improvements on each of the four
separate parcels of land comprising the
Property.
(n) Master Lease
Guaranties: For each of the Master Leases, the Lease
Guaranty, dated as of December 31, 1990,
by The Mountain States Telephone and
Telegraph Company, a Colorado corporation,
in favor of the landlord under The Master
Leases, the Lease Guaranty, dated as of
December 31, 1990, by U S WEST Inc., a
Colorado corporation, in favor of the
landlord under The Master Leases; and the
Lease Guaranty, dated as of December 31,
1990, by U S WEST Real Estate, Inc., a
Colorado corporation, in favor of the
landlord under the Master Leases.
-2-
<PAGE>
(o) Related Agreements: This Agreement, that Agreement of
Purchase and Sale of even date herewith
between PREFCO VII Limited Partnership
and Carr, and that Agreement of Purchase
and Sale of even date herewith (covering
the remainder interest) between PREFCO
VII Limited Partnership, Ltd. and Carr,
the Pitney Debt Agreement, and any
related agreements entered into by Carr
and Contributors or any other such seller
or contributor with respect to the
Contributed Property or any other
property covered by the Master Leases.
(p) Pitney Debt Agreement: That letter agreement of even date
herewith among Contributors, Carr, and
PREFCO VII Limited Partnership regarding
a satisfaction payment to PREFCO VII
Limited Partnership in connection with a
tenancy-in-common agreement.
(q) Contribution Agreement: That certain Contribution Agreement
between Contributors and Carr related to
this transaction.
1.2 Contributed Property. Subject to the terms and conditions of this
Agreement of Purchase and Sale (this "Agreement"), Contributors agree to
contribute and convey to Carr, and Carr agrees to accept such contribution and
conveyance of the following property (collectively, the "Contributed Property"):
(a) Contributors' tenants in common interest with respect to the "Real
Property," being the four parcels of land described in Exhibits A-1 through A-4
attached hereto; all improvements and fixtures (other than fixtures owned by
tenants pursuant to the Leases) located thereon, including, but not limited to,
the office buildings located on such lands, (collectively, the "Improvements");
all and singular the rights, benefits, privileges, easements, tenements,
hereditaments and appurtenances thereon or in anyway appertaining to such real
property; and all right, title and interest of Contributors in and to all strips
and gores and any land lying in the bed of any street, road or alley, open or
proposed, adjoining such real property; excepting from such real property
remainder interests conveyed to Arizona - Relco Limited Partnership pursuant to
Special Warranty Deeds and Assignments, recorded under Recording Numbers
91-0552245, 91- 0552246, and 91-0552247 Maricopa County Recorder, Maricopa
County, Arizona, and at Docket 9172, Page 876, Pima County Recorder's Office,
Pima County, Arizona.
(b) Contributors' tenants in common interest with respect to the
landlord's interest in the "Leases," being all leases of space or other
occupancy agreements affecting the Improvements, including without limitation
the Master Leases and any and all amendments and supplements thereto, the Master
Lease Guaranties, and any other guaranties and security received by landlord in
connection therewith.
(c) All right, title and interest of Contributors, if any, in and to
the "Personal Property," being all tangible personal property now or hereafter
used in connection with the operation, ownership, maintenance, management,
occupancy or improvement of the Real Property including, without limitation:
equipment; machinery; furniture; art work; furnishings; office equipment and
supplies; and, whether stored on or offsite, all tools, supplies, and
construction and finish materials not incorporated in the Improvements and held
for repairs and replacements. The term "Personal Property" also shall include
any and all deposits, bonds or other security, if any, deposited or delivered by
Contributors with or to any and all governmental bodies, utility companies or
other third parties in connection with the operation, ownership, maintenance,
management, occupancy or improvement of the Real Property.
(d) All right, title and interest of Contributors, if any, in and to
the "Intangible Property," being all intangible personal property now or
hereafter used in connection with the operation, ownership, maintenance,
management or occupancy of the Real Property, including, without limitation: all
trade names and trade marks associated with the Real Property, including,
without limitation, the name of the Improvements; the plans and specifications
for the Improvements; warranties covering any of the Real or Personal Property;
all contract rights related to the construction, operation, ownership or
management of the Real Property that are expressly assumed by Carr pursuant to
this Agreement; applications, permits, approvals and licenses (to the extent
assignable); insurance proceeds and
-3-
<PAGE>
condemnation awards or claims thereto to be assigned to Carr hereunder; any
funds held by Master Tenant or Manager under the Master Leases or the Management
Agreement; and all books and records relating to the Real Property.
1.3 Earnest Money. On or before November 7, 1997, Carr shall deposit
the Earnest Money with the Escrow Agent. If Carr fails to timely deposit the
Earnest Money, then this Agreement shall automatically terminate. The Escrow
Agent shall release the Earnest Money to Carr at and upon the Closing, or
otherwise, to the party entitled to receive the Earnest Money in accordance with
this Agreement. The Earnest Money shall be held and disbursed by the Escrow
Agent pursuant to Article 8 of this Agreement. In addition to any other right or
remedy of Carr under this Agreement, the Earnest Money shall be returned to Carr
if this Agreement is terminated for any reason permitted herein other than
Carr's default hereunder.
1.4 Remedies. Contributors' sole and exclusive remedy in the event Carr
defaults in its obligation to close this transaction shall be to terminate this
Agreement and to retain the Earnest Money as liquidated damages, Contributors
waiving all other rights or remedies in the event of such default by Carr. The
parties acknowledge that Contributors' actual damages in the event of a default
by Carr under this Agreement will be difficult to ascertain, and that such
liquidated damages represent the parties' best estimate of such damages. Carr
may enforce specific performance of Contributors' obligation to close this
transaction or pursue any other remedy at law or in equity in the event of
Contributors' breach; provided that Carr may not pursue a claim for damages for
such breach unless such breach is willful.
1.5 Effect of Default or Termination under Related Agreement. A default
under a Related Agreement does not constitute a default under this Agreement.
However, if a Related Agreement is terminated or the closing under a Related
Agreement does not occur simultaneously with the Closing because of a default by
any party thereunder, then: (i) if neither Carr nor Contributors are in default
hereunder, then Carr and Contributors shall be excused from their respective
obligations to acquire and contribute the Contributed Property, and this
Agreement shall terminate and the Earnest Money shall be returned to Carr; and
(ii) if either Carr or the Contributors are in default hereunder, then the
nondefaulting party shall have the remedies set forth in Paragraph 1.4.
1.6 Existing Mortgage Loan. The Contributed Property is to be conveyed
without release of, and subject to, the Existing Mortgage Loan in accordance
with the following:
(a) Conditions to Assumption. It shall be a condition precedent to the
obligations of Contributors and Carr to close the contribution of the
Contributed Property that as of the Closing Date there shall not exist any
uncured default or event that, but for the giving of notice or the passage of
time, or both would constitute a default under the Loan Documents, and Lender
shall have delivered to Carr an estoppel certificate reasonably satisfactory to
Carr and to the Contributors (the estoppel certificate will include an agreement
by the holder of the Existing Mortgage that the single member limited liability
company that Carr will form for the single purpose of holding title to the
Contributed Property may be the mortgagor under the Existing Mortgage, and that
the transfer of an interest in Carr or CarrAmerica Realty Corporation does not
breach the prohibition in the loan documents against a transfer of an interest
in the mortgagor or its affiliates; and will acknowledge receipt by Lender of
certain guarantees from Contributors). If the conditions set forth in this
Paragraph 1.6, or in Paragraph 2.3, or Paragraph 3.2 have not been satisfied by
the Closing Date then either party may, by delivering written notice to the
other party on or before Closing Date extend the Closing Date up to an aggregate
extension of 15 days in order to satisfy such conditions, and if such conditions
are not satisfied by the Closing Date, as extended, then this Agreement shall
terminate, the Earnest Money shall be returned to Carr and the parties will have
no further obligations under this Agreement, except as expressly stated herein.
-4-
<PAGE>
(b) Costs. Any fees and charges charged by Lender pursuant to the Loan
Documents to consent to the transfer shall be paid by Carr, regardless of
whether the transaction contemplated hereby is consummated. Any costs and
expenses incurred by Lender and that pursuant to the Loan Documents Lender
requires be reimbursed in connection with the transfer of the Contributed
Property, including recording costs and expenses relating to the recordation of
any mortgage assignment agreement or other documentation relating to the
transfer of the Contributed Property, attorneys' fees incurred by Lender, and
any title insurance premiums or costs for endorsements required by Lender, shall
be paid by Carr, regardless of whether the transaction contemplated hereby is
consummated.
(c) Contact with Lender. Carr shall have the right to directly contact
Lender concerning the Existing Mortgage Loan. Carr shall promptly provide to
Lender all information it may reasonably request in connection with the
transfer. Carr shall form a single-purpose entity to assume the Existing
Mortgage Loan in accordance with the Loan Documents and shall otherwise use
commercially reasonable efforts to comply with the requirements of the Loan
Documents with respect to the conveyance of the Property so that no consent is
necessary except as described in Paragraph 1.6(a).
ARTICLE 2: INSPECTION
2.1 Contributed Property Information. Contributors have delivered to
Carr complete copies of the Master Leases, Master Lease Guaranties, Loan
Documents, Tripartite Agreement, Management Agreement, and Option Agreements
(the last three terms are defined in Paragraph 5.3). At Carr's reasonable
request from time to time, Contributors shall make available to Carr, for review
and copying, at Contributors offices, all other material information and
documents relating to the Contributed Property in Contributors possession. The
information and documents provided and made available to Carr pursuant to this
Paragraph 2.1 is the "Contributed Property Information."
2.2 Due Diligence. Carr has examined, inspected and investigated the
Contributed Property and the agreements, documents and records related thereto
that it deemed necessary, and is satisfied with the results of its inspection,
examination and investigation. Carr acknowledges that no additional "inspection
period" is provided under this Agreement.
Subject to the terms of the Master Leases and the Management Agreement,
Carr shall have reasonable access to the Contributed Property and all books and
records for the Contributed Property that are in Contributors possession or
control for the purpose of conducting surveys, architectural, engineering,
geotechnical and environmental inspections and tests (including intrusive
inspection and sampling), and any other inspections, studies or tests reasonably
required by Carr. Carr shall keep the Contributed Property free and clear of any
liens and will indemnify, defend, and hold Contributors harmless from all claims
asserted by third parties against Contributors to recover for personal injury or
Contributed Property damage as a result of entry onto the Contributed Property
by Carr, its agents, employees and representatives. If any inspection or test
disturbs the Contributed Property, Carr will restore the Contributed Property to
its condition before any such inspection or test. During the pendency of this
Agreement, subject to the terms of the Master Leases and the Management
Agreement, Carr and its agents, employees and representatives shall have a
continuing right of reasonable access to the Contributed Property and such books
and records for the purpose of examining and making copies of all books and
records and other materials relating to the Contributed Property in Contributors
possession or control. Subject to the terms of the Master Leases and the
Management Agreement, Carr shall have the right to conduct a "walk-through" of
the Contributed Property before the Closing upon appropriate notice to tenants
as permitted under the Leases. In the course of its investigations, Carr may
make inquiries to third parties, including, without limitation, tenants,
lenders, contractors, Contributed Property managers, parties to Service
Contracts and municipal, local and other government officials and
representatives, and Contributors consents to such inquiries.
-5-
<PAGE>
2.3 Tenant Estoppels. Contributors shall promptly deliver to the Master
Tenant an estoppel certificate for each Master Lease in the form of Exhibit B-1
attached hereto (the "Master Tenant Estoppels"). Carr shall prepare the Master
Tenant Estoppels for Contributors review and comment before their delivery to
the Master Tenant. Carr's obligation to close this transaction is subject to the
condition that, as of Closing (1) estoppel certificates for all the Master
Leases substantially in the form required above executed by the Master Tenant
and consistent with representations of Contributors in Paragraph 7.1 have been
delivered to Carr; (2) the Master Leases shall be in full force and effect and
no monetary or material nonmonetary default or claim by landlord or tenant shall
exist under any such Master Lease; (3) the Tri-partite Agreements, Management
Agreement and Option Agreements (defined in Paragraph 5.3(d)) are in full force
and effect without any existing default thereunder, and the Tenant has executed
and delivered to Carr certificates with respect to the Tri-partite Agreements
and Management Agreement substantially in the form of Exhibits B-2 and B-3
attached hereto; and (4) the Master Lease Guaranties are in full force and
effect without any existing default thereunder, and the guarantors of the Master
Lease Guaranties have executed and delivered to Carr certificates substantially
in the form of Exhibit C attached hereto. Contributors shall cooperate with
Purchaser, without obligation to incur any expense or liability, in obtaining
estoppel certificates from Third Party Lessees, as defined in the Master Leases,
but obtaining such certificates is not a condition to Closing. If the conditions
set forth in this Paragraph 2.3 have not been satisfied by the Closing Date,
then unless Carr waives such conditions in writing, this Agreement shall
terminate, the Earnest Money shall be returned to Carr and the parties shall
have no further obligations under this Agreement. Nonsatisfaction of the
conditions in this Paragraph 2.3 is not a default by Contributor.
ARTICLE 3: TITLE AND SURVEY REVIEW
3.1 Delivery of Title Commitment and Survey. Carr shall cause to be
prepared (1) a current, effective commitment for title insurance (the "Title
Commitment") issued by the Title Company, in the amount of the Contribution
Value with Carr as the proposed insured, and accompanied by true, complete and
legible copies of all documents referred to in the Title Commitment; (2) a
current ALTA-ACSM Urban survey of the Contributed Property (the "Survey")
prepared by a surveyor acceptable to Carr, including a certification addressed
to Carr substantially in the form attached hereto as Exhibit D; and (3) copies
of Uniform Commercial Code, judgment and tax lien searches in the name of
Contributors, any general partner, member or manager of Contributors, and the
Contributed Property issued by the Title Company or a search company acceptable
to Carr ("UCC Searches"). The Title Commitment, the documents referred to
therein, the Survey and the UCC Searches are referred to herein collectively as
the "Title Documents."
3.2 Title Review and Cure. Contributors will cooperate with Carr in
curing any objections Carr may have to title to the Contributed Property;
provided however, Contributors shall have no obligation to cure title objections
except liens and security interests created by Contributors after the Date of
this Agreement, and Contributors agree to remove such exceptions or encumbrances
to title which it creates after the Date of this Agreement. As to any other
exceptions or objections raised by Carr, Contributors shall have 14 days from
the receipt of Carr's notice of objections either to have such exceptions or
objections removed or, if acceptable to Carr, to provide affirmative title
insurance protection for such exceptions satisfactory to Carr or to notify Carr
that it does not intend to cure such objection. If, with respect to those title
objections that Contributors have no obligation to cure, Contributors fail
either to provide for the removal of such exceptions or objections or to obtain
affirmative title insurance protection for such exceptions or objections
satisfactory to Carr within such 14 day period, then Carr must elect either to
terminate this Agreement by delivering written notice to Contributors within 5
days following such period, or to waive such objections. Upon delivery of such
termination notice by Carr, this Agreement shall automatically terminate, the
parties shall be released from all further obligations under this Agreement
except pursuant to any provisions which by their terms survive a termination of
this Agreement, and the Earnest Money shall be promptly returned to Carr. If
after the Date of this Agreement, the Title Company revises the Title
Commitment, or the surveyor revises the Survey, to add or modify exceptions, or
to add or modify the conditions to obtaining any endorsement which the Title
Company has agreed to issue, then Carr may terminate this Agreement and receive
a refund of the Earnest Money if provision for their removal or modification
satisfactory to Carr is not made. Carr shall have been deemed to have approved
any title exception that Contributors are not obligated to remove and to which
either Carr did not object as provided above, or to which Carr did object, but
with respect to which Carr did not terminate this Agreement. If there are
exceptions or objections raised by Carr, the Closing Date shall be extended to
the extent necessary to permit Contributors and Carr to exercise their rights as
provided above, but only in accordance with the time periods set forth in
Paragraph 1.6(a).
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3.3 Delivery of Title Policy at Closing. As a condition to Carr's
obligation to close, at Closing (i) the Title Company shall irrevocably commit
to issue to Carr an ALTA Owner's Policy (Revised 10-17-70 and 10-17-84) (or
other form if required by state law) of title insurance, with extended coverage
(i.e., with ALTA General Exceptions 1 through 5 deleted, or with corresponding
deletions if the Contributed Property is located in a non-ALTA state), issued by
the Title Company as of the date and time of the recording of the Deed, in the
amount of the Contribution Value, containing the Carr's Endorsements, insuring
Carr as owner of good, marketable and indefeasible fee simple title to the
Contributed Property (the conveyances from Contributors and the sellers under
the Related Agreements effecting a merger of the estates held by each, with fee
simple title vesting in Carr subject only to the Permitted Exceptions), and
subject only to the Permitted Exceptions (the "Title Policy"), and (ii) the
updated UCC Searches (within 10 days of Closing) show no security interests
(other than Permitted Exceptions) not disclosed in the UCC Searches delivered
pursuant to Paragraph 3.1;. "Permitted Exceptions" means the exceptions set
forth in Exhibit I to this Agreement; real estate taxes not yet due and payable;
the Loan Documents; the Management Agreement, the Tripartite Agreements, and the
Option Agreements; and tenants in possession as tenants only under the Leases
without (except as provided in the Master Leases) any option to purchase or
acquire an interest in the Contributed Property, and the Pitney Debt Documents.
"Carr's Endorsements" shall mean, to the extent such endorsements are available
under the laws of the state in which the Contributed Property is located: (1)
owner's comprehensive; (2) access; (3) survey (accuracy of survey); (4) location
(survey legal matches title legal); (5) separate tax lot; (6) legal lot; (7)
zoning 3.1, with parking and loading docks; (8) non-imputation endorsement; and
(9) such other endorsements as Carr may require during the Due Diligence Period
based on its review of the Title Commitment and Survey.
3.4 Title and Survey Costs. Carr shall pay for the cost of the Survey,
the premium for extended coverage, the cost of Carr's Endorsements other than
the non-imputation endorsement, and the cost of the UCC Searches.
ARTICLE 4: OPERATIONS AND RISK OF LOSS
4.1 Ongoing Operations. During the pendency of this Agreement:
(a) Preservation of Business. Subject to the rights and obligations of
the manager under the Management Agreement, Contributors shall use reasonable
efforts to cause the Contributed Property to be operated only in the ordinary
and usual course of business and consistent with past practice, shall perform
its obligations under Leases and other agreements affecting the Contributed
Property, and shall not take any action or omission which would cause any of the
representations or warranties of Contributors contained herein to become
inaccurate or any of the covenants of Contributors to be breached.
(b) New Contracts. Without Carr's prior written consent in each
instance, Contributors will not enter into or amend, terminate, waive any
default under, or grant concessions regarding any contract or agreement that
will be an obligation affecting the Contributed Property or binding on the Carr
after the Closing.
(c) Listings and Other Offers. Contributors will not list the
Contributed Property with any broker or otherwise solicit or make or accept any
offers to sell the Contributed Property, engage in any discussions or
negotiations with any third party with respect to the sale or other disposition
of any of the Contributed Property, or enter into any contracts or agreements
(whether binding or not) regarding any disposition of any of the Contributed
Property.
(d) Leasing Arrangements. Contributors will not amend, terminate, waive
any default under, grant concessions regarding, incur any obligation for leasing
commissions in connection with, or enter into any Lease without Carr's prior
written consent in each instance.
(e) Loan Documents. Contributors shall comply with its obligations
under the Loan Documents.
(f) Agreements. Contributors shall comply with its obligations under
any agreement to be assigned to Carr pursuant to Article 5 and shall not amend
any such agreement without Carr's prior written approval.
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4.2 Damage. Contributors shall promptly give Carr written notice of any
damage to the Contributed Property of which Contributors becomes aware,
describing such damage, whether such damage is covered by insurance and the
estimated cost of repairing such damage. If such damage is material, Carr may
elect by notice to Contributors given within 14 days after Carr is notified of
such damage (and the Closing shall be extended, if necessary, to give Carr such
14 day period to respond to such notice) to terminate this Agreement, in which
event the Earnest Money shall be immediately returned to Carr. Damage as to any
one or multiple occurrences is material if the cost to repair the damage, as
reasonably estimated by a reputable third party contractor, exceeds in the
aggregate $5 million, or triggers any option by Master Tenant to terminate any
Master Lease. If Carr does not so terminate this Agreement, then at closing
Contributors shall assign to Carr its right and interest in and to the insurance
provided under the Master Leases with respect to such damages and shall obtain
any appropriate acknowledgment of such assignment by the insurer.
4.3 Condemnation. Contributors shall promptly give Carr notice of any
eminent domain proceedings that are contemplated, threatened or instituted with
respect to the Contributed Property of which Contributors becomes aware. By
notice to Contributors given within 14 days after Carr receives notice of
proceedings in eminent domain that are contemplated, threatened or instituted by
any body having the power of eminent domain with respect to the Contributed
Property (and if necessary the Closing Date shall be extended to give Carr the
full 14 day period to make such election), Carr may terminate this Agreement if
the taking or threatened taking is material, or proceed under this Agreement, in
which event Contributors shall, at the Closing, assign to Carr its right, title
and interests in and to any condemnation award, and Carr shall have the sole
right during the pendency of this Agreement to negotiate and otherwise deal with
the condemning authority in respect of such matter. A taking as to one or more
proceedings is material if the award (including any award with respect to
remainder interests and interests of co-tenants) is reasonably estimated to
exceed $1 million or the taking would likely entitle Master Tenant to an
abatement or reduction in rent.
ARTICLE 5: CLOSING
5.1 Closing and Escrow. The consummation of the transaction
contemplated herein ("Closing") shall occur on the Closing Date at the offices
of the Escrow Agent through an escrow with the Escrow Agent. Units (as defined
in the Contribution Agreement) and any required closing funds shall be deposited
into and held by Escrow Agent in a closing escrow account with a bank
satisfactory to Carr and Contributors. Upon satisfaction or completion of all
closing conditions and deliveries, the parties shall direct the Escrow Agent to
immediately record and deliver the closing documents to the appropriate parties
and make disbursements according to the closing statements executed by
Contributors and Carr. The Escrow Agent shall agree in writing with Contributors
and Carr that (1) recordation of the Deeds constitutes its representation that
it is holding the closing documents, closing funds and closing statements and is
prepared and irrevocably committed to disburse the closing funds in accordance
with the closing statements and (2) release of Units to the Contributors shall
irrevocably commit it to issue the Title Policy in accordance with this
Agreement. Provided such supplemental escrow instructions are not in conflict
with this Agreement as it may be amended in writing from time to time,
Contributors and Carr agree to execute such supplemental escrow instructions as
may be appropriate to enable Escrow Agent to comply with the terms of this
Agreement.
5.2 Conditions to the Parties' Obligations to Close. In addition to all
other conditions set forth herein, the obligation of Contributors, on the one
hand, and Carr, on the other hand, to consummate the transactions contemplated
hereunder shall be contingent upon the following:
(a) The other party's representations and warranties contained herein
shall be true and correct as of the Date of this Agreement and the Closing Date;
(b) As of the Closing Date, the other party shall have performed its
obligations hereunder and all deliveries to be made by the other party at
Closing shall have been tendered;
(c) As of the Closing Date, no action or proceeding by or before any
governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the transactions contemplated by
this Agreement, other than an action or proceeding instituted or threatened by
such party; and
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(d) Any other condition set forth in this Agreement to such party's
obligation to close is not satisfied by the applicable date.
(e) The Closing occurs simultaneously with the closings under the
Related Agreements.
(f) As to Carr's obligation to close, as of the Closing, neither
Contributors nor any other party is in default under any agreement to be
assigned to or assumed by Carr hereunder.
(g) As of the Closing Date, as to Contributors' obligation, Carr and
CarrAmerica Realty Corporation, and, as to Carr's obligation, Contributors shall
have performed their respective obligations to be performed and deliveries on
their behalf to have been made, as of the Closing Date under the Contribution
Agreement, and the conditions to such party's obligations to close under the
Contribution Agreement have been satisfied.
So long as a party is not in default hereunder, if any condition to
such party's obligation to proceed with the Closing hereunder has not been
satisfied as of the Closing Date or other applicable date, such party may, in
its sole discretion, terminate this Agreement by delivering written notice to
the other party and all parties under the Related Agreements on or before the
Closing Date or other applicable date, or elect to close, notwithstanding the
non-satisfaction of such condition, in which event such party shall be deemed to
have waived any such condition except for breach by a party of a covenant in
which case the Closing shall not relieve such breaching party from any liability
it would otherwise have hereunder. A party shall be entitled to postpone the
Closing up to an aggregate of 10 days in order to cause any condition to be
satisfied.
5.3 Contributors Deliveries in Escrow. At least one business day before
the Closing Date, Contributors shall deliver in escrow to the Escrow Agent the
following:
(a) Deed. For each of the four parcels comprising the Contributed
Property: a special warranty deed conveying Contributors tenancy-in-common
interest in the Real Contributed Property to Carr (warranting title against
grantor's acts);
(b) Assignment of Master Leases. For each of the four Master Leases; an
Assignment of Master Lease in the form of Exhibit E attached hereto (the "Master
Lease Assignment"), executed and acknowledged by Contributors;
(c) Third Party Leases. For each of the Third Party Leases, an
assignment substantially in the form of Exhibit E attached hereto, modified as
appropriate, executed and acknowledged by Contributors;
(d) Bill of Sale and Assignment of Contracts. For each of the four
parcels comprising the Contributed Property, a bill of sale and assignment in
the form of Exhibit F, assigning that Tripartite Agreement relating to the
applicable parcel, dated as of December 31, 1990, among Master Tenant, PREFCO
VII Limited Partnership and Arizona- Relco Limited Partnership (the "Tripartite
Agreements"); that Management and Rent Disbursement Agreement, dated as of
December 31, 1990, between Tenant and Contributors (the "Management Agreement");
and that Option and Subordination Agreement relating to the applicable parcel,
dated as of December 31, 1990, between PREFCO VII Limited Partnership and
Arizona-Relco Limited Partnership (the "Option Agreements");
(e) Notice to Tenants. A notice to each tenant in form reasonably
satisfactory to Contributors and Carr;
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(f) State Law Disclosures. Such disclosures and reports as are required
by applicable state and local law in connection with the conveyance of real
Contributed Property;
(g) FIRPTA. A Foreign Investment in Real Property Tax Act affidavit
executed by Contributors. If Contributors fails to provide the necessary
affidavit and/or documentation of exemption on the Closing Date, Carr may
proceed in accordance with the withholding provisions in such act;
(h) Intentionally Omitted;
(i) Authority. Evidence of the existence, organization and authority of
Contributors and of the authority of the persons executing documents on behalf
of Contributors reasonably satisfactory to the Carr and the Title Company;
(j) Insurance. Certificates of insurance carried by the Master Tenant
pursuant to the Master Leases naming Carr as an additional insured or loss
payee, as appropriate;
(k) Pitney Debt Agreement. At Closing, Contributors shall be in
compliance with and will tender their respective deliveries pursuant to, the
Pitney Debt Agreement; and
(l) Other Deliveries. Any other Closing deliveries required to be made
by or on behalf of Contributors hereunder.
5.4 Carr's Deliveries in Escrow. At least one business day before the
Closing Date (except as otherwise permitted below), Carr shall deliver in escrow
to the Escrow Agent the following:
(a) Contribution Value. The Contribution Value, net of the credits
charged against Contributor pursuant to Paragraph 6.1(b) and 6.1(c), is payable
by the issuance of Units pursuant to and as defined in the Contribution
Agreement;
(b) Assignments. The instruments described in Paragraph 5.3(b), (c),
(d) and (e) executed by Carr, as provided in each such instrument;
(c) State Law Disclosures. Such disclosures and reports as are required
by applicable state and local law in connection with the conveyance of real
property;
(d) Loan Documents. Such documents and deliveries (if any) by or on
behalf of Carr as may be required by the Lender pursuant to the Loan Documents
to effect the transfer of the Contributed Property subject to the Existing
Mortgage Loan;
(e) Authority. Evidence of the existence, organization and authority of
Carr and of the authority of the persons executing documents on behalf of Carr
reasonably satisfactory to the Contribution and the Title Company;
(f) Contribution Agreement. The Closing deliveries and documents
required under the Contribution Agreement by the Contributors and their
affiliates; and
(g) Pitney Debt Agreement. At Closing, Carr shall be in compliance with
and will tender its deliveries pursuant to, the Pitney Debt Agreement.
(h) Other Deliveries. Any other Closing deliveries required to be made
by or on behalf of Carr hereunder.
5.5 Closing Statements/Escrow Fees. Contributors and Carr shall deposit
with the Escrow Agent executed closing statements consistent with this Agreement
in the form required by the Escrow Agent.
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5.6 Sales, Transfer and Documentary Taxes. Carr shall pay all sales,
gross receipts, compensating, stamp, excise, documentary, transfer, deed or
similar taxes and fees imposed in connection with this transaction under
applicable state or local law.
5.7 Possession. At the time of Closing, Contributors shall deliver to
Carr possession of the Contributed Property, subject only to the Permitted
Exceptions and the Third Party Leases.
5.8 Delivery of Books and Records. Immediately after the Closing,
Contributors shall deliver to the offices of Carr's Contributed Property manager
to the extent that the same are in Contributors possession: copies or originals
of all books and records of account, contracts, copies of correspondence with
tenants and suppliers, receipts for deposits, unpaid bills and other papers or
documents which pertain to the Contributed Property; all permits and warranties;
all advertising materials, booklets, keys and other items, if any, used in the
operation of the Contributed Property; the original "as-built" plans and
specification; and all other available plans and specifications and all
operation manuals. Contributors shall cooperate with Carr after Closing to
transfer to Carr any such information stored electronically.
ARTICLE 6: PRORATIONS AND ADJUSTMENTS
6.1 Prorations. Not less than 5 days prior to Closing, Contributors
shall provide to Carr such information and verification reasonably necessary to
support the prorations and adjustments under this Article 6. The items in
subparagraph (a) of this Paragraph 6.1 shall be prorated between Contributors
and Carr as of the close of the day immediately preceding the Closing Date:
(a) Income. The Master Tenant is currently remitting to the Lender the
monthly installment of rent payable under the Master Leases, and the Lender is
applying such amount to the scheduled monthly installment of principal and
interest under the Existing Mortgage Loan that is due on the first day of each
month, and delivering the net monthly amount (currently $6803.43) to
Contributors and to PREFCO VII Limited Partnership. The parties shall allocate
the Contributors' portion (49 percent ) of the net monthly amount for the month
in which the Closing Date falls evenly over such month and prorate as of the
Closing Date.
(b) Loan Documents. Carr shall receive at Closing a credit against the
Contribution Value equal to Contributors' allocable portion (49 percent) of the
outstanding principal balance of the Existing Mortgage Loan as of the Closing
Date (assuming payments under the Loan Documents for the month of Closing have
been paid). Carr shall have no obligation to assume or pay or take the
Contributed Property subject to any amounts owing under the Existing Mortgage
Loan as of the Closing Date other than the outstanding principal balance and
accrued interest for the month of Closing. Carr shall purchase any escrows of
Contributors funds with Lender that are transferred to Carr at Closing.
(c) Pitney Debt. Carr shall receive at Closing a credit against the
Contribution Value for the outstanding principal balance of the Prefco Notes (as
defined in the Pitney Debt Agreement) as of the Closing Date.
6.2 Tenant Deposits. At Closing, Contributors shall transfer to Carr
all its right, title and interest in any tenant security deposits. As of the
Closing, Carr shall assume Contributors obligations related to tenant security
deposits, but only to the extent Contributors interest therein is properly
transferred to Carr.
6.3 Sales Commissions. Contributors and Carr represent and warrant each
to the other that they have not dealt with any real estate broker, sales person
or finder in connection with this transaction other than Broker. Carr shall pay
Broker in accordance with their separate agreement (at Closing if Closing
occurs). Broker is an independent contractor and is not authorized to make any
agreement or representation on behalf of either party. Except as expressly set
forth above, in the event of any claim for broker's or finder's fees or
commissions in connection with the negotiation, execution or consummation of
this Agreement, or the transactions contemplated hereby, each party shall
indemnify and hold harmless the other party from and against any such claim
based upon any statement, representation or agreement of such party. This
provision shall survive any termination of this Agreement.
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ARTICLE 7: REPRESENTATIONS AND WARRANTIES
7.1 Contributors Representations and Warranties. As a material
inducement to Carr to execute this Agreement and consummate this transaction,
Contributors represents and warrants to Carr that:
(a) Organization and Authority. Contributors have been duly organized
and are validly existing as the entities described in Paragraph 1.1, and is in
good standing in its State of incorporation or formation. Contributors have the
full right and authority and has obtained any and all consents required to enter
into this Agreement and to consummate or cause to be consummated the
transactions contemplated hereby. This Agreement has been, and all of the
documents to be delivered by Contributors at the Closing will be, authorized and
properly executed and constitute, or will constitute, as appropriate, the valid
and binding obligations of Contributors, enforceable in accordance with their
terms.
(b) Conflicts. There is no agreement to which Contributors is a party
or, to Contributors knowledge, binding on Contributors which is in conflict with
this Agreement, or which challenges or impairs Contributors ability to execute
or perform its obligations under this Agreement.
(c) Pending Actions or Proceedings. There is not now pending or, to the
best of Contributors knowledge, threatened, any action, suit or proceeding
before any court or governmental agency or body against the Contributors that
would prevent Contributors from performing its obligations hereunder.
(d) Master Leases. To Contributors knowledge, Master Tenant has not
asserted nor are there any defenses or offsets to rent under the Master Leases
accruing after the Closing Date, and no monetary or material nonmonetary default
or breach exists on the part of the Master Tenant under any Master Lease.
Contributors have not received any notice of any monetary or material
nonmonetary default or breach on the part of the landlord under any Master
Lease, nor, to the best of Contributors' knowledge, does there exist any such
default or breach on the part of the landlord.
(e) Agreements. The copies of the Tripartite Agreements, Option and
Subordination Agreements, and Management Agreements delivered to Carr pursuant
to Paragraph 2.1 are true, correct and complete, and to Contributors knowledge,
neither Contributors nor any other party is in default under any such agreement.
(f) Disclosure. Other than this Agreement, the Related Agreements, the
agreements assigned to Carr at Closing pursuant hereto and the Permitted
Exceptions, the tenancy in common agreement among Contributors and PREFCO VII
Limited Partnership (which shall be terminated at Closing) there are no
contracts or agreements of any kind relating to the Contributed Property to
which Contributors or its agents is a party.
7.2 Carr's Representations and Warranties. As a material inducement to
Contributors to execute this Agreement and consummate this transaction, Carr
represents and warrants to Contributors that:
(a) Organization and Authority. Carr has been duly organized and is
validly existing as a Delaware limited partnership, in good standing in the
State of Delaware, and will be qualified to do business in Arizona on the
Closing Date. Carr has the full right and authority and has obtained any and all
consents required to enter into this Agreement and to consummate or cause to be
consummated the transactions contemplated hereby. This Agreement has been, and
all of the documents to be delivered by Carr at the Closing will be, authorized
and properly executed and constitutes, or will constitute, as appropriate, the
valid and binding obligations of Carr, enforceable in accordance with their
terms.
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(b) Conflicts and Pending Action. There is no agreement to which Carr
is a party or, to Carr's knowledge, binding on Carr which is in conflict with
this Agreement. There is no action or proceeding pending or, to Carr's
knowledge, threatened against Carr which challenges or impairs Carr's ability to
execute or perform its obligations under this Agreement.
(c) Institutional Investor. CarrAmerica Realty Corporation is a real
estate investment trust under the Internal Revenue Code and its net worth
exceeds $50 million. CarrAmerica Realty Corporation's Annual Report on Form 10-K
for the year ended December 31, 1996 and its Quarterly Report for the quarter
ended March 31, 1997 do not contain an untrue statement of material for fact or
omit to state any factor that would be material, and since the dates and periods
of such reports there has been no material adverse change in the financial
position of CarrAmerica Realty Corporation.
7.3 Survival of Representations and Warranties. The representations and
warranties set forth in this Article 7 are made as of the Date of this Agreement
and are remade as of the Closing Date, and shall not be deemed to be merged into
or waived by the instruments of Closing, but shall survive the Closing (provided
that the representations in Paragraph 7.1(c) through (f) and shall survive only
for a period of 1 year, and Carr shall have the right to bring an action thereon
only if Carr, as the case may be, has given the other party written notice of
the circumstances giving rise to the alleged breach within such 1-year period.)
The representation in Paragraph 7.1(d) shall survive the Closing only for a
period of 1 year and only to the extent the matters covered by the
representation are not addressed in the Master Tenant Estoppels.
7.4 No Reliance on Documents. Except as expressly stated herein,
Contributors makes no representation or warranty as to the truth, accuracy or
completeness of any materials, data or information delivered by Contributors to
Carr in connection with the transaction contemplated hereby. Carr acknowledges
and agrees that all materials, data and information delivered by Contributors to
Carr in connection with the transaction contemplated hereby are provided to Carr
as a convenience only and that any reliance on or use of such materials, data or
information by Carr shall be at the sole risk of Carr, except as otherwise
expressly stated herein. Without limiting the generality of the foregoing
provisions, Carr acknowledges and agrees that except as expressly stated herein
Carr shall not have any right to rely on any reports delivered by Contributors
to Carr, but rather will rely on its own inspections and investigations of the
Contributed Property and any reports commissioned by Carr with respect thereto.
7.5 DISCLAIMERS; AS IS. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, IT IS UNDERSTOOD AND AGREED THAT CONTRIBUTORS IS NOT MAKING AND HAS
NOT AT ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER,
EXPRESSED OR IMPLIED, WITH RESPECT TO THE CONTRIBUTED PROPERTY, INCLUDING, BUT
NOT LIMITED TO ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE (OTHER THAN
CONTRIBUTORS LIMITED WARRANTY OF TITLE TO BE SET FORTH IN THE DEED), ZONING, TAX
CONSEQUENCES, LATENT OR PATENT PHYSICAL OR ENVIRONMENTAL CONDITIONS, UTILITIES,
OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, THE
COMPLIANCE OF THE CONTRIBUTED PROPERTY WITH GOVERNMENTAL LAWS, THE MASTER
LEASES, THE LOAN DOCUMENTS, THE TRUTH, ACCURACY OR COMPLETENESS OF THE DOCUMENTS
OR ANY OTHER INFORMATION PROVIDED BY OR ON BEHALF OF CONTRIBUTORS TO Carr, OR
ANY OTHER MATTER OR THING REGARDING THE CONTRIBUTED PROPERTY. CARR ACKNOWLEDGES
AND AGREES THAT UPON CLOSING CONTRIBUTORS SHALL SELL AND CONVEY TO CARR AND CARR
SHALL ACCEPT THE CONTRIBUTED PROPERTY "AS IS, WHERE IS, WITH ALL FAULTS", EXCEPT
TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS AGREEMENT. CARR HAS NOT
RELIED AND WILL NOT RELY ON, AND CONTRIBUTORS IS NOT LIABLE FOR OR BOUND BY, ANY
EXPRESSED OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR
INFORMATION PERTAINING TO THE CONTRIBUTED PROPERTY, THE MASTER LEASES OR THE
LOAN DOCUMENTS MADE OR FURNISHED BY CONTRIBUTORS OR ANY REAL ESTATE BROKER OR
AGENT TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING,
UNLESS SPECIFICALLY SET FORTH IN THIS AGREEMENT. CARR REPRESENTS TO
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CONTRIBUTORS THAT CARR HAS CONDUCTED, OR WILL CONDUCT PRIOR TO CLOSING, SUCH
INVESTIGATIONS OF THE CONTRIBUTED PROPERTY, INCLUDING BUT NOT LIMITED TO, THE
PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS CARR DEEMS NECESSARY TO
SATISFY ITSELF AS TO THE CONDITION OF THE CONTRIBUTED PROPERTY, THE MASTER
LEASES, THE LOAN DOCUMENTS, ANY OTHER AGREEMENT RELATING TO THE CONTRIBUTED
PROPERTY AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH
RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON OR DISCHARGED FROM THE
CONTRIBUTED PROPERTY, AND EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT WILL
RELY SOLELY UPON SAME. UPON CLOSING, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS AGREEMENT, CARR SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT
NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL
CONDITIONS, MAY NOT HAVE BEEN REVEALED BY CARR'S INVESTIGATIONS, AND CARR, UPON
CLOSING, SHALL, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, BE
DEEMED TO HAVE WAIVED, RELINQUISHED AND RELEASED CONTRIBUTORS (AND ITS
DIRECTORS, SHAREHOLDERS, PARTNERS, EMPLOYEES AND AGENTS) FROM AND AGAINST ANY
AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION (INCLUDING CAUSES OF ACTION IN TORT),
LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS' FEES AND
COURT COSTS) OF ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, WHICH CARR
MIGHT HAVE ASSERTED OR ALLEGED AGAINST CONTRIBUTORS (AND THEIR OFFICERS,
DIRECTORS, SHAREHOLDERS, PARTNERS, EMPLOYEES AND AGENTS) AT ANY TIME BY REASON
OF OR ARISING OUT OF ANY LATENT OR PATENT CONSTRUCTION DEFECTS OR PHYSICAL
CONDITIONS, OR VIOLATIONS OF ANY APPLICABLE LAWS (INCLUDING, WITHOUT LIMITATION,
ANY ENVIRONMENTAL LAWS).
7.6 RESERVED RIGHTS. NOTWITHSTANDING PARAGRAPHS 7.4 AND 7.5 ABOVE: CARR
IS RELYING UPON, AND DOES NOT WAIVE, RELINQUISH OR RELEASE THE EXPRESS
REPRESENTATIONS, WARRANTIES AND OTHER OBLIGATIONS OF CONTRIBUTORS SET FORTH IN
THIS AGREEMENT AND IN ANY DOCUMENT OR INSTRUMENT EXECUTED BY CONTRIBUTORS IN
CONNECTION WITH THIS AGREEMENT. PARAGRAPH 7.5 DOES NOT CONSTITUTE AN INDEMNITY.
ARTICLE 8: EARNEST MONEY PROVISIONS
8.1 Investment and Use of Funds. The Escrow Agent shall invest the
Earnest Money in government insured interest-bearing accounts satisfactory to
Contributors and Carr, shall not commingle the Earnest Money with any funds of
the Escrow Agent or others, and shall promptly provide Carr and Contributors
with confirmation of the investments made.
8.2 Intentionally Omitted.
8.3 Termination. Except as otherwise expressly provided herein, upon
not less than 10 business days' prior written notice to the Escrow Agent and the
other parties, Escrow Agent shall deliver the Earnest Money to the party
requesting the same; provided, however, that if any other party shall, within
said 10 business day period, deliver to the requesting party and the Escrow
Agent a written notice that it disputes the claim to the Earnest Money, Escrow
Agent shall retain the Earnest Money until it receives written instructions
executed by all parties as to the disposition and disbursement of the Earnest
Money, or until ordered by final court order, decree or judgment, which is not
subject to appeal, to deliver the Earnest Money to a particular party, in which
event the Earnest Money shall be delivered in accordance with such notice,
instruction, order, decree or judgment.
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8.4 Interpleader. The parties agree that in the event of any
controversy regarding the Earnest Money, unless mutual written instructions are
received by the Escrow Agent directing the Earnest Money's disposition, the
Escrow Agent shall not take any action, but instead shall await the disposition
of any proceeding relating to the Earnest Money or, at the Escrow Agent's
option, the Escrow Agent may interplead all parties and deposit the Earnest
Money with a court of competent jurisdiction, in which event the Escrow Agent
may recover all of its court costs and reasonable attorneys' fees. Contributors,
or Carr, whichever loses in any such interpleader action, shall be solely
obligated to pay such costs and fees of the Escrow Agent, as well as the
reasonable attorneys' fees of the prevailing party in accordance with the other
provisions of this Agreement.
8.5 Liability of Escrow Agent. The parties acknowledge that the Escrow
Agent is acting solely as a stakeholder at their request and for their
convenience, that the Escrow Agent shall not be deemed to be the agent of either
of the parties, and that the Escrow Agent shall not be liable to either of the
parties for any action or omission on its part taken or made in good faith, and
not in disregard of this Agreement, but shall be liable for its negligent acts
and for any loss, cost or expense incurred by Contributors, or Carr resulting
from the Escrow Agent's mistake of law respecting the Escrow Agent's scope or
nature of its duties. Contributors, and Carr shall jointly and severally
indemnify and hold the Escrow Agent harmless from and against all costs, claims
and expenses, including reasonable attorneys' fees, incurred in connection with
the performance of the Escrow Agent's duties hereunder, except with respect to
actions or omissions taken or made by the Escrow Agent in bad faith, in
disregard of this Agreement or involving negligence on the part of the Escrow
Agent.
ARTICLE 9: MISCELLANEOUS
9.1 Parties Bound. Neither party may assign this Agreement without the
prior written consent of the other, and any such prohibited assignment shall be
void; provided that Carr may assign this Agreement in connection with an
assignment of all Related Agreements without Contributors consent to an
Affiliate in connection with the transfer of the Contributed Property subject to
and in accordance with the requirements of the Existing Mortgage Loan covering
transfers to an Institutional Investor. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the respective legal
representatives, successors, assigns, heirs and devises of the parties. For the
purposes of this paragraph, the term "Affiliate" means (a) an entity that
directly or indirectly controls, is controlled by, or is under common control
with Carr or (b) an entity at least a majority of whose economic interest is
owned by Carr; and the term "control" means the power to direct the management
of such entity through voting rights, ownership or contractual obligations.
9.2 Headings. The article and paragraph headings of this Agreement are
for convenience only and in no way limit or enlarge the scope or meaning of the
language hereof.
9.3 Expenses. Except as otherwise expressly provided herein, each party
hereto shall pay its own expenses incident to this Agreement and the
transactions contemplated hereunder, including all legal and accounting fees and
disbursements.
9.4 Invalidity and Waiver. If any portion of this Agreement is held
invalid or inoperative, then so far as is reasonable and possible the remainder
of this Agreement shall be deemed valid and operative, and, to the greatest
extent legally possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative. The failure by either party to enforce
against the other any term or provision of this Agreement shall not be deemed to
be a waiver of such party's right to enforce against the other party the same or
any other such term or provision in the future.
9.5 Governing Law. This Agreement shall, in all respects, be governed,
construed, applied, and enforced in accordance with Arizona law.
9.6 Survival. The following provisions of this Agreement shall survive
the Closing and shall not be deemed to be merged into or waived by the
instruments of Closing: Paragraph 1.6, Carr's indemnity in Paragraph 2.2,
Paragraphs 5.6, 5.8, 6.1(a), 6.3, and Article 7 (subject to the limitations set
forth in Paragraph 7.3), 8 and 9. Carr's indemnity in Paragraph 2.2, Paragraph
6.3, and Article 8 shall survive any termination of this Agreement.
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<PAGE>
9.7 No Third Party Beneficiary. This Agreement is not intended to give
or confer any benefits, rights, privileges, claims, actions or remedies to any
person or entity as a third party beneficiary, decree, or otherwise.
9.8 Entirety and Amendments. This Agreement and the Pitney Debt
Agreement embody the entire agreement between the parties and supersedes all
prior agreements and understandings relating to the Contributed Property. This
Agreement may be amended or supplemented only by an instrument in writing
executed by the party against whom enforcement is sought.
9.9 Time of the Essence. Time is of the essence in the performance of
this Agreement.
9.10 Confidentiality. Between the date hereof and for a period ending 1
year after the Closing Date, neither party shall release or cause or permit to
be released any press notices or advertising promotion or other publicity
relating to this transaction without obtaining the written consent of the other
party. No provision in this Paragraph 9.10 shall preclude a party from
discussing the substance or any relevant details of such transactions with any
of its attorneys, accountants, professional consultants, lenders, partners,
affiliates, investors, or any prospective lender, partner or investor, as the
case may be, or prevent a party hereto, from complying with laws, rules,
regulations and court orders, including without limitation, governmental
regulatory, disclosure, tax and reporting requirements and stock exchange rules
or prevent Carr or Contributors from making a public announcement of the
acquisition or sale of the Contributed Property in accordance with its corporate
information policy that does not disclose the Contribution Value or the identity
of the other party.
9.11 Attorneys' Fees. Should either party employ attorneys to enforce
any of the provisions hereof, the party against whom any final judgment is
entered agrees to pay the prevailing party all reasonable costs, charges, and
expenses, including reasonable attorneys' fees, expended or incurred by the
prevailing party in connection therewith.
9.12 Notices. All notices required or permitted hereunder shall be in
writing and shall be served on the parties at the addresses set forth in
Paragraph 1.1. Any such notices shall be (1) sent by overnight delivery using a
nationally recognized overnight courier, in which case notice shall be deemed
delivered one business day after deposit with such courier, (2) sent by
facsimile, in which case notice shall be deemed delivered upon confirmed
transmission of such notice, or (3) sent by personal delivery, in which case
notice shall be deemed delivered upon receipt or refusal of delivery. A party's
address may be changed by written notice to the other party; provided that no
notice of a change of address shall be effective until actual receipt of such
notice. Copies of notices are for informational purposes only, and a failure to
give or receive copies of any notice shall not be deemed a failure to give
notice. The attorney for a party has the authority to send notices on behalf of
such party.
9.13 Construction. The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and that the normal rule of
construction, to the effect that any ambiguities are to be resolved against the
drafting party, shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
9.14 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described herein, the day of the act or event after
which the designated period of time begins to run is not to be included and the
last day of the period so computed is to be included, unless such last day is a
Saturday, Sunday or legal holiday for national banks in the location where the
Contributed Property is located, in which event the period shall run until the
end of the next day which is neither a Saturday, Sunday or legal holiday. The
last day of any period of time described herein shall be deemed to end at 6
p.m., Washington, D.C. time.
9.15 Information and Audit Cooperation. At Carr's request, at any time
before or for one year after the Closing, Contributors shall provide to Carr's
designated independent auditor access to the books and records of the
Contributed Property, and all related information regarding the period for which
Carr is required to have the Contributed Property audited under the regulations
of the Securities and Exchange Commission, and Contributors shall provide to
such auditor a representation letter regarding the books and records of the
Contributed Property, in substantially the form of Exhibit G attached hereto, in
connection with the normal course of auditing the Contributed Property in
accordance with generally accepted auditing standards.
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<PAGE>
9.16 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of such counterparts shall constitute one Agreement. To facilitate execution of
this Agreement, the parties may execute and exchange by facsimile counterparts
of the signature pages.
9.17 Further Assurances. In addition to the acts and deeds recited
herein and contemplated to be performed, executed and/or delivered by the
parties at Closing, each party agrees to perform, execute and deliver, on or
after the Closing, any further actions and documents, and will obtain such
consents, as may be reasonably necessary or as may be reasonably requested to
fully effectuate the purposes, terms and conditions of this Agreement or to
further perfect the conveyance, transfer and assignment of the Contributed
Property to Carr.
9.18 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
[Signature page to follow.]
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<PAGE>
SIGNATURE PAGE TO
AGREEMENT OF PURCHASE AND SALE
BETWEEN
PHOENIXWEST ASSOCIATES, LTD.
VERSAILLES ASSOCIATES LIMITED PARTNERSHIP
LAKEVIEW 436 ASSOCIATES LTD.
PINES REALTY ASSOCIATES, LTD.
AND
CARRAMERICA REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of September 30, 1997.
PINES REALTY ASSOCIATES, LTD.,
a Florida limited partnership
By: 7425, Inc., a Florida
corporation, its General Partner
By: /s/ Norton Herrick
------------------------------
Norton Herrick
President
LAKEVIEW 436 ASSOCIATES, LTD., a
Florida limited partnership
By: Lakeview-Nort, Ltd., its general partner
By: 436, Inc., its general partner
By: /s/ Norton Herrick
---------------------------
Norton Herrick
President
VERSAILLES ASSOCIATES LIMITED PARTNERSHIP,
a Florida limited partnership
By: G-P Versailles, Inc., its general
partner
By: /s/ Norton Herrick
--------------------------------
Norton Herrick
President
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<PAGE>
PHOENIXWEST ASSOCIATES, LTD., a Florida
limited partnership
By: G-P PhoenixWest, Inc., its general
partner
By: /s/ Norton Herrick
--------------------------------------
Norton Herrick
President
"Contributors"
CARRAMERICA REALTY, L.P., a Delaware
limited partnership
By: CarrAmerica Realty GP
Holdings, Inc., a Delaware
corporation, General Partner
By: /s/ Robert G. Stuckey
--------------------------------------
Name: Robert G. Stuckey
--------------------------------------
Title: Managing Director and Vice President
--------------------------------------
"Carr"
Escrow Agent has executed this Agreement in order to confirm that
Escrow Agent has received and shall hold the Earnest Money, and the interest
earned thereon, in escrow, and shall disburse the Earnest Money, and the
interest earned thereon, pursuant to the provisions of Article 8 hereof.
CHICAGO TITLE COMPANY
By: /s/ Ken Buvala
--------------------------------
Name: Ken Buvala
--------------------------------
Title: Branch Manager
--------------------------------
"Escrow Agent"
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<PAGE>
AGREEMENT OF PURCHASE AND SALE
U.S. West Communication Group office portfolio, Phoenix and Tucson, Arizona
[PITNEY BOWES]
ARTICLE 1: PROPERTY/PURCHASE PRICE
1.1 Certain Basic Terms.
(a) Seller and Notice Address
PREFCO VII LIMITED PARTNERSHIP ("Seller")
Attention: Michael Sedgwick Ryan
Pitney Bowes Credit Corporation
Capital Markets
27 Waterview Drive
Shelton, Connecticut 06484-5151
Telephone: 203/922-4000
Facsimile: 203/922-4083
With a copy to: Kelley Drye & Warren LLP
Attention: John A. Garraty, Jr.
101 Park Avenue
New York, New York 10178
Telephone: 212/808-7653
Facsimile: 212/808-7897
(b) Purchaser and Notice Address:
CARRAMERICA REALTY, L.P. ("Carr")
a Delaware limited partnership
Attention: Karen Dorigan
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Telephone: 202/639-3843
Facsimile: 202/ 737-2147
With copies to: Mayer, Brown & Platt
Attention: George Ruhlen
141 East Palace Avenue
Santa Fe, New Mexico 87501
Telephone: 505/820-8185
Facsimile: 505/820-7334
Mayer, Brown & Platt
Attention: James A. Parker
190 South LaSalle Street
Chicago, Illinois 60603
Telephone: 312/701-7853
Facsimile: 312/706-8732
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<PAGE>
(c) Date of this
Agreement: September 30, 1997
(d) Purchase Price: $42,585,000
(e) Earnest Money: $368,400, and any other deposits of earnest
money made pursuant to the terms of this
Agreement, together with interest thereon.
(f) Intentionally Omitted.
(g) Closing Date: November 1, 1997, subject to extension as
provided in Paragraph 1.6(a) or otherwise in
this Agreement.
(h) Title Company: Chicago Title Company
Attention: Frank Jansen
700 South Flower Street, Suite 920
Los Angeles, California 90017
Telephone: 213/488-4346
Facsimile: 213/891-0834
(i) Escrow Agent: Chicago Title Company
Attention: Ken Buvala
2201 East Camelback Road, Suite 126B
Phoenix, Arizona 85016
Telephone: 602/468-6333
Facsimile: 602/468-6336
(j) Broker: CB Commercial
(k) Existing Mortgage
Loan: That certain loan in the aggregate
principal amount of $64,640,000, evidenced
by four promissory notes dated December 31,
1990, made by Seller, as maker, to UBS
Mortgage Finance Inc. ("Lender") in the
original principal amounts of $28,441,600,
$13,574,400, $13,574,400 and $9,049,600,
respectively.
(l) Loan Documents: All documents and instruments evidencing,
securing or otherwise related to the
Existing Mortgage Loan.
(m) Master Leases: Those four master leases, each dated
December 31, 1990 between PREFCO VII Limited
Partnership, as landlord, and U S WEST
Business Resources, Inc. ("Master Tenant"),
as tenant, as amended, each covering
improvements on each of the four separate
parcels of land comprising the Property.
(n) Master Lease
Guaranties: For each of the Master Leases, the Lease
Guaranty, dated as of December 31, 1990, by
The Mountain States Telephone and Telegraph
Company, a Colorado corporation, in favor
of Seller, the Lease Guaranty, dated as of
December 31, 1990, by U S WEST Inc., a
Colorado corporation, in favor of Seller;
and the Lease Guaranty, dated as of
December 31, 1990, by U S WEST Real Estate,
Inc., a Colorado corporation, in favor of
Seller.
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<PAGE>
(o) Related Agreements: This Agreement, that Agreement of Purchase
and Sale of even date herewith between Pines
Realty Associates, Ltd., Lakeview 436
Associates, Ltd., Versailles Associates
Limited Partnership and Phoenix West
Associates, Ltd. and Purchaser, and that
Agreement of Purchase and Sale of even date
herewith (covering the remainder interest)
between PREFCO VII Limited Partnership and
Purchaser, the Pitney Debt Agreement and any
related agreements entered into by Purchaser
and Seller or any other such seller or
contributor with respect to the Property or
any other property covered by the Master
Leases.
(p) Pitney Debt
Agreement: That letter agreement of even date herewith
among Phoenixwest Associates, Ltd.,
Versailles Associates Limited Partnership,
Lakeview 436 Associates Ltd., and Pines
Realty Associates, Ltd., Seller, and
Purchaser regarding a satisfaction payment
to Seller in connection with a
tenancy-in-common agreement.
1.2 Property. Subject to the terms and conditions of this Agreement of
Purchase and Sale (this "Agreement"), Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from Seller, the following property (collectively,
the "Property"):
(a) Seller's tenants in common interest with respect to the "Real
Property," being the four parcels of land described in Exhibits A-1 through A-4
attached hereto; all improvements and fixtures (other than fixtures owned by
tenants pursuant to the Leases) located thereon, including, but not limited to,
the office buildings located on such lands, (collectively, the "Improvements");
all and singular the rights, benefits, privileges, easements, tenements,
hereditaments and appurtenances thereon or in anyway appertaining to such real
property; and all right, title and interest of Seller in and to all strips and
gores and any land lying in the bed of any street, road or alley, open or
proposed, adjoining such real property; excepting from such Real Property
remainder interests conveyed to Arizona - Relco Limited Partnership pursuant to
Special Warranty Deeds and Assignments, recorded under Recording Numbers
91-0552245, 91-0552246, and 91-0552247 Maricopa County Recorder, Maricopa
County, Arizona, and at Docket 9172, Page 876, Pima County Recorder's Office,
Pima County, Arizona.
(b) Seller's tenants in common interest with respect to the landlord's
interest in the "Leases," being all leases of space or other occupancy
agreements affecting the Improvements, including without limitation the Master
Leases and any and all amendments and supplements thereto, the Master Lease
Guaranties, and any other guaranties and security received by landlord in
connection therewith.
(c) All right, title and interest of Seller, if any, in and to the
"Personal Property," being all tangible personal property now or hereafter used
in connection with the operation, ownership, maintenance, management, occupancy
or improvement of the Real Property including, without limitation: equipment;
machinery; furniture; art work; furnishings; office equipment and supplies; and,
whether stored on or offsite, all tools, supplies, and construction and finish
materials not incorporated in the Improvements and held for repairs and
replacements. The term "Personal Property" also shall include any and all
deposits, bonds or other security, if any, deposited or delivered by Seller with
or to any and all governmental bodies, utility companies or other third parties
in connection with the operation, ownership, maintenance, management, occupancy
or improvement of the Real Property.
(d) All right, title and interest of Seller, if any, in and to the
"Intangible Property," being all intangible personal property now or hereafter
used in connection with the operation, ownership, maintenance, management or
occupancy of the Real Property, including, without limitation: all trade names
and trade marks associated with the Real Property, including, without
limitation, the name of the Improvements; the plans and specifications for the
Improvements; warranties covering any of the Property; all contract rights
related to the construction, operation, ownership or management of the Real
Property that are expressly assumed by Purchaser pursuant to this Agreement;
applications, permits, approvals and licenses (to the extent assignable);
insurance proceeds and condemnation awards or claims thereto to be assigned to
Purchaser hereunder; any funds held by Master Tenant or Manager under the Master
Leases or the Management Agreement; and all books and records relating to the
Property.
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<PAGE>
1.3 Earnest Money. On or before November 7, 1997, Purchaser shall
deposit the Earnest Money with the Escrow Agent. The Escrow Agent shall pay the
Earnest Money to Seller at and upon the Closing, or otherwise, to the party
entitled to receive the Earnest Money in accordance with this Agreement. The
Earnest Money shall be held and disbursed by the Escrow Agent pursuant to
Article 8 of this Agreement. In addition to any other right or remedy of
Purchaser under this Agreement, the Earnest Money shall be returned to Purchaser
if this Agreement is terminated for any reason other than Purchaser's default
hereunder.
1.4 Remedies. Seller's sole and exclusive remedy in the event Purchaser
defaults in its obligation to close this transaction shall be to terminate this
Agreement and to retain the Earnest Money as liquidated damages, Seller waiving
all other rights or remedies in the event of such default by Purchaser. The
parties acknowledge that Seller's actual damages in the event of a default by
Purchaser under this Agreement will be difficult to ascertain, and that such
liquidated damages represent the parties' best estimate of such damages.
Purchaser may enforce specific performance of Seller's obligation to close this
transaction or pursue any other remedy at law or in equity in the event of
Seller's breach; provided that Carr may not pursue a claim for damages for such
breach unless such breach is willful.
1.5 Effect of Default or Termination under Related Agreement. A default
under a Related Agreement does not constitute a default under this Agreement.
However, if a Related Agreement is terminated or the closing under a Related
Agreement does not occur simultaneously with the Closing because of a default by
any party thereunder, then: (i) if neither Purchaser nor Seller is in default
hereunder, then Purchaser and Seller shall be excused from their respective
obligations to purchase and sell the Property, and this Agreement shall
terminate and the Earnest Money shall be returned to Purchaser; and (ii) if
either Purchaser or the Seller is in default hereunder, then the nondefaulting
party shall have the remedies set forth in Paragraph 1.4.
1.6 Existing Mortgage Loan. The Property is to be conveyed without
release of, and subject to, the Existing Mortgage Loan in accordance with the
following:
(a) Conditions to Assumption. It shall be a condition precedent to the
obligations of Seller and Purchaser to close the purchase and sale of the
Property that as of the Closing Date there shall not exist any uncured default
or event that, but for the giving of notice or the passage of time, or both
would constitute a default under the Loan Documents, and Lender shall have
delivered to Carr an estoppel certificate reasonably satisfactory to Carr and to
Seller (the estoppel certificate will include an agreement by the holder of the
Existing Mortgage that the single member limited liability company that Carr
will form for the single purpose of holding title to the Property may be the
mortgagor under the Existing Mortgage, and that the transfer of an interest in
Purchaser or in CarrAmerica Realty Corporation does not breach the prohibition
in the loan documents against a transfer of an interest in the mortgagor or its
affiliates; and will acknowledge receipt by Lender of certain guarantees). If
the conditions set forth in this Paragraph 1.6, or in Paragraph 2.3 or Paragraph
3.2 have not been satisfied by the Closing Date, then either party may, by
delivering written notice to the other party on or before Closing Date, extend
the Closing Date up to an aggregate extension of 15 days, in order to satisfy
such conditions, and if such conditions are not satisfied by the Closing Date,
as extended, then this Agreement shall terminate, the Earnest Money shall be
returned to Carr and the parties will have no further obligations under this
Agreement, except as expressly stated herein.
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<PAGE>
(b) Costs. Any fees and charges charged by Lender pursuant to the Loan
Documents to consent to the transfer shall be paid by Purchaser, regardless of
whether the transaction contemplated hereby is consummated as well. Any costs
and expenses incurred by Lender and that pursuant to the Loan Documents Lender
requires be reimbursed in connection with the transfer of the Property,
including recording costs and expenses relating to the recordation of any
mortgage assignment agreement or other documentation relating to the transfer of
the Property, attorneys' fees incurred by Lender, and any title insurance
premiums or costs for endorsements required by Lender, shall be paid by
Purchaser, regardless of whether the transaction contemplated hereby is
consummated.
(c) Contact with Lender. Purchaser shall have the right to directly
contact Lender concerning the Existing Mortgage Loan. Purchaser shall promptly
provide to Lender all information it may reasonably request in connection with
the transfer. Purchaser shall form a single-purpose entity to assume the
Existing Mortgage Loan in accordance with the Loan Documents and shall otherwise
use commercially reasonable efforts to comply with the requirements of the Loan
Documents with respect to the conveyance of the Property so that no consent is
necessary except as described in Paragraph 1.6(a).
ARTICLE 2: INSPECTION
2.1 Property Information. Seller has delivered to Purchaser complete
copies of the Master Leases, Master Lease Guaranties, Loan Documents, Tripartite
Agreement, Management Agreement, and Option Agreements (the last three terms are
defined in Paragraph 5.3). At Purchaser's reasonable request from time to time,
Seller shall make available to Purchaser, for review and copying, at Seller's
offices, all other material information and documents relating to the Property
in Seller's possession. The information and documents provided and made
available to Purchaser pursuant to this Paragraph 2.1 is the "Property
Information."
2.2 Due Diligence. Carr has examined, inspected and investigated the
Property and the agreements, documents and records related thereto that it
deemed necessary, and is satisfied with the results of its inspection,
examination and investigation. Carr acknowledges that no additional "inspection
period" is provided under this Agreement.
Subject to the terms of the Master Leases and the Management Agreement,
Purchaser shall have reasonable access to the Property and all books and records
for the Property that are in Seller's possession or control for the purpose of
conducting surveys, architectural, engineering, geotechnical and environmental
inspections and tests (including intrusive inspection and sampling), and any
other inspections, studies or tests reasonably required by Purchaser. Purchaser
shall keep the Property free and clear of any liens and will indemnify, defend,
and hold Seller harmless from all claims asserted by third parties against
Seller to recover for personal injury or property damage as a result of entry
onto the Property by Purchaser, its agents, employees and representatives. If
any inspection or test disturbs the Property, Purchaser will restore the
Property to its condition before any such inspection or test. During the
pendency of this Agreement, subject to the terms of the Master Leases and the
Management Agreement, Purchaser and its agents, employees and representatives
shall have a continuing right of reasonable access to the Property and such
books and records for the purpose of examining and making copies of all books
and records and other materials relating to the Property in Seller's possession
or control. Subject to the terms of the Master Leases and the Management
Agreement, Purchaser shall have the right to conduct a "walk-through" of the
Property before the Closing upon appropriate notice to tenants as permitted
under the Leases. In the course of its investigations, Purchaser may make
inquiries to third parties, including, without limitation, tenants, lenders,
contractors, property managers, parties to Service Contracts and municipal,
local and other government officials and representatives, and Seller consents to
such inquiries.
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<PAGE>
2.3 Tenant Estoppels. Purchaser shall promptly deliver to the Master
Tenant an estoppel certificate for each Master Lease in the form of Exhibit B-1
attached hereto (the "Master Tenant Estoppels"). Purchaser shall prepare the
Master Tenant Estoppels for Seller's review and comment before their delivery to
the Master Tenant. Purchaser's obligation to close this transaction is subject
to the condition that, as of Closing (1) estoppel certificates for all the
Master Leases substantially in the form required above executed by the Master
Tenant, confirming the rental rate in Exhibit H and the paid through date and
consistent with representations of Seller in Paragraph 7.1 have been delivered
to Purchaser; (2) the Master Leases shall be in full force and effect and no
monetary or material nonmonetary default or claim by landlord or tenant shall
exist under any such Master Lease; (3) the Tri-partite Agreements, Management
Agreement and Option Agreements (defined in Paragraph 5.3(d)) are in full force
and effect without any existing default thereunder, and the Tenant has executed
and delivered to Purchaser certificates with respect to the Tri-partite
Agreements and Management Agreement substantially in the form of Exhibits B-2
and B-3 attached hereto; and (4) the Master Lease Guaranties are in full force
and effect without any existing default thereunder, and the guarantors of the
Master Lease Guaranties have executed and delivered to Purchaser certificates
substantially in the form of Exhibit C attached hereto. Seller shall cooperate
with Purchaser, without obligation to incur any expense or liability, in
obtaining estoppel certificates from Third Party Lessees, as defined in the
Master Leases, but obtaining such certificates is not a condition to Closing. If
the conditions set forth in this Paragraph 2.3 have not been satisfied by the
Closing Date, then unless Carr waives such conditions in writing, this Agreement
shall terminate, the Earnest Money shall be returned to Carr and the parties
shall have no further obligations under this Agreement except as expressly
stated herein. Nonsatisfaction of the conditions in this Paragraph 2.3 is not a
default by Seller.
ARTICLE 3: TITLE AND SURVEY REVIEW
3.1 Delivery of Title Commitment and Survey. Purchaser shall cause to
be prepared (1) a current, effective commitment for title insurance (the "Title
Commitment") issued by the Title Company, in the amount of the Purchase Price
with Purchaser as the proposed insured, and accompanied by true, complete and
legible copies of all documents referred to in the Title Commitment; (2) a
current ALTA-ACSM Urban survey of the Property (the "Survey") prepared by a
surveyor acceptable to Purchaser, including a certification addressed to
Purchaser substantially in the form attached hereto as Exhibit D; and (3) copies
of Uniform Commercial Code, judgment and tax lien searches in the name of
Seller, any general partner, member or manager of Seller, and the Property
issued by the Title Company or a search company acceptable to Purchaser ("UCC
Searches"). The Title Commitment, the documents referred to therein, the Survey
and the UCC Searches are referred to herein collectively as the "Title
Documents."
3.2 Title Review and Cure. Seller will cooperate with Purchaser in
curing any objections Purchaser may have to title to the Property; provided,
however Seller shall not have any obligation to cure title objections except
liens and security interests created by Seller after the Date of this Agreement,
and Seller agrees to remove such exceptions or encumbrances to title which it
creates after the Date of this Agreement. As to any other exceptions or
objections raised by Purchaser, Seller shall have 14 days from the receipt of
Purchaser's notice of objections either to have such exceptions or objections
removed or, if acceptable to Purchaser, to provide affirmative title insurance
protection for such exceptions satisfactory to Purchaser or to notify Purchaser
that it does not intend to cure such objection. If, with respect to those other
objections that Seller has no obligation to cure, Seller fails either to provide
for the removal of such exceptions or objections or to obtain affirmative title
insurance protection for such exceptions or objections satisfactory to Purchaser
within such 14 day period, then Purchaser must elect either to terminate this
Agreement by delivering written notice to Seller within 5 days following such
period, or to waive such objections. Upon delivery of such termination notice by
Purchaser, this Agreement shall either automatically terminate, the parties
shall be released from all further obligations under this Agreement except
pursuant to any provisions which by their terms survive a termination of this
Agreement, and the Earnest Money shall be promptly returned to Purchaser. If
after the Date of this Agreement, the Title Company revises the Title
Commitment, or the surveyor revises the Survey, to add or modify exceptions, or
to add or modify the conditions to obtaining any endorsement which the Title
Company has agreed to issue, then Purchaser may terminate this Agreement and
receive a refund of the Earnest Money if provision for their removal or
modification satisfactory to Purchaser is not made. Purchaser shall have been
deemed to have approved any title exception that Seller, is not obligated to
remove and to which either Purchaser did not object as provided above, or to
which Purchaser did object, but with respect to which Purchaser did not
terminate this Agreement. If there are exceptions or objections raised by
Purchaser, the Closing Date shall be extended to the extent necessary to permit
Seller and Purchaser to exercise their rights as provided above, but only in
accordance with the time periods set forth in Paragraph 1.6(a).
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3.3 Delivery of Title Policy at Closing. As a condition to Purchaser's
obligation to close, at Closing (i) the Title Company shall irrevocably commit
to issue to Purchaser an ALTA Owner's Policy (Revised 10-17-70 and 10-17-84) (or
other form if required by state law) of title insurance, with extended coverage
(i.e., with ALTA General Exceptions 1 through 5 deleted, or with corresponding
deletions if the Property is located in a non-ALTA state), issued by the Title
Company as of the date and time of the recording of the Deed, in the amount of
the Purchase Price, containing the Purchaser's Endorsements, insuring Purchaser
as owner of good, marketable and indefeasible fee simple title to the Property
(the conveyances from Seller and the sellers under the Related Agreements
effecting a merger of the estates held by each, with fee simple title vesting in
Purchaser subject only to the Permitted Exceptions), and subject only to the
Permitted Exceptions (the "Title Policy"), and (ii) the updated UCC Searches
(within 10 days of Closing) show no security interests (other than Permitted
Exceptions) not disclosed in the UCC Searches delivered pursuant to Paragraph
3.1;. "Permitted Exceptions" means the exceptions set forth in Schedule I to
this Agreement; real estate taxes not yet due and payable; the Loan Documents;
the Management Agreement, the Tripartite Agreements, and the Option Agreements;
and tenants in possession as tenants only under the Leases without (except as
provided in the Master Leases) any option to purchase or acquire an interest in
the Property. "Purchaser's Endorsements" shall mean, to the extent such
endorsements are available under the laws of the state in which the Property is
located: (1) owner's comprehensive; (2) access; (3) survey (accuracy of survey);
(4) location (survey legal matches title legal); (5) separate tax lot; (6) legal
lot; (7) zoning 3.1, with parking and loading docks; and (8) such other
endorsements as Purchaser may require during the Due Diligence Period based on
its review of the Title Commitment and Survey.
3.4 Title and Survey Costs. Purchaser shall pay for the cost of the
Survey, the premium for extended coverage, the cost of Purchaser's Endorsements,
and the cost of the UCC Searches. Seller shall pay the base premium for the
Title Policy under this Agreement and the Related Agreements and any premium for
a non-imputation endorsement.
ARTICLE 4: OPERATIONS AND RISK OF LOSS
4.1 Ongoing Operations. During the pendency of this Agreement:
(a) Preservation of Business. Subject to the rights and obligations of
the manager under the Management Agreement, Seller shall, use reasonable efforts
to cause the Property to be operated only in the ordinary and usual course of
business and consistent with past practice, shall perform its obligations under
Leases and other agreements affecting the Property, and shall not take any
action or omission which would cause any of the representations or warranties of
Seller contained herein to become inaccurate or any of the covenants of Seller
to be breached.
(b) New Contracts. Without Purchaser's prior written consent in each
instance, Seller will not enter into or amend, terminate, waive any default
under, or grant concessions regarding any contract or agreement that will be an
obligation affecting the Property or binding on the Purchaser after the Closing.
(c) Listings and Other Offers. Seller will not list the Property with
any broker or otherwise solicit or make or accept any offers to sell the
Property, engage in any discussions or negotiations with any third party with
respect to the sale or other disposition of any of the Property, or enter into
any contracts or agreements (whether binding or not) regarding any disposition
of any of the Property.
(d) Leasing Arrangements. Seller will not amend, terminate, waive any
default under, grant concessions regarding, incur any obligation for leasing
commissions in connection with, or enter into any Lease without Purchaser's
prior written consent in each instance.
(e) Loan Documents. Seller shall comply with its obligations under the
Loan Documents.
(f) Agreements. Seller shall comply with its obligations under any
agreement to be assigned to Purchaser pursuant to Article 5 and shall not amend
any such agreement without Purchaser's prior written approval.
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4.2 Damage. Seller shall promptly give Purchaser written notice of any
damage to the Property of which Seller becomes aware, describing such damage,
whether such damage is covered by insurance and the estimated cost of repairing
such damage. If such damage is material, Purchaser may elect by notice to Seller
given within 14 days after Purchaser is notified of such damage (and the Closing
shall be extended, if necessary, to give Purchaser such 14 day period to respond
to such notice) to terminate this Agreement, in which event the Earnest Money
shall be immediately returned to Purchaser. Damage as to any one or multiple
occurrences is material if the cost to repair the damage, as reasonably
estimated by a reputable third party contractor, exceeds in the aggregate $5
million, or triggers any option by Master Tenant to terminate any Master Lease.
If Purchaser does not so terminate this Agreement, then at closing Seller shall
assign to Purchaser its right and interest in and to the insurance provided
under the Master Leases with respect to such damages and shall obtain any
appropriate acknowledgment of such assignment by the insurer.
4.3 Condemnation. Seller shall promptly give Purchaser notice of any
eminent domain proceedings that are contemplated, threatened or instituted with
respect to the Property of which Seller becomes aware. By notice to Seller given
within 14 days after Purchaser receives notice of proceedings in eminent domain
that are contemplated, threatened or instituted by any body having the power of
eminent domain with respect to the Property or Remainder Interests (and if
necessary the Closing Date shall be extended to give Purchaser the full 14 day
period to make such election), Purchaser may terminate this Agreement if the
taking or threatened taking is material, or proceed under this Agreement, in
which event Seller shall, at the Closing, assign to Purchaser its right, title
and interests in and to any condemnation award, and Purchaser shall have the
sole right during the pendency of this Agreement to negotiate and otherwise deal
with the condemning authority in respect of such matter. A taking as to one or
more proceedings is material if the award (including any award with respect to
remainder interests and interests of co-tenants) is reasonably estimated to
exceed $1 million or the taking would likely entitle Master Tenant to an
abatement or reduction in rent.
ARTICLE 5: CLOSING
5.1 Closing and Escrow. The consummation of the transaction
contemplated herein ("Closing") shall occur on the Closing Date at the offices
of the Escrow Agent through an escrow with the Escrow Agent. Funds shall be
deposited into and held by Escrow Agent in a closing escrow account with a bank
satisfactory to Purchaser and Seller. Upon satisfaction or completion of all
closing conditions and deliveries, the parties shall direct the Escrow Agent to
immediately record and deliver the closing documents to the appropriate parties
and make disbursements according to the closing statements executed by Seller
and Purchaser. The Escrow Agent shall agree in writing with Seller and Purchaser
that (1) recordation of the Deeds constitutes its representation that it is
holding the closing documents, closing funds and closing statements and is
prepared and irrevocably committed to disburse the closing funds in accordance
with the closing statements; and (2) release of funds to the Seller shall
irrevocably commit it to issue the Title Policy in accordance with this
Agreement. Provided such supplemental escrow instructions are not in conflict
with this Agreement as it may be amended in writing from time to time, Seller
and Purchaser agree to execute such supplemental escrow instructions as may be
appropriate to enable Escrow Agent to comply with the terms of this Agreement.
5.2 Conditions to the Parties' Obligations to Close. In addition to all
other conditions set forth herein, the obligation of Seller, on the one hand,
and Purchaser, on the other hand, to consummate the transactions contemplated
hereunder shall be contingent upon the following:
(a) The other party's representations and warranties contained herein
shall be true and correct as of the Date of this Agreement and the Closing Date;
(b) As of the Closing Date, the other party shall have performed its
obligations hereunder and all deliveries to be made by the other party at
Closing shall have been tendered;
(c) As of the Closing Date, no action or proceeding by or before any
governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the transactions contemplated by
this Agreement, other than an action or proceeding instituted or threatened by
such party; and
(d) Any other condition set forth in this Agreement to such party's
obligation to close is not satisfied by the applicable date.
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(e) The Closing occurs simultaneously with the closings under the
Related Agreements.
(f) As to Purchaser's obligation to close, as of the Closing, neither
Seller nor any other party is in default under any agreement to be assigned to
or assumed by Purchaser hereunder.
So long as a party is not in default hereunder, if any condition to
such party's obligation to proceed with the Closing hereunder has not been
satisfied as of the Closing Date or other applicable date, such party may, in
its sole discretion, terminate this Agreement by delivering written notice to
the other party and all parties under the Related Agreements on or before the
Closing Date or other applicable date, or elect to close, notwithstanding the
non-satisfaction of such condition, in which event such party shall be deemed to
have waived any such condition except for breach by a party of a covenant in
which case the Closing shall not relieve such breaching party from any liability
it would otherwise have hereunder. A party shall be entitled to postpone the
Closing up to an aggregate of 10 days in order to cause any condition to be
satisfied.
5.3 Seller's Deliveries in Escrow. At least one business day before the
Closing Date, Seller shall deliver in escrow to the Escrow Agent the following:
(a) Deed. For each of the four parcels comprising the Property: a
special warranty deed conveying Seller's tenancy-in-common interest in the Real
Property to Purchaser (warranting title against grantor's acts);
(b) Assignment of Master Leases. For each of the four Master Leases; an
Assignment of Master Lease in the form of Exhibit E attached hereto (the "Master
Lease Assignment"), executed and acknowledged by Seller; and originals of the
Master Leases;
(c) Third Party Leases. For each of the Third Party Leases, an
assignment substantially in the form of Exhibit E attached hereto, modified as
appropriate, executed and acknowledged by Seller;
(d) Bill of Sale and Assignment of Contracts. For each of the four
parcels comprising the Property: a bill of sale and assignment in the form of
Exhibit F, assigning among other property: that Tripartite Agreement relating to
the applicable parcel, dated as of December 31, 1990, among Master Tenant,
PREFCO VII Limited Partnership and Arizona-Relco Limited Partnership (the
"Tripartite Agreements"); that Management and Rent Disbursement Agreement, dated
as of December 31, 1990, between Tenant and Seller (the "Management Agreement");
and that Option and Subordination Agreement relating to the applicable parcel,
dated as of December 31, 1990, between PREFCO VII Limited Partnership and
Arizona-Relco Limited Partnership (the "Option Agreements"), together with
originals or certified copies of such agreements (except to the extent otherwise
agreed to by Purchaser prior to the execution of this Agreement);
(e) Notice to Tenants. A notice to each tenant in form reasonably
satisfactory to Seller and Purchaser.
(f) State Law Disclosures. Such disclosures and reports as are required
by applicable state and local law in connection with the conveyance of real
property;
(g) FIRPTA. A Foreign Investment in Real Property Tax Act affidavit
executed by Seller. If Seller fails to provide the necessary affidavit and/or
documentation of exemption on the Closing Date, Purchaser may proceed in
accordance with the withholding provisions in such act;
(h) Intentionally Omitted;
(i) Authority. Evidence of the existence, organization and authority of
Seller and of the authority of the persons executing documents on behalf of
Seller reasonably satisfactory to the Purchaser and the Title Company;
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(j) Master Lease Guaranties. The originals of all Master Lease
Guaranties; provided, however, Seller may deliver a certified copy of the Master
Lease Guarantee from U S WEST INC., of the Master Lease for 5090 North 40th
Street, Phoenix, Arizona;
(k) Insurance. Certificates of insurance carried by the Master Tenant
pursuant to the Master Leases naming Purchaser as an additional insured or loss
payee, as appropriate.
(l) Pitney Debt Agreement. At Closing, Seller shall be in compliance
with and shall tender its deliveries pursuant to, the Pitney Debt Agreement;
(m) Letter Agreement. Seller's payments pursuant to that letter
agreement of even date herewith between Seller and Purchaser.
(n) Other Deliveries. Any other Closing deliveries required to be made
by or on behalf of Seller hereunder.
5.4 Purchaser's Deliveries in Escrow. At least one business day before
the Closing Date (except as otherwise permitted below), Purchaser shall deliver
in escrow to the Escrow Agent the following:
(a) Purchase Price. On the Closing Date, the Purchase Price, less the
credit applicable to the Existing Mortgage Loan pursuant to Paragraph 6.1(b),
less the Earnest Money that is applied to the Purchase Price, plus or minus
applicable prorations, deposited by Purchaser with the Escrow Agent in
immediate, same-day federal funds wired for credit into the Escrow Agent's
escrow account;
(b) Assignments. The instruments described in Paragraph 5.3(b), (c) and
(d) executed by Purchaser, as provided in each such instrument;
(c) State Law Disclosures. Such disclosures and reports as are required
by applicable state and local law in connection with the conveyance of real
property;
(d) Loan Documents. Such documents and deliveries (if any) by or on
behalf of Purchaser as may be required by the Lender pursuant to the Loan
Documents to effect the transfer of the Property subject to the Existing
Mortgage Loan; and
(e) Authority. Evidence of the existence, organization and authority of
Seller and of the authority of the persons executing documents on behalf of
Purchaser reasonably satisfactory to the Seller and the Title Company.
(f) Pitney Debt Agreement. At Closing, Purchaser shall be in compliance
with and will tender its deliveries pursuant to, the Pitney Debt Agreement; and
(g) Other Deliveries. Any other Closing deliveries required to be made
by or on behalf of Purchaser hereunder.
5.5 Closing Statements/Escrow Fees. Seller and Purchaser shall deposit
with the Escrow Agent executed closing statements consistent with this Agreement
in the form required by the Escrow Agent. The Escrow Agent's escrow fee, closing
charges, and any cancellation fee under this Agreement and the Related
Agreements shall be divided equally between and paid by Seller and Purchaser.
5.6 Sales, Transfer and Documentary Taxes. Purchaser shall pay all
sales, gross receipts, compensating, stamp, excise, documentary, transfer, deed
or similar taxes and fees imposed in connection with this transaction under
applicable state or local law.
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5.7 Possession. At the time of Closing, Seller shall deliver to
Purchaser possession of the Property, subject only to the Permitted Exceptions
and the Third Party Leases.
5.8 Delivery of Books and Records. Immediately after the Closing,
Seller shall deliver to the offices of Purchaser's property manager to the
extent that the same are in Seller's possession: copies or originals of all
books and records of account, contracts, copies of correspondence with tenants
and suppliers, receipts for deposits, unpaid bills and other papers or documents
which pertain to the Property; all permits and warranties; all advertising
materials, booklets, keys and other items, if any, used in the operation of the
Property; the original "as-built" plans and specification; and all other
available plans and specifications and all operation manuals. Seller shall
cooperate with Purchaser after Closing to transfer to Purchaser any such
information stored electronically.
ARTICLE 6: PRORATIONS AND ADJUSTMENTS
6.1 Prorations. Not less than 5 days prior to Closing, Seller shall
provide to Purchaser such information and verification reasonably necessary to
support the prorations and adjustments under this Article 6. The items in
subparagraph (a) of this Paragraph 6.1 shall be prorated between Seller and
Purchaser as of the close of the day immediately preceding the Closing Date.
(a) Income and Expenses. The Master Tenant is currently remitting to
the Lender the monthly installment of rent payable under the Master Leases, and
the Lender is applying such amounts to the scheduled monthly installment of
principal and interest under the Existing Mortgage Loan that is due on the first
day of each month, and delivering the net monthly amount (currently $6803.43) to
Seller and to the contributors under the Contribution Agreement. The parties
shall allocate the Seller's portion (51 percent ) of the net monthly amount for
the month in which the Closing Date falls evenly over such month and prorate as
of the Closing Date.
(b) Loan Documents. Purchaser shall receive at Closing a credit against
the Purchase Price equal to Seller's allocable portion (51 percent) of the
outstanding principal balance of the Existing Mortgage Loan as of the Closing
Date (assuming payments under the Loan Documents for the month of Closing have
been paid). Purchaser shall have no obligation to assume or pay or take the
Property subject to any amounts owing under the Existing Mortgage Loan as of the
Closing Date other than the outstanding principal balance and accrued interest
for the month of Closing. Purchaser shall purchase any escrows of Seller's funds
with Lender that are transferred to Purchaser at Closing.
6.2 Tenant Deposits. At Closing, Seller shall transfer to Purchaser all
its right, title and interest in any tenant security deposits. As of the
Closing, Purchaser shall assume Seller's obligations related to tenant security
deposits, but only to the extent Seller's interest therein is properly
transferred to Purchaser.
6.3 Sales Commissions. Seller and Purchaser represent and warrant each
to the other that they have not dealt with any real estate broker, sales person
or finder in connection with this transaction other than Broker. Purchaser shall
pay Broker in accordance with their separate agreement (at Closing if Closing
occurs). Broker is an independent contractor and is not authorized to make any
agreement or representation on behalf of either party. Except as expressly set
forth above, in the event of any claim for broker's or finder's fees or
commissions in connection with the negotiation, execution or consummation of
this Agreement, or the transactions contemplated hereby, each party shall
indemnify and hold harmless the other party from and against any such claim
based upon any statement, representation or agreement of such party. This
provision shall survive any termination of this Agreement.
ARTICLE 7: REPRESENTATIONS AND WARRANTIES
7.1 Seller's Representations and Warranties. As a material inducement
to Purchaser to execute this Agreement and consummate this transaction, Seller
represents and warrants to Purchaser that:
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(a) Organization and Authority. Seller has been duly organized and is
validly existing as the entity described in Paragraph 1.1, and is in good
standing in its State of incorporation or formation. Seller is in good standing
and is qualified to do business in Arizona. Seller has the full right and
authority and has obtained any and all consents required to enter into this
Agreement and to consummate or cause to be consummated the transactions
contemplated hereby. This Agreement has been, and all of the documents to be
delivered by Seller at the Closing will be, authorized and properly executed and
constitute, or will constitute, as appropriate, the valid and binding
obligations of Seller, enforceable in accordance with their terms.
(b) Conflicts. There is no agreement to which Seller is a party or, to
Seller's knowledge, binding on Seller which is in conflict with this Agreement,
or which challenges or impairs Seller's ability to execute or perform its
obligations under this Agreement.
(c) Pending Actions or Proceedings. There is not now pending or, to the
best of Seller's knowledge, threatened, any action, suit or proceeding before
any court or governmental agency or body against the Seller that would prevent
Seller from performing its obligations hereunder.
(d) Master Leases. The documents described in Exhibit H constituting
the Master Leases and the Master Lease Guaranties are true, correct and complete
copies of all of the Master Leases affecting the Property, including any and all
amendments or supplements thereto, and of the Master Lease Guaranties. To
Seller's knowledge, Master Tenant has not asserted nor are there any defenses or
offsets to rent under the Master Leases accruing after the Closing Date, and no
monetary or material nonmonetary default or breach exists on the part of the
Master Tenant under any Master Lease. Seller has not received any notice of any
monetary or material nonmonetary default or breach on the part of the landlord
under any Master Lease, nor, to the best of Seller's knowledge, does there exist
any such default or breach on the part of the landlord.
(e) Agreements. The copies of the Tripartite Agreements, Option and
Subordination Agreements, and Management Agreements delivered to Purchaser
pursuant to Paragraph 2.1 are true, correct and complete, and to Seller's
knowledge, neither Seller nor any other party is in default under any such
agreement.
(f) Disclosure. Other than this Agreement, the Related Agreements, the
agreements assigned to Purchaser at Closing pursuant hereto, the tenancy in
common agreement among Seller and the contributors under the Contribution
Agreement, and the Permitted Exceptions, there are no contracts or agreements of
any kind relating to the Property to which Seller or its agents is a party.
(g) Loan Documents. To Seller's knowledge, the Loan Documents delivered
to Purchaser include true, accurate and complete copies of all of the material
documents and instruments in effect with respect to the Existing Mortgage.
Seller has not received any notice that Seller is in default under the Existing
Mortgage, nor, to Seller's knowledge, does any default or breach exist, nor any
event or circumstance which, with the giving of notice or passage of time, or
both, would constitute a default or breach by Seller under the Loan Documents.
7.2 Purchaser's Representations and Warranties. As a material
inducement to Seller and Remainderman to execute this Agreement and consummate
this transaction, Purchaser represents and warrants to Seller and Remainderman
that:
(a) Organization and Authority. Purchaser has been duly organized and
is validly existing as a Delaware limited partnership, in good standing in the
State of Delaware, and will be qualified to do business in Arizona on the
Closing Date. Purchaser has the full right and authority and has obtained any
and all consents required to enter into this Agreement and to consummate or
cause to be consummated the transactions contemplated hereby. This Agreement has
been, and all of the documents to be delivered by Purchaser at the Closing will
be, authorized and properly executed and constitutes, or will constitute, as
appropriate, the valid and binding obligations of Purchaser, enforceable in
accordance with their terms.
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(b) Conflicts and Pending Action. There is no agreement to which
Purchaser is a party or, to Purchaser's knowledge, binding on Purchaser which is
in conflict with this Agreement. There is no action or proceeding pending or, to
Purchaser's knowledge, threatened against Purchaser which challenges or impairs
Purchaser's ability to execute or perform its obligations under this Agreement.
(c) Institutional Investor. CarrAmerica Realty Corporation is a real
estate investment Trust under the Internal Revenue Code and its net worth
exceeds $50 million. CarrAmerica Realty Corporation's Annual Report on Form 10-K
for the year ended December 31, 1996 and its Quarterly Report for the quarter
ended March 31, 1997 do not contain an untrue statement of material for fact or
omit to state any factor that would be material, and since the dates and periods
of such reports there has been no material adverse change in the financial
position of CarrAmerica Realty Corporation.
7.3 Survival of Representations and Warranties. The representations and
warranties set forth in this Article 7 are made as of the Date of this Agreement
and are remade as of the Closing Date, and shall not be deemed to be merged into
or waived by the instruments of Closing, but shall survive the Closing (provided
that the representations in Paragraph 7.1(c) through (f) shall survive only for
a period of 1 year, and Purchaser shall have the right to bring an action
thereon only if Purchaser, as the case may be, has given the other party written
notice of the circumstances giving rise to the alleged breach within such 1-year
period.) The representation in Paragraph 7.1(d) shall survive the Closing only
for a period of 1 year and only to the extent the matters covered by the
representation are not addressed in the Master Tenant Estoppels.
7.4 No Reliance on Documents. Except as expressly stated herein, Seller
makes no representation or warranty as to the truth, accuracy or completeness of
any materials, data or information delivered by Seller to Purchaser in
connection with the transaction contemplated hereby. Purchaser acknowledges and
agrees that all materials, data and information delivered by Seller to Purchaser
in connection with the transaction contemplated hereby are provided to Purchaser
as a convenience only and that any reliance on or use of such materials, data or
information by Purchaser shall be at the sole risk of Purchaser, except as
otherwise expressly stated herein. Without limiting the generality of the
foregoing provisions, Purchaser acknowledges and agrees that except as expressly
stated herein Purchaser shall not have any right to rely on any reports
delivered by Seller to Purchaser, but rather will rely on its own inspections
and investigations of the Property and any reports commissioned by Purchaser
with respect thereto.
7.5 DISCLAIMERS; AS IS. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND HAS NOT AT
ANY TIME MADE ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER,
EXPRESSED OR IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED
TO ANY WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, TITLE (OTHER THAN SELLER'S LIMITED WARRANTY OF
TITLE TO BE SET FORTH IN THE DEED), ZONING, TAX CONSEQUENCES, LATENT OR PATENT
PHYSICAL OR ENVIRONMENTAL CONDITIONS, UTILITIES, OPERATING HISTORY OR
PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, THE COMPLIANCE OF THE PROPERTY
WITH GOVERNMENTAL LAWS, THE MASTER LEASES, THE LOAN DOCUMENTS, THE TRUTH,
ACCURACY OR COMPLETENESS OF THE DOCUMENTS OR ANY OTHER INFORMATION PROVIDED BY
OR ON BEHALF OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING REGARDING THE
PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELL
AND CONVEY TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY "AS IS, WHERE
IS, WITH ALL FAULTS", EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS
AGREEMENT. PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER IS NOT
LIABLE FOR OR BOUND BY, ANY EXPRESSED OR IMPLIED WARRANTIES, GUARANTIES,
STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, THE
MASTER LEASES OR THE LOAN DOCUMENTS MADE OR FURNISHED BY SELLER OR ANY REAL
ESTATE BROKER OR AGENT TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY
OR IN WRITING, UNLESS SPECIFICALLY SET FORTH IN THIS AGREEMENT. PURCHASER
REPRESENTS TO SELLER THAT PURCHASER HAS CONDUCTED, OR WILL CONDUCT PRIOR TO
CLOSING, SUCH
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INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITIONS THEREOF, AS PURCHASER DEEMS NECESSARY TO SATISFY ITSELF
AS TO THE CONDITION OF THE PROPERTY, THE MASTER LEASES, THE LOAN DOCUMENTS, ANY
OTHER AGREEMENT RELATING TO THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE OR
CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON
OR DISCHARGED FROM THE PROPERTY, AND EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT WILL RELY SOLELY UPON SAME. UPON CLOSING, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN THIS AGREEMENT, PURCHASER SHALL ASSUME THE RISK THAT
ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE
PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER'S
INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN THIS AGREEMENT, BE DEEMED TO HAVE WAIVED, RELINQUISHED AND
RELEASED SELLER (AND ITS DIRECTORS, SHAREHOLDERS, PARTNERS, EMPLOYEES AND
AGENTS) FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION
(INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS AND
EXPENSES (INCLUDING ATTORNEYS' FEES AND COURT COSTS) OF ANY AND EVERY KIND OR
CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED
AGAINST SELLER (AND ITS OFFICERS, DIRECTORS, SHAREHOLDERS, PARTNERS, EMPLOYEES
AND AGENTS) AT ANY TIME BY REASON OF OR ARISING OUT OF ANY LATENT OR PATENT
CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, OR VIOLATIONS OF ANY APPLICABLE
LAWS (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL LAWS).
7.6 RESERVED RIGHTS. NOTWITHSTANDING PARAGRAPHS 7.4 AND 7.5 ABOVE:
PURCHASER IS RELYING UPON, AND DOES NOT WAIVE, RELINQUISH OR RELEASE THE EXPRESS
REPRESENTATIONS, WARRANTIES AND OTHER OBLIGATIONS OF SELLER SET FORTH IN THIS
AGREEMENT AND IN ANY DOCUMENT OR INSTRUMENT EXECUTED BY SELLER IN CONNECTION
WITH THIS AGREEMENT. PARAGRAPH 7.5 DOES NOT CONSTITUTE AN INDEMNITY.
ARTICLE 8: EARNEST MONEY PROVISIONS
8.1 Investment and Use of Funds. The Escrow Agent shall invest the
Earnest Money in government insured interest-bearing accounts satisfactory to
Seller and Purchaser, shall not commingle the Earnest Money with any funds of
the Escrow Agent or others, and shall promptly provide Purchaser and Seller with
confirmation of the investments made.
8.2 Intentionally Omitted.
8.3 Termination. Except as otherwise expressly provided herein, upon
not less than 10 business days' prior written notice to the Escrow Agent and the
other parties, Escrow Agent shall deliver the Earnest Money to the party
requesting the same; provided, however, that if any other party shall, within
said 10 business day period, deliver to the requesting party and the Escrow
Agent a written notice that it disputes the claim to the Earnest Money, Escrow
Agent shall retain the Earnest Money until it receives written instructions
executed by all parties as to the disposition and disbursement of the Earnest
Money, or until ordered by final court order, decree or judgment, which is not
subject to appeal, to deliver the Earnest Money to a particular party, in which
event the Earnest Money shall be delivered in accordance with such notice,
instruction, order, decree or judgment.
8.4 Interpleader. The parties agree that in the event of any
controversy regarding the Earnest Money, unless mutual written instructions are
received by the Escrow Agent directing the Earnest Money's disposition, the
Escrow Agent shall not take any action, but instead shall await the disposition
of any proceeding relating to the Earnest Money or, at the Escrow Agent's
option, the Escrow Agent may interplead all parties and deposit the Earnest
Money with a court of competent jurisdiction, in which event the Escrow Agent
may recover all of its court costs and reasonable attorneys' fees. Seller,
Remainderman or Purchaser, whichever loses in any such interpleader action,
shall be solely obligated to pay such costs and fees of the Escrow Agent, as
well as the reasonable attorneys' fees of the prevailing party in accordance
with the other provisions of this Agreement.
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8.5 Liability of Escrow Agent. The parties acknowledge that the Escrow
Agent is acting solely as a stakeholder at their request and for their
convenience, that the Escrow Agent shall not be deemed to be the agent of either
of the parties, and that the Escrow Agent shall not be liable to either of the
parties for any action or omission on its part taken or made in good faith, and
not in disregard of this Agreement, but shall be liable for its negligent acts
and for any loss, cost or expense incurred by Seller, or Purchaser resulting
from the Escrow Agent's mistake of law respecting the Escrow Agent's scope or
nature of its duties. Seller, and Purchaser shall jointly and severally
indemnify and hold the Escrow Agent harmless from and against all costs, claims
and expenses, including reasonable attorneys' fees, incurred in connection with
the performance of the Escrow Agent's duties hereunder, except with respect to
actions or omissions taken or made by the Escrow Agent in bad faith, in
disregard of this Agreement or involving negligence on the part of the Escrow
Agent.
ARTICLE 9: MISCELLANEOUS
9.1 Parties Bound. Neither party may assign this Agreement without the
prior written consent of the other, and any such prohibited assignment shall be
void; provided that Purchaser may assign this Agreement in connection with an
assignment of all Related Agreements without Seller's consent to an Affiliate in
connection with the transfer of the Property subject to and in accordance with
the requirements of the Existing Mortgage Loan covering transfers to an
Institutional Investor. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the respective legal representatives,
successors, assigns, heirs and devises of the parties. For the purposes of this
paragraph, the term "Affiliate" means (a) an entity that directly or indirectly
controls, is controlled by, or is under common control with Purchaser or (b) an
entity at least a majority of whose economic interest is owned by Purchaser; and
the term "control" means the power to direct the management of such entity
through voting rights, ownership or contractual obligations.
9.2 Headings. The article and paragraph headings of this Agreement are
for convenience only and in no way limit or enlarge the scope or meaning of the
language hereof.
9.3 Expenses. Except as otherwise expressly provided herein, each party
hereto shall pay its own expenses incident to this Agreement and the
transactions contemplated hereunder, including all legal and accounting fees and
disbursements.
9.4 Invalidity and Waiver. If any portion of this Agreement is held
invalid or inoperative, then so far as is reasonable and possible the remainder
of this Agreement shall be deemed valid and operative, and, to the greatest
extent legally possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative. The failure by either party to enforce
against the other any term or provision of this Agreement shall not be deemed to
be a waiver of such party's right to enforce against the other party the same or
any other such term or provision in the future.
9.5 Governing Law. This Agreement shall, in all respects, be governed,
construed, applied, and enforced in accordance with Arizona law.
9.6 Survival. The following provisions of this Agreement shall survive
the Closing and shall not be deemed to be merged into or waived by the
instruments of Closing: Paragraph 1.6, Purchaser's indemnity in Paragraph 2.2,
Paragraphs 5.6, 5.8, 6.1(a), 6.3, and Article 7 (subject to the limitations set
forth in Paragraph 7.3), 8 and 9. Purchaser's indemnity in Paragraph 2.2,
Paragraph 6.3, and Article 8 shall survive any termination of this Agreement.
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<PAGE>
9.7 No Third Party Beneficiary. This Agreement is not intended to give
or confer any benefits, rights, privileges, claims, actions or remedies to any
person or entity as a third party beneficiary, decree, or otherwise.
9.8 Entirety and Amendments. This Agreement, the Pitney Debt Agreement
and the letter agreement of even date herewith among the parties embody the
entire agreement between the parties and supersedes all prior agreements and
understandings relating to the Property. This Agreement may be amended or
supplemented only by an instrument in writing executed by the party against whom
enforcement is sought.
9.9 Time of the Essence. Time is of the essence in the performance of
this Agreement.
9.10 Confidentiality. Between the date hereof and for a period ending 1
year after the Closing Date, neither party shall release or cause or permit to
be released any press notices or advertising promotion or other publicity
relating to this transaction without obtaining the written consent of the other
party. No provision in this Paragraph 9.10 shall preclude a party from
discussing the substance or any relevant details of such transactions with any
of its attorneys, accountants, professional consultants, lenders, partners,
affiliates, investors, or any prospective lender, partner or investor, as the
case may be, or prevent a party hereto, from complying with laws, rules,
regulations and court orders, including without limitation, governmental
regulatory, disclosure, tax and reporting requirements and stock exchange rules
or prevent Purchaser or Seller from making a public announcement of the
acquisition or sale of the property in accordance with its corporate information
policy that does not disclose the purchase price or the identity of the other
party.
9.11 Attorneys' Fees. Should either party employ attorneys to enforce
any of the provisions hereof, the party against whom any final judgment is
entered agrees to pay the prevailing party all reasonable costs, charges, and
expenses, including reasonable attorneys' fees, expended or incurred by the
prevailing party in connection therewith.
9.12 Notices. All notices required or permitted hereunder shall be in
writing and shall be served on the parties at the addresses set forth in
Paragraph 1.1. Any such notices shall be (1) sent by overnight delivery using a
nationally recognized overnight courier, in which case notice shall be deemed
delivered one business day after deposit with such courier, (2) sent by
facsimile, in which case notice shall be deemed delivered upon confirmed
transmission of such notice, or (3) sent by personal delivery, in which case
notice shall be deemed delivered upon receipt or refusal of delivery. A party's
address may be changed by written notice to the other party; provided that no
notice of a change of address shall be effective until actual receipt of such
notice. Copies of notices are for informational purposes only, and a failure to
give or receive copies of any notice shall not be deemed a failure to give
notice. The attorney for a party has the authority to send notices on behalf of
such party.
9.13 Construction. The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and that the normal rule of
construction, to the effect that any ambiguities are to be resolved against the
drafting party, shall not be employed in the interpretation of this Agreement or
any exhibits or amendments hereto.
9.14 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described herein, the day of the act or event after
which the designated period of time begins to run is not to be included and the
last day of the period so computed is to be included, unless such last day is a
Saturday, Sunday or legal holiday for national banks in the location where the
Property is located, in which event the period shall run until the end of the
next day which is neither a Saturday, Sunday or legal holiday. The last day of
any period of time described herein shall be deemed to end at 6 p.m.,
Washington, D.C. time.
9.15 Information and Audit Cooperation. At Purchaser's request, at any
time before or for one year after the Closing, Seller shall provide to
Purchaser's designated independent auditor access to the books and records of
the Property, and all related information regarding the period for which
Purchaser is required to have the Property audited under the regulations of the
Securities and Exchange Commission, and Seller shall provide to such auditor a
representation letter regarding the books and records of the Property, in
substantially the form of Exhibit G attached hereto, in connection with the
normal course of auditing the Property in accordance with generally accepted
auditing standards.
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9.16 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of such counterparts shall constitute one Agreement. To facilitate execution of
this Agreement, the parties may execute and exchange by facsimile counterparts
of the signature pages.
9.17 Further Assurances. In addition to the acts and deeds recited
herein and contemplated to be performed, executed and/or delivered by the
parties at Closing, each party agrees to perform, execute and deliver, on or
after the Closing, any further actions and documents, and will obtain such
consents, as may be reasonably necessary or as may be reasonably requested to
fully effectuate the purposes, terms and conditions of this Agreement or to
further perfect the conveyance, transfer and assignment of the Property to
Purchaser.
9.18 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
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<PAGE>
SIGNATURE PAGE TO
AGREEMENT OF PURCHASE AND SALE
BETWEEN
PREFCO VII LIMITED PARTNERSHIP
AND
CARRAMERICA REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of September 30, 1997.
PREFCO VII LIMITED PARTNERSHIP, a Connecticut
limited partnership
By: PREFCO VII, Inc., a Connecticut corporation
and its general partner
By: /s/ Michael Ryan
-----------------------------------------
Name: Michael Ryan
---------------------------------------
Title: Vice President
--------------------------------------
"Seller"
CARRAMERICA REALTY, L.P., a Delaware limited
partnership
By: CarrAmerica Realty GP Holdings, Inc.
a Delaware corporation, General Partner
By: /s/ Robert G. Stuckey
-----------------------------------------
Name: Robert G. Stuckey
---------------------------------------
Title: Managing Director and Vice President
--------------------------------------
"Purchaser"
Escrow Agent has executed this Agreement in order to confirm that
Escrow Agent has received and shall hold the Earnest Money, and the interest
earned thereon, in escrow, and shall disburse the Earnest Money, and the
interest earned thereon, pursuant to the provisions of Article 8 hereof.
CHICAGO TITLE COMPANY
By: /s/ Ken Buvala
-----------------------------------------
Name: Ken Buvala
---------------------------------------
Title: Branch Manager
--------------------------------------
"Escrow Agent"
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<PAGE>
AGREEMENT OF PURCHASE AND SALE
U.S. West Communication Group office portfolio, Phoenix and Tucson, Arizona
[Remainder Interest]
ARTICLE 1: PROPERTY/PURCHASE PRICE
1.1 General Provisions. Purchaser acknowledges that Seller does not
possess title to the Property. Simultaneously with the Closing (as hereinafter
defined) and immediately prior to the conveyance contemplated herein, Seller
will acquire the Property pursuant to the terms of that certain Agreement of
Purchase and Sale by and between Seller, as purchaser, and Roller Hockey of
Southeast Florida, Ltd., a Florida limited partnership ("Roller Hockey") as
seller (the "Roller Hockey Contract").
l.lA Certain Basic Terms.
(a) Seller and Notice Address:
PREFCO VII Limited Partnership
a Connecticut limited partnership
c/o Pitney Bowes Credit Corporation
Capital Markets
27 Waterview Drive
Shelton, Connecticut 06484-4361
Attention: Mr. Michael Ryan
With a copy to:
Kelley Drye & Warren LLP
Att: John A. Garraty, Jr.
101 Park Avenue
New York, New York 10178
Telephone: 212/808-7653
Facsimile: 212/808-7897
<PAGE>
(b) Purchaser and Notice Address:
CARRAMERICA REALTY, L.P.
a Delaware limited partnership
Attention: Joseph Wallace 1700
Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Telephone: 202/624-7507
Facsimile: 202/630-0102
With copies to: Mayer, Brown & Platt
Attention: George Ruhlen
141 East Palace Avenue
Santa Fe, New Mexico 87501
Telephone: 505/820-8185
Facsimile: 505/820-7334
Mayer, Brown & Platt
Attention: James A. Parker
190 South LaSalle Street
Chicago, Illinois 60603
Telephone: 312/701-7853
Facsimile: 312/706-8732
(c) Date of this
Agreement: as of September 30, 1997
(d) Purchase Price: $6,502,518.00
(e) Earnest Money: $54,600 and any other deposits of earnest
money made pursuant to the terms of this
Agreement, together with interest
thereon.
(f) Intentionally
Omitted
(g) Closing Date: The same date as the Closing under the Related
Agreements.
(h) Title Company: Chicago Title Company
Attention: Frank Jansen
700 South Flower Street,
Suite 920
Los Angeles, California 90017
Telephone: 213/4884346
Facsimile: 213/891-0834
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<PAGE>
(i) Escrow Agent: Chicago Title Company
Attention: Ken Buvala
2201 East Camelback Road,
Suite 126B
Phoenix, Arizona 85016
Telephone: 602/468-6333
Facsimile: 602/468-6336
(j) Broker: CB Commercial
(k) Existing Mortgage
Loan: That certain loan in the aggregate principal
amount of $64,640,000, evidenced by four
promissory notes dated December 31, 1990,
payable to UBS Mortgage Finance Inc. ("Lender")
in the original principal amounts of
$28,441,600, $13,574,400, $13,574,400 and
$9,049,600, respectively.
(1) Loan Documents: All documents and instruments evidencing,
securing or otherwise related to the Existing
Mortgage Loan.
(m) Master Leases: Those four master leases, each dated December
31, 1990 between PREFCO VII Limited
Partnership, as landlord, and U S WEST Business
Resources, Inc. ("Master Tenant"), as tenant,
each covering improvements on each of the four
separate parcels of land comprising the
Property.
(n) Master
Lease Guaranties: For each of the Master Leases, the Lease
Guaranty, dated as of December 31, 1990, by The
Mountain States Telephone and Telegraph
Company, a Colorado corporation, in favor of
Seller, the Lease Guaranty, dated as of
December 31, 1990, by U S WEST Inc., a Colorado
corporation, in favor of Seller, and the Lease
Guaranty, dated as of December 31, 1990, by U S
WEST Real Estate, Inc., a Colorado corporation,
in favor of Seller.
3
<PAGE>
(o) Related Agreements:
This Agreement, that Agreement of Purchase and
Sale of even date herewith between Pines Realty
Associates, Ltd., Lakeview 436 Associates,
Ltd., Versailles Associates Limited Partnership
and PhoenixWest Associates, Ltd. and Purchaser,
that Agreement of Purchase and Sale of even
date herewith between Seller and Purchaser
relating to the conveyance of Seller's
tenancy-in-common interest in an
estate-for-years in the Real Property and any
related agreements entered into by Purchaser
and Seller or any other such seller with
respect to the Property or any other property
covered by the Master Leases.
1.2 Property. Subject to the terms and conditions of this Agreement of
Purchase and Sale (this "Agreement"), Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from Seller, the following property (collectively,
the "Property"):
(a) The remainder interests conveyed to Arizona - Relco Limited
Partnership pursuant to Special Warranty Deeds and Assignments, recorded
under Recording Numbers 91-0552245, 91-0552246, and 91-0552247 Maricopa
County Recorder, Maricopa County, Arizona, and Docket 9172, Page 876, Pima
County Recorder's Office, Pima County, Arizona, covering the real property
described in Exhibits A-1 through _ attached hereto (the "Real Property")
(the "Remainder Interest").
(b) All right, title and interest of Seller, if any, in and to the
"Intangible Property," being all intangible personal property now or
hereafter used in connection with the operation, ownership, maintenance,
management or occupancy of the Real Property, including, without
limitation: all trade names and trade marks associated with the Real
Property, including, without limitation, the name of the Improvements; the
plans and specifications for the Improvements; warranties covering any of
the Property; all contract rights related to the construction, operation,
ownership or management of the Real Property that are expressly assumed by
Purchaser pursuant to this Agreement; applications, permits, approvals and
licenses (to the extent assignable); insurance proceeds and condemnation
awards or claims thereto to be assigned to Purchaser hereunder; any funds
held by Master Tenant or Manager under the Master Leases or the Management
Agreement; and all books and records relating to the Property.
1.3 Earnest Money. On or before November 7, 1997, Purchaser shall deposit
the Earnest Money with the Escrow Agent. The Escrow Agent shall pay the Earnest
Money to Seller at and upon the Closing, or otherwise to the party entitled to
receive the Earnest Money in accordance with this Agreement. The Earnest Money
shall be held and disbursed by the Escrow Agent pursuant to Article 8 of this
Agreement. In addition to any other right or remedy of Purchaser under this
Agreement, the Earnest Money shall be returned to Purchaser if this Agreement is
terminated for any reason other than Purchaser's default hereunder.
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<PAGE>
1.4 Remedies. In the event of a default by Purchaser in its obligations
under this Agreement, Seller's sole and exclusive remedy shall be to terminate
this Agreement and to retain the Earnest Money as liquidated damages, Seller
waiving all other rights or remedies in the event of such default by Purchaser.
The parties acknowledge that Seller's actual damages in the event of a default
by Purchaser under this Agreement will be difficult to ascertain, and that such
liquidated damages represent the parties' best estimate of such damages.
In the event of a breach by Seller in its obligations under this Agreement,
Purchaser may enforce specific performance of Seller's obligation to close this
transaction or pursue any other remedy at law or in equity in the event of
Seller's breach; provided that Purchaser may not pursue a claim for damages for
such breach unless such breach is willful.
1.5 Effect of Default or Termination under Related Agreements. A default
under a Related Agreement does not constitute a default under this Agreement.
However, if a Related Agreement is terminated or the closing under a Related
Agreement does not occur simultaneously with the Closing because of a default by
any party thereunder, then: (i) if neither Purchaser nor Seller are in default
hereunder, then Purchaser and Seller shall be excused from their respective
obligations to acquire and sell the Property, and this Agreement shall terminate
and the Earnest Money shall be returned to Purchaser; and (ii) if either
Purchaser or Seller are in default hereunder, then the nondefaulting party shall
have the remedies set forth in Paragraph 1.4.
ARTICLE 2: INSPECTION
2.1 Property Information. Seller has delivered to Purchaser complete copies
of the Tripartite Agreement and Option Agreements (as defined in Paragraph 5.3).
At Purchaser's reasonable request from time to time, Seller shall make available
to Purchaser, for review and copying, at Seller's offices, all other material
information and documents relating to the Property in Seller's possession. The
information and documents provided and made available to Purchaser pursuant to
this Paragraph 2.1 is the "Property Information."
2.2 Due Diligence. Purchaser has examined, inspected and investigated the
Property and the agreements, documents and records related thereto that it
deemed necessary, and is satisfied with the results of its inspection,
examination and investigation. Purchaser acknowledges that no additional
"inspection period" is provided under this Agreement and that Purchaser is
acquiring the Property "as is" as set forth in Section 7.5 hereof.
ARTICLE 3: TITLE AND SURVEY REVIEW
3.1 Delivery of Title Commitment and Survey. Purchaser shall cause to be
prepared (1) a current, effective commitment for title insurance (the "Title
Commitment") issued by the Title Company, in the amount of the Purchase Price
with Purchaser as the proposed insured, and accompanied by true, complete and
legible copies of all documents referred to in the Title Commitment; and (2)
copies of Uniform Commercial Code, judgment and tax lien searches in the name of
5
<PAGE>
Seller any general partner, member or manager of Seller, and the Property issued
by the Title Company or a search company acceptable to Purchaser ("WCC
Searches"). The Title Commitment, the documents referred to therein, the Survey
and the UCC Searches are referred to herein collectively as the "Title
Documents."
3.2 Title Review and Cure. Seller will cooperate with Purchaser in curing
any objections Purchaser may have to title to the Property; however, Seller
shall not have any obligation to cure title objections except liens and security
interests created by Seller after the Date of this Agreement. As to any other
exceptions or objections raised by Purchaser, Seller shall have fourteen (14)
days from the receipt of Purchaser's notice of objections either to have such
exceptions or objections removed or, if acceptable to Purchaser, to provide
affirmative title insurance protection for such exceptions satisfactory to
Purchaser, or to notify Purchaser that it does not intend to cure such
objection. If, with respect to those title objections that Seller has no
obligation to cure, Seller fails either to provide for the removal of such
exceptions or objections or to obtain affirmative title insurance protection for
such exceptions or objections satisfactory to Purchaser within such fourteen
(14) day period, then Purchaser must elect either to terminate this Agreement by
delivering written notice to Seller within five (5) days following such period
or, if later, before the expiration of the Title Review Period, or to waive such
objection. Upon delivery of such termination notice by Purchaser, this Agreement
shall automatically terminate, the parties shall be released from all further
obligations under this Agreement except pursuant to any provisions which by
their terms survive a termination of this Agreement, and the Earnest Money shall
be promptly returned to Purchaser. If after the expiration of the Title Review
Period, the Title Company revises the Title Commitment, or the surveyor revises
the Survey, to add or modify exceptions, or to add or modify the conditions to
obtaining any endorsement requested by Purchaser during the Title Review Period,
then Purchaser may terminate this Agreement and receive a refund of the Earnest
Money if provision for their removal or modification satisfactory to Purchaser
is not made. Purchaser shall have been deemed to have approved any title
exception that Seller is not obligated to remove and to which either Purchaser
did not object as provided above, or to which Purchaser did object, but with
respect to which Purchaser did not terminate this Agreement. If there are
exceptions or objections raised by Purchaser, the Closing Date shall be extended
to the extent necessary to permit Seller and Purchaser to exercise their rights
as provided above.
3.3 Delivery of Title Policy at Closing. As a condition to Purchaser's
obligation to close, at Closing (i) the Title Company shall irrevocably commit
to issue to Purchaser an ALTA Owner's Policy (Revised 10-17-70 and 10-17-84) (or
other form if required by state law) of title insurance, with extended coverage
(i.e., with ALTA General Exceptions 1 through 5 deleted, or with corresponding
deletions if the Property is located in a non-ALTA state), issued by the Title
Company as of the date and time of the recording of the Deed, in the amount of
the Purchase Price, containing the Purchaser's Endorsements, insuring Purchaser
as owner of good, marketable and indefeasible fee simple title to the Property
(the conveyances from Seller and the sellers under the Related Agreements
effecting a merger of the estates held by each, with fee simple title vesting in
Purchaser subject only to the Permitted Exceptions), and subject only to the
Permitted Exceptions (the "Title Policy"), and (ii) the updated UCC Searches
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<PAGE>
(within 10 days of Closing) show no security interests (other than Permitted
Exceptions) not disclosed in the UCC Searches delivered pursuant to Paragraph
3.1; "Permitted Exceptions" means exceptions set forth in Exhibit C hereto; real
estate taxes not yet due and payable; the Loan Documents; the Tripartite
Agreements; the Option Agreements. "Purchaser's Endorsements" shall mean, to the
extent such endorsements are available under the laws of the state in which the
Property is located: (1) owner's comprehensive; (2) access; (3) survey (accuracy
of survey); (4) location (survey legal matches title legal); (5) separate tax
lot; (6) legal lot; (7) zoning 3.1, with parking and loading docks; and (8) such
other endorsements as Purchaser may require during the Title Review Period based
on its review of the Title Commitment.
ARTICLE 4: ROLLER HOCKEY CONTRACT; RISK OF LOSS
4.1 Roller Hockey Contract. Seller shall comply with its obligations under
the Roller Hockey Contract in all material respects.
4.2 Condemnation. Seller shall promptly give Purchaser notice of any
eminent domain proceedings that are contemplated, threatened or instituted with
respect to the Property of which Seller becomes aware. By notice to Seller given
within fourteen (14) days after Purchaser receives notice of proceedings in
eminent domain that are contemplated, threatened or instituted by any body
having the power of eminent domain with respect to the Property (and if
necessary the Closing Date shall be extended to give Purchaser the full fourteen
(14) day period to make such election), Purchaser may terminate this Agreement
if the taking or threatened taking is material, or proceed under this Agreement,
in which event Seller shall, at the Closing, assign to Purchaser its right,
title and interests in any to any condemnation award, and Purchaser shall have
the sole right during the pendency of this Agreement to negotiate and otherwise
deal with the condemning authority in respect of such matter. A taking as to one
or more proceedings is material if the award (including any award with respect
to interests of the sellers under the other Related Agreements) is reasonably
estimated to exceed $1 million or the taking would likely entitle Master Tenant
to an abatement or reduction in rent.
ARTICLE 5: CLOSING
5.1 Closing and Escrow. The consummation of the transaction contemplated
herein ("Closing") shall occur on the Closing Date at the offices of the Escrow
Agent through an escrow with the Escrow Agent. Funds shall be deposited into and
held by Escrow Agent in a closing escrow account with a bank satisfactory to
Purchaser and Seller. Upon satisfaction or completion of all closing conditions
and deliveries, the parties shall direct the Escrow Agent to immediately record
and deliver the closing documents to the appropriate parties and make
disbursements according to the closing statements executed by Seller and
Purchaser. The Escrow Agent shall agree in writing with Seller and Purchaser
that (1) recordation of the Deeds constitutes its representation that it is
holding the closing documents, closing funds and closing statements and is
prepared and irrevocably committed to disburse the closing funds in accordance
with the closing statements and (2) release of funds to the Seller shall
irrevocably commit it to issue the Title Policy in accordance with this
Agreement. Provided such supplemental escrow instructions are not in conflict
with this Agreement as it may be amended in writing from time to time, Seller
and Purchaser agree to execute such supplemental escrow instructions as may be
appropriate to enable Escrow Agent to comply with the terms of this Agreement.
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5.2 Conditions to the Parties' Obligations to Close. In addition to all
other conditions set forth herein, the obligation of Seller, on the one hand,
and Purchaser, on the other hand, to consummate the transactions contemplated
hereunder shall be contingent upon the following:
(a) The other party's representations and warranties contained herein
shall be true and correct as of the Date of this Agreement and the Closing
Date;
(b) As of the Closing Date, the other party shall have performed its
obligations hereunder and all deliveries to be made by the other party at
Closing shall have been tendered;
(c) As of the Closing Date, no action or proceeding by or before any
governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which is
reasonably expected to restrain, prohibit or invalidate the transactions
contemplated by this Agreement, other than an action or proceeding
instituted or threatened by such party; and
(d) Any other condition set forth in this Agreement to such party's
obligation to close is satisfied by the applicable date.
(e) The Closing occurs simultaneously with the closings under the
Related Agreements.
(f) As to Purchaser's obligation to close, as of the Closing, neither
Seller nor any other party is in default under any agreement to be assigned
to or assumed by Purchaser hereunder.
So long as a party is not in default hereunder, if any condition to such
party's obligation to proceed with the Closing hereunder has not been satisfied
as of the Closing Date or other applicable date, such party may, in its sole
discretion, terminate this Agreement by delivering written notice to the other
party and all parties under the Related Agreements on or before the Closing Date
or other applicable date, or elect to close, notwithstanding the
non-satisfaction of such condition, in which event such party shall be deemed to
have waived any such condition except for breach by a party of a covenant in
which case the Closing shall not relieve such breaching party from any liability
it would otherwise have hereunder. A party shall be entitled to postpone the
Closing up to an aggregate of ten (10) days in order to cause any condition to
be satisfied.
5.3 Seller's Deliveries in Escrow. At lease one (1) business day before the
Closing Date, Seller shall deliver in escrow to the Escrow Agent the following:
(a) Deed. For each of the four parcels comprising the Property: a
special warranty deed conveying the remainder interest described in
Paragraph 1.2(a) (warranting title only against Seller's acts);
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(b) Bill of Sale and Assignment of Contracts. For each of the four
parcels comprising the Property, a bill of sale and assignment in the form
of Exhibit B, assigning that Tripartite Agreement relating to the
applicable parcel, dated as of December 31, 1990, among Master Tenant,
Seller and Arizona-Relco Limited Partnership ( the "Tripartite
Agreements"), and that Option and Subordination Agreement relating to
the-applicable parcel, dated as of December 31, 1990, between Seller and
Arizona-Relco Limited Partnership (the "Option Agreements");
(c) State Law Disclosures. Such disclosures and reports as are
required by applicable state and local law in connection with the
conveyance of real property;
(d) FIRPTA. A Foreign Investment in Real Property Tax Act affidavit
executed by Seller. If Seller fails to provide the necessary affidavit
and/or documentation of exemption on the Closing Date, Purchaser may
proceed in accordance with the withholding provisions in such act;
(e) Intentionally Omitted;
(f) Authority. Evidence of the existence, organization and authority
of Seller and the authority of the persons executing documents on behalf of
Seller reasonably satisfactory to the Purchaser and the Title Company; and
(g) Other Deliveries. Any other Closing deliveries required to be made
by or on behalf of Seller hereunder.
5.4 Purchaser's Deliveries in Escrow. At least one (1) business day before
the Closing Date (except as otherwise permitted below), Purchaser shall
deliver in escrow to the Escrow Agent the following:
(a) Purchase Price. On the Closing Date, the Purchase Price, less the
Earnest Money that is applied to the Purchase Price deposited by Purchaser
with the Escrow Agent in immediate, same-day federal funds wired for credit
into the Escrow Agent's escrow account;
(b) Assignment. The instrument described in Paragraph 5.3(b) executed
by Purchaser, as provided in each such instrument;
(c) State Law Disclosures. Such disclosures and reports as are
required by applicable state and local law in connection with the
conveyance of real property;
(d) Intentionally Omitted;
(e) Authority. Evidence of the existence, organization and authority
of Purchaser and the authority of the persons executing documents on behalf
of Purchaser reasonably satisfactory to Seller and the Title Company; and
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<PAGE>
(f) Other Deliveries. Any other Closing deliveries required to be made
by or on behalf of Purchaser hereunder.
5.5 Intentionally Omitted
5.6 Sales. Transfer and Documentary Taxes. Purchaser shall pay all sales,
gross receipts, compensating, stamp, excise, documentary, transfer, deed or
similar taxes and fees imposed in connection with this transaction under
applicable state or local law.
ARTICLE 6: PRORATIONS AND ADJUSTMENTS
6.1 Prorations. Intentionally Omitted
6.2 Sales Commissions. Seller and Purchaser represent and warrant each to
the other that they have not dealt with any real estate broker, sales person or
finder in connection with this transaction other than Broker. Purchaser shall
pay Broker in accordance with their separate agreement (at Closing if Closing
occurs). Broker is an independent contractor and is not authorized to make any
agreement or representation on behalf of either party. Except as expressly set
forth above, in the event of any claim for broker's or finder's fees or
commissions in connection with the negotiation, execution or consummation of
this Agreement, or the transactions contemplated hereby, each party shall
indemnify and hold harmless the other party from and against any such claim
based upon any statement, representation or agreement of such party. This
provision shall survive any termination of this Agreement.
ARTICLE 7: REPRESENTATIONS AND WARRANTIES
7.1 Seller's Representations and Warranties. As a material inducement to
Purchaser to execute this Agreement and consummate this transaction, Seller
represents and warrants to Purchaser that:
(a) Organization and Authority. Seller has been duly organized and is
validly existing as the entity described in Paragraph 1.1, and is in good
standing in its State of incorporation or formation. Seller is in good
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standing and is qualified to do business in Arizona. Seller has the full
right and authority and has obtained any and all consents required to enter
into this Agreement and to consummate or cause to be consummated the
transactions contemplated hereby. This Agreement has been, and all of the
documents to be delivered by Seller at the Closing will be, authorized and
properly executed and constitute, or will constitute, as appropriate, the
valid and binding obligations of Seller, enforceable in accordance with
their terms.
7.2 Purchaser's Representations and Warranties. As a material inducement to
Seller to execute this Agreement and consummate this transaction, Purchaser
represents and warrants to Seller that:
(a) Organization and Authority. Purchaser has been duly organized and
is validly existing as a Delaware limited partnership, in good standing in
the State of Delaware, and will be qualified to do business in Arizona on
the Closing Date. Purchaser has the full right and authority and has
obtained any and all required to enter into this Agreement subject only to
obtaining certain internal approvals on or before the expiration of the Due
Diligence Period and to consummate or cause to be consummated the
transactions contemplated hereby. This Agreement has been, and all of the
documents to be delivered by Purchaser at the Closing will be, authorized
and properly executed and constitutes, or will constitute, as appropriate,
the valid and binding obligations of Purchaser, enforceable in accordance
with their terms.
(b) Conflicts and Pending Action. There is no agreement to which
Purchaser is a party or, to Purchaser's knowledge, binding on Purchaser
which is in conflict with this Agreement. There is no action or proceeding
pending or, to Purchaser's knowledge, threatened against Purchaser which
challenges or impairs Purchaser's ability to execute or perform its
obligations under this Agreement.
7.3 Survival of Representations and Warranties. The representations and
warranties set forth in this Article 7 are made as of the Date of this Agreement
and are remade as of the Closing Date, and shall not be deemed to be merged into
or waived by the instruments of Closing, but shall survive the Closing.
7.4 No Reliance on Documents. Except as expressly stated herein, Seller
makes no representation or warranty as to the truth, accuracy or completeness of
any materials, data or information delivered by Seller to Purchaser in
connection with the transaction contemplated hereby. Purchaser acknowledges and
agrees that all materials, data and information delivered by Seller to Purchaser
in connection with the transaction contemplated hereby are provided to Purchaser
as a convenience only and that any reliance on or use of such materials, data or
information by Purchaser shall be at the sole risk of Purchaser, except as
otherwise expressly stated herein. Without limiting the generality of the
foregoing provisions, Purchaser acknowledges and agrees that except as expressly
stated herein Purchaser shall not have any right to rely on any reports
delivered by Seller to Purchaser, but rather will rely on its own inspections
and investigations of the Property and any reports commissioned by Purchaser
with respect thereto.
7.5 DISCLAIMERS; AS IS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, IT
IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING AND HAS NOT AT ANY TIME MADE
ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESSED OR
IMPLIED, WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO ANY
WARRANTIES OR REPRESENTATIONS AS TO HABITABILITY, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, TITLE (OTHER THAN SELLER'S LIMITED WARRANTY OF TITLE TO BE
SET FORTH IN THE DEED), ZONING, TAX CONSEQUENCES, LATENT OR PATENT PHYSICAL OR
ENVIRONMENTAL CONDITIONS, UTILITIES, OPERATING HISTORY OR PROJECTIONS,
VALUATION, GOVERNMENTAL APPROVALS, THE COMPLIANCE OF THE PROPERTY WITH
GOVERNMENTAL LAWS, THE MASTER LEASES, THE LOAN DOCUMENTS, THE TRUTH, ACCURACY OR
COMPLETENESS OF THE DOCUMENTS OR ANY OTHER INFORMATION PROVIDED BY OR ON BEHALF
OF SELLER TO PURCHASER, OR ANY OTHER MATTER OR THING REGARDING THE PROPERTY.
PURCHASER ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELL AND CONVEY
TO PURCHASER AND PURCHASER SHALL ACCEPT THE PROPERTY "AS IS, WHERE IS, WITH ALL
FAULTS", EXCEPT TO THE EXTENT EXPRESSLY PROVIDED OTHERWISE IN THIS AGREEMENT.
PURCHASER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR
11
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BOUND BY, ANY EXPRESSED OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS,
REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, THE MASTER LEASES OR
THE LOAN DOCUMENTS MADE OR FURNISHED BY SELLER OR ANY REAL ESTATE BROKER OR
AGENT TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING,
UNLESS SPECIFICALLY SET FORTH IN THIS AGREEMENT. PURCHASER REPRESENTS TO SELLER
THAT PURCHASER HAS CONDUCTED, OR WILL CONDUCT PRIOR TO CLOSING, SUCH
INVESTIGATIONS OF THE PROPERTY, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITIONS THEREOF, AS PURCHASER DEEMS NECESSARY TO SATISFY ITSELF
AS THE CONDITION OF THE PROPERTY, THE MASTER LEASES, THE LOAN DOCUMENTS, ANY
OTHER AGREEMENT RELATING TO THE PROPERTY AND THE EXISTENCE OR NONEXISTENCE OR
CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS OR TOXIC SUBSTANCES ON
OR DISCHARGED FROM THE PROPERTY, AND EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT WILL RELY SOLELY UPON SAME. UPON CLOSING, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN THIS AGREEMENT, PURCHASER SHALL ASSUME THE RISK THAT
ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION DEFECTS AND ADVERSE
PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY PURCHASER'S
INVESTIGATIONS, AND PURCHASER, UPON CLOSING, SHALL, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN THIS AGREEMENT, BE DEEMED TO HAVE WAIVED, RELINQUISHED AND
RELEASED SELLER (AND ITS DIRECTORS, SHAREHOLDERS, PARTNERS, EMPLOYEES AND
AGENTS) FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION
(INCLUDING CAUSES OF ACTION IN TORT), LOSSES, DAMAGES, LIABILITIES, COSTS AND
EXPENSES (INCLUDING ATTORNEYS' FEES AND COURT COSTS) OF ANY AND EVERY KIND OR
CHARACTER, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT HAVE ASSERTED OR ALLEGED
AGAINST SELLER (AND ITS OFFICERS, DIRECTORS, SHAREHOLDERS, PARTNERS, EMPLOYEES
AND AGENTS) AT ANY TIME BY REASON OF OR ARISING OUT OF ANY LATENT OR PATENT
CONSTRUCTION DEFECTS OR PHYSICAL CONDITIONS, OR VIOLATIONS OF ANY APPLICABLE
LAWS (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL LAWS).
7.6 RESERVED RIGHTS. NOTWITHSTANDING PARAGRAPHS 7.4 AND 7.5 ABOVE,
PURCHASER IS RELYING UPON AND DOES NOT WAIVE RELINQUISH OR RELEASE THE EXPRESS
REPRESENTATIONS, WARRANTIES AND OTHER OBLIGATIONS OF SELLER SET FORTH IN THIS
AGREEMENT AND IN ANY DOCUMENT OR INSTRUMENT EXECUTED BY SELLER IN CONNECTION
WITH THIS AGREEMENT; PARAGRAPH 7.5 DOES NOT CONSTITUTE AN INDEMNITY.
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ARTICLE 8: EARNEST MONEY PROVISIONS
8.1 Investment and Use of Funds. The Escrow Agent shall invest the Earnest
Money in government insured interest-bearing accounts satisfactory to Seller and
Purchaser, shall not commingle the Earnest Money with any funds of the Escrow
Agent or others, and shall promptly provide Purchaser and Seller with
confirmation of the investments made.
8.2 Intentionally Omitted
8.3 Termination. Except as otherwise expressly provided herein, upon not
less than 10 business days' prior written notice to the Escrow Agent and the
other parties, Escrow Agent shall deliver the Earnest Money to the party
requesting the same; provided, however, that if any other party shall, within
said 10 business day period, deliver to the requesting party and the Escrow
Agent a written notice that it disputes the claim to the Earnest Money, Escrow
Agent shall retain the Earnest Money until it receives written instructions
executed by all parties as to the disposition and disbursement of the Earnest
Money, or until ordered by final court order, decree or judgment, which is not
subject to appeal, to deliver the Earnest Money to a particular party, in which
event the Earnest Money shall be delivered in accordance with such notice,
instruction, order, decree or judgment.
8.4 Interpleader. The parties agree that in the event of any controversy
regarding the Earnest Money, unless mutual written instructions are received by
the Escrow Agent directing the Earnest Money's disposition, the Escrow Agent
shall not take any action, but instead shall await the disposition of any
proceeding relating to the Earnest Money or, at the Escrow Agent's option, the
Escrow Agent may interplead all parties and deposit the Earnest Money with a
court of competent jurisdiction, in which event the Escrow Agent may recover all
of its court costs and reasonable attorneys' fees. Seller or Purchaser,
whichever loses in any such interpleader action, shall be solely obligated to
pay such costs and fees of the Escrow Agent, as well as the reasonable
attorneys' fees of the prevailing party in accordance with the other provisions
of this Agreement.
8.5 Liability of Escrow Agent. The parties acknowledge that the Escrow
Agent is acting solely as a stakeholder at their request and for their
convenience, that the Escrow Agent shall not be deemed to be the agent of either
of the parties, and that the Escrow Agent shall not be liable to either of the
parties for any action or omission on its part taken or made in good faith, and
not in disregard of this Agreement, but shall be liable for its negligent acts
and for any loss, cost or expense incurred by Seller, or Purchaser resulting
from the Escrow Agent's mistake of law respecting the Escrow Agent's scope or
nature of its duties. Seller and Purchaser shall jointly and severally indemnify
and hold the Escrow Agent harmless from and against all costs, claims and
expenses, including reasonable attorneys' fees, incurred in connection with the
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performance of the Escrow Agent's duties hereunder, except with respect to
actions or omissions taken or made by the Escrow Agent in bad faith, in
disregard of this Agreement or involving negligence on the part of the Escrow
Agent.
ARTICLE 9: MISCELLANEOUS
9.1 Parties Bound. Neither party may assign this Agreement without the
prior written consent of the other, and any such prohibited assignment shall be
void; provided that Purchaser may assign this Agreement in connection with an
assignment of all Related Agreements without Seller's consent to an Affiliate in
connection with the transfer of the Property subject to and in accordance with
the requirements of the Existing Mortgage Loan. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the respective legal
representatives, successors, assigns, heirs and devises of the parties. For the
purposes of this paragraph, the term "Affiliate" means (a) an entity that
directly or indirectly controls, is controlled by, or is under common control
with Purchaser or (b) an entity at least a majority of whose economic interest
is owned by Purchaser, and the term "control" means the power to direct the
management of such entity through voting rights, ownership or contractual
obligations.
9.2 Headings. The article and paragraph headings of this Agreement are for
convenience only and in no way limit or enlarge the scope or meaning of the
language hereof.
9.3 Expenses. Except as otherwise expressly provided herein, each party
hereto shall pay its own expenses incident to this Agreement and the
transactions contemplated hereunder, including all legal and accounting fees and
disbursements.
9.4 Invalidity and Waiver. If any portion of this Agreement is held invalid
or inoperative, then so far as is reasonable and possible the remainder of this
Agreement shall be deemed valid and operative, and, to the greatest extent
legally possible, effect shall be given to the intent manifested by the portion
held invalid or inoperative. The failure by either party to enforce against the
other any term or provision of this Agreement shall not be deemed to be a waiver
of such party's right to enforce against the other party the same or any other
such term or provision in the future.
9.5 Governing Law. This Agreement shall, in all respects, be governed,
construed, applied, and enforced in accordance with Arizona law.
9.6 Survival. The following provisions of this Agreement shall survive the
Closing and shall not be deemed to be merged into or waived by the instruments
of Closing: Purchaser's indemnity in Paragraph 2.2, Paragraphs 5.6, 6.2, and
Article 7, 8 and 2. Purchaser's indemnity in Paragraph 2.2, Paragraph 6.2 and
Article 8 shall survive any termination of this Agreement.
9.7 No Third Party Beneficiary. This Agreement is not intended to give or
confer any benefits, rights, privileges, claims, actions or remedies to any
person or entity as a third party beneficiary, decree, or otherwise.
9.8 Entirety and Amendments. This Agreement embodies the entire agreement
between the parties and supersedes all prior agreements and understandings
relating to the Property. This Agreement may be amended or supplemented only by
an instrument in writing executed by the party against whom enforcement is
sought.
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9.9 Time of the Essence. Time is of the essence in the performance of this
Agreement.
9.10 Confidentiality. Between the date hereof and for a period ending 1
year after the Closing Date, neither party shall release or cause or permit to
be released any press notices or advertising promotion or other publicity
relating to this transaction without obtaining the written consent of the other
party. No provision in this Paragraph 9.10 shall preclude a party from
discussing the substance or any relevant details of such transactions with any
of its attorneys, accountants, professional consultants, lenders, partners,
affiliates, investors, or any prospective lender, partner or investor, as the
case may be, or prevent a party hereto, from complying with laws, rules,
regulations and court orders, including without limitation, governmental
regulatory, disclosure, tax and reporting requirements and stock exchange rules
or prevent Purchaser or Seller from making a public announcement of the
acquisition or sale of the property in accordance with its corporate information
policy that does not disclose the purchase price or the identity of the other
party.
9.11 Attorneys' Fees. Should either party employ attorneys to enforce any
of the provisions hereof, the party against whom any final judgment is entered
agrees to pay the prevailing party all reasonable costs, charges, and expenses,
including reasonable attorneys' fees, expended or incurred by the prevailing
party in connection therewith.
9.12 Notices. All notices required or permitted hereunder shall be in
writing and shall be served on the parties at the addresses set forth in
Paragraph 1.1. Any such notices shall be (1) sent by overnight delivery using a
nationally recognized overnight courier, in which case notice shall be deemed
delivered one business day after deposit with such courier, (2) sent by
facsimile, in which case notice shall be deemed delivered upon confirmed
transmission of such notice, or (3) sent by personal delivery, in which case
notice shall be deemed delivered upon receipt or refusal of delivery. A party's
address may changed by written notice to the other party; provided that no
notice of a change of address shall be effective until actual receipt of such
notice. Copies of notices are for informational purposes only, and a failure to
give or receive copies of any notices shall not be deemed a failure to give
notice. The attorney for a party has the authority to send notices on behalf of
such party.
9.13 Construction. The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and that the normal rule of
construction, to the effect that any ambiguities are to be resolved against the
drafting party, shall not be employed in the interpretation of this agreement or
any exhibits or amendments hereto.
9.14 Intentionally Omitted
9.15 Calculation of Time Periods. Unless otherwise specified, in computing
any period of time described herein, the day of the act or event after which the
designated period of time begins to run is not to be included and the last day
of the period so computed is to be included, unless such last day is a Saturday,
Sunday or legal holiday for national banks in the location where the Property is
15
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located, in which event the period shall run until the end of the next day which
is neither a Saturday, Sunday or legal holiday. The last day of any period of
time described herein shall be deemed to end at 6 p.m., Washington, D.C. time.
9.16 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of such counterparts shall constitute one Agreement. To facilitate execution of
this Agreement, the parties may execute and exchange by facsimile counterparts
of the signature pages.
9.17 Intentionally Omitted
9.18 Further Assurances. In addition to the acts and deeds recited herein
and contemplated to be performed, executed and/or delivered by the parties at
Closing, each party agrees to perform, execute and deliver, on or after the
Closing, any further actions and documents, and will obtain such consents, as
may be reasonably necessary or as may be reasonably requested to fully
effectuate the purposes, terms and conditions of this Agreement or to further
perfect the conveyance, transfer and assignment of the Property to Purchaser.
9.19 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
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SIGNATURE PAGE TO
AGREEMENT OF PURCHASE AND SALE
BETWEEN
PREFCO VII LIMITED PARTNERSHIP
AND
CARRAMERICA REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 30th day of September, 1997.
PREFCO VII LIMITED PARTNERSHIP, a
Connecticut limited partnership
By: PREFCO VII, a Connecticut corporation
By:
--------------------------------
Name:
Title:
"Seller"
CARRAMERICA REALTY, L.P., a Delaware
limited partnership
By: CarrAmerica Realty GP Holdings, Inc.,
a Delaware corporation
By:
---------------------------------
Name:
Title:
"Purchaser"
Escrow Agent has executed this Agreement in order to confirm that Escrow
Agent has received and shall hold the Earnest Money, and the interest earned
thereon, in escrow, and shall disburse the Earnest Money, and the interest
earned thereon, pursuant to the provisions of Article 8 hereof.
CHICAGO TITLE COMPANY
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
"Escrow Agent"
17
<PAGE>
CONTRIBUTION AGREEMENT
by and among
CARRAMERICA REALTY, L.P.,
CARRAMERICA REALTY CORPORATION
and
PHOENIXWEST ASSOCIATES, LTD.,
VERSAILLES ASSOCIATES LIMITED PARTNERSHIP,
LAKEVIEW 436 ASSOCIATES, LTD.,
and
PINES REALTY ASSOCIATES, LTD.
September 30, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I CONTRIBUTION OF PROPERTY.................................... 1
1.1. Contribution and Acquisition of Contributed Property........ 1
1.2. Closing..................................................... 1
ARTICLE II EXCHANGE AMOUNT............................................ 2
2.1. Exchange Amount............................................. 2
2.2. Section 704(c) Allocation and Method........................ 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR............. 3
3.1. Organization and Standing................................... 3
3.2. Authorization; No Conflicts................................. 3
3.3. Binding Obligations......................................... 4
3.4. No Litigation............................................... 4
3.5. Securities Law Matters...................................... 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CARR..................... 6
4.1. Organization and Standing................................... 6
4.2. Authorization; No Conflicts................................. 6
4.3. Binding Obligations......................................... 7
4.4. No Litigation............................................... 7
4.5. No Tax Audits............................................... 7
4.6. Issuance of Units........................................... 7
4.7. Tax Reporting............................................... 7
4.8. Carr LLC.................................................... 8
4.9. No Investment Company....................................... 8
4.10. No Representation with Regard to Tax Treatment............. 8
ARTICLE V CONDITIONS PRECEDENT TO THE CLOSING......................... 8
5.1. Conditions to Obligations of Contributors................... 8
5.2. Conditions to Obligations of Carr and CRC................... 9
ARTICLE VI SURVIVAL; INDEMNIFICATION.................................. 9
6.1. Survival.................................................... 9
6.2. Agreement of Contributors................................... 10
6.3. Agreement of Carr to Indemnify.............................. 10
6.4. Agreement of CRC to Indemnify............................... 10
6.5. Conditions of Indemnification............................... 10
ARTICLE VII CONFIDENTIALITY; TAX MATTERS.............................. 11
7.1. Confidentiality............................................. 11
7.2. Limitation on Sale of Contributed Property.................. 12
7.3. Debt Guarantee Agreement.................................... 13
7.4. Damages..................................................... 14
7.5. Lockout Restrictions; Redemption of Herrick Units........... 15
7.6. Special Loss Allocation..................................... 16
7.7. Rights and Remedies of Contributors......................... 17
ARTICLE VIII REMEDIES; TERMINATION.................................... 17
8.1. Remedies.................................................... 17
8.2. Termination................................................. 18
ARTICLE IX MISCELLANEOUS.............................................. 18
-i-
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9.1. Additional Actions and Documents............................ 18
9.2. Expenses.................................................... 18
9.3. Assignment.................................................. 18
9.4. Entire Agreement; Amendment................................. 18
9.5. Waiver...................................................... 19
9.6. Severability................................................ 19
9.7. Governing Law............................................... 19
9.8. Notices..................................................... 19
9.9. Headings.................................................... 20
9.10. Execution in Counterparts.................................. 20
9.11. Attorneys' Fees............................................ 21
9.12. Waiver of Jury Trial....................................... 21
EXHIBITS
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Side Letter
Exhibit C Partnership Agreement of Carr and
Form of Second Amendment thereto
Exhibit D Form of Partner Consent
Exhibit E Information Regarding Carr and CRC
Exhibit F Form of Guarantees
SCHEDULES
Schedule 1 Allocation of Units
Schedule 2 List of Partners of Contributors
<PAGE>
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of
September 30, 1997 by and among CarrAmerica Realty, L.P., a Delaware limited
partnership ("Carr"), CarrAmerica Realty Corporation, a Delaware corporation
("CRC") and PhoenixWest Associates, Ltd. (formerly known as Cypress Lakes of
Boca Rio Associates, Limited Partnership), a Florida limited partnership,
Versailles Associates Limited Partnership, a Florida limited partnership,
Lakeview 436 Associates, Ltd., a Florida limited partnership and Pines Realty
Associates, Ltd., a Florida limited partnership (each a "Contributor," and
collectively, "Contributors").
RECITALS:
A. Contributors own a forty-nine percent (49%) tenants-in-common
interest in the property known as the U.S. West Communication Group office
portfolio (the "Contributed Property").
B. Carr and Contributors have entered into an Agreement of Purchase and
Sale dated as of the date hereof (the "Acquisition Agreement") pursuant to which
Contributors have agreed to transfer the Contributed Property to Carr on the
terms and conditions set forth therein and herein and have made certain
representations and warranties in connection therewith (the "Acquisition").
C. Carr and a newly formed Delaware limited liability company of which
Carr is the sole member ("Carr LLC") will enter into an Assignment Agreement
(the "Assignment Agreement"), pursuant to which Carr shall transfer the
Contributed Property to Carr LLC, upon which Carr LLC shall hold the Contributed
Property as its sole assets.
D. Carr and Contributors desire to enter into this Agreement to set
forth certain additional terms and conditions upon which Contributors will
transfer the Contributed Property to Carr.
ARTICLE I
CONTRIBUTION OF PROPERTY
1.1. Contribution and Acquisition of Contributed Property
Subject to the terms and conditions hereof, Contributors agree to
contribute to Carr, and Carr agrees to acquire and accept from Contributors, all
of Contributors' right, title and interest in and to the Contributed Property,
in exchange for Class E units of limited partnership interest in Carr ("Class E
Units"), as set forth in Article II hereof, in a transaction intended by the
partners to qualify for nonrecognition of gain to Contributors pursuant to
Section 721 of the Internal Revenue Code of 1986, as amended (the "Code").
1.2. Closing
The closing of the transactions contemplated by this Agreement and the
Acquisition Agreement (the "Closing") shall occur on a date (the "Closing Date")
as set forth in Section 1.1(g) of the Acquisition Agreement, subject to
extension pursuant to Section 1.6(a) of the Acquisition Agreement, and upon
satisfaction or waiver of the conditions set forth in Article V hereof. The
Closing shall occur simultaneously with the delivery of the following documents:
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(a) the amendment to the Partnership Agreement (as defined in Section
2.1(b) below) referred to in Section 2.1(a) below, executed by CarrAmerica
Realty GP Holdings, Inc., as general partner ("GP Holdings"), and Contributors;
(b) the Registration Rights Agreement, substantially in the form
attached hereto as Exhibit A, executed by CarrAmerica Realty Corporation
("CRC"), Contributors and, if the partners of Contributors (or partners of such
partners) will receive a distribution from Contributors of Class E Units, each
of such partners, as contemplated in Article II hereof;
(c) certificates of each of Carr and CRC and each Contributor
certifying as to continued accuracy of the representations and warranties made
by such party herein, executed by an officer or other authorized signatory of
such party;
(d) the side letter, substantially in the form attached hereto as
Exhibit B, executed by GP Holdings and delivered to Contributors regarding the
transfer and pledge of the Class E Units;
(e) the closing documents delivered by the parties pursuant to the
Acquisition Agreement; and
(f) such other documents as the parties may mutually agree.
ARTICLE II
EXCHANGE AMOUNT
2.1. Exchange Amount
(a) Units Delivered at Closing. In exchange for the contribution of the
Contributed Property and upon execution and delivery of the Partnership
Agreement (as defined below) by Contributors, Contributors shall receive, at the
Closing, a number of Class E Units in Carr (rounded to the nearest whole number)
equal to (i) the difference of (A) the Contribution Value (as defined in the
Acquisition Agreement), less (B) any third-party debt and other obligations
assumed (or taken subject to), divided by the Closing Value (the "Units"). For
purposes of this Agreement, the "Closing Value" shall mean the average closing
price of a share of common stock of CRC (the "Common Stock") for the ten (10)
day trading period ending on the date that is five (5) business days immediately
preceding the Closing Date. Each Contributor shall be entitled to receive the
proportionate number of Units as set forth in Schedule 1 hereto.
(b) Distribution of Units. At the Closing, Carr shall issue the Units
either to Contributors or, at the option of Contributors, directly to
Contributors' partners (or to partners of such partners) in accordance with
written instructions provided to Carr by Contributors (or Contributors'
partners) setting forth the name and address of, and the number of Units
received by, each partner, provided that each such partner (i) makes each of the
representations and warranties set forth in Section 3.5 hereof and (ii) has
executed and delivered the Second Amended and Restated Agreement of Limited
Partnership of Carr, as amended, and as proposed to be further amended by a
Second Amendment thereto (the "Second Amendment") substantially in the form
attached hereto as Exhibit C (the "Partnership Agreement").
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2.2. Section 704(c) Allocation and Method
Carr and Contributors agree that, for purposes of Section 704(c) of the
Internal Revenue Code of 1986 as amended (the "Code"), the Contribution Value as
set forth in the Acquisition Agreement will be allocated among the various
components of the Contributed Property in a manner to be reasonably agreed upon
by Carr and Contributors prior to the Closing. The method under section 704(c)
of the Code used by Carr with respect to the Contributed Property (or any
property received in exchange for the Contributed Property in a like-kind
exchange) to adjust for discrepancies between the agreed upon value of the
various components of the Contributed Property and the adjusted tax basis of
such components will be the "traditional method," as set forth in Treasury
Regulation 1.704-3(c)(1).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
Contributors jointly and severally represent and warrant to Carr as
follows:
3.1. Organization and Standing
Each Contributor is a limited partnership duly formed, validly existing
and in good standing under the laws of its jurisdiction of organization. Each
Contributor has the full and unrestricted partnership power and authority to
own, operate and lease its assets, to carry on its business as currently
conducted, to execute and deliver this Agreement, the Assignment Agreement and
each other agreement, instrument or document relating to the Acquisition
(including the Acquisition Agreement) or contemplated hereby or thereby (the
"Other Agreements") to which it is a party and to carry out the transactions
contemplated hereby or thereby.
3.2. Authorization; No Conflicts
The execution and delivery of this Agreement and the Other Agreements
by each Contributor and the performance by each Contributor of its covenants and
agreements under this Agreement and the Other Agreements have been, or at
Closing will have been, duly authorized by all necessary partnership action on
the part of such Contributor, and a valid consent of each partner of such
Contributor to the Acquisition and the transactions related thereto
substantially in the form attached hereto as Exhibit D has been received by such
Contributor and delivered to Carr, or at Closing will have been received by such
Contributor and delivered to Carr. The execution, delivery and performance by
each Contributor of this Agreement and each Other Agreement to which such
Contributor is a party, the fulfillment of and compliance with the respective
terms and provisions hereof and thereof, and the consummation by such
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Contributor of the transactions contemplated hereby and thereby, do not and will
not: (a) conflict with, or violate any provision of, the certificate of limited
partnership or agreement of limited partnership of any Contributor; (b) conflict
with, or violate any provision of, any statute, law, ordinance, regulation,
rule, order, writ or injunction having applicability to any Contributor or any
of its assets; (c) conflict with, result in any breach of, or constitute a
default under any agreement to which any Contributor or any Contributor's
partners is a party or by which it or they or any of its or their assets are
bound; (d) result in or require the creation or imposition of or result in the
acceleration of any indebtedness or of any encumbrance of any nature upon, or
with respect to, Contributor or any Contributor's partners or any of the assets
now owned or hereafter acquired by any Contributor; except (in the case of
clauses (b), (c) and (d) above) for such conflicts, violations, breaches or
defaults as will not have a material adverse effect on the business or financial
condition of any Contributor or the consummation of the Acquisition.
3.3. Binding Obligations
This Agreement and each Other Agreement executed and delivered by each
Contributor on or prior to the date hereof constitutes a valid and binding
obligation of such Contributor, enforceable in accordance with its terms; and
each Other Agreement to be executed by each Contributor pursuant hereto or
thereto, when executed and delivered in accordance with the provisions hereof or
thereof, shall be a valid and binding obligation of such Contributor,
enforceable in accordance with its terms.
3.4. No Litigation
There are no actions, suits, claims, arbitrations, proceedings or
investigations pending or, to the knowledge of any Contributor, threatened
against, affecting or involving any Contributor or its businesses or assets, or
the transactions contemplated by this Agreement, at law or in equity, or before
or by any court, arbitrator or governmental authority, domestic or foreign, that
could reasonably be expected to have a material adverse effect on the business
or financial condition of any Contributor or to challenge or impair the ability
of any Contributor to consummate the Acquisition.
3.5. Securities Law Matters
(a) Each Contributor acknowledges that Carr intends the offer and
issuance of the Units to be exempt from registration under the Securities Act
and applicable state securities laws by virtue of (i) the status of each
Contributor and each partner of such Contributor as an Accredited Investor (as
defined below), and (ii) Regulation D promulgated under Section 4(2) of the
Securities Act ("Regulation D"), and that Carr will rely in part upon the
representations and warranties made by each Contributor in this Agreement in
making the determination that the offer and issuance of the Units qualify for
exemption under Rule 506 of Regulation D as an offer and sale only to Accredited
Investors (as defined below).
(b) Each Contributor, each of such Contributor's partners and each
other person or entity who has a right to vote upon or approve the transactions
contemplated hereby or who will receive a distribution of Units pursuant to
Section 2.1(b) are "accredited investors" as defined in Regulation 501(a) under
Regulation D ("Accredited Investors"). The only partners of Contributors are as
set forth in Schedule 2 hereto. Each Contributor has provided to Carr a true,
correct and complete copy of such Contributor's limited partnership agreement.
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(c) Each Contributor and each other person or entity who will receive a
distribution of Units pursuant to Section 2.1(b) will acquire the Units for
their own account and not with a view to or for sale in connection with any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(d) Each Contributor and its partners have sufficient knowledge and
experience in financial, tax and business matters to enable them to evaluate the
merits and risks of investment in the Units. Each Contributor and its partners
have the ability to bear the economic risk of acquiring the Units. Each
Contributor acknowledges that (i) the transactions contemplated by this
Agreement and the Other Agreements involve complex tax consequences for each
Contributor and its partners, and each Contributor and its partners are relying
solely on the advice of their own tax advisors in evaluating such consequences,
(ii) neither Carr nor CRC has made (or shall be deemed to have made) any
representations as to the tax consequences of such transaction to any
Contributor or any of its partners, and (iii) references in this Agreement to
the intended tax effect of the Acquisition and the other matters described
herein shall not be deemed to imply any representation by Carr as to a
particular tax effect that may be obtained by any Contributor or its partners.
Each Contributor and its partners remain responsible for all tax consequences
relating to each Contributor and its partners, except for the tax consequences
to Contributors that Carr and CRC have agreed to be responsible for as expressly
provided in this Agreement.
(e) Each Contributor has received and reviewed the materials containing
certain information regarding Carr and CRC, the parent of the general partner of
Carr and a publicly traded corporation, listed on Exhibit E hereto prior to
executing this Agreement. Each Contributor has been supplied with, or had access
to, information to which a reasonable investor would attach significance in
making an investment decision to acquire the Units and any other information
Contributors have requested. Each Contributor has had an opportunity to ask
questions of and receive information and answers from Carr and CRC concerning
Carr, CRC, the Units and the Common Stock into which the Units may be redeemed,
and to assess and evaluate any information supplied to each Contributor by Carr
or CRC, and all such questions have been answered and all such information has
been provided to the full satisfaction of Contributors.
(f) Each Contributor acknowledges that the Units are not registered
under the Securities Act or any state securities laws and cannot be resold
without registration thereunder or exemption therefrom. Each Contributor agrees
that it will not, or, if any person or entity receives a distribution of Units
pursuant to Section 2.1(b), such person or entity will not transfer all or any
portion of the Units (or any Common Stock received upon redemption of Units) for
at least one (1) year after the Closing Date, and thereafter only if such
transfer has been registered or is exempt from registration under the Securities
Act and any applicable state securities laws.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CARR AND CRC
Carr represents and warrants to Contributors and CRC represents and
warrants to Contributors (solely with respect to Section 4.1 through Section
4.5) as follows:
4.1. Organization and Standing
(a) Carr is a limited partnership duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the full and
unrestricted partnership power and authority to own, operate and lease its
assets and to carry on its business as currently conducted. Carr is duly
qualified to conduct business as a foreign limited partnership and is in good
standing in each jurisdiction where the nature of the business conducted by Carr
or the character of the assets owned, leased or otherwise held by it makes any
such qualification necessary, except where the failure to be so qualified would
not have a material adverse effect upon the business of Carr as currently
conducted.
(b) CRC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the full and
unrestricted corporate power and authority to own, operate and lease its assets
and to carry on its business as currently conducted. CRC is duly qualified to
conduct business as a foreign corporation and is in good standing in each
jurisdiction where the nature of the business conducted by CRC or the character
of the assets owned, leased or otherwise held by it makes any such qualification
necessary, except where the failure to be so qualified would not have a material
adverse effect upon the business of CRC as currently conducted.
4.2. Authorization; No Conflicts
(a) The execution, delivery and performance by Carr of this Agreement
and each Other Agreement to which Carr is a party, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and the
consummation by Carr of the transactions contemplated hereby and thereby, do not
and will not: (i) conflict with, or violate any provisions of, the certificate
of limited partnership or agreement of limited partnership of Carr; (ii)
conflict with, or violate any provision of, any statute, law, ordinance,
regulation, rule, order, writ or injunction having applicability to Carr or any
of its assets; or (iii) conflict with, result in any breach of, or constitute a
default under any agreement to which Carr is a party or by which it or any of
its assets are bound; except (in the case of clauses (ii) and (iii) above) for
such conflicts, violations, breaches or defaults as will not have a material
adverse effect on the business or financial condition of Carr or the
consummation of the Acquisition.
(b) The execution, delivery and performance by CRC of this Agreement
and each Other Agreement to which CRC is a party, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and the
consummation by CRC of the transactions contemplated hereby and thereby, do not
and will not: (i) conflict with, or violate any provisions of, the certificate
of incorporation or by-laws of CRC; (ii) conflict with, or violate any provision
of, any statute, law, ordinance, regulation, rule, order, writ or injunction
having applicability to CRC or any of its assets; or (iii) conflict with, result
in any breach of, or constitute a default under any agreement to which CRC is a
party or by which it or any of its assets are bound; except (in the case of
clauses (ii) and (iii) above) for such conflicts, violations, breaches or
defaults as will not have a material adverse effect on the business or financial
condition of CRC or the consummation of the Acquisition.
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4.3. Binding Obligations
This Agreement and each Other Agreement executed and delivered by Carr
and CRC constitutes a valid and binding obligation of Carr and CRC,
respectively, enforceable in accordance with its terms; and each Other Agreement
to be executed by Carr and CRC pursuant hereto or thereto, when executed and
delivered in accordance with the provisions hereof or thereof, shall be a valid
and binding obligation of Carr and CRC, respectively, enforceable in accordance
with its terms.
4.4. No Litigation
There are no actions, suits, claims, arbitrations, proceedings or
investigations pending or, to the knowledge of Carr or CRC, threatened against,
affecting or involving Carr, CRC or their businesses or assets or the
transactions contemplated by this Agreement, at law or in equity, or before or
by any court, arbitrator or governmental authority, domestic or foreign, that
could reasonably be expected to have a material adverse effect on the business
or financial condition of Carr or CRC or challenge or impair the ability of Carr
or CRC to consummate the Acquisition.
4.5. No Tax Audits
Neither Carr nor CRC is a party to any pending action, audit or
proceeding by any taxing authority for any assessment or collection of any
federal, state or local taxes. An audit of Carr and CRC for the taxable year
ended 1993 was recently completed, which audit resulted in a proposed adjustment
to which Carr, CRC and the other partners of Carr agreed to and is not expected
to result in any direct liability to CRC. The Internal Revenue Service did not
take any positions or raise any issues during such audit that would bear on the
tax treatment of the transactions contemplated herein.
4.6. Issuance of Units
The Units to be issued to Contributors pursuant to Article II hereof at
the Closing will have been duly authorized for issuance by Carr to Contributors,
and upon issuance will be validly issued, fully paid and non-assessable. At the
Closing, the terms of the Units will conform in all material respects to the
terms set forth in the Partnership Agreement.
4.7. Tax Reporting
Carr will treat the transfer of the Contributed Property to Carr for
federal income tax purposes as a contribution that qualifies for nonrecognition
of gain pursuant to Section 721 of the Code and will determine the share of
Carr's liabilities allocable to the Contributors by including the amount of
those liabilities guaranteed by the Herricks pursuant to Section 7.3 hereof.
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4.8. Carr LLC
Carr shall not take any actions or assume any positions which will
cause Carr LLC to be treated as an association taxable as a corporation.
4.9. No Investment Company
As of the Closing Date and immediately thereafter, less than eighty
(80%) percent of the value of Carr's assets (i) are held for investment and (ii)
consist of stocks and securities, as such term is defined in Section 351(e)(1)
of the Code. There is no plan in existence as of the Closing Date which would
cause this representation to not be accurate at a subsequent date.
4.10. No Representation with Regard to Tax Treatment
Notwithstanding any provision of this Agreement, Carr makes no
representation regarding the tax consequences (and shall have no liability with
respect to representations of tax consequences) to any Contributor or to any of
its direct or indirect partners of the transactions contemplated herein or in
any Other Agreements.
ARTICLE V
CONDITIONS PRECEDENT TO THE CLOSING
5.1. Conditions to Obligations of Contributors
The obligation of Contributors to consummate the closing of the
contribution described in Section 1.2 hereof is subject to the fulfillment, at
or prior to the Closing, of each of the following conditions, and failure to
satisfy any such condition shall excuse and discharge all obligations of
Contributors to carry out the provisions of this Agreement unless such failure
is waived in writing by Contributors:
(a) Representations and Warranties. The representations and warranties
made by Carr and CRC herein and the statements contained in any document
furnished by Carr and CRC in connection with the Closing pursuant to this
Agreement shall be true in all material respects when made and on and as of the
Closing Date as though such representations and warranties were made on and as
of such date, except for any changes therein contemplated by this Agreement or
any Other Agreement.
(b) Legal Proceedings. No action or proceeding by or before any
governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the transactions contemplated by
this Agreement, other than an action or proceeding instituted or threatened by
any Contributor.
(c) Conditions under Acquisition Agreement. All conditions to the
obligation of Contributors to consummate the closing under the Acquisition
Agreement shall have been satisfied or waived by Contributors.
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(d) Documents at Closing. All documents required to be furnished to
Contributors (either hereunder or under the Acquisition Agreement) prior to or
at the Closing shall have been so furnished.
5.2. Conditions to Obligations of Carr and CRC
The obligation of Carr and CRC to consummate the closing of the
contribution described in Section 1.2 hereof is subject to the fulfillment, at
or prior to the Closing, of each of the following conditions, and failure to
satisfy any such condition shall excuse and discharge all obligations of Carr
and CRC to carry out the provisions of this Agreement unless such failure is
waived in writing by Carr:
(a) Representations and Warranties. The representations and warranties
made by Contributors herein and the statements contained in any document
furnished by Contributors or its partners in connection with the Closing
pursuant to this Agreement shall be true in all material respects when made and
on and as of the Closing Date as though such representations and warranties were
made on and as of such date, except for any changes therein contemplated by this
Agreement or any Other Agreement.
(b) Legal Proceedings. No action or proceeding by or before any
governmental authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which is reasonably
expected to restrain, prohibit or invalidate the transactions contemplated by
this Agreement other than an action or proceeding instituted or threatened by
Carr or CRC.
(c) Conditions under Acquisition Agreement. All conditions to the
obligation of Carr to consummate the closing under the Acquisition Agreement
shall have been satisfied or waived by Carr and CRC.
(d) Documents at Closing. All documents required to be furnished to
Carr and CRC (either hereunder or under the Acquisition Agreement) prior to or
at the Closing shall have been so furnished.
ARTICLE VI
SURVIVAL; INDEMNIFICATION
6.1. Survival
All representations, warranties, covenants, indemnities and other
agreements of the parties hereto made in this Agreement or in any document
furnished pursuant hereto shall not be extinguished by the Closing, but shall
survive the Closing, except as may be otherwise specified herein or as limited
by law. No investigation, audit or inspection made by or on behalf of any party
hereto shall affect the survival of the representations, warranties, covenants,
indemnities and other agreements of the parties hereto. All representations and
warranties of the parties hereto made in this Agreement or in any document
delivered pursuant hereto shall also be deemed made on and as of the Closing
Date.
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6.2. Agreement of Contributors
Subject to the conditions and provisions of this Article VI,
Contributors hereby jointly and severally agree to indemnify, defend and hold
harmless Carr and its subsidiaries and affiliates (including CRC) and each of
their respective officers, directors, partners, employees, successors and
assigns (collectively, the "Carr Indemnified Persons") from and against and in
respect of all demands, claims, actions or causes of action, assessments,
losses, damages (including, without limitation, diminution in value),
liabilities, costs and expenses, including, without limitation, interest,
penalties and attorneys' fees and disbursements (the "Claims"), asserted
against, resulting to, imposed upon or incurred by the Carr Indemnified Persons,
directly or indirectly, by reason of or resulting from any breach of any
representation or warranty in any material respect made by Contributors in this
Agreement or in any document furnished by or on behalf of Contributors pursuant
to this Agreement.
6.3. Agreement of Carr to Indemnify
Subject to the conditions and provisions of this Article VI, Carr
hereby agrees to indemnify, defend and hold harmless each Contributor and its
subsidiaries and affiliates and each of their respective officers, directors,
partners, employees, successors and assigns (collectively, the "Contributor
Indemnified Persons"), from and against and in respect of all Claims asserted
against, resulting to, imposed upon or incurred by the Contributor Indemnified
Persons, directly or indirectly, by reason of or resulting from any breach of
any representation or warranty in any material respect made by Carr in this
Agreement or in any document furnished by or on behalf of Carr pursuant to this
Agreement.
6.4. Agreement of CRC to Indemnify
Subject to the conditions and provisions of this Article VI, CRC hereby
agrees to indemnify, defend and hold harmless each Contributor Indemnified
Person, from and against and in respect of all Claims asserted against,
resulting to, imposed upon or incurred by the Contributor Indemnified Persons,
directly or indirectly, by reason of or resulting from any breach of any
representation or warranty in any material respect made by CRC in this Agreement
or in any document furnished by or on behalf of CRC pursuant to this Agreement.
6.5. Conditions of Indemnification
The obligations and liabilities of Contributors, Carr and CRC hereunder
with respect to their respective indemnities pursuant to this Article VI
resulting from any Claim shall be subject to the following terms and conditions:
(a) The indemnified party shall give prompt written notice (which
notice shall be deemed to have been promptly given unless the indemnifying party
shall have suffered a material adverse effect by reason of failure to give such
notice) to the indemnifying party of any Claim which is asserted against,
resulting to, imposed upon or incurred by such indemnified party and which may
give rise to liability of the indemnifying party pursuant to this Article VI,
stating (to the extent known or reasonably anticipated) the nature and basis of
such Claim and the amount thereof.
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(b) If the facts pertaining to a Claim arise out of the Claim of any
third party, or if there is any Claim against a third party available by virtue
of the circumstances of the Claim, the indemnifying party may assume the defense
of such action or proceeding at such indemnifying party's own expense with
counsel chosen by the indemnifying party and approved by the indemnified party,
which approval shall not be unreasonably withheld; provided, however, that the
indemnifying party shall not agree to settlement of any such action or
proceeding which provides for any relief other than the payment of monetary
damages or which could have a material precedential impact or effect on the
business or financial condition of the indemnified party without the prior
written consent of the indemnified party; and provided further, that if the
indemnified party reasonably determines that a conflict of interest exists where
it is advisable for the indemnified party to be represented by separate counsel
or that, upon advice of counsel, there may be legal defenses available to it
which are different from or in addition to those available to the indemnifying
party, then the indemnifying party shall not be entitled to assume such defense
and the indemnified party shall be entitled to separate counsel at the
indemnifying party's expense. If the indemnifying party is not entitled to
assume the defense of such action or proceeding as a result of the proviso to
the preceding sentence, the indemnifying party's counsel shall be entitled to
conduct the indemnifying party's defense and the indemnified party's counsel
shall be entitled to conduct the indemnified party's defense, it being
understood that both such counsel will cooperate with each other to conduct the
defense of such action or proceeding as efficiently as possible. If the
indemnifying party is not so entitled to assume the defense of such action or
does not assume such defense, after having received the notice referred to in
subparagraph (a) above, the indemnifying party will pay the reasonable fees and
expenses of counsel for the indemnified party. In such event, however, the
indemnifying party will not be liable for any settlement effected without the
written consent of the indemnifying party. If an indemnifying party is entitled
to assume, and assumes, the defense of such action or proceeding in accordance
with this paragraph, the indemnifying party shall not be liable for any fees and
expenses of counsel for the indemnified party incurred thereafter in connection
with such action or proceeding. Whether or not the indemnifying party chooses to
so defend or prosecute such Claim, all the parties hereto shall cooperate in the
defense or prosecution thereof and shall furnish such records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
and appeals, as may be reasonably requested in connection therewith. The
indemnifying party shall be subrogated to all rights and remedies of the
indemnified party.
ARTICLE VII
CONFIDENTIALITY; TAX MATTERS
7.1. Confidentiality
(a) Information. Before the Closing or if the Closing does not occur,
all information provided by Carr to Contributors in connection with the
transactions contemplated by this Agreement shall be kept strictly confidential
and shall not, without the prior consent of Carr, be disclosed by any
Contributor or used for any purpose other than evaluating such transactions.
Each Contributor agrees that such information shall only be transmitted to such
Contributor's partners, officers, directors, trustees, employees, attorneys,
accountants, contractors, consultants, advisors and agents who need to know such
information for purposes of evaluating such transactions and who agree to be
bound by these confidentiality provisions, and each Contributor agrees that in
the event the Closing does not take place for any reason, each Contributor shall
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return all such information to Carr. The provisions of this section shall not
apply to any information which is a matter of public record or lawfully
obtainable from other sources and shall not prevent either party from complying
with applicable laws, rules, regulations and court orders, including, without
limitation, governmental regulatory, disclosure, tax and reporting requirements.
(b) Public Notices. Between the date hereof and for a period ending one
(1) year after the Closing Date, neither party shall release or cause or permit
to be released any press notices or advertising promotion or other publicity
relating to this transaction without first giving reasonable notice to, and
consulting with, the other party and, as required herein, obtaining the written
consent of the other party. No provisions in this Section 7.1 shall preclude a
party from discussing the substance or any relevant details of such transactions
with any of its attorneys, accountants, professional consultants, lenders,
partners, affiliates, investors, or any prospective lender, partner or investor,
as the case may be, or prevent a party hereto, from complying with laws, rules,
regulations and court orders, including without limitation, governmental
regulatory, disclosure, tax and reporting requirements (including, in the case
of Carr, disclosure by CRC of information that it determines is necessary or
appropriate in accordance with its obligations as a public company under rules
of the New York Stock Exchange, the Securities and Exchange Commission or other
regulatory body) and stock exchange rules or making an announcement or making
any communication to its shareholders in accordance with its corporate policy.
7.2. Limitation on Sale of Contributed Property
Carr agrees that it will not sell, transfer, exchange or otherwise
dispose of part or all of its interest in the Contributed Property during the
period (the "Lockout Period") commencing on the Closing Date and ending on the
later of the date of death of Norton Herrick ("N. Herrick") and his spouse,
Elaine Herrick ("E. Herrick") (N. Herrick, E. Herrick, Howard Herrick, Michael
Herrick, Evan Herrick and the general partners of Contributors are hereinafter
referred to as the "Herricks"), subject to earlier termination as set forth in
Section 7.5 below, except in connection with either a like-kind exchange of the
Contributed Property pursuant to Section 1031 of the Code or other disposition
that pursuant to a nonrecognition provision in the Code does not result in the
current recognition of any gain to the Herricks, in which case the newly
acquired property shall be treated as Contributed Property and shall continue to
be subject to the Lockout Restrictions. Notwithstanding anything to the contrary
set forth herein, the prohibition against the sale, transfer, exchange or other
disposition by Carr with respect to the Contributed Property during the Lockout
Period shall automatically terminate in the event that (i) Carr terminates the
Lockout Restrictions in accordance with Section 7.5, (ii) the Herricks at any
time exercise their right to redeem the Units held by the Herricks (the "Herrick
Units") for Common Stock, or (iii) a taxable sale, transfer, assignment or other
disposition of the Herrick Units, including upon foreclosure with respect
thereto (but excluding a pledge or other grant of security interest in the
Herrick Units).
-12-
<PAGE>
7.3. Debt Guarantee Agreement
(a) Carr agrees that it will take the Contributed Property at Closing
subject to Contributors' obligations under that certain first mortgage loan
provided by UBS Mortgage Finance, Inc. (the "Existing Debt"), and that so long
as Carr owns such Contributed Property (or, if earlier, until the expiration of
the Lockout Period), it will provide the Herricks and the Contributors
(collectively, the "Guarantors") with the opportunity, at Closing and until the
Existing Debt is repaid in full, to guarantee a portion of the Existing Debt
equal to the lesser of (i) $27,000,000, or (ii) the outstanding principal
balance on the Existing Debt (the "Existing Debt Guarantee Amount"); provided,
however, that Carr shall agree to use its commercially reasonable efforts to
maintain at least $16,000,000 of debt secured by the Contributed Property that
may be guaranteed by the Guarantors pursuant to either the Existing Debt or
other indebtedness (including debt that may be provided by CRC or any affiliate
thereof).
(b) Carr and CRC represent, warrant and covenant that they will enter
into loan arrangements whereby CRC will loan and Carr will borrow as necessary
an amount equal to the amount, if any, by which the Existing Debt Guarantee
Amount pursuant to Section 7.3(a) is less than $27,000,000 (the "CarrAmerica
Loan"), which loan shall be a recourse loan on the assets of Carr (but not to
the partners of Carr) and secured by the Carr Properties (as defined in Section
7.3(c)) in accordance with Section 7.3(c), and that it will provide the
Guarantors with the opportunity, for the duration of the Lockout Period, to
guarantee amounts due under the CarrAmerica Loan (the "CarrAmerica Loan
Guarantee Amount"), which together with the Existing Debt Guarantee Amount shall
be no less than $27,000,000. Carr represents and warrants that it is the present
intention of Carr that the proceeds of the CarrAmerica Loan shall be used solely
for the ordinary business and operations of Carr. Carr further agrees that it
will not prepay, refinance, or otherwise replace the CarrAmerica Loan during the
Lockout Period; provided, however, that the foregoing limitation shall not apply
if Carr replaces or refinances the CarrAmerica Loan with a new loan secured by
the Carr Properties so long as the Guarantors are offered the opportunity to
irrevocably and unconditionally guarantee such replacement financing in an
amount up to the CarrAmerica Loan Guarantee Amount or indemnify and hold
harmless CRC and its affiliates, at the option of the Guarantors, if applicable,
from any liability with respect to a corresponding amount of the CarrAmerica
Loan Guarantee Amount. Carr represents and warrants that it is the present
intention of Carr that the proceeds of such replacement financing shall be used
solely for the ordinary business and operations of Carr. Notwithstanding
anything to the contrary set forth herein, the obligation of Carr to make
available the CarrAmerica Loan Guarantee Amount shall automatically terminate in
the event that (i) Carr terminates the Lockout Restrictions in accordance with
Section 7.5, (ii) the Herricks at any time exercise their right to redeem the
Herrick Units for Common Stock, or (iii) a taxable sale, transfer, assignment or
other disposition of the Herrick Units, including upon foreclosure with respect
thereto (but excluding a pledge or other grant of security interest in the
Herrick Units).
-13-
<PAGE>
(c) Carr and CRC represent, warrant and covenant that the security for
the Carr America Loan made pursuant to the provisions of Section 7.3(b) shall
consist solely of real estate assets of Carr and shall have a fair market value
of at least five times the amount of such loan (each real estate asset securing
the CarrAmerica Loan being referred to herein as a "Carr Property" and
collectively, the "Carr Properties"), and that Carr and CRC shall deliver a
written certificate to the Herricks certifying as to such value. CRC represents,
warrants and covenants that CRC shall have a valid and enforceable first
mortgage lien on any such Carr Properties. Carr shall have the right, in its
sole and absolute discretion, to elect to sell or otherwise dispose of any of
the Carr Properties, in which case Carr shall provide substitute security for
the CarrAmerica Loan by pledging additional unencumbered assets of Carr selected
by Carr with a fair market value at least equal to the value previously
allocated to the Carr Property being sold or otherwise replaced; provided,
however, that Carr and CRC shall have delivered a written certificate to the
Herricks prior to such replacement certifying that the fair market value of such
substitute asset is at least equal to the value previously allocated to the Carr
Property being sold or otherwise replaced; and further provided, however, that
in the event such Carr Property is also a Contributed Property, then Carr shall
not have the right to sell or otherwise dispose of such Carr Property, as
provided for in Section 7.2, unless such sale or disposition is permitted by
Section 7.2.
(d) Carr agrees that, so long as this Section 7.3 is in effect, it will
not place a mortgage or lien (or permit any such mortgage or lien) to be placed
upon the Contributed Property and the other interests in the U.S. West
Communication Group office portfolio addressed in the Related Agreements (as
defined in the Acquisition Agreement) unless such mortgage or lien secures only
the Existing Debt or any replacement financing.
(e) Any guarantees provided by the Guarantors shall be in the
respective forms of composite Exhibit E attached hereto, as applicable, and
shall provide that such guarantees shall terminate in accordance with the terms
of the respective guarantees.
(f) The Herricks shall have the right, effective upon the seventh (7th)
anniversary of the Closing Date or at any time thereafter as specified by the
Herricks, by written notice delivered to Carr, to require that Carr redeem the
Herrick Units for real estate in accordance with the terms and procedures set
forth in Section 7.5(b).
(g) Carr and CRC represent, warrant and covenant that no person or
entity other than the Guarantors shall have the right to guarantee the Existing
Debt or the CarrAmerica Loan, if and when such loan is made by CRC to Carr.
7.4. Damages
In the event that Carr breaches any of its obligations set forth in
Section 7.2 or Section 7.3, the Herricks shall be entitled to receive from Carr
as damages an amount equal to the aggregate federal, state and local income
taxes incurred by the Herricks as a result thereof and the payment of such
amount shall be guaranteed by CRC. Any such federal, state and local income
taxes shall be deemed to be the amount of gain or income recognized by the
Herricks multiplied by the then highest rate or rates applicable to such gain or
income for the year in which such gain or income is recognized. The parties
agree that such damages shall be considered to include any federal, state and
local income taxes incurred by the Herricks by reason of the receipt of a
payment from Carr for a breach of such obligations. No effect shall be given in
determining the amount of damages to the Herricks of their other taxable income,
tax deductions, tax credits, tax carry forwards nor to any other of their tax
-14-
<PAGE>
benefits or tax attributes. The same principles of computation shall apply for
state and local taxes. In addition, Carr shall pay to the Herricks any interest
and/or penalties incurred by the Herricks as a result of a breach by Carr in the
event that the Herricks actually incur the obligations to pay such interest
and/or penalties as a result of such breach; provided, however, that Carr shall
not be liable for any additional interest and/or penalties incurred by the
Herricks as a result of the failure by the Herricks to pay any such interest
and/or penalties to the appropriate governmental entity upon payment by Carr to
the Herricks of all damages, if any, determined in accordance with Section 7.7.
7.5. Lockout Restrictions; Redemption of Herrick Units
(a) The provisions set forth in Section 7.2 and Section 7.3 with
respect to the obligations and/or restrictions of Carr or CRC (or any affiliate
thereof) during the Lockout Period shall be collectively referred to hereafter
as the "Lockout Restrictions." Carr shall have the right to cause a termination
of the Lockout Restrictions, if such Lockout Restrictions remain in effect and
have not theretofore been terminated in accordance with this Agreement,
effective on the twentieth (20th) anniversary of the Closing Date or at any time
thereafter as specified by Carr, by written notice delivered to the Herricks,
which notice shall not be delivered prior to the date of such twentieth (20th)
anniversary, and upon payment by Carr to the Herricks in an amount equal to
fifty percent (50%) of the aggregate federal, state and local income taxes
incurred by the Herricks, which amount shall be based on a reasonable estimate
made by the Herricks of such taxes (or if such reasonable estimate is not
received by Carr within ninety (90) days of such written notice, then Carr may
estimate the amount due based on an assumed $27,000,000 gain recognition by the
Herricks multiplied by the then highest current tax rate applicable to such
gain), and the difference between the estimated taxes and the actual amounts due
under this paragraph shall be delivered to the Herricks or Carr, as appropriate,
by the other party within ten (10) business days after the date on which the
actual amounts due under this paragraph are determined (with a copy of the tax
filings to be delivered to Carr by the Herricks as soon as practicable). The
taxes incurred shall be based on the then highest rate or rates applicable to
such gain or income for the year in which such gain or income is recognized;
provided, however, that the maximum amount payable by Carr under this Section
7.5(a) shall not exceed $8,000,000, which maximum amount shall be reduced by
$1,000,000 on each successive anniversary date following the twentieth (20th)
anniversary of the Closing Date (the "Optional Payment"). The maximum amount of
the Optional Payment shall be that amount applicable to the year in which the
notice of exercise of the right to terminate is given by Carr to the Herricks
although payment of the Optional Payment may occur at a later date. No effect
shall be given in determining the amount of damages to the Herricks of their
other taxable income, tax deductions, tax credits, tax carry forwards nor to any
other of their tax benefits or tax attributes. The termination of the Lockout
Restrictions under this Section 7.5(a) shall be effective upon the latest to
occur of the (i) first anniversary of the date of such notice from Carr to the
Herricks provided that the completion of the redemption of the Herrick Units as
set forth in Section 7.5(b) below has occurred prior to such first anniversary
date (or, such earlier date upon completion of the redemption of the Herrick
Units as set forth in Section 7.5(b) below), or (ii) the payment by Carr of the
Optional Payment. Notwithstanding anything to the contrary in the preceding
sentence or otherwise, if the completion of the redemption of the Herricks Units
-15-
<PAGE>
as set forth in Section 7.5(b) has not occurred prior to the first anniversary
of the date of such notice from Carr, then Carr shall have the right to
terminate the Lockout Restrictions within five (5) months from the date of such
first anniversary, which termination shall be effective upon the payment by Carr
of the Optional Payment; provided, however, that if Carr does not pay the
Optional Payment within this five (5) month period, the termination of the
Lockout Restrictions shall not be deemed to have occurred, and Carr shall have
no further right to terminate the Lockout Restrictions under this Section
7.5(a); provided, further, that upon the twenty-eighth (28th) anniversary of the
Closing Date (at which time the Optional Payment shall have been reduced to
zero), Carr shall have the right to cause a termination of the Lockout
Restrictions at any time thereafter in accordance with the terms set forth in
this Section 7.5(a).
(b) In the event that Carr shall deliver notice of its exercise right
to terminate the Lockout Restrictions pursuant to Section 7.5(a) above, the
Herricks shall have a period of one (1) year after receipt of such notice to
complete the redemption of the Herrick Units for real estate to be selected by
the Herricks (in their sole discretion) and acquired by Carr for purposes of
executing such redemption (the "Herrick Designated Replacement Property")
subject to the following conditions (and completion of the redemption of the
Herrick Units within such one (1) year period shall be deemed to constitute a
full waiver by the Herricks of the right to receive the Optional Payment). The
Herrick Designated Replacement Property shall have such value and be subject to
such debt as shall be designated by the Herricks; provided, however, that (i)
Carr shall not be required in any event to expend more in connection with the
acquisition and delivery of the Herrick Designated Replacement Property than the
value equal to the number of Herrick Units multiplied by the value of a share of
common stock of CRC, as adjusted in accordance with the Partnership Agreement
(the "Unit Equity Value"); (ii) to the extent that the total cost of acquiring
and delivering the Herrick Designated Replacement Property would exceed the Unit
Equity Value, the Herricks shall be obligated to pay to Carr the balance in cash
as needed from time to time in advance of Carr incurring an obligation to
proceed with the acquisition of such Herrick Designated Replacement Property;
and (iii) the Herricks shall provide any credit support necessary to obtain the
level of debt requested by the Herricks with respect to such Herrick Designated
Replacement Property.
(c) The Herricks shall reimburse, indemnify and hold harmless Carr for
any losses and expenses that may be incurred by Carr in connection with the
acquisition and delivery of the Herrick Designated Replacement Property in
excess of the Unit Equity Value (and shall provide to Carr reasonably security
therefor).
7.6. Special Loss Allocation
Pursuant to the terms of the Second Amendment, the Class E Units shall
be allocated losses in the aggregate amount of $50,000 per year for a period of
twenty (20) years. Carr shall make available for the Herricks sufficient
additional debt of Carr to permit the Herricks to have an adjusted tax basis in
the Herrick Units in an amount that would permit them to utilize such losses,
which debt shall be subject to the terms and conditions set forth in Section 7.3
above.
-16-
<PAGE>
7.7. Rights and Remedies of Contributors
Notwithstanding any provision of this Agreement, Contributors agree
that the sole and exclusive rights and remedies to which they may be entitled at
law or in equity for a breach or violation by the other party of any of the
covenants and agreements set forth in Sections 7.2 through 7.5 (the "Tax-Related
Covenants") shall be for damages as determined pursuant to this Section 7.7, and
Contributors shall not be entitled to pursue a claim for specific performance of
the terms of Sections 7.2 through 7.5 (other than with respect to a breach by
Carr of the provisions of Section 7.3(f); the parties agreeing that monetary
damages may be difficult to ascertain and that specific performance will be an
appropriate remedy). If Contributors notify Carr of a claim that Carr has
breached or violated any of the Tax-Related Covenants, Carr and Contributors
agree to negotiate in good faith to resolve any disagreements regarding any such
breach or violation. If any such disagreement cannot be resolved by Carr and
Contributors within thirty (30) days after receipt by Carr of the notice in
accordance with the preceding sentence, Carr and Contributors shall jointly
retain a nationally recognized independent public accounting firm ("an
Accounting Firm") to act as an arbitrator to resolve as expeditiously as
possible all points of any such disagreement (including, without limitation,
whether a breach by Carr of any of the Lockout Restrictions has occurred and, if
so, the amount of damages that the Herricks are entitled to as a result thereof,
determined as set forth in Section 7.4). If the parties cannot agree on an
Accounting Firm, each of Contributors and Carr shall retain an Accounting Firm,
and the Accounting Firm selected by Carr and the Accounting Firm selected by
Contributors shall jointly retain an Accounting Firm. If the two Accounting
Firms cannot agree upon a third Accounting Firm within thirty (30) days, such
matter shall be referred to a court of competent jurisdiction to select the
third Accounting Firm. The Accounting Firms shall be instructed to resolve as
expeditiously as possible all points of any such disagreement (including,
without limitation, whether a breach by Carr of any of the Lockout Restrictions
has occurred and, if so, the amount of damages that the Herricks are entitled to
as a result thereof, determined as set forth in Section 7.4). All determinations
made by the Accounting Firm or the Accounting Firms, as the case may be, with
respect to the resolution of any breach or violation of the Tax-Related
Covenants shall be final, conclusive and binding on Carr and Contributors. The
fees and expenses of any Accounting Firms incurred in connection with any such
determination shall be shared equally by Carr and Contributors. The rights and
remedies of Contributors set forth in this Section 7.7 shall be available to any
of the Contributors individually.
ARTICLE VIII
REMEDIES; TERMINATION
8.1. Remedies
If this Agreement is terminated prior to the Closing, Carr and
Contributors shall have the same rights and remedies set forth in Section 1.4 of
the Acquisition Agreement, as if such section had been set forth in this
Agreement; provided, however, that no party shall be entitled to additional
damages beyond those set forth in the Acquisition Agreement.
-17-
<PAGE>
8.2. Termination
If the Acquisition Agreement is terminated in accordance with the
provisions thereof, then this Agreement shall automatically terminate. So long
as a party is not in default hereunder, if any condition to such party's
obligation to proceed with the Closing hereunder has not been satisfied as of
the Closing Date or other applicable date, such party may, in its sole
discretion, terminate this Agreement by written notice to the other party on or
before the Closing Date or other applicable date, or elect to close,
notwithstanding the non-satisfaction of such condition, in which event such
party shall be deemed to have waived any such condition.
ARTICLE IX
MISCELLANEOUS
9.1. Additional Actions and Documents
Each of the parties hereto hereby agrees to take or cause to be taken
such further actions, to execute, deliver and file or cause to be executed,
delivered and filed such further documents, and will obtain such consents, as
may be necessary or as may be reasonably requested in order to fully effectuate
the purposes, terms and conditions of this Agreement.
9.2. Expenses
Each party hereto shall pay its own legal, accounting and other
advisory fees incurred in connection with the negotiation and closing of the
Agreement. The provisions of this Section 9.2 shall survive any termination of
this Agreement.
9.3. Assignment
No party hereto shall assign its rights and/or obligations under this
Agreement, in whole or in part, whether by operation of law or otherwise,
without the prior written consent of the other parties hereto. Notwithstanding
anything to the contrary in the preceding sentence, at any time after the
Closing Date, Carr may assign its rights and/or obligations under this Agreement
to an affiliate, or any other person or entity in connection with a merger,
consolidation, sale or contribution of all or substantially all of its or CRC's
assets, or other similar corporate transaction; provided, that no assignment
pursuant to the preceding clause shall release the assigning party from its
respective liabilities and obligations hereunder.
9.4. Entire Agreement; Amendment
This Agreement, including the Exhibits and other documents referred to
herein or furnished pursuant hereto, together with the Acquisition Agreement and
the exhibits and other documents referred to therein or furnished pursuant
thereto, constitute the entire agreement among the parties hereto with respect
to the transactions contemplated herein, and supersede all prior oral or written
agreements, commitments or understandings with respect to the matters provided
for herein; provided, that nothing in this Section 9.4 shall have any effect on
the Other Agreements. Prior drafts of this Agreement shall not be admissible as
evidence in any legal proceeding arising out of or relating to this Agreement or
the transactions contemplated herein. No amendment, modification or discharge of
this Agreement shall be valid or binding unless set forth in writing and duly
executed and delivered by the party against whom enforcement of the amendment,
modification, or discharge is sought.
-18-
<PAGE>
9.5. Waiver
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Agreement or under any other documents
furnished in connection with or pursuant to this Agreement shall impair any such
right, power or privilege or be construed as a waiver of any default or any
acquiescence therein. No single or partial exercise of any such right, power or
privilege shall preclude the further exercise of such right, power or privilege,
or the exercise of any other right, power or privilege. No waiver shall be valid
against any party hereto unless made in writing and signed by the party against
whom enforcement of such waiver is sought and then only to the extent expressly
specified therein.
9.6. Severability
If any part of any provision of this Agreement or any other agreement
or document given pursuant to or in connection with this Agreement shall be
invalid or unenforceable in any respect, such part shall be ineffective to the
extent of such invalidity or unenforceability only, without in any way affecting
the remaining parts of such provision or the remaining provisions of this
Agreement.
9.7. Governing Law
This Agreement, the rights and obligations of the parties hereto, and
any claim or disputes relating thereto, shall be governed by and construed in
accordance with the laws of the State of Delaware (excluding the choice of law
rules thereof).
9.8. Notices
All notices, demands, requests, or other communications which may be or
are required to be given, served, or sent by any party to any other party
pursuant to this Agreement shall be in writing and shall be hand delivered, sent
by overnight courier or mailed by first-class, registered or certified mail,
return receipt requested, postage prepaid, or transmitted by facsimile,
telegram, telecopy or telex, addressed as follows:
(i) If to any Contributor:
The Herrick Company, Inc.
Attn: Norton Herrick
2295 Corporate Boulevard, N.W., Suite 222
Boca Raton, FL 33431
Telephone: 561/241-9880
Facsimile: 561/241-9887
-19-
<PAGE>
With a copy to:
Battle Fowler, LLP
Attn: Peter Fass, Esq.
75 E. 55th Street
New York, NY 10022
Telephone: 212/856-6850
Facsimile: 212/856-7822
(ii) If to Carr:
CarrAmerica Realty Corporation
Attn: Robert G. Stuckey
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Telephone: 202/624-7533
Facsimile: 202/638-0102
With a copy to:
Hogan & Hartson L.L.P.
Attn: David W. Bonser, Esq.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telephone: 202/637-5868
Facsimile: 202/637-5910
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed, faxed, telecopied or telexed in the manner described above, or
which shall be delivered to a telegraph company, shall be deemed sufficiently
given, served, sent, received or delivered for all purposes at such time as it
is delivered to the addressee (with the return receipt, the delivery receipt,
the confirmation receipt (with respect to a facsimile), or (with respect to a
telecopy or telex) the answerback being deemed conclusive, but not exclusive,
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
9.9. Headings
Section headings contained in this Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
9.10. Execution in Counterparts
To facilitate execution, this Agreement may be executed in as many
counterparts as may be required. It shall not be necessary that the signatures
of, or on behalf of, each party, or that the signatures of all persons required
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<PAGE>
to bind any party, appear on each counterpart; but it shall be sufficient that
the signature of, or on behalf of, each party, or that the signatures of the
persons required to bind any party, appear on one or more of the counterparts.
All counterparts shall collectively constitute a single agreement. It shall not
be necessary in making proof of this Agreement to produce or account for more
than a number of counterparts containing the respective signatures of, or on
behalf of, all of the parties hereto.
9.11 Attorneys' Fees
Should either party employ attorneys to enforce any of the provisions
hereof, the party against whom any final judgment is entered agrees to pay the
prevailing party all reasonable costs, charges and expenses, including
reasonable attorneys' fees, expended or incurred by the prevailing party in
connection therewith.
9.12. Waiver of Jury Trial
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ACQUISITION AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE PROVISIONS OF THIS SECTION 9.12
SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Contribution
Agreement to be duly executed on their behalf as of the date first above
written.
CONTRIBUTORS:
PhoenixWest Associates, Ltd. (formerly known
as Cypress Lakes at Boca Rio Associates,
Limited Partnership)
By: G-P PhoenixWest, Inc.,
General Partner
By: /s/ Norton Herrick
---------------------------
Name: Norton Herrick
Title: President
Versailles Associates Limited Partnership
By: G-P Versailles, Inc.,
General Partner
By: /s/ Norton Herrick
-------------------------
Name: Norton Herrick
Title: President
Lakeview 436 Associates, Ltd.
By: Lakeview-Nort, Ltd.,
General Partner
By: 436, Inc.,
General Partner
By: /s/ Norton Herrick
-------------------------
Name: Norton Herrick
Title: President
Pines Realty Associates, Ltd.
By: 7425, Inc.,
General Partner
By: /s/ Norton Herrick
-------------------------
Name: Norton Herrick
Title: President
-22-
<PAGE>
CARR:
CARRAMERICA REALTY, L.P.
By: CarrAmerica Realty GP Holdings, Inc.,
General Partner
By: /s/ Robert G. Stuckey
----------------------------------
Name: Robert G. Stuckey
Title: Managing Director and Vice President
CRC:
CARRAMERICA REALTY CORPORATION
By: /s/ Robert G. Stuckey
----------------------------------
Name: Robert G. Stuckey
Title: Chief Investment Officer
-23-
EXHIBIT 21.1
U.S. West, L.L.C.
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Partners
CarrAmerica Realty, L.P.:
We consent to incorporation by reference in the registration statement (No.
333-22353) on Form S-3 of CarrAmerica Realty, L.P. of our report dated February
6, 1998, relating to the consolidated balance sheets of CarrAmerica Realty, L.P.
as of December 31, 1997 and 1996, and the related consolidated statements of
operations, partners' capital and cash flows for the year ended December 31,
1997 and the period from March 6, 1996 (date of inception) to December 31, 1996
and the related schedule of Consolidated Real Estate and Accumulated
Depreciation as of December 31, 1997.
Washington, D.C.
March 31, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CARRAMERICA REALTY, L.P. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE
SHEET AS OF DECEMBER 31, 1997 AND FROM CARRAMERICA REALTY, L.P. AND
SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1997
</LEGEND>
<CIK> 0001040554
<NAME> chefw$d5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1.000
<CASH> 41,894
<SECURITIES> 0
<RECEIVABLES> 5,085
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 569,215
<DEPRECIATION> 13,360
<TOTAL-ASSETS> 636,568
<CURRENT-LIABILITIES> 0
<BONDS> 258,953
0
0
<COMMON> 0
<OTHER-SE> 377,632
<TOTAL-LIABILITY-AND-EQUITY> 636,568
<SALES> 0
<TOTAL-REVENUES> 60,469
<CGS> 0
<TOTAL-COSTS> 49,215
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,693
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,693
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,693
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> Notes & accounts receivable are presented net of allowance for doubtful
accounts as the allowance is immaterial.
</FN>
</TABLE>
