SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(AMENDMENT No. 1)
CarrAmerica Realty Corporation
(formerly named Carr Realty Corporation)
(Name of Issuer)
Common Stock, $0.01 Par Value
(Title of Class of Securities)
14441K 10 3
(CUSIP Number)
Paul E. Szurek
SECURITY CAPITAL U.S. REALTY
69, route d'Esch
L-1470 Luxembourg
(352) 48 78 78
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 30, 1996
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Sche-
dule 13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-
1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with this state-
ment / /. (A fee is not required only if the reporting person:
(1) has a previous statement on file reporting beneficial own-
ership of more than five percent of the class of securities
described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less
of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all
exhibits, should be filed with the Commission. See Rule
13d-1(a) for other parties to whom copies are to be sent.
(Continued on following pages)
Page 1 of 11 Pages<PAGE>
CUSIP No. 14441K 10 3 13D Page 2 of 11 Pages
1 NAME OF PERSON
Security Capital Holdings S.A.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) /x/
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Luxembourg
7 SOLE VOTING POWER
NUMBER OF 11,627,907 (See Item 5)
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 11,627,907
WITH
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,627,907 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
46.5% (See Item 5)
14 TYPE OF PERSON REPORTING*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT<PAGE>
Item 1. Security and Issuer.
This Amendment relates to shares of common stock, par
value $0.01 per share ("Common Stock"), of CarrAmerica Realty
Corporation, a Maryland corporation formerly named Carr Realty
Corporation ("Carr"). The principal executive offices of Carr
are located at 1700 Pennsylvania Avenue, N.W., Washington, D.C.
20006.
Item 2. Identity and Background.
This Amendment is filed by Security Capital Holdings
S.A. ("Holdings"), a corporation organized and existing under
the laws of Luxembourg and a wholly owned subsidiary of Secu-
rity Capital U.S. Realty, a corporation organized and existing
under the laws of Luxembourg ("Security Capital U.S. Realty"
and, together with Holdings, "USRealty"). The business objec-
tive of USRealty is to become Europe's preeminent publicly-held
real estate operating company with strategic investments in
leading "value-added" real estate operating companies in the
United States. USRealty intends to acquire 25% to 45% of the
common stock of a limited number of U.S. real estate operating
companies with specific market niches and the potential to be
leaders in their respective peer groups. USRealty intends to
maximize shareholder returns in these companies by investing
sufficient capital and, by obtaining representation on the
boards of directors and committees thereof, participating with
managements in developing and implementing strategies for long-
term growth in per share operating results. The principal of-
fices of USRealty are located at 69, route d'Esch, L-1470, Lux-
embourg.
During the last five years, to the best of USRealty's
knowledge, neither USRealty nor any of its executive officers
or directors has been convicted in a criminal proceeding (ex-
cluding traffic violations or similar misdemeanors) or has been
a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction as result of which USRealty or
such person was or is subject to a judgment, decree, or final
order enjoining future violations of, or prohibiting or man-
dating activities subject to, federal or state securities laws,
or finding any violation with respect to such laws.
Each executive officer and each director of USRealty is a
citizen of the United States but, with the exception of one
director, all executive officers and directors are residents of
various European countries. The name, business address, and
present principal occupation (including the name, principal
business and address of the corporation or organization in
which such employment is conducted) of each executive officer
Page 3 of 11 Pages<PAGE>
and director is set forth in Exhibit 1 to this Amendment and is
specifically incorporated herein by reference.
USRealty previously filed a Schedule 13D with respect
to its investment in Carr, in which it disclosed that USRealty
may be deemed to beneficially own up to 11,627,907 shares of
Common Stock because of its right to acquire such 11,627,907
shares of Common Stock.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to a Stock Purchase Agreement, dated as of
November 5, 1995, by and among Carr, Security Capital U.S. Re-
alty and Holdings (the "Stock Purchase Agreement"), subject to
the terms and conditions thereof, Carr agreed to sell and USRe-
alty agreed to purchase up to 11,627,907 shares of Common Stock
or, under certain circumstances, Series A Convertible Preferred
Stock, par value $0.01 per share (the "Preferred Stock") of
Carr, convertible into Common Stock upon the availability of a
sufficient number of authorized but unissued shares of Common
Stock (such Preferred Stock, collectively with such Common
Stock, the "Shares"). Security Capital U.S. Realty agreed to
advance the funds to Holdings necessary to purchase the Shares
as required by the Stock Purchase Agreement, and guaranteed the
performance by Holdings of its obligations thereunder.
On April 29, 1996, Carr Holdings and Security Capital
U.S. Realty entered into Amendment No. 1 to the Amended Stock
Purchase Agreement (the "Amendment No. 1"), a copy of which
Amendment is filed herewith as Exhibit 2.1. The Stock Purchase
Agreement, as amended by Amendment No. 1, is herein referred to
as the Amended Stock Purchase Agreement.
On April 30, 1996, pursuant to the Amended Stock Pur-
chase Agreement, USRealty purchased all 11,627,907 shares of
Common Stock. The aggregate purchase price paid to Carr for
the Shares was $249,613,870. Security Capital U.S. Realty ad-
vanced Holdings the funds necessary to purchase such shares as
required by the Amended Stock Purchase Agreement. These funds
have been obtained by USRealty from equity subscriptions which
have been received by USRealty from various international in-
vestors.
A copy of the Stock Purchase Agreement, and the vari-
ous Exhibits thereto, is attached to the previously filed
Schedule 13D as Exhibit 2 thereto and is specifically incorpo-
rated herein by reference, and a copy of Amendment No. 1 is
attached hereto as Exhibit 2.1 and is specifically incorporated
herein by reference. The description herein of such agreements
Page 4 of 11 Pages<PAGE>
and the Exhibits thereto is qualified in its entirety by refer-
ence to such agreements and Exhibits.
Item 4. Purpose of Transaction.
The purchase of the Shares is for the purpose of own-
ership and not with a view to or for sale in connection with
any distribution thereof. USRealty has no present intention or
plan to effect any distribution of the Shares.
The Amended Stock Purchase Agreement provided for
USRealty's purchase of 6,634,000 shares of Common Stock at a
price of $21.467 per share at an initial closing under the
Stock Purchase Agreement. The Amended Stock Purchase Agreement
provided that, from time to time thereafter, at the election of
Carr, USRealty would purchase additional Shares at a price of
$21.467 per share, in minimum increments of $25 million, until
an aggregate of $249,613,870 (the "Total Equity Commitment") is
invested. If Carr did not elect to sell all 11,627,907 Shares
to USRealty by January 1, 1997, USRealty could elect to make a
single purchase of additional Shares from Carr at a price of
$21.467 per share to the extent that the Total Equity Commit-
ment was not yet been invested.
The Amended Stock Purchase Agreement provided that
after the record date for the meeting of Carr's stockholders
regarding the transactions contemplated by the Amended Stock
Purchase Agreement, USRealty would have the right, from time to
time and subject to certain limitations, to use up to $50 mil-
lion of its Total Equity Commitment to purchase shares of Com-
mon Stock from third parties in one or more public market or
private transactions. However, USRealty would not be permitted
to purchase more than 650,000 shares from third parties prior
to its initial purchase of 6,634,000 shares of Common Stock
from Carr. If USRealty made any such public market or private
transaction purchases, Carr would have the right to require US-
Realty to invest a like amount in Shares in addition to the
Total Equity Commitment. All such additional investments would
be made at Carr's request either on the same terms as other
investors in future offerings at or above $21.467 per share or
at $21.467 per share if not concurrent with a future offering.
The Amended Stock Purchase Agreement also provided
that Carr would submit to a vote of its stockholders for their
approval (i) a proposed amendment to Carr's articles of incor-
poration amending the ownership limitations therein to permit
USRealty to acquire the Shares and to make certain other modi-
fications to facilitate Carr's continued qualification as a
real estate investment trust for federal income tax purposes (a
Page 5 of 11 Pages<PAGE>
"REIT") and (ii) a separate and independent proposal to in-
crease the number of shares of Common Stock authorized by the
articles of incorporation to 90,000,000 shares. If Carr's
stockholders approved the transactions contemplated by the
Stock Purchase Agreement but did not approve the proposed in-
crease in Carr's authorized capital stock, Carr would sell to
USRealty shares of Common Stock to the extent of the remaining
shares of unauthorized, unissued and unreserved Common Stock,
and thereafter, if necessary, shares of Preferred Stock.
The initial closing was subject to various condi-
tions, including (i) approval by Carr's stockholders of the
transaction contemplated by the Stock Purchase Agreement, (ii)
approval by Carr's stockholders of the proposed amendment to
Carr's articles of incorporation to amend the ownership limita-
tions to permit USRealty to acquire the Shares and to make cer-
tain other modifications to facilitate Carr's continued quali-
fication as a REIT, (iii) approval by the partners of Carr Re-
alty, L.P., the entity through which Carr currently conducts
its business, of certain amendments to the partnership agree-
ment of Carr Realty, L.P., (iv) the continued treatment of Carr
as a REIT, (v) the consummation of the initial closing by April
30, 1996 (subject to extension by either party to June 30,
1996), (vi) the absence of any unsolicited superior proposal
for an alternative transaction that, if required by the fidu-
ciary duty of Carr's board of directors, results in Carr's ter-
mination of the Stock Purchase Agreement, and payment of a fee
to USRealty thereunder, (vii) completion of certain operational
changes (including Carr's acquisition of the development divi-
sion of The Oliver Carr Company), and (viii) satisfaction of
various customary conditions. Subsequent closings also were
subject to certain conditions.
The Amended Stock Purchase Agreement contemplated
that the parties would enter into a Stockholders Agreement and
a Registration Rights Agreement at the initial closing. The
agreements as executed are attached hereto as Exhibits 2.2 and
2.3, respectively, are specifically incorporated herein by ref-
erence and the description herein of such agreements is quali-
fied in its entirety by reference to such agreements. Pursuant
to the Stockholders Agreement, USRealty is entitled to certain
rights and is subject to certain restrictions, including the
following: (i) as long as USRealty owns 25% by value of the
outstanding capital stock on a fully diluted basis, USRealty
has the right to nominate its proportionate share of Carr's
board of directors (but not more than 40% rounded down to the
nearest whole number), to obtain certain operating and finan-
cial information and to participate in Carr's future equity
offerings by purchasing up to 30% of the securities offered
therein; (ii) during a standstill period of five years (which
Page 6 of 11 Pages<PAGE>
period shall be automatically extended for one-year increments
unless USRealty gives Carr 270 days' notice cancelling such
extensions or unless sooner terminated upon certain events),
USRealty is subject to certain limitations and restrictions
relating to voting of its Shares, acquisitions of additional
Shares (generally limited to 45%, or 48% initially, of the out-
standing shares of Common Stock and to 40% of the outstanding
shares on a fully diluted basis), transfers of its Shares and
various other matters; and (iii) as long as USRealty owns 25%
by value of the outstanding capital stock on a fully diluted
basis and as long as the standstill period (including exten-
sions) is in effect, Carr may not take certain specified corpo-
rate actions relating to incurrence of indebtedness, third
party property management, investments outside the office prop-
erty segment, REIT termination and reduction of its interest in
Carr Realty, L.P. Pursuant to the Registration Rights Agree-
ment, Carr has granted USRealty certain registration rights to
facilitate the resale of its Shares under certain conditions
and certain tag-along rights to sell a portion of its Shares in
connection with certain extraordinary issuances of stock by
Carr.
Early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, with respect to the Notification and Report Form pre-
viously filed by USRealty was granted on December 11, 1995.
On February 26, 1996, Carr's stockholders approved
the transactions contemplated by the Stock Purchase Agreement
and the increase in Carr's authorized capital stock.
On April 29, 1996, Carr Holdings and Security Capital
U.S. Realty entered into Amendment No. 1, a copy of which
Amendment is filed herewith as Exhibit 2.1.
On April 30, 1996, pursuant to the Stock Purchase
Agreement, USRealty purchased all 11,627,907 shares of Common
Stock subject to the Amended Stock Purchase Agreement. The aggregate
purchase price paid to Carr for the Shares was $249,613,870.
Security Capital U.S. Realty advanced Holdings the funds neces-
sary to purchase such shares as required by the Amended Stock
Purchase Agreement. The conditions to closing described above
were all either satisfied or waived. The provisions of the
Amended Stock Purchase Agreement relating to the Preferred
Stock and USRealty's right to purchase shares of Common Stock
from third parties in public market or private transactions are
no longer applicable.
Except as set forth in this Item 4, USRealty present-
ly has no plans or proposals that relate to or would result in
Page 7 of 11 Pages<PAGE>
any of the actions specified in clauses (a) through (j) of Item
4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
As of April 30, 1996, USRealty beneficially owns up
to 11,627,907 shares of Common Stock because of USRealty's pur-
chase of such shares of Common Stock on April 30, 1996. USRe-
alty owns approximately 46.5% of the outstanding Common Stock,
and approximately 39.0% on a fully diluted basis, based on the
number of outstanding shares of Common Stock and the number of
outstanding limited partnership units of Carr Realty, L.P. that
are redeemable for Common Stock or the cash equivalent thereof.
Security Capital Group Incorporated is the largest holder of
the outstanding interests in Security Capital U.S. Realty (al-
though such ownership is less than 40%) and may be deemed to
control Security Capital U.S. Realty. Security Capital Group
Incorporated disclaims beneficial ownership of the Shares to be
acquired by USRealty.
Except as set forth in this Item 5, to the best
knowledge and belief of USRealty, no transactions involving
Common Stock have been effected during the past 60 days by US-
Realty or by its directors, executive officers or controlling
persons.
Item 6. Contracts, Arrangements, Understanding or Relation-
ships with Respect to Securities of the Issuer.
As described above in Item 4, the Amended Stock Pur-
chase Agreement, the Stockholders Agreement and the Registra-
tion Rights Agreement among Carr, Security Capital U.S. Realty
and Holdings provide for various rights and restrictions with
respect to Carr's Common Stock and Preferred Stock.
A copy of the Stock Purchase Agreement, and the vari-
ous Exhibits thereto (including the forms of the Stockholders
Agreement and the Registration Rights Agreement), is attached
to the previously filed Schedule 13D as Exhibit 2 thereto and
copies of Amendment No. 1 to the Stock Purchase Agreement, the
Stockholders Agreement and the Registration Rights Agreement,
as executed are attached hereto as Exhibits 2.1, 2.2 and 2.3,
respectively, and all such Exhibits are specifically incorpo-
rated herein by reference, and the description herein of such
agreements and the Exhibits thereto are qualified in their en-
tirety by reference to such agreements and Exhibits.
Page 8 of 11 Pages<PAGE>
Item 7. Material to be filed as Exhibits.
The following Exhibits are filed as part of this Schedule
13D:
Exhibit 1 Name, Business Address, and Present Principal
Occupation of Each Executive Officer and Direc-
tor of Security Capital U.S. Realty and of Secu-
rity Capital Holdings S.A.
Exhibit 2 Stock Purchase Agreement, dated as of November
5, 1995, by and among Carr Realty Corporation,
Security Capital Holdings S.A. and Security
Capital U.S. Realty (incorporated by reference
to Exhibit 5.1 of Carr Realty Corporation's Cur-
rent Report on Form 8-K dated November 6, 1995)
Exhibit 2.1 Amendment No. 1 to the Stock Purchase Agreement,
dated as of April 29, 1996, by and among Carr
Realty Corporation, Security Capital Holdings
S.A. and Security Capital U.S. Realty
Exhibit 2.2 Stockholders Agreement, dated as of April 30,
1996, by and among Carr Realty Corporation, Carr
Realty, L.P., Security Capital Holdings S.A. and
Security Capital U.S. Realty
Exhibit 2.3 Registration Rights Agreement, dated as of April
30, 1996, by and among Carr Realty Corporation,
Security Capital Holdings S.A. and Security
Capital U.S. Realty
Page 9 of 11 Pages<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowl-
edge and belief, I certify that the information set forth
in this statement is true, complete, and correct.
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
May 7, 1996
Page 10 of 11 Pages<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Description Page No.
1 Name, Business Address, and Present
Principal Occupation of Each Executive
Officer and Director of Security Capi-
tal U.S. Realty and of Security Capital
Holdings S.A.
2 Stock Purchase Agreement, dated as of
November 5, 1995, by and among Carr
Realty Corporation, Security Capital
U.S. Realty and Security Capital Hold-
ings S.A. (incorporated by reference to
Exhibit 5.1 of Carr Realty Corpora-
tion's Current Report on Form 8-K dated
November 6, 1995)
2.1 Amendment No. 1 to the Stock Purchase
Agreement, dated as of April 29, 1996,
by and among Carr Realty Corporation,
Security Capital Holdings S.A. and Se-
curity Capital U.S. Realty
2.2 Stockholders Agreement, dated as of
April 30, 1996, by and among Carr Re-
alty Corporation, Carr Realty, L.P.,
Security Capital Holdings S.A. and Se-
curity Capital U.S. Realty
2.3 Registration Rights Agreement, dated as
of April 30, 1996, by and among Carr
Realty Corporation, Security Capital
Holdings S.A. and Security Capital U.S.
Realty
EXHIBIT 1
NAME, PRINCIPAL BUSINESS, AND ADDRESS
OF THE DIRECTORS AND EXECUTIVE OFFICERS
OF SECURITY CAPITAL U.S. REALTY
AND OF SECURITY CAPITAL HOLDINGS S.A.
The identity and background of the executive officers
and directors of Security Capital U.S. Realty and Security
Capital Holdings S.A. are as follows:
SECURITY CAPITAL U.S. REALTY:
1 W. Joseph Houlihan is a Director of Security
Capital U.S. Realty. Mr. Houlihan's present principal occupa-
tion is as Executive Vice President and Director of the Insti-
tutional Management Group of GIM Algemeen Vermogensbeheer which
provides investment management and advisory services. GIM Al-
gemeen Vermogensbeheer's business address is Fellenoord 35,
Postbus 365, 5600 AJ Eindhoven, The Netherlands.
2 James T. Mauck is a Director of Security Capital
U.S. Realty. Mr. Mauck's present principal occupation is as
Managing Director for Continental Europe of R.R. Donnelley &
Sons Company which provides printing and related services.
R.R. Donnelley & Sons Company's European business address is
Overschiestraat 59a, 1062XD Amsterdam, The Netherlands.
3 William D. Sanders is a Director of Security
Capital U.S. Realty. Mr. Sanders' present principal occupation
is as Chairman of the Board of Directors and Chief Executive
Officer of Security Capital Group Incorporated which controls
and operates a group of highly focused, fully integrated real
estate operating companies. Security Capital Group Incorpo-
rated's business address is 125 Lincoln Avenue, Santa Fe, New
Mexico 87501.
4 Paul E. Szurek is a Managing Director of Secu-
rity Capital U.S. Realty. Mr. Szurek's present principal oc-
cupation is as Managing Director of Security Capital U.S. Re-
alty and as Managing Director of Security Capital (EU) Manage-
ment S.A. Security Capital U.S. Realty's and Security Capital
(EU) Management S.A.'s business address is 69, route d'Esch, L-
1470 Luxembourg.<PAGE>
5 Albert D. Adriani is a Vice President of Secu-
rity Capital U.S. Realty. Mr. Adriani's present principal oc-
cupation is as Vice President of Security Capital U.S. Realty
and as Vice President of Security Capital (EU) Management S.A.
Security Capital U.S. Realty's and Security Capital (EU) Man-
agement S.A.'s business address is 69, route d'Esch, L-1470
Luxembourg.
SECURITY CAPITAL HOLDINGS S.A.:
1. W. Joseph Houlihan is a Director of Security
Capital Holdings S.A. Mr. Houlihan's present principal occupa-
tion is as Executive Vice President and Director of the Insti-
tutional Management Group of GIM Algemeen Vermogensbeheer which
provides investment management and advisory services. GIM Al-
gemeen Vermogensbeheer's business address is Fellenoord 35,
Postbus 365, 5600 AJ Eindhoven, The Netherlands.
2. James T. Mauck is a Director of Security Capital
Holdings S.A. Mr. Mauck's present principal occupation is as
Managing Director for Continental Europe of R.R. Donnelley &
Sons Company which provides printing and related services.
R.R. Donnelley & Sons Company's European business address is
Overschiestraat 59a, 1062XD Amsterdam, The Netherlands.
3. Paul E. Szurek is a Managing Director of Secu-
rity Capital Holdings S.A. Mr. Szurek's present principal oc-
cupation is as Managing Director of Security Capital U.S. Re-
alty and as Managing Director of Security Capital (EU) Manage-
ment S.A. Security Capital U.S. Realty's and Security Capital
(EU) Management S.A.'s business address is 69, route d'Esch, L-
1470 Luxembourg.
4. Albert D. Adriani is a Vice President of Secu-
rity Capital U.S. Realty. Mr. Adriani's present principal oc-
cupation is as Vice President of Security Capital U.S. Realty
and as Vice President of Security Capital (EU) Management S.A.
Security Capital U.S. Realty's and Security Capital (EU) Man-
agement S.A.'s business address is 69, route d'Esch, L-1470
Luxembourg.
EXHIBIT 2.1
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT (this "Amendment")
is made and entered into as of April 29, 1996 by and among CARR REALTY
CORPORATION, a Maryland corporation (the "Company"), SECURITY CAPITAL U.S.
REALTY, a Luxembourg corporation (the "Advancing Party"), and SECURITY CAPITAL
HOLDINGS S.A., a Luxembourg corporation and a wholly-owned subsidiary of the
Advancing Party ("Buyer").
WHEREAS, the parties hereto entered into a Stock Purchase
Agreement, dated as of November 5, 1995 (the "Agreement"), pursuant to which
Buyer agreed to purchase from the Company, and the Company agreed to sell to
the Buyer up to an aggregate of 11,627,907 shares of Company Stock at an
aggregate price of $250,000,000.50, or $21.50 per share;
WHEREAS, the parties hereto previously agreed that the Initial
Closing would occur on April 22, 1996, and that Buyer would purchase the entire
11,627,907 shares of Company Common Stock to be purchased pursuant to the
Agreement at the Initial Closing;
WHEREAS, the Company desires to defer the Initial Closing until
April 30, 1996; and
WHEREAS, in consideration for Buyer agreeing to defer the Initial
Closing, the Company has agreed to reduce the Purchase Price for the Purchased
Shares and to revise the form of Stockholders Agreement, all as set forth
below;
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Agreement.
2. Closing Date of Initial Closing; Full Funding of Total Equity
Commitment at Initial Closing. Subject to the terms and conditions of the
Agreement, (i) the Initial Closing shall be held on Tuesday, April 30, 1996 at
10:00 a.m. local time at the offices of Hogan & Hartson L.L.P, Columbia Square,
555 Thirteenth Street, N.W., Washington, D.C. 20004, and (ii) at the Initial
Closing, the Company will sell, convey, assign, transfer, and deliver, and
Buyer will purchase and acquire from the Company, an aggregate of 11,627,907
shares of Company Common Stock, which shall satisfy the Total Equity Commitment
in full and shall reduce the Remaining Equity Commitment to zero.
3. Adjustment to Purchase Price. The aggregate Purchase Price for
the 11,627,907 Purchased Shares shall be equal to $249,613,870.00 (which
results in a Per Share Purchase Price of approximately $21.467).<PAGE>
4. Amendments to Exhibit C.
a. Section 1.41 of Exhibit C to the Agreement hereby is
amended by deleting such Section 1.41 in its entirety and replacing it with the
following:
Section 1.41 "25% Termination Date" shall mean the first
date, if any, following the date on which the Remaining Equity
Commitment shall have been reduced to zero and on which Investor's
ownership of Company Stock shall have been below 25% by value of
the outstanding shares of Company Stock, on a fully diluted basis,
for a continuous period of 180 days; provided, that, if Investor's
ownership of Company Stock shall, following the date on which the
Remaining Equity Commitment shall have been reduced to zero, have
fallen below 25% by value of the outstanding shares of Company
Stock, on a fully diluted basis, as a result of the redemption of
limited partnership or other interests in partnerships or other
entities other than the Operating Partnership for shares of Company
Common Stock, then the 25% Termination Date shall mean the first
date, if any, following the date on which Investor's ownership of
Company Stock shall have been below 25% by value of the outstanding
shares of Company Stock, on a fully diluted basis, for a continuous
period of 450 days; provided, however, that if Investor's ownership
of Company Stock shall, following the date on which the Remaining
Equity Commitment shall have been reduced to zero, have fallen
below 25% by value of the outstanding shares of Company Stock, on a
fully diluted basis, as a result of a Transfer by Investor of
Company Stock, or as a result of a failure of Investor to exercise
its rights under Section 4.2 during the sixty days immediately
prior to the expiration of such 180-day period or 450-day period,
as applicable, if any such rights are exercisable during such pe-
riod, to the extent necessary to (and provided that it shall be
possible by such exercise to) raise its ownership of the
outstanding Company Common Stock, on a fully diluted basis, above
such 25% threshold, then the 25% Termination Date shall occur
immediately upon such Transfer or failure to exercise its rights
under Section 4.2, as the case may be.
b. Section 2.1(a) of Exhibit C to the Agreement hereby is
amended by deleting the third sentence of such Section 2.1(a) in its entirety
and replacing it with the following:
Thereafter and until the 25% Termination Date, at each annual or
special meeting of stockholders of the Company at, or the taking of
action by written consent of stockholders of the Company with
respect to, which any Directors are to be elected, Investor shall
have the right (but not the obligation) to nominate for election to
the Board that number of Directors which, when added to the number
of Directors who are then Investor Nominees and who will continue
to serve as Directors without regard to the outcome of the election
at such meeting or by such consent, represent the same proportion
of the total number of Directors (but in no event more
-2-<PAGE>
than 40% thereof) as is represented by the number of shares of
Company Stock which Investor then owns, as of the applicable record
date for such meeting (or, in the case of the first annual meeting
of stockholders of the Company following the Initial Closing, if
the record date for such annual meeting is prior to the date of the
Initial Closing, then as of the date of the Initial Closing),
relative to the number of shares of outstanding Company Stock as of
such date, on a fully diluted basis (such Directors also, "Investor
Nominees"), provided, that if Investor nominates for election to
the Board less than the number of Directors which Investor is
entitled, pursuant to this Section 2.1(a), to nominate for election
to the Board, at the first annual meeting of stockholders of the
Company following the Initial Closing, Investor shall have the
right (but not the obligation), at any time and from time to time
until 300 days following the first annual meeting of stockholders
of the Company following the Initial Closing, to designate for
placement on the Board, subject to the terms and conditions hereof,
that number of additional Directors which, when added to the number
of Directors who are Investor Nominees at such time, equals the
number of Directors that Investor was entitled to nominate for
election to the Board at the first annual meeting of stockholders
of the Company following the Initial Closing, and the Company
shall, as soon as reasonably practicable, cause each additional
Director so designated by Investor to become a member of the Board
in accordance with the second sentence hereof.
5. No Effect on Consistent Terms. All terms of the Agreement not
inconsistent with this Amendment shall remain in place and in full force and
effect and shall be unaffected by this Amendment.
6. Headings. The headings contained in this Amendment are
inserted for convenience of reference only and shall not affect the meaning or
interpretation of this Amendment.
-3-<PAGE>
IN WITNESS WHEREOF, this Amendment has been signed by or on behalf
of each of the parties hereto as of the day first above written.
CARR REALTY CORPORATION
By: /s/ Brian K. Fields
Name: Brian K. Fields
Title: Chief Financial Officer
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL U.S. REALTY
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
-4-
Exhibit 2.2
STOCKHOLDERS AGREEMENT
by and among
CARR REALTY CORPORATION
CARR REALTY, L.P.
SECURITY CAPITAL HOLDINGS S.A.
and
SECURITY CAPITAL U.S. REALTY
dated as of
April 30, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions
Section 1.1 "Affiliate"............................... 1
Section 1.2 "Agreement"............................... 1
Section 1.3 "Beneficially Own"........................ 1
Section 1.4 "Board"................................... 2
Section 1.5 "Buyer"................................... 2
Section 1.6 "Code".................................... 2
Section 1.7 "Company"................................. 2
Section 1.8 "Company Common Stock".................... 2
Section 1.9 "Conflict of Interest Policies"........... 2
Section 1.10 "Corporate Action Covenants".............. 2
Section 1.11 "Covered Transaction"..................... 2
Section 1.12 "Director"................................ 2
Section 1.13 "Early Termination Event"................. 2
Section 1.14 "Exercise Notice"......................... 2
Section 1.15 "Extraordinary Transaction"............... 2
Section 1.16 "fully diluted"........................... 2
Section 1.17 "Government Authority".................... 3
Section 1.18 "Group"................................... 3
Section 1.19 "Investor"................................ 3
Section 1.20 "Investor Nominees"....................... 3
Section 1.21 "Investor Restricted Person".............. 3
Section 1.22 "Key Committees".......................... 3
Section 1.23 "Large Controlled Subsidiary"............. 3
Section 1.24 "1933 Act"................................ 3
Section 1.25 "1934 Act"................................ 3
Section 1.26 "Office Property"......................... 3
Section 1.27 "Office Property Company"................. 3
Section 1.28 "Operating Partnership"................... 3
Section 1.29 "Participation Notice".................... 3
Section 1.30 "Passive Assets Percentage"............... 3
Section 1.31 "Passive Income Percentage"............... 3
Section 1.32 "person".................................. 4
Section 1.33 "SCGI".................................... 4
Section 1.34 "SCGI Restricted Person".................. 4
Section 1.35 "Securities Filings"...................... 4
Section 1.36 "Standstill Extension Term"............... 4
Section 1.37 "Standstill Period"....................... 4
Section 1.38 "Stock Purchase Agreement"................ 4
Section 1.39 "13D Group"............................... 4
Section 1.40 "Transfer"................................ 4
Section 1.41 "25% Termination Date".................... 4
Section 1.42 "USREALTY"................................ 5
Section 1.43 "Voting Securities"....................... 5<PAGE>
ARTICLE 2
Board of Directors
Section 2.1 Investor Nominees......................... 5
Section 2.2 Committee Representation;
Subsidiary Boards....................... 6
Section 2.3 Vacancies................................. 7
ARTICLE 3
Information Rights
Section 3.1 Operating Statements; Public
Company Status.......................... 7
Section 3.2 Advice of Actions......................... 7
ARTICLE 4
Voting and Participation Rights
Section 4.1 Voting Rights............................. 8
Section 4.2 Participation Rights...................... 9
ARTICLE 5
Standstill Provisions
Section 5.1 Standstill Period......................... 11
Section 5.2 Restrictions During Standstill
Period and Standstill Extension
Term................................... 13
Section 5.3 Investments in Office Properties and
Purchases of Interests in Office
Property Companies..................... 15
Section 5.4 Compliance with Insider Trading Policy.... 16
Section 5.5 Compliance with Article V of the
Amended Company Charter................ 16
Section 5.6 Investment Company Matters................ 17
ARTICLE 6
Limitations on Corporate Actions, Etc.
Section 6.1 Limitations on Corporate Actions.......... 17
Section 6.2 Provision of Information.................. 19
Section 6.3 Compliance with Conflicts of
Interest Policy........................ 19
Section 6.4 Sales of Assets........................... 20
-ii-<PAGE>
ARTICLE 7
Miscellaneous
Section 7.1 Counterparts.............................. 20
Section 7.2 Governing Law............................. 20
Section 7.3 Entire Agreement.......................... 20
Section 7.4 Expenses.................................. 20
Section 7.5 Notices................................... 20
Section 7.6 Successors and Assigns.................... 21
Section 7.7 Headings.................................. 21
Section 7.8 Amendments and Waivers.................... 21
Section 7.9 Interpretation; Absence of Presumption.... 22
Section 7.10 Severability.............................. 22
Section 7.11 Further Assurances........................ 22
Section 7.12 Specific Performance...................... 22
Section 7.13 Investor Breach........................... 22
Section 7.14 Confidentiality........................... 23
-iii-<PAGE>
THIS STOCKHOLDERS AGREEMENT (the "Agreement"), dated as of April 30,
1996, is made by and among Carr Realty Corporation, a Maryland corporation (the
"Company"), Carr Realty, L.P., a Delaware limited partnership (the "Operating
Partnership"), Security Capital U.S. Realty, a Luxembourg corporation
("USREALTY"), and Security Capital Holdings S.A., a Luxembourg corporation and
a wholly owned subsidiary of USREALTY ("Buyer"). Capitalized terms not
otherwise defined herein have the meaning ascribed to them in the Stock
Purchase Agreement (as hereinafter defined).
RECITALS:
WHEREAS, the Company, USREALTY and Buyer have entered into a Stock
Purchase Agreement, dated as of November 5, 1995 (the "Stock Purchase
Agreement"), pursuant to which the Company is selling, conveying, assigning and
transferring, and Buyer is purchasing, certain shares of the common stock, par
value $.01 per share, of the Company (the "Company Common Stock") on the date
hereof, and pursuant to which the Company has agreed to sell, and Buyer has
agreed to purchase, certain additional shares of Company Stock, upon the terms
and subject to the conditions set forth therein; and
WHEREAS, it is a condition to the transactions contemplated by the
Stock Purchase Agreement and the parties believe it to be in their best
interests that they enter into this Agreement and provide for certain rights
and restrictions with respect to the investment by Investor (as hereinafter
defined) in the Company and the corporate governance of the Company;
NOW, THEREFORE, in consideration of the premises and the covenants
and agreements contained herein and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have the
following respective meanings:
Section 1.1 "Affiliate" shall have the meaning ascribed thereto in
Rule 12b-2 promulgated under the 1934 Act, and as in effect on the date hereof.
Section 1.2 "Agreement" shall have the meaning set forth in the
first paragraph hereof.
Section 1.3 "Beneficially Own" shall mean, with respect to any
security, having direct or indirect (including through any Subsidiary or
Affiliate) "beneficial ownership" of such security, as determined pursuant to
Rule 13d-3 under the 1934 Act, including pursuant to any agreement, arrangement
or understanding, whether or not in writing.<PAGE>
Section 1.4 "Board" shall mean the board of directors of the
Company.
Section 1.5 "Buyer" shall have the meaning set forth in the first
paragraph hereof.
Section 1.6 "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto, including all of the rules and regulations
promulgated thereunder.
Section 1.7 "Company" shall have the meaning set forth in the first
paragraph hereof.
Section 1.8 "Company Common Stock" shall have the meaning set forth
in the second paragraph hereof.
Section 1.9 "Conflict of Interest Policies" shall have the meaning
set forth in Section 6.3.
Section 1.10 "Corporate Action Covenants" shall have the meaning set
forth in Section 6.1.
Section 1.11 "Covered Transaction" shall have the meaning set forth
in Section 5.1(a)(iv).
Section 1.12 "Director" shall mean a member of the Board.
Section 1.13 "Early Termination Event" shall have the meaning set
forth in Section 5.1(a).
Section 1.4 "Exercise Notice" shall have the meaning set forth in
Section 4.2(b).
Section 1.5 "Extraordinary Transaction" shall mean (a) any merger,
consolidation, sale of assets (or group of assets), recapitalization, other
business combination, liquidation, or other similar action out of the ordinary
course of business of the Company, or (b) any issuance of securities to any
person or Group requiring shareholder approval in accordance with the
guidelines of the New York Stock Exchange as to such matters, as in effect as
of the date of the Stock Purchase Agreement.
Section 1.6 "fully diluted" shall mean, with respect to the Company
Stock, the total number of outstanding shares of Company Stock (for such
purposes, treating the number of shares of Company Preferred Stock as that
number of shares of Company Common Stock into which such shares of Company
Preferred Stock are then convertible), plus the sum of (a) all Operating
Partnership Units outstanding as of the applicable time and held by limited
partners of the Operating Partnership other than the Company, and (b) all
Operating Partnership Units issuable upon the exercise of options or warrants
to purchase and securities convertible into (or exchangeable or redeemable for)
Operating Partnership Units outstanding as of the applicable time, such sum not
to exceed 5,758,989 for purposes of this definition.
-2-<PAGE>
Section 1.17 "Government Authority" shall mean any government or
state (or any subdivision thereof) of or in the United States, or any agency,
authority, bureau, commission, department or similar body or instrumentality
thereof, or any governmental court or tribunal.
Section 1.18 "Group" shall mean a "group" as such term is used in
Section 13(d)(3) of the 1934 Act.
Section 1.19 "Investor" shall mean, collectively, as the context may
require, USREALTY and Buyer, and shall also include any Affiliate of USREALTY
or Buyer of which USREALTY and/or Buyer collectively, directly or indirectly,
Beneficially Own 98% or more of the voting power and economic interests, or any
BONA FIDE financial institution to which any Investor has Transferred
(including upon foreclosure of a pledge) shares of Company Stock for the
purpose of securing BONA FIDE indebtedness of any Investor and which has agreed
to be bound by this Agreement.
Section 1.20 "Investor Nominees" shall have the meaning set forth in
Section 2.1(a).
Section 1.21 "Investor Restricted Person" shall have the meaning set
forth in Section 5.3(a).
Section 1.22 "Key Committees" shall have the meaning set forth in
Section 2.2(a).
Section 1.23 "Large Controlled Subsidiary" shall mean a Controlled
Subsidiary having assets in excess of $200,000,000.
Section 1.24 "1933 Act" shall mean the Securities Act of 1933, as
amended.
Section 1.25 "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
Section 1.26 "Office Property" shall have the meaning set forth in
Section 5.3(a).
Section 1.27 "Office Property Company" shall have the meaning set
forth in Section 5.3(b).
Section 1.28 "Operating Partnership" shall have the meaning set
forth in the first paragraph hereof.
Section 1.29 "Participation Notice" shall have the meaning set forth
in Section 4.2(b).
Section 1.30 "Passive Assets Percentage" shall have the meaning set
forth in Section 6.1(c).
Section 1.31 "Passive Income Percentage" shall have the meaning set
forth in Section 6.1(c).
-3-<PAGE>
Section 1.32 "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
organization, other form of business or legal entity or Government Authority.
Section 1.33 "SCGI" shall have the meaning set forth in Section 5.3.
Section 1.34 "SCGI Restricted Person" shall have the meaning set
forth in Section 5.3(a).
Section 1.35 "Securities Filings" shall have the meaning set forth
in Section 3.1(a)(ii).
Section 1.36 "Standstill Extension Term" shall have the meaning set
forth in Section 5.1(b).
Section 1.37 "Standstill Period" shall have the meaning set forth in
Section 5.1(a).
Section 1.38 "Stock Purchase Agreement" shall have the meaning set
forth in the second paragraph hereof.
Section 1.39 "13D Group" shall mean any group of persons acquiring,
holding, voting or disposing of Voting Securities which would be required under
Section 13(d) of the 1934 Act and the rules and regulations thereunder (as in
effect, and based on legal interpretations thereof existing, on the date
hereof) to file a statement on Schedule 13D with the Securities and Exchange
Commission as a "person" within the meaning of Section 13(d)(3) of the 1934 Act
if such group beneficially owned Voting Securities representing more than 5% of
any class of Voting Securities then outstanding.
Section 1.40 "Transfer" shall have the meaning set forth in Section
5.2(a)(ii).
Section 1.41 "25% Termination Date" shall mean the first date, if
any, following the date on which the Remaining Equity Commitment shall have
been reduced to zero and on which Investor's ownership of Company Stock shall
have been below 25% by value of the outstanding shares of Company Stock, on a
fully diluted basis, for a continuous period of 180 days; provided, that, if
Investor's ownership of Company Stock shall, following the date on which the
Remaining Equity Commitment shall have been reduced to zero, have fallen below
25% by value of the outstanding shares of Company Stock, on a fully diluted
basis, as a result of the redemption of limited partnership or other interests
in partnerships or other entities other than the Operating Partnership for
shares of Company Common Stock, then the 25% Termination Date shall mean the
first date, if any, following the date on which Investor's ownership of Company
Stock shall have been below 25% by value of the outstanding shares of Company
Stock, on a fully diluted basis, for a continuous period of 450 days; provided,
however, that if Investor's ownership of Company Stock shall, following the
date on which the Remaining Equity Commitment shall have been reduced to zero,
have fallen below 25% by value of the outstanding shares of Company Stock, on a
fully diluted basis, as a result of a Transfer by Investor of Company Stock, or
as a result of a failure of Investor to exercise its rights under Section 4.2
during the sixty days immediately prior to the expiration of such 180-day
period or 450-day period, as
-4-<PAGE>
applicable, if any such rights are exercisable during such period, to the
extent necessary to (and provided that it shall be possible by such exercise
to) raise its ownership of the outstanding Company Common Stock, on a fully
diluted basis, above such 25% threshold, then the 25% Termination Date shall
occur immediately upon such Transfer or failure to exercise its rights under
Section 4.2, as the case may be.
Section 1.42 "USREALTY" shall have the meaning set forth in the
first paragraph hereof.
Section 1.43 "Voting Securities" shall mean at any time shares of
any class of capital stock of the Company which are then entitled to vote
generally in the election of Directors.
ARTICLE 2
Board of Directors
Section 2.1 Investor Nominees. (a) From and after the Initial
Closing and until the next annual or special meeting of stockholders of the
Company at, or the next taking of action by written consent of stockholders of
the Company with respect to, which any Directors are to be elected, the
Investor shall have the right (but not the obligation) to have on the Board two
Directors (such Directors, the "Investor Nominees"), and the Company shall
cause such Investor Nominees to become members of the Board. To effectuate the
placement of such Investor Nominees on the Board, the Company shall, at its
sole option, (i) expand the size of the Board or (ii) solicit the resignations
of the appropriate number of Directors, in either case, to the extent necessary
to permit the Investor Nominees to serve. Thereafter and until the 25%
Termination Date, at each annual or special meeting of stockholders of the
Company at, or the taking of action by written consent of stockholders of the
Company with respect to, which any Directors are to be elected, Investor shall
have the right (but not the obligation) to nominate for election to the Board
that number of Directors which, when added to the number of Directors who are
then Investor Nominees and who will continue to serve as Directors without
regard to the outcome of the election at such meeting or by such consent,
represent the same proportion of the total number of Directors (but in no event
more than 40% thereof) as is represented by the number of shares of Company
Stock which Investor then owns, as of the applicable record date for such
meeting (or, in the case of the first annual meeting of stockholders of the
Company following the Initial Closing, if the record date for such annual
meeting is prior to the date of the Initial Closing, then as of the date of the
Initial Closing), relative to the number of shares of outstanding Company Stock
as of such date, on a fully diluted basis (such Directors also, "Investor
Nominees"), provided, that if Investor nominates for election to the Board less
than the number of Directors which Investor is entitled, pursuant to this
Section 2.1(a), to nominate for election to the Board, at the first annual
meeting of stockholders of the Company following the Initial Closing, Investor
shall have the right (but not the obligation), at any time and from time to
time until 300 days following the first annual meeting of stockholders of the
Company following the Initial Closing, to designate for placement on the Board,
subject to the terms and conditions hereof, that number of additional Directors
which, when added to the number of Directors who are Investor Nominees at such
time, equals the number of Directors that Investor was entitled to nominate for
election to the Board at the first annual meeting of stockholders of the
-5-<PAGE>
Company following the Initial Closing, and the Company shall, as soon as
reasonably practicable, cause each additional Director so designated by
Investor to become a member of the Board in accordance with the second sentence
hereof. In computing the number of Investor Nominees, any fraction is to be
rounded down to the nearest whole number.
(b) Investor will not name any person as an Investor Nominee if (i)
such person is not reasonably experienced in business, financial or real estate
matters; (ii) such person has been convicted of, or has pled NOLO CONTENDERE
to, a felony; (iii) the election of such person would violate any law; or (iv)
any event required to be disclosed pursuant to Item 401(f) of Regulation S-K of
the 1934 Act has occurred with respect to such person.
(c) The Company will support the nomination of, and the Company's
nominating committee (or any other committee exercising a similar function)
shall recommend to the Board, the election of each Investor Nominee to the
Board, and the Company will exercise all authority under applicable law to
cause each Investor Nominee to be elected to the Board. Without limiting the
generality of the foregoing, with respect to each meeting of stockholders of
the Company at which Directors are to be elected, the Company shall use its
reasonable efforts to solicit from the stockholders of the Company eligible to
vote in the election of Directors proxies in favor of any Investor Nominees.
Section 2.2 Committee Representation; Subsidiary Boards. (a)
During such time as Investor is entitled pursuant to Section 2.1(a) to have at
least one Investor Nominee on the Board, unless Investor chooses not to
exercise its rights under this Section 2.2(a), at least one Director who is an
Investor Nominee shall serve on each of the audit committee, the nominating
committee, the executive compensation committee, the executive committee, any
special committee(s) of the Board, and any other committees which shall be
charged with exercising substantial authority on behalf of the Board (the
foregoing, the "Key Committees"). Notwithstanding the foregoing, if none of
the Directors who are Investor Nominees would be considered "independent" of
the Company or "disinterested" (i) for purposes of any applicable rule of the
New York Stock Exchange or any other securities exchange or other self-
regulating organization (such as the National Association of Securities
Dealers) requiring that members of the audit committee of the Board be
independent of the Company, (ii) for purposes of any law or regulation that
requires, in order to obtain or maintain favorable tax, securities, corporate
law or other material legal benefits with respect to any plan or arrangement
for employee compensation or benefits, that the members of the committee of the
Board charged with responsibility for such plan or arrangement be "independent"
of the Company or "disinterested", or (iii) for purposes of any special
committee formed in connection with any transaction or potential transaction
involving the Company and any of Investor, its Affiliates or any Group of which
Investor is a member or such other transaction or potential transaction which
would involve an actual or potential conflict of interest on the part of the
Directors who are Investor Nominees, then a Director who is an Investor Nominee
shall not be required to be appointed to any such committee; provided, however,
that the committees of the Board shall be organized such that, to the extent
practicable, the only items to be considered by a Key Committee on which no
Director who is an Investor Nominee may serve will be those items which prevent
the Director who is an Investor Nominee from serving on such Key Committee.
Any members of any Key Committee who are Investor Nominees shall, in the event
of any vacancy in such membership, be replaced by a Director who is an Investor
Nominee elected by a majority of the Directors who are Investor Nominees.
-6-<PAGE>
(b) During such time as Investor is entitled pursuant to Section
2.1(a) to have at least one Investor Nominee on the Board, unless Investor
chooses not to exercise its rights under this Section 2.2(b), one individual
designated by Investor shall serve as a member of the board of directors or
comparable governing body of each Controlled Subsidiary of the Company, if any,
that is a corporation or other person with a board of directors or board of
trustees.
Section 2.3 Vacancies. In the event that any Investor Nominee shall
cease to serve as a Director for any reason other than the fact that Investor
no longer has a right to nominate a Director, as provided in Section 2.1(a),
the vacancy resulting thereby shall be filled by an Investor Nominee designated
by Investor; provided, however, that any Investor Nominee so designated shall
satisfy the qualification requirements set forth in Section 2.1(b).
ARTICLE 3
Information Rights
Section 3.1 Operating Statements; Public Company Status. (a) From
and after the date hereof, until the 25% Termination Date, if any, the Company
will:
(i) deliver to Investor, as soon as practicable after the end
of each month, an operating and financial statement and management
report of the Company, the Operating Partnership and each Subsidiary
not consolidated with the Company or the Operating Partnership as at
and for the end of such month, all in such form as may be prepared by
the Company and the Operating Partnership for internal use by
management;
(ii) deliver to Investor, as promptly as practicable following
filing, a copy of each report, schedule or other document filed by
the Company pursuant to the requirements of any federal or state
securities laws (collectively, the "Securities Filings"); and
(iii) continue to comply in all material respects with the
reporting requirements of Section 13 or 15(d) of the 1934 Act.
(b) The Company will afford Investor a reasonable opportunity to
review any Securities Filing which refers to, describes or mentions Investor
prior to the time that such Securities Filing is filed with or sent to the
applicable Government Authority.
Section 3.2 Advice of Actions. From and after the date hereof,
until the 25% Termination Date, if any, without first having consulted with the
representative of Investor designated by Investor in writing, the Company will
not seek approval by the Board of any proposal relating to:
(a) the acquisition, whether by merger, consolidation, purchase of
stock or assets (or group of assets) or other business combination, of any
business or assets (or group of assets) having a value in excess of
$25,000,000;
-7-<PAGE>
(b) the sale or disposal of any assets (or group of assets), whether
by merger, consolidation, sale of stock or assets (or group of assets) or
other business combination having a value in excess of $25,000,000;
(c) the incurrence or issuance of indebtedness, the entering into a
guaranty, or the engagement in any other financing arrangement in excess
of $25,000,000;
(d) the annual operating budget for the Company;
(e) a material change in the executive management of the Company;
(f) any new material agreements or arrangements with any members of
the executive management of the Company; or
(g) the issuance by the Company of capital stock of the Company, by
the Operating Partnership of Operating Partnership Units, or by a
Controlled Subsidiary of any equity interests, other than, (i) to the
Company or a wholly owned Subsidiary thereof, (ii) to limited partners of
the Operating Partnership upon redemptions of Operating Partnership Units,
(iii) to employees of the Company or a Significant Subsidiary in
connection with any employee benefit plan approved by the stockholders of
the Company, (iv) the issuance of Class A Units (as defined in the
Partnership Agreement) automatically upon conversion of Class B Units (as
defined in the Partnership Agreement) pursuant to the Partnership
Agreement, and (v) the issuance of 40,909 Class C Units (as defined in the
Partnership Agreement) (or warrants to purchase 40,909 shares of Company
Common Stock) pursuant to the Contribution Agreement, dated as of January
20, 1995, between Carr Realty, L.P. and The Evans Company.
Notwithstanding the foregoing, the Company shall have no obligation to accept
or comply with any advice offered by Investor or its designated representative
in any consultation referred to in this Section 3.2. The designated
representative of Investor, for purposes of this Section 3.2, initially shall
be Paul Szurek.
ARTICLE 4
Voting and Participation Rights
Section 4.1 Voting Rights. Subject to the provisions of this
Section 4.1, Investor may vote the shares of Company Stock which it owns in its
sole and absolute discretion. During the Standstill Period and any Standstill
Extension Term, Investor will vote all shares of Company Stock which it owns in
one of the following two manners, at its option: (a) in accordance with the
recommendation of the Board, or (b) proportionally in accordance with the votes
of the other holders of Company Stock; provided, however, that Investor may
vote (i) all of the shares of Company Stock that it owns, in its sole and
absolute discretion, with regard to (x) the election of the Investor Nominee(s)
to the Board and (y) any amendment to the Amended Company Charter or the By-
laws of the Company which would reasonably be expected to materially adversely
affect Investor, and (ii) the shares of Company Stock that it owns representing
ownership of up to 28% of the then
-8-<PAGE>
outstanding shares of Company Stock, in its sole and absolute discretion, with
regard to any Extraordinary Transaction submitted to a vote of the stockholders
of the Company (unless (A) the Amended Company Charter shall be amended to
require the affirmative vote of less than the holders of two-thirds of all
shares entitled to vote on such Extraordinary Transaction or (B) such
Extraordinary Transaction is otherwise subject to the approval of less than
two-thirds of all shares entitled to vote thereon, in either of which case
Investor may vote all of the shares of Company Stock it owns, in its sole and
absolute discretion, with regard to any such Extraordinary Transaction).
During the Standstill Period and any Standstill Extension Term, with regard to
any Extraordinary Transaction submitted to a vote of the stockholders of the
Company, Investor will vote all shares of Company Stock owned by it that
represent ownership of in excess of 28% of the outstanding shares of Company
Stock, in one of the following two manners, at its option: (x) in accordance
with the recommendation of the Board, or (y) proportionally in accordance with
the votes of the other holders of Company Stock (provided that, as set forth in
the immediately preceding sentence, in any case described in subpart (A) or (B)
of the parenthetical clause set forth in the immediately preceding sentence,
Investor may vote all of the shares of Company Stock it owns in its sole and
absolute discretion).
Section 4.2 Participation Rights. (a) Right to Participate. From
and after the date hereof, until the 25% Termination Date, if any, Investor
shall be entitled to a participation right to purchase or subscribe for up to
30% (or up to 35% if necessary in order for Investor to retain ownership of
such percentage amount of the outstanding Company Stock, on a fully diluted
basis, as is necessary for the product of such ownership percentage and the
Company's fully diluted ownership percentage of the Operating Partnership to be
at least equal to 25%) of the total number of any additional shares of capital
stock or Operating Partnership Units, as the case may be, to be issued or sold
by the Company or a Large Controlled Subsidiary (to the extent permitted by the
governing documents of such Large Controlled Subsidiary and subject to the
rights of the shareholders, partners, or other owners, as the case may be, of
such Large Controlled Subsidiary), in the event that the Company or such Large
Controlled Subsidiary issues or sells any of its capital stock or Operating
Partnership Units (other than any such shares or Operating Partnership Units
issued to the Company or any of its Controlled Subsidiaries or pursuant to
options, rights or warrants or other commitments or securities in effect or
outstanding on the date of the Stock Purchase Agreement, including redemption
rights relating to Operating Partnership Units, and other than any such shares
or Operating Partnership Units issued pursuant to employee benefit plans
approved by the Company's stockholders, including upon the exercise of stock
options granted to management).
(b) Notice. In the event the Company or a Large Controlled
Subsidiary proposes to issue or sell any shares of capital stock or Operating
Partnership Units in a transaction giving rise to the participation rights
provided for in this Section, the Company shall send a written notice (the
"Participation Notice") to Investor setting forth the number of shares of such
capital stock of the Company or a Large Controlled Subsidiary, as the case may
be, or of Operating Partnership Units which the Company or a Large Controlled
Subsidiary, as the case may be, proposes to sell or issue, the price (before
any commission or discount) at which such shares are proposed to be issued (or,
in the case of an underwritten or privately placed offering in which the price
is not known at the time the Participation Notice is given, the method of
determining such price and an estimate thereof), and all other relevant
information as to such proposed transaction as may be necessary for Investor
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to determine whether or not to exercise the rights granted in this Section. At
any time within 30 days after its receipt of the Participation Notice, Investor
may exercise its participation rights to purchase or subscribe for shares of
such shares of capital stock or Operating Partnership Units, as provided for in
this Section, by so informing the Company in writing (an "Exercise Notice").
Each Exercise Notice shall state the percentage of the proposed sale or
issuance that the Investor elects to purchase. Each Exercise Notice shall be
irrevocable, subject to the conditions to the closing of the transaction giving
rise to the participation right provided for in this Section.
(c) Abandonment of Sale or Issuance. The Company or a Large
Controlled Subsidiary, as the case may be, shall have the right, in its sole
discretion, at all times prior to consummation of any proposed sale or issuance
giving rise to the participation right granted by this Section, to abandon,
rescind, annul, withdraw or otherwise terminate such sale or issuance,
whereupon all participation rights in respect of such proposed sale or issuance
pursuant to this Section shall become null and void, and neither the Company
nor any of its Large Controlled Subsidiaries shall have any liability or
obligation to Investor or any Affiliate thereof who has acquired shares of
Company Stock pursuant to the Stock Purchase Agreement or from Investor with
respect thereto by virtue of such abandonment, rescission, annulment,
withdrawal or termination.
(d) Terms of Sale. The purchase or subscription by Investor or an
Affiliate thereof, as the case may be, pursuant to this Section shall be on the
same price and other terms and conditions, including the date of sale or
issuance, as are applicable to the purchasers or subscribers of the additional
shares of capital stock of the Company or a Large Controlled Subsidiary or
Operating Partnership Units, as the case may be, whose purchases or
subscriptions give rise to the participation rights, which price and other
terms and conditions shall be substantially as stated in the relevant
Participation Notice (which standard shall be satisfied if the price, in the
case of a negotiated transaction, is not greater than 110% of the estimated
price set forth in the relevant Participation Notice or, in the case of an
underwritten or privately placed offering, is not greater than the greater of
(i) 110% of the estimated price set forth in the relevant Participation Notice
or (ii) the most recent closing price on or prior to the date of the pricing of
the offering); provided, however, that in the event the consideration to be
received by the Company or a Large Controlled Subsidiary, as the case may be,
in connection with the issuance of shares of capital stock or Operating
Partnership Units giving rise to participation rights hereunder is other than
cash or cash equivalents, the price per share or Operating Partnership Unit at
which the participation rights may be exercised shall be the price per share or
Operating Partnership Unit set forth in the Participation Notice or determined
in the manner set forth in the Participation Notice (which shall in either
event be the price as set forth in the agreement pursuant to which such shares
or Operating Partnership Units are to be issued, provided that the
consideration to be received therefor is valued based upon the fair market
value thereof); provided, further, however, that in the event the consideration
to be received by the Company or a Large Controlled Subsidiary, as the case may
be, in connection with the issuance of shares of capital stock or Operating
Partnership Units giving rise to participation rights hereunder is other than
cash or cash equivalents, and the fair market value of the consideration to be
received is not determinable, the price per share or Operating Partnership Unit
at which the participation rights may be exercised shall, (i) in the event that
shares of capital stock with an established trading market are being issued or
sold, be the average ten-day trailing market price of such shares as of the
date of receipt of the Participation Notice, and (ii) in the event any other
shares of capital stock are being issued or sold, be determined by
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reference to the amount set forth above, adjusted as may be appropriate to
reflect the relationship between those shares of capital stock with an
established trading market and those shares of capital stock to be issued in
the relevant transaction; provided, finally, that in the event the purchases or
subscriptions giving rise to the participation rights are effected by an
offering of securities registered under the 1933 Act and in which offering it
is not legally permissible for the securities to be purchased by Investor to be
included, such securities to be purchased by Investor will be purchased in a
concurrent private placement.
(e) Timing of Sale. If, with respect to any Participation Notice,
Investor fails to deliver an Exercise Notice within the requisite time period,
the Company or a Large Controlled Subsidiary, as the case may be, shall have
120 days after the expiration of the time in which the Exercise Notice is
required to be delivered in which to sell or issue not more than the number of
shares of capital stock of the Company or a Large Controlled Subsidiary or
Operating Partnership Units, as the case may be, described in the Participation
Notice on terms not more favorable to the Company or a Large Controlled
Subsidiary, as the case may be, than were set forth in the Participation
Notice. If, at the end of 120 days following the expiration of the time in
which the Exercise Notice is required to be delivered, the Company or a Large
Controlled Subsidiary, as the case may be, has not completed the sale or
issuance of capital stock of the Company or a Large Controlled Subsidiary or
Operating Partnership Units, as the case may be, in accordance with the terms
described in the Participation Notice (or at a price which is at least 90% of
the estimated price set forth in the Participation Notice), the Company or a
Large Controlled Subsidiary, as the case may be, shall again be obligated to
comply with the provisions of this Section with respect to, and provide the
opportunity to participate in, any proposed sale or issuance of shares of
capital stock of the Company or a Large Controlled Subsidiary or Operating
Partnership Units, as the case may be; provided, however, that notwithstanding
the foregoing, if the price at which such capital stock or Operating
Partnership Units is to be sold in an underwritten offering (or a privately
placed offering in which the price is not less than 97% of the most recent
closing price at the time of the pricing of the offering) is not at least 90%
of the estimated price set forth in the Participation Notice, the Company may
inform Investor of such fact and Investor shall be entitled to elect, by
written notice delivered within two Business Days following such notice from
the Company, to participate in such offering in accordance with the provisions
of this Section 4.2.
ARTICLE 5
Standstill Provisions
Section 5.1 Standstill Period. (a) Subject to the provisions of
the following sentence, the "Standstill Period" shall be the period commencing
on the date hereof and ending on the fifth anniversary of the date hereof.
Prior to the 25% Termination Date, if any, the Standstill Period shall also be
terminated on the earliest of:
(i) the occurrence of any event of default on the part of the
Company or any Subsidiary under any debt agreements, instruments, or
arrangements which event of default would reasonably be expected to result
in a Material Adverse Effect;
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(ii) the acquisition by any person or Group other than Investor or
any Affiliate thereof of Beneficial Ownership of 15% or more of the
outstanding shares of Company Stock, on a fully diluted basis;
(iii) any person or Group having a number of Directors on the Board,
or having the right or power to elect a number of Directors on the Board,
equal to or greater than the number of Directors to which Investor is
entitled;
(iv) the authorization by the Company or the Board or any committee
thereof (with all Investor Nominees abstaining or voting against) of the
solicitation of offers or proposals or indications of interest with
respect to any merger, consolidation, other business combination,
liquidation, sale of the Company or all or substantially all of the assets
of the Company or any other change of control of the Company or similar
extraordinary transaction, but excluding any merger, consolidation or
other business combination in which the Company is the surviving and
acquiring corporation and in which the businesses or assets so acquired do
not, or would not reasonably be expected to, have a value greater than 50%
of the assets of the Company prior to such merger, consolidation or other
business combination (any of the foregoing, a "Covered Transaction");
(v) the written submission by any person or Group other than
Investor or any Affiliate thereof of a proposal to the Company (including
to the Board or any agent, representative or Affiliate of the Company)
with respect to, or otherwise expressing an interest in pursuing, a
Covered Transaction; provided, however, that the Standstill Period shall
not terminate pursuant to this Section 5.1(a)(v) if, as soon as
practicable after receipt of any such proposal, the Board determines that
such proposal is not in the best interest of the Company and its
stockholders and for so long as the Board continues to reject such
proposal as a result of such determination;
(vi) in connection with any actual or proposed Covered Transaction,
the removal of any rights plan, provisions of the Amended Company Charter
relating to staggered terms of office for directors, provisions of the
Amended Company Charter or the By-laws of the Company relating to
supermajority voting of the Company's stockholders, "excess share"
provisions of the Amended Company Charter or the By-laws of the Company,
or any other similar arrangements, agreements, commitments or provisions
in the Amended Company Charter or the By-laws of the Company which would
reasonably be expected to impede the consummation of such actual or
proposed Covered Transaction by action of any Government Authority, the
Board, the stockholders of the Company or otherwise, or, whether or not in
connection with any actual or proposed Covered Transaction, any
modification, amendment, waiver or repeal of the ownership restrictions in
Section 5.2 of the Amended Company Charter (except as may be necessary to
allow any acquisition of Company Stock that would not constitute an Early
Termination Event under Section 5.1(a)(ii));
(vii) any breach by the Company of the Stock Purchase Agreement which
is neither cured nor desisted from within 30 days of receipt of written
notice of such breach and which would reasonably be expected to materially
adversely affect Investor or cause a Material Adverse Effect;
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(viii) any breach of this Agreement by the Company or the Operating
Partnership which is neither cured nor desisted from within 30 days of
receipt of written notice of such breach and which would reasonably be
expected to materially adversely affect Investor or cause a Material
Adverse Effect; or
(ix) any violation of any Corporate Action Covenant.
Any event set forth in subsection (i), (ii), (iii), (iv), (v), (vi),
(vii), (viii) or (ix) of this Section 5.1(a) shall be an "Early Termination
Event."
(b) If the Standstill Period shall not have been terminated prior to
the fifth anniversary of the date hereof, the Standstill Period and any
Standstill Extension Term shall automatically be extended for successive one-
year periods (each such period, a "Standstill Extension Term"), unless, in the
case of each Standstill Extension Term, Investor provides to the Company
written notice at least 270 days prior to the commencement of such Standstill
Extension Term, that such Standstill Extension Term and all further Standstill
Extension Terms are cancelled. Any Standstill Extension Term will be
terminated upon the earlier of (i) the first anniversary thereof or (ii) the
occurrence of an Early Termination Event.
Section 5.2 Restrictions During Standstill Period and Standstill
Extension Term. (a) During the Standstill Period and any Standstill Extension
Term, Investor will not, will cause each of its controlled Affiliates not to,
and will use its reasonable best efforts to cause each of its other Affiliates
not to, directly or indirectly:
(i) act in concert with any other person or Group by becoming a
member of a 13D Group, other than any 13D Group comprised exclusively of
Investor and one or more of its Affiliates;
(ii) sell, transfer, pledge or otherwise dispose of (collectively,
"Transfer") any shares of Company Stock except for: (v) Transfers made in
compliance with the requirements of Rule 144 of the 1933 Act, (w)
Transfers pursuant to negotiated transactions with third parties, (x)
Transfers pursuant to or in accordance with the Registration Rights
Agreement, (y) Transfers to one or more Affiliates of Investor who agree
to be bound by the terms and conditions of this Agreement and who satisfy
the ownership criteria in the definition of "Investor", and (z) Transfers
to a BONA FIDE financial institution for the purpose of securing BONA FIDE
indebtedness of any Investor; provided, further, that no Transfers
pursuant to this Section 5.2 shall be made in violation of Article V of
the Amended Company Charter;
(iii) purchase or otherwise acquire shares of Company Stock as a
result of which, after giving effect to such purchase or acquisition,
Investor and its Affiliates will Beneficially Own (A) more than 45% (or,
for purchases pursuant to Sections 2.4 or 2.5 of the Stock Purchase
Agreement, up to 48% if and to the extent such ownership would not violate
Article V of the Amended Company Charter) of the outstanding shares of
Company Stock, or (B) more than 40% of the outstanding shares of Company
Stock, on a fully diluted basis;
(iv) solicit or propose to effect or negotiate any Covered
Transaction other than pursuant to the Stock Purchase Agreement;
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(v) solicit, initiate or participate in any "solicitation" of
"proxies" or become a "participant" in any "election contest" (as such
terms are defined or used in Regulation 14A under the 1934 Act,
disregarding clause (iv) of Rule 14a-1(l)(2) and including an exempt
solicitation pursuant to Rule 14a-2(b)(1)); call, or in any way
participate in a call for, any special meeting of stockholders of the
Company (or take any action with respect to acting by written consent of
the stockholders of the Company); request, or take any action to obtain or
retain any list of holders of any securities of the Company; or initiate
or propose any stockholder proposal or participate in the making of, or
solicit stockholders of the Company for the approval of, one or more
stockholder proposals; provided, however, that Investor shall not be
prohibited from communicating with a securityholder who is engaged in any
"solicitation" of "proxies" or who is a "participant" in any "election
contest";
(vi) seek representation on the Board or a change in the composition
or size of the Board other than as permitted by Section 2;
(vii) Transfer any capital stock of Buyer or any capital stock of any
Affiliate of Buyer that owns Company Stock, or cause Buyer or any such
Affiliate thereof to Transfer any options, warrants, convertible
securities or other similar rights to acquire any capital stock of Buyer
or any such Affiliate thereof; provided, however, that no such Transfer
shall be prohibited if after giving effect thereto the Beneficial Owner of
such shares of Company Stock satisfies the ownership criteria in the
definition of "Investor"; and provided, further, that no Transfers to a
BONA FIDE financial institution for the purpose of securing BONA FIDE
indebtedness of any Investor shall be prohibited hereby;
(viii) request the Company or any of its directors, officers, employees
or agents to amend or waive any provisions of this Section 5.2 or Article
V of the Amended Company Charter or seek to challenge the legality or
effect thereof; or
(ix) assist, advise, encourage or act in concert with any person with
respect to, or seek to do, any of the foregoing.
(b) In the event any BONA FIDE financial institution to which
Company Stock shall have been transferred in accordance with the provisions
hereof shall foreclose upon such Company Stock, such financial institution
shall, at least ten Business Days prior to effecting any further Transfer of
such Company Stock (other than to an Affiliate and other than by pledge or
hypothecation to another BONA FIDE financial institution, in each of which case
the transferee shall agree to be bound by this Agreement) provide the Company
with written notice of its intention to effect such a Transfer. The Company
shall have ten Business Days from the date of such notice to elect to purchase
all, but not less than all, of the shares of Company Stock subject to such
notice, at a price equal to the higher of (x) the average ten-day trailing
market price of such shares as of the date of receipt of such notice, or (y)
the average ten-day trailing market price of such shares as of the date the
Company irrevocably informs such financial institution of its election to
purchase such shares of Company Stock. If the Company so elects to purchase
such shares of Company Stock, the closing of such purchase shall be within 10
Business Days of the Company's notice to such effect.
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Section 5.3 Investments in Office Properties and Purchases of
Interests in Office Property Companies. (a) Subject to the provisions of the
following sentence, and excluding transactions which are the subject of
paragraph (b) of this Section, from and after the date hereof until the 25%
Termination Date, if any, Investor and any other person of which Investor is
the direct or indirect general partner or as to which Investor has the direct
or indirect right or power to elect a majority of the board of directors or
other governing body or otherwise controls (but subject, in the case of any
person other than Investor, to the fiduciary duties of such person or its
general partner, board of directors or other governing body) (any such person,
an "Investor Restricted Person") shall not, and Investor shall use its
reasonable best efforts to cause Security Capital Group Incorporated ("SCGI")
and any person of which SCGI is the direct or indirect general partner or as to
which SCGI has the direct or indirect right or power to elect a majority of the
board of directors or other governing body or otherwise controls (but subject,
in the case of any person other than Investor, to the fiduciary duties of such
person or its general partner, board of directors or other governing body)
(SCGI and any such person, an "SCGI Restricted Person") not to, directly or
indirectly, own, purchase, develop or otherwise acquire, directly or
indirectly, any office property in the United States (an "Office Property").
Notwithstanding the foregoing, Investor, any Investor Restricted Person or any
SCGI Restricted Person may own, purchase, or otherwise acquire, directly or
indirectly, any Office Properties if the investment in the Office Properties is
incidental to an investment made by Investor, such Investor Restricted Person
or such SCGI Restricted Person which investment is not primarily related to
Office Properties; it being understood and agreed that any acquisition of real
estate properties in which Office Properties constitute 30% or less of the
purchase price of all of the real estate properties acquired shall be
considered an investment in which the Office Properties acquired are incidental
to an investment which is not primarily related to Office Properties; provided,
however, that if Investor, any Investor Restricted Person or any SCGI
Restricted Person determines to make such a permitted investment, Investor,
such Investor Restricted Person or such SCGI Restricted Person shall afford the
Company a period of ten Business Days after receipt of written notice from
Investor describing the material terms of the proposed investment, in which to
provide Investor, such Investor Restricted Person or such SCGI Restricted
Person, as applicable, written notice that it elects to purchase the Office
Properties constituting a part of such investment (subject to customary due
diligence and other closing conditions); in the event Investor, such Investor
Restricted Person or such SCGI Restricted Person thereafter makes such
investment and the price and other terms are not less favorable to the Company
than those set forth in the notice of material terms delivered to the Company,
the Company shall promptly acquire the Office Properties included therein, at
the price allocated to such Office Properties in the purchase agreement entered
into by Investor, the Investor Restricted Person or the SCGI Restricted Person,
as the case may be, in respect of such acquisition and otherwise on terms
substantially similar to the terms of Investor's, the Investor Restricted
Person's or SCGI Restricted Person's acquisition of such properties; provided,
further, that if Investor, an Investor Restricted Person or an SCGI Restricted
Person shall have made such a purchase, including the Office Properties
therein, and if Investor, an Investor Restricted or an SCGI Restricted Person
should thereafter, but prior to the 25% Termination Date, determine to sell any
Office Properties so purchased, Investor, such Investor Restricted Person or
such SCGI Restricted Person shall inform the Company of such fact, and the
Company shall have ten Business Days in which to give Investor, such Investor
Restricted Person or such SCGI Restricted Person written notice that it desires
to purchase such Office Properties; such notice shall set forth the terms
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on which the Company is prepared to effect such purchase; Investor, such
Investor Restricted Person or such SCGI Restricted Person shall be free to
accept such offer, or to otherwise dispose of such Office Properties, but shall
in no event dispose of such Office Properties on terms materially less
favorable to Investor, such Investor Restricted Person or such SCGI Restricted
Person without first again affording the Company the opportunity to purchase
such Office Properties.
(b) From and after the date hereof until the 25% Termination Date,
if any, Investor and any Investor Restricted Person shall not, and Investor
shall use its reasonable best efforts to cause all SCGI Restricted Persons not
to, purchase or otherwise acquire equity securities, or options, warrants,
calls, purchase rights, subscription rights, conversion rights, exchange rights
or similar rights to purchase or otherwise acquire equity securities,
representing 9% or more of the equity interest of any person, other than the
Company, if (i) such person's principal business activity is the acquisition,
development or ownership for rental purposes of Office Properties, (ii) more
than 25% of such person's assets are Office Properties (but not including as
Office Property assets for such purpose any indebtedness secured directly or
indirectly by Office Properties), or (iii) more than 25% of such person's
revenues are derived from the purchase, development or ownership of Office
Properties (any such person, an "Office Property Company"); provided, however,
that Investor, any Investor Restricted Person or any SCGI Restricted Person
shall be entitled to purchase or otherwise acquire less than 9% of the equity
interest of an Office Property Company only if no Investor, Investor Restricted
Person or SCGI Restricted Person shall be represented on (or have the right to
nominate representatives to) the board of directors or similar governing body
or shall participate in the management, of such Office Property Company.
(c) The provisions of this Section 5.3 shall not restrict Investor,
any Investor Restricted Person or any SCGI Restricted Person from, directly or
indirectly, (x) providing debt financing for Office Properties or investing in,
owning or acquiring a mortgage REIT or other person substantially all of whose
business consists of making mortgage loans on Office Properties and other real
estate assets, (y) in connection with the activities described in clause (x),
acquiring or owning any Office Properties through foreclosure on mortgages or
similar instruments or other realization on security or (z) the ownership of
any REIT convertible debt which is passively held and unaccompanied by
representation on the board of directors or participation in management and
which is held by a person of which none of Investor, any Investor Restricted
Person or any SCGI Restricted Person directly or indirectly Beneficially Owns
20% or more of the outstanding economic or voting interest.
Section 5.4 Compliance with Insider Trading Policy. For as long as
Investor Beneficially Owns any shares of Company Stock, Investor will, and will
use its commercially reasonable efforts to cause its directors, officers,
employees, agents, and representatives to, comply with the written policy of
the Company reasonably designed to prevent violations of insider trading and
similar laws.
Section 5.5 Compliance with Article V of the Amended Company
Charter. For as long as Investor Beneficially Owns any shares of Company Stock
(unless the Standstill Period or any Standstill Extension Term is terminated by
any of the actions set forth in Section 5.1(a)(iv), (v) or (vi) (or unless any
such action occurs following the termination of the Standstill Period or any
Standstill Extension Term) or by any other willful action by the
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Company which constitutes an Early Termination Event (or would constitute an
Early Termination Event during the Standstill Period or any Standstill
Extension Term)), Investor, each Investor Restricted Person and any BONA FIDE
financial institution or other transferee described in Section 5.2(b) will, and
Investor will use its reasonable best efforts to cause the SCGI Restricted
Persons to, comply with Article V of the Amended Company Charter and will not
seek to challenge the legality or effect thereof.
Section 5.6 Investment Company Matters. From and after the date
hereof until the 25% Termination Date, if any, Investor shall use its
reasonable best efforts to not be or become an "investment company" or an
entity "controlled" by an "investment company", as such terms are defined in
the Investment Company Act of 1940, as amended.
ARTICLE 6
Limitations on Corporate Actions, Etc.
Section 6.1 Limitations on Corporate Actions. The Company agrees
that (a) from and after the date hereof, until the earlier of (i) the
termination of the Standstill Period or any Standstill Extension Term or (ii)
the 25% Termination Date, if any, it will not, and will not permit any of its
Controlled Subsidiaries to:
(A) incur total consolidated indebtedness in an amount in
excess of 65% of the sum of (x) (i) the market value of the
Company's outstanding shares, on a fully diluted basis, as of
the date of the Stock Purchase Agreement, and computed using the
Per Share Purchase Price, plus (ii) consolidated indebtedness of
the Company for money borrowed secured by real property or
improvements, as of the date of the Stock Purchase Agreement,
plus (y) the acquisition cost (defined as gross purchase price
plus transaction costs, before depreciation) to the Company or
its Controlled Subsidiaries of properties acquired after the
date of the Stock Purchase Agreement, minus (z) gross receipts
from the Company's disposition of any property from and after
the date of the Stock Purchase Agreement to the extent such
gross receipts are distributed to the Company's stockholders,
unless the violation of such ratio is cured within 30 days of
its occurrence;
(B) retain any third party (other than any Significant
Subsidiary) to manage more than 10% of the real estate assets
(excluding raw land and parking facilities) of the Company,
unless such retention is desisted prior to the fifth day
immediately preceding the end of the calendar quarter in which
it arises;
(C) have at any time more than 10%, at cost, of its
consolidated assets in property types other than office
buildings or land suitable and intended for development of
office properties, unless such ratio is reduced below such 10%
level within thirty days;
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(D) in the case of the Company, (1) terminate its
eligibility for treatment as a real estate investment trust, as
defined in the Code, or (2) take any action or fail to take any
action which would reasonably be expected to, alone or in
conjunction with any other factors, result in the loss of such
eligibility, unless in the case of a failure to take action,
such action is taken within thirty days; or
(E) except as permitted or required by any agreements or
commitments existing as of the date of the Stock Purchase
Agreement and disclosed to Investor pursuant thereto, cause or
permit the Operating Partnership to issue or grant (i) any
additional Operating Partnership Units, (ii) any securities
convertible into any Operating Partnership Units, or (iii) any
options, warrants, calls, purchase rights, subscription rights,
conversion rights, exchange rights or any other contractual
commitments or agreements by which the holder thereof or the
party thereto may purchase or otherwise acquire Operating
Partnership Units if, as a result of any of the actions
described in the foregoing clauses (i), (ii) or (iii) of this
paragraph (E), the Company will own or hold less than 70% of the
Operating Partnership Units, on a fully diluted basis, unless
any such issuances or grants are revoked to the extent necessary
prior to the fifth day immediately preceding the end of the
calendar quarter in which they are made;
(b) at any time during which any shares of Company Preferred Stock
are outstanding, the Company will not issue any shares of Company Preferred
Stock to any person other than Investor without the express written consent of
Investor; or
(c) from and after the date hereof until the first date, if any,
following the date on which the Remaining Equity Commitment shall have been
reduced to zero on which Investor's ownership of Company Stock shall have been
below 25% of the actually outstanding shares of Company Stock for a continuous
period of 180 days (or if Investor's ownership of Company Stock shall,
following the date on which the Remaining Equity Commitment shall have been
reduced to zero, have fallen below 25% by value of the actually outstanding
shares of Company Stock as a result of a Transfer by Investor of Company Stock
or a failure of Investor to exercise its rights under Section 4.2 during the
sixty days immediately prior to the expiration of such 180-day period, if any
such rights are exercisable during such period, to the extent necessary to (and
provided that it shall be possible by such exercise to) raise its ownership of
the actually outstanding Company Common Stock above such 25% threshold, then
until such Transfer or failure to exercise its rights under Section 4.2, as the
case may be), the Company (i) will not, without the prior written consent of
Investor, either take any action that would cause, or fail to take any action
which failure would cause, (A) the percentage of the Company's consolidated
gross income that is considered "passive income" (within the meaning of Section
1296(a)(1) of the Code and computed using the assumptions and conventions set
forth in Schedule 6.1(c), together with such modifications thereto as Investor
shall advise the Company in writing are necessary as a result of the
promulgation of regulations, rulings, or other formal or informal
administrative guidance clarifying existing law or a change in existing law or
interpretations thereof) (the "Passive Income Percentage") to exceed 45%, or
(B) the average percentage of the Company's assets (by value, computed as of
the end of every calendar quarter) held during any taxable year which produce
passive income or which are held for the production
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of passive income (as such terms are used in Section 1296(a)(2) of the Code and
computed using the assumptions and conventions set forth in Schedule 6.1(c),
together with such modifications thereto as Investor shall advise the Company
in writing are necessary as a result of the promulgation of regulations,
rulings, or other formal or informal administrative guidance clarifying
existing law or a change in existing law or interpretations thereof) (the
"Passive Assets Percentage") to exceed the lesser of (x) 45% or (y) the greater
of (1) 30% or (2) the average Passive Assets Percentage for the prior two
taxable years (assuming for this purpose that the Passive Assets Percentage was
45% for all periods prior to and including the period ending December 31,
1995); provided, however, that if the Board determines in good faith that the
Company's failure to take such action or the taking of such action, as the case
may be, would have a material adverse effect on the Company's net earnings,
cash flow, funds from operations or business, or would reasonably be expected
to cause the Company to fail to qualify as a REIT, the Company will negotiate
with Investor in good faith with a view toward reaching a reasonable
accommodation that would satisfy the interests of the Company in such matters
and the interests of Investor in the Company's not being classified as a
"passive foreign investment company" under the Code; provided, further,
however, that if the Company and Investor are unable to reach such a reasonable
accommodation after good faith negotiations, the requirements of this paragraph
(c) shall not apply to the action or failure to act at issue, and (ii) will
otherwise consider in good faith suggestions made by Investor as to the
structure of the Company's operations in order to permit Investor to avoid
being classified as a "passive foreign investment company" under the Code. The
Company may cure any breach of this Section 6.1(c) prior to the fifth day
immediately preceding the end of the calendar quarter in which such breach
arises.
The agreements of the Company set forth in subsections (a), (b) and (c) of this
Section 6.1 shall be the "Corporate Action Covenants."
Section 6.2 Provision of Information. For as long as Investor
Beneficially Owns any shares of Company Stock, the Company will provide to
Investor all information and documentation requested by Investor, and will
cooperate with Investor as requested, as may be necessary for Investor to
perform the calculations to be made in connection with and to meet the
documentation requirements pursuant to Sections 1291 through 1297 of the Code,
as may be amended from time to time, and any successor provisions thereto, and
as may otherwise be reasonably necessary in connection with any other record
keeping or reporting laws, rules or regulations (including all such
information, documentation and cooperation as is necessary to enable Investor
to (1) file any Tax Returns it is required to file and (2) to determine and
document its status, income, asset mix and other relevant items with respect to
the Passive Foreign Investment Company provisions in the Code).
Section 6.3 Compliance with Conflicts of Interest Policy. From and
after the date hereof until the 25% Termination Date, the Company will, and
will cause its Controlled Subsidiaries to, comply with and enforce the policies
and agreements of the Company, as in effect as of the date of the Stock
Purchase Agreement and previously disclosed to Investor, relating to
transactions with affiliates and potential conflicts of interest, including
such policies relating to and agreements with The Oliver Carr Company and
certain related parties, as such policies and agreements may be modified or
amended from time to time with the consent of Investor (such policies and
agreements, the "Conflict of Interest Policies"). From and after the date
hereof until the 25% Termination Date, Investor will comply with the Conflict
of Interest Policies; provided, however, that the provisions of this Agreement,
the Stock Purchase Agreement and the Registration Rights Agreement and the
-19-<PAGE>
transactions contemplated hereby and thereby shall not be limited, amended or
modified in any way by, and shall govern in the event of a conflict with, the
Conflict of Interest Policies.
Section 6.4 Sales of Assets. From and after the date hereof until
the 25% Termination Date, the Company will, and will cause its Controlled
Subsidiaries to, use its reasonable efforts, consistent with prudent management
of the Company's properties and assets in the interest of the Company's
stockholders, to dispose of properties or assets through tax deferred exchanges
which exchanges will defer any capital gains distributions to stockholders of
the Company. In the event it is expected that any capital gains distributions
are to be made, the Company will endeavor to provide Investor with such advance
notice thereof as may be practicable.
ARTICLE 7
Miscellaneous
Section 7.1 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party. Copies of executed
counterparts transmitted by telecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for purposes of this
Section, provided receipt of copies of such counterparts is confirmed.
Section 7.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT
REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 7.3 Entire Agreement. This Agreement (including agreements
incorporated herein) and the Schedules and Exhibits hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein. This Agreement
is not intended to confer upon any person not a party hereto (and their
successors and assigns) any rights or remedies hereunder.
Section 7.4 Expenses. Except as set forth in the Stock Purchase
Agreement, all legal and other costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses.
Section 7.5 Notices. All notices and other communications hereunder
shall be sufficiently given for all purposes hereunder if in writing and
delivered personally, sent by documented overnight delivery service or, to the
extent receipt is confirmed, telecopy, telefax or other electronic transmission
service to the appropriate address or number as set forth below. Notices to
the Company shall be addressed to:
-20-<PAGE>
Carr Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: Thomas A. Carr
Telecopy Number: (202) 638-0102
with a copy to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attention: J. Warren Gorrell, Jr., Esq.
Telecopy Number: (202) 637-5910
or at such other address and to the attention of such other person as the
Company may designate by written notice to Investor. Notices to Investor shall
be addressed to:
Security Capital Holdings S.A.
69, route d'Esch
L-2953 Luxembourg
Attention: Managing Director
Telecopy Number: (352) 4590-3331
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Telecopy Number: (212) 403-2000
Section 7.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors. Neither party shall be permitted to assign any of its rights
hereunder to any third party, except that any Investor shall be permitted to
assign its rights hereunder to any other person who would satisfy the criteria
in the definition of "Investor" which agrees to be bound by this Agreement.
Section 7.7 Headings. The Section, Article and other headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All
references to Sections or Articles contained herein mean Sections or Articles
of this Agreement unless otherwise stated.
Section 7.8 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment is
sought. Either party hereto may, only by an instrument in writing, waive
compliance by the other party hereto with any term or provision hereof on the
part of such other party hereto to be performed or
-21-<PAGE>
complied with. The waiver by any party hereto of a breach of any term or
provision hereof shall not be construed as a waiver of any subsequent breach.
Section 7.9 Interpretation; Absence of Presumption. (a) For the
purposes hereof, (i) words in the singular shall be held to include the plural
and vice versa and words of one gender shall be held to include the other
gender as the context requires, (ii) the terms "hereof", "herein", and
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole (including all of the Schedules
and Exhibits hereto) and not to any particular provision of this Agreement, and
Article, Section, paragraph, Schedule and Exhibit references are to the
Articles, Sections, paragraphs, Schedules and Exhibits to this Agreement unless
otherwise specified, (iii) the word "including" and words of similar import
when used in this Agreement shall mean "including, without limitation," unless
the context otherwise requires or unless otherwise specified, (iv) the word
"or" shall not be exclusive, and (v) provisions shall apply, when appropriate,
to successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
(c) All references herein to the number of shares of Company Stock
outstanding, or to any percentage of the shares of Company Stock, or any
similar reference, shall, in each case, be determined and computed without
reference to any distinction between Company Common Stock and Company Preferred
Stock, but counting each share of Company Preferred Stock outstanding as the
equivalent of that number of shares of Company Common Stock into which each
share of Company Preferred Stock is then convertible.
Section 7.10 Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
Section 7.11 Further Assurances. The Company and Investor agree
that, from time to time, each of them will, and will cause their respective
Affiliates to, execute and deliver such further instruments and take such other
action as may be necessary to carry out the purposes and intents hereof.
Section 7.12 Specific Performance. The Company and Investor each
acknowledge that, in view of the uniqueness of arrangements contemplated by
this Agreement, the parties hereto would not have an adequate remedy at law for
money damages in the event that this Agreement were not performed in accordance
with its terms, and therefore agree that the parties hereto shall be entitled
to specific enforcement of the terms hereof in addition to any other remedy to
which the parties hereto may be entitled at law or in equity.
Section 7.13 Investor Breach. In the event Investor shall have
breached (i) its obligation to effect a purchase of Company Stock pursuant to
the Stock Purchase Agreement which breach is neither cured nor desisted from
within 30 days of receipt of written notice of such breach, or (ii) any of its
obligations under this Agreement which breach is neither cured nor desisted
from within 30 days of receipt of written notice of such breach
-22-<PAGE>
and which would reasonably be expected to materially adversely affect the
Company, the Company shall no longer be required to perform any of its
obligations hereunder.
Section 7.14 Confidentiality. Investor agrees that all information
provided to Investor or any of its representatives pursuant to this Agreement
shall be kept confidential, and Investor shall not disclose such information to
any persons other than the directors, officers, employees, financial advisors,
legal advisors, accountants, consultants and affiliates of Investor who
reasonably need to have access to the confidential information and who are
advised of the confidential nature of such information; provided, however, the
foregoing obligation of Investor shall not (a) relate to any information that
(i) is or becomes generally available other than as a result of unauthorized
disclosure by Investor or by persons to whom Investor has made such information
available, (ii) is or becomes available to Investor on a non-confidential basis
from a third party that is not, to Investor's knowledge, bound by any other
confidentiality agreement with the Company, or (b) prohibit disclosure of any
information if required by law, rule, regulation, court order or other legal or
governmental process.
-23-<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties hereto as of the day first above written.
CARR REALTY CORPORATION
By: /s/ Brian K. Fields
Name: Brian K. Fields
Title: Chief Financial Officer
CARR REALTY, L.P.
By: /s/ Brian K. Fields
Name: Brian K. Fields
Title: Chief Financial Officer
of Carr Realty
Corporation, its
general partner
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL U.S. REALTY
By:/s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
-24-
Exhibit 2.3
REGISTRATION RIGHTS AGREEMENT
by and among
CARR REALTY CORPORATION
SECURITY CAPITAL HOLDINGS S.A.
and
SECURITY CAPITAL U.S. REALTY
dated as of
April 30, 1996
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions............................................... 1
(a) "Agreement".......................................... 1
(b) "Buyer".............................................. 1
(c) "Company"............................................ 1
(d) "Company Registration Expenses"...................... 1
(e) "Commission"......................................... 1
(f) "Exchange Act"....................................... 2
(g) "Exercise Notice".................................... 2
(h) "Extraordinary Transaction".......................... 2
(i) "Extraordinary Transaction Shares"................... 2
(j) "Holdings"........................................... 2
(k) "NASD"............................................... 2
(l) "Registrable Securities"............................. 2
(m) "Registration Expenses".............................. 2
(n) "Registration Suspension
Period"........................................... 2
(o) "Securities Act"..................................... 2
(p) "Shelf Registration"................................. 3
(q) "Stock Purchase Agreement"........................... 3
(r) "Suspension Notice".................................. 3
(s) "Tag-Along Notice"................................... 3
(t) "Tag-Along Shares"................................... 3
(u) "Third Party"........................................ 3
(v) "Underwritten/Placed Offering"....................... 3
(w) "USREALTY"........................................... 3
Section 2. Shelf Registration........................................ 3
(a) Obligation to File and Maintain...................... 3
(b) Black-Out Periods of Buyer........................... 4
(c) Black-Out Periods of the Company..................... 4
(d) Number of Shelf Registrations........................ 5
(e) Size of Shelf Registration........................... 5
(f) Notice............................................... 6
(g) Expenses............................................. 6
(h) Selection of Underwriters............................ 6
(i) Company Right to Purchase............................ 6
Section 3. Incidental Registrations.................................. 6
(a) Notification and Inclusion........................... 6
-i-<PAGE>
(b) Cut-back Provisions.................................. 7
(c) Expenses............................................. 7
(d) Duration of Effectiveness............................ 7
Section 4. Registration Procedures................................... 7
Section 5. Requested Underwritten Offerings.......................... 10
Section 6. Preparation; Reasonable Investigation..................... 10
Section 7. Tag-Along Rights.......................................... 11
(a) Rights and Notice.................................... 11
(b) Number of Shares to be Included...................... 11
(c) Abandonment of Sale.................................. 12
(d) Terms of Sale........................................ 12
(e) Timing of Sale....................................... 12
Section 8. Indemnification........................................... 12
(a) Indemnification by the Company....................... 12
(b) Indemnification by Buyer............................. 13
(c) Notices of Claims, etc............................... 13
(d) Other Indemnification................................ 14
(e) Indemnification Payments............................. 14
(f) Contribution......................................... 14
Section 9. Covenants Relating to Rule 144............................ 14
Section 10. Miscellaneous............................................. 15
(a) Counterparts......................................... 15
(b) Governing Law........................................ 15
(c) Entire Agreement..................................... 15
(d) Notices.............................................. 15
(e) Successors and Assigns............................... 16
(f) Headings............................................. 16
(g) Amendments and Waivers............................... 16
(h) Interpretation; Absence of
Presumption....................................... 16
(i) Severability......................................... 17
-ii-<PAGE>
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of April
30, 1996, by and among Carr Realty Corporation, a Maryland corporation (the
"Company"), Security Capital U.S. Realty, a Luxembourg corporation ("USRE-
ALTY"), and Security Capital Holdings S.A., a Luxembourg corporation
("Holdings") and a wholly owned subsidiary of USREALTY. Capitalized terms not
otherwise defined herein have the meaning ascribed to them in the Stock
Purchase Agreement (as hereinafter defined).
WHEREAS, the Company, Holdings and USREALTY have entered into a Stock
Purchase Agreement, dated as of November 5, 1995 (the "Stock Purchase Agree-
ment"), that provides for the purchase by Holdings and sale by the Company to
Holdings of shares of Company Common Stock and Company Preferred Stock; and
WHEREAS, in order to induce Buyer to enter into the Stock Purchase
Agreement, the Company has agreed to provide the registration rights set forth
herein;
NOW, THEREFORE, in consideration of the premises and the covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and intending to
be legally bound hereby, the parties hereto hereby agree as follows:
Section 1. Definitions. As used herein, the following terms shall
have the following meanings:
(a) "Agreement": shall have the meaning set forth in the first
paragraph hereof.
(b) "Buyer": shall mean, collectively, as the context may require,
USREALTY and Holdings, and shall also include any Affiliate of USREALTY or
Holdings of which USREALTY and/or Holdings collectively, directly or indi-
rectly, Beneficially Own 98% or more of the voting power and of the economic
interests, or any bona fide financial institution to which any Buyer has
Transferred (including upon foreclosure of a pledge) shares of Company Stock
for the purpose of securing bona fide indebtedness of any Buyer. (Capitalized
terms used in this definition and not defined herein shall have the meanings
ascribed to them in the Stockholders Agreement.)
(c) "Company": shall have the meaning set forth in the first
paragraph hereof.
(d) "Company Registration Expenses": the fees and disbursements of
counsel and independent public accountants for the Company incurred in
connection with the Company's performance of or compliance with this Agreement,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, and any premiums and other
costs of policies of insurance obtained by the Company against liabilities
arising out of the sale of any securities.
(e) "Commission": the Securities and Exchange Commission, and any
successor thereto.<PAGE>
(f) "Exchange Act": the Securities Exchange Act of 1934, as
amended, and any successor thereto, and the rules and regulations thereunder.
(g) "Exercise Notice": shall have the meaning set forth in Section
7(a).
(h) "Extraordinary Transaction": (i) any merger, consolidation,
sale or acquisition of assets, recapitalization, other business combination,
liquidation, or other action out of the ordinary course of business of the Com-
pany, or (ii) any issuance of securities, in either case involving the sale,
issuance or other disposition of capital stock of the Company representing, in
the aggregate, at least 30% of the capital stock of the Company on a fully
diluted basis.
(i) "Extraordinary Transaction Shares": shall have the meaning set
forth in Section 7(a).
(j) "Holdings": shall have the meaning set forth in the first
paragraph hereof.
(k) "NASD": the National Association of Securities Dealers, Inc.
(l) "Registrable Securities": (i) any and all shares of Company
Stock acquired by Buyer pursuant to the Stock Purchase Agreement, (ii) any and
all shares of Company Stock acquired by Buyer pursuant to Section 2.5(b) of the
Stock Purchase Agreement, (iii) any and all securities acquired by Buyer
pursuant to Section 4.2 of the Stockholders Agreement, and (iv) any securities
issued or issuable with respect to any Company Stock or other securities re-
ferred to in clause (i), (ii) or (iii) by way of conversion, exchange, stock
dividend or stock split or in connection with a combination of shares, re-
capitalization, merger, consolidation or other reorganization or otherwise. As
to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (A) a registration statement with re-
spect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, or (B) such securities shall have been sold
in accordance with Rule 144 (or any successor provision) under the Securities
Act.
(m) "Registration Expenses": all registration, filing and stock ex-
change or NASD fees, all fees and expenses of complying with securities or blue
sky laws, all printing expenses, messenger and delivery expenses, any fees and
disbursements of any separate counsel retained by Buyer, any fees and disburse-
ments of underwriters customarily paid by sellers of securities who are not the
issuers of such securities and all underwriting discounts and commissions and
transfer taxes, if any, and any premiums and other costs of policies of
insurance obtained by Buyer against liabilities arising out of the public
offering of securities.
(n) "Registration Suspension Period": shall have the meaning set
forth in Section 2(b).
(o) "Securities Act": the Securities Act of 1933, as amended, and
any successor thereto, and the rules and regulations thereunder.
-2-<PAGE>
(p) "Shelf Registration": shall have the meaning set forth in
Section 2(a).
(q) "Stock Purchase Agreement": shall have the meaning set forth in
the second paragraph hereof.
(r) "Suspension Notice": shall have the meaning set forth in
Section 2(b).
(s) "Tag-Along Notice": shall have the meaning set forth in Section
7(a).
(t) "Tag-Along Shares": shall have the meaning set forth in Section
7(a).
(u) "Third Party": shall have the meaning set forth in Section
7(a).
(v) "Underwritten/Placed Offering": a sale of securities of the
Company to an underwriter or underwriters for reoffering to the public or on
behalf of a person other than the Company through an agent for sale to the
public.
(w) "USREALTY": shall have the meaning set forth in the first para-
graph hereof.
Section 2. Shelf Registration. (a) Obligation to File and
Maintain. At any time following the date on which the Remaining Equity
Commitment equals zero, promptly upon the written request of Buyer, the Company
will use its best efforts to file with the Commission a registration statement
under the Securities Act for the offering on a continuous or delayed basis in
the future of all of the Registrable Securities (the "Shelf Registration").
The Shelf Registration shall be on an appropriate form and the Shelf
Registration and any form of prospectus included therein or prospectus
supplement relating thereto shall reflect such plan of distribution or method
of sale as Buyer may from time to time notify the Company, including the sale
of some or all of the Registrable Securities in a public offering or, if re-
quested by Buyer, subject to receipt by the Company of such information
(including information relating to purchasers) as the Company reasonably may
require, (iii) in a transaction constituting an offering outside the United
States which is exempt from the registration requirements of the Securities Act
in which the Company undertakes to effect registration of such shares as soon
as possible after the completion of such offering in order to permit such
shares to be freely tradeable in the United States, (iv) in a transaction con-
stituting a private placement under Section 4(2) of the Securities Act in con-
nection with which the Company undertakes to register such shares after the
conclusion of such placement to permit such shares to be freely tradeable by
the purchasers thereof, or (v) in a transaction under Rule 144A of the
Securities Act in connection with which the Company undertakes to register such
shares after the conclusion of such transaction to permit such shares to be
freely tradeable by the purchasers thereof. The Company shall use its best
efforts to keep the Shelf Registration continuously effective for the period
beginning on the date on which the Shelf Registration is declared effective and
ending on the first date that there are no Registrable Securities (provided
that the Company may terminate the effectiveness of a Shelf Registration on the
second anniversary of the date of effectiveness thereof plus a number of days
equal to the number of days in all Registration Suspension Periods relating to
such Shelf Registration). During the period during which the Shelf Registra-
tion is effective, the Company shall supplement or make amendments to the Shelf
Registration, if required by
-3-<PAGE>
the Securities Act or if reasonably requested by Buyer or an underwriter of
Registrable Securities, including to reflect any specific plan of distribution
or method of sale, and shall use its reasonable best efforts to have such
supplements and amendments declared effective, if required, as soon as prac-
ticable after filing.
(b) Black-Out Periods of Buyer. Notwithstanding anything herein to
the contrary, (i) the Company shall have the right from time to time to require
Buyer not to sell under the Shelf Registration or to suspend the effectiveness
thereof during the period starting with the date 30 days prior to the Company's
good faith estimate, as certified in writing by an executive officer of the
Company to Buyer, of the proposed date of filing of a registration statement or
a preliminary prospectus supplement relating to an existing shelf registration
statement, in either case, pertaining to an underwritten public offering of
equity securities of the Company for the account of the Company, and ending on
the date 90 days following the effective date of such registration statement or
the date of filing of such prospectus supplement, and (ii) the Company shall be
entitled to postpone or suspend (but not for a period exceeding 90 days) the
filing or effectiveness of a registration statement otherwise required to be
prepared and filed by it pursuant to this Section 2 if the Company determines,
in its good faith judgment, that such registration and offering or continued
effectiveness would interfere with any material financing, acquisition,
disposition, corporate reorganization or other material transaction involving
the Company or any of its subsidiaries or public disclosure thereof would be
required prior to the time such disclosure might otherwise be required, or when
the Company is in possession of material information that it deems advisable
not to disclose in a registration statement.
Once any registration statement filed pursuant to this Section 2 or
in which Registrable Securities are included pursuant to Section 3 has been de-
clared effective, any period during which the Company fails to keep such
registration statement effective and usable for resale of Registrable Secu-
rities for the period required by Section 4(b) shall be referred to as a
"Registration Suspension Period". A Registration Suspension Period shall com-
mence on and include the date that the Company gives written notice to Buyer of
its determination that such registration statement is no longer effective or
usable for resale of Registrable Securities (the "Suspension Notice") to and
including the date when the Company notifies Buyer that the use of the pro-
spectus included in such registration statement may be resumed for the disposi-
tion of Registrable Securities.
(c) Black-Out Periods of the Company. Subject to the conditions of
this Section 2(c), Buyer shall have the right, exercisable on not more than two
occasions, to require the Company not to sell any common equity securities of
the Company or any securities convertible into common equity securities of the
Company under any registration statement or prospectus supplement relating to
an existing shelf registration statement (other than sales of shares of Common
Stock upon the redemption of Operating Partnership Units, or limited
partnership units of any other Subsidiary of the Company and sales of equity
securities issued or granted pursuant to any employee benefit or similar plan
or any dividend reinvestment plan), or to suspend the effectiveness thereof,
during the period starting with the date 15 days prior to Buyer's good faith
estimate, as certified in writing by an executive officer of Buyer to the Com-
pany, of the proposed date of filing of a preliminary prospectus supplement re-
lating to a Shelf Registration filed pursuant to Section 2(a), pertaining to an
underwritten public offering of Registrable Securities, and ending on the date
60 days following the date of
-4-<PAGE>
filing of the final prospectus supplement, but in no event on a date later than
75 days following the date of filing of the preliminary prospectus supplement.
The Company's obligations under this Section 2(c) are subject to the continuing
satisfaction of the following conditions: (a) the Registrable Securities to be
offered by Buyer in such underwritten public offering shall represent (i) in
the case of Buyer's first exercise of its rights under this Section 2(c), the
greater of (A) at least 20% of the then outstanding shares of Company Common
Stock and (B) at least that number of shares of Registrable Securities having a
market value, based on the most recent closing price, of $150 million, in each
case determined at the time Buyer exercises its rights under this Section 2(c);
and (ii) in the case of Buyer's second exercise of its rights under this
Section 2(c), the greater of (A) at least 40% of the total number of shares of
Registrable Securities then Beneficially Owned by Buyer and its Affiliates and
(B) at least that number of shares of Registrable Securities having a market
value, based on the most recent closing price, of $200 million, in each case
determined at the time Buyer exercises its rights under this Section 2(c); (b)
no black-out period pursuant to Section 2(b)(i) shall be in effect at the time
of Buyer's exercise of its rights under this Section 2(c); (c) the Company
shall not have suspended sales of Registrable Securities pursuant to Section
2(b)(ii); (d) the Company shall not have delivered to Buyer a written notice to
the effect that the Board of Directors has determined in good faith that
compliance with this Section 2(c) would reasonably be expected to have a
Material Adverse Effect on the Company; and (e) Buyer shall not be in default
of any of its material obligations under the Stock Purchase Agreement, the
Stockholders Agreement or this Agreement. In no event may the Company include
in any preliminary prospectus supplement under which Buyer is offering Regis-
trable Securities covered by this Section 2(c) any equity securities of the
Company or any securities convertible into equity securities of the Company.
(d) Number of Shelf Registrations. The Company shall be obligated
to effect no more than five Shelf Registrations under this Section 2, plus an
additional Shelf Registration for each $200,000,000 in aggregate purchase price
of shares of Company Stock purchased by Buyer from the Company in excess of the
Total Equity Commitment (but not including any shares of Company Stock
purchased pursuant to Section 2.5(b) of the Stock Purchase Agreement). A Shelf
Registration shall not be deemed to have been effected, nor shall it be suf-
ficient to reduce the number of Shelf Registrations available to Buyer under
this Section 2, unless such registration becomes effective pursuant to the
Securities Act and is kept continuously effective for a period of at least two
years (other than any periods during such period of effectiveness which are
Registration Suspension Periods, and provided that no such Registration Sus-
pension Periods shall count towards such two-year period); provided, however,
that no Shelf Registration shall be deemed to have been effected, nor shall it
reduce the number of Shelf Registrations available under this Section 2, if
such registration cannot be used by Buyer for more than 60 days as a result of
any stop order, injunction or other order of the Commission or other Government
Authority for any reason other than an act or omission of Buyer.
(e) Size of Shelf Registration. The Company shall not be required
to effect a Shelf Registration of fewer than 1,000,000 shares or other units of
Registrable Securities (as adjusted for any stock splits, reverse stock splits
or similar events which occur after the date hereof), except that if there are
less than 1,000,000 (as adjusted for any stock splits, reverse stock splits or
similar events which occur after the date hereof) shares of Registrable
Securities outstanding, then the Company shall be required to effect
-5-<PAGE>
a Shelf Registration of all of the remaining shares or other units of
Registrable Securities outstanding.
(f) Notice. The Company shall give Buyer prompt notice in the event
that the Company has suspended sales of Registrable Securities under Section
2(b).
(g) Expenses. All Company Registration Expenses incurred in connec-
tion with any Shelf Registration which may be requested under this Section 2
shall be borne by the Company, and all Registration Expenses incurred in con-
nection with any such Shelf Registration shall be borne by Buyer.
(h) Selection of Underwriters. Any and all underwriters or other
agents involved in any sale of Registrable Securities pursuant to a
registration statement contemplated by this Section 2 shall include such
underwriter(s) or other agent(s) as selected by Buyer and approved of by the
Company, which approval shall not be unreasonably withheld; provided that
Security Capital Markets Group Incorporated or any other Affiliate of Buyer
shall in all events be approved by the Company.
(i) Company Right to Purchase. If Buyer proposes to offer any
Registrable Securities in an underwritten offering under a Shelf Registration
statement filed by the Company pursuant to Section 2(a), Buyer shall give the
Company prior written notice of the proposed offering, setting forth the number
of Registrable Securities that Buyer proposes to offer, the expected timing of
the proposed offering, and the expected gross selling price of such offering.
The Company shall have the right, if it irrevocably so notifies Buyer within 10
Business Days after its receipt of Buyer's notice, to purchase all of the
Registrable Securities that Buyer proposes to offer, at the gross selling price
set forth in Buyer's notice to the Company. In the event the Company shall so
notify Buyer, it shall effect such purchase within 10 Business Days.
Section 3. Incidental Registrations. (a) Notification and
Inclusion. If the Company proposes to register for its own account any common
equity securities of the Company or any securities convertible into common eq-
uity securities of the Company under the Securities Act (other than a regis-
tration relating solely to the sale of securities to participants in a dividend
reinvestment plan, a registration on Form S-4 relating to a business com-
bination or similar transaction permitted to be registered on such Form S-4, a
registration on Form S-8 relating solely to the sale of securities to par-
ticipants in a stock or employee benefit plan, or a registration permitted
under Rule 462 under the Securities Act registering additional securities of
the same class as were included in an earlier registration statement for the
same offering and declared effective), the Company shall, at each such time,
promptly give written notice of such registration to Buyer. Upon the written
request of Buyer given within 10 days after receipt of such notice by Buyer,
the Company shall seek to include in such proposed registration such Regis-
trable Securities as Buyer shall request be so included and shall use its best
efforts to cause a registration statement covering all of the Registrable Se-
curities that Buyer has requested to be registered to become effective under
the Securities Act. The Company shall be under no obligation to complete any
offering of securities it proposes to make under this Section 3 and shall incur
no liability to Buyer for its failure to do so. If, at any time
-6-<PAGE>
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to Buyer and, thereupon,
(i) in the case of a determination not to register, the Company shall be re-
lieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration Ex-
penses incurred in connection therewith) and (ii) in the case of a de-
termination to delay registering, the Company shall be permitted to delay reg-
istering any Registrable Securities for the same period as the delay in regis-
tering such other securities.
(b) Cut-back Provisions. If a registration pursuant to this Section
3 involves an Underwritten/Placed Offering of the securities so being
registered, whether or not solely for sale for the account of the Company,
which securities are to be distributed by or through one or more underwriters
of recognized standing under underwriting terms customary for such transaction,
and the underwriter or the managing underwriter, as the case may be, of such
Underwritten/Placed Offering shall inform the Company of its belief that the
amount of securities requested to be included in such registration or offering
exceeds the amount which can be sold in (or during the time of) such offering
without delaying or jeopardizing the success of the offering (including the
price per share of the securities to be sold), then the Company will include in
such registration (i) first, all the securities of the Company which the
Company proposes to sell for its own account or the account of others (other
than Buyer) requesting inclusion in such registration pursuant to rights to
registration on request, and (b) second, to the extent of the amount which the
Company is so advised can be sold in (or during the time of) such offering,
Registrable Securities and other securities requested to be included in such
registration, pro rata among Buyer and others exercising incidental registra-
tion rights, on the basis of the shares of Company Stock requested to be
included by all such persons.
(c) Expenses. The Company shall bear and pay all Company Registra-
tion Expenses incurred in connection with any registration of Registrable
Securities pursuant to this Section 3 for Buyer, and all Registration Expenses
incurred in connection with any registration of any other securities referred
to in the first sentence of Section 3(a), and Buyer shall bear and pay all
Registration Expenses incurred in connection with any registration of Regis-
trable Securities pursuant to this Section 3 for Buyer.
(d) Duration of Effectiveness. At the request of Buyer, the Company
shall, subject to Section 2(b), use its best efforts to keep any registration
statement for which Registrable Securities are included under this Section 3
effective and usable for up to 90 days (subject to extension for the length of
any Registration Suspension Period), unless the distribution of securities reg-
istered thereunder has been earlier completed; provided, however, that in no
event will the Company be required to prepare or file audited financial
statements with respect to any fiscal year by a date prior to the date on which
the Company would be so required to prepare and file such audited financial
statements if such registration statement were no longer effective and usable.
Section 4. Registration Procedures. In connection with the filing
of any registration statement as provided in Section 2 or 3, the Company shall
use its best efforts to, as expeditiously as reasonably practicable:
-7-<PAGE>
(a) prepare and file with the Commission the requisite registration
statement (including a prospectus therein) to effect such registration and
use its best efforts to cause such registration statement to become effec-
tive, provided that before filing such registration statement or any
amendments or supplements thereto, the Company will furnish to the counsel
selected by Buyer copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel before any such
filing is made, and the Company will comply with any reasonable request
made by such counsel to make changes in any information contained in such
documents relating to Buyer;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in con-
nection therewith as may be necessary to maintain the effectiveness of
such registration and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until, in the case of Section 2, the termination of
the period during which the Shelf Registration is required to be kept
effective, or, in the case of Section 3, the earlier of such time as all
of such securities have been disposed of and the date which is 90 days af-
ter the date of initial effectiveness of such registration statement;
(c) furnish to Buyer such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the pro-
spectus contained in such registration statements (including each complete
prospectus and any summary prospectus) and any other prospectus filed
under Rule 424 under the Securities Act, in conformity with the require-
ments of the Securities Act, and such other documents, including documents
incorporated by reference, as Buyer may reasonably request;
(d) register or qualify all Registrable Securities under such other
securities or blue sky laws of such jurisdictions as Buyer shall rea-
sonably request, to keep such registration or qualification in effect for
so long as such registration statement remains in effect, and take any
other action which may be reasonably necessary or advisable to enable
Buyer to consummate the disposition in such jurisdictions of the secur-
ities owned by Buyer, except that the Company shall not for any such pur-
pose be required to qualify generally to do business as a foreign corpora-
tion in any jurisdiction wherein it would not but for the requirements of
this paragraph be obligated to be so qualified, or to consent to general
service of process in any such jurisdiction, or to subject the Company to
any material tax in any such jurisdiction where it is not then so subject;
(e) cause all Registrable Securities covered by such registration
statement to be registered with or approved by such other Government
Authority as may be reasonably necessary to enable Buyer to consummate the
disposition of such Registrable Securities;
-8-<PAGE>
(f) furnish to Buyer a signed counterpart, addressed to Buyer (and
the underwriters, if any), of
(i) an opinion of counsel for the Company, dated the effective
date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), reasonably satisfactory in
form and substance to Buyer, and
(ii) to the extent permitted by then applicable rules of
professional conduct, a "comfort" letter, dated the effective date of
such registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statements included in
such registration statement;
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, all as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the underwriters
in underwritten public offerings of securities;
(g) immediately notify Buyer at any time when the Company becomes
aware that a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made, and at the request of Buyer promptly prepare and
furnish to Buyer a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made;
(h) comply or continue to comply in all material respects with the
Securities Act and the Exchange Act and with all applicable rules and
regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, an earnings statement covering the pe-
riod of at least 12 months, but not more than 18 months, beginning with
the first full calendar month after the effective date of such regis-
tration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act, and not file any amendment or
supplement to such registration statement or prospectus to which Buyer
shall have reasonably objected on the grounds that such amendment or
supplement
-9-<PAGE>
does not comply in all material respects with the requirements of the
Securities Act, having been furnished with a copy thereof at least five
Business Days prior to the filing thereof;
(i) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement; and
(j) list all Company Stock covered by such registration statement on
any securities exchange on which any of the Company Stock is then listed.
Buyer shall furnish in writing to the Company such information regarding Buyer
(and any of its affiliates), the Registrable Securities to be sold, the
intended method of distribution of such Registrable Securities, and such other
information requested by the Company as is necessary for inclusion in the
registration statement relating to such offering pursuant to the Securities Act
and the rules of the Commission thereunder. Such writing shall expressly state
that it is being furnished to the Company for use in the preparation of a
registration statement, preliminary prospectus, supplementary prospectus, final
prospectus or amendment or supplement thereto, as the case may be.
Buyer agrees by acquisition of the Registrable Securities that upon
receipt of any notice from the Company of the happening of any event of the
kind described in paragraph (g) of this Section 4, Buyer will forthwith discon-
tinue its disposition of Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until Buyer's receipt of the
copies of the supplemented or amended prospectus contemplated by paragraph (g)
of this Section 4.
Section 5. Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offerings by Buyer, under a registration re-
quested pursuant to Section 2(a), the Company will enter into a customary
underwriting agreement with such underwriters for such offering, to contain
such representations and warranties by the Company and such other terms as are
customarily contained in agreements of this type, including indemnities to the
effect and to the extent provided in Section 6. Buyer shall be a party to such
underwriting agreement and may, at its option, require that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of Buyer.
Buyer shall not be required to make any representations or warranties to or
agreement with the Company or the underwriters other than representations, war-
ranties or agreements regarding Buyer and Buyer's intended method of distri-
bution and any other representation or warranty required by law.
Section 6. Preparation; Reasonable Investigation. In connection
with the preparation and filing of the registration statement under the
Securities Act, the Company will give Buyer, its underwriters, if any, and
their respective counsel, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give
each of them such access to its books and records and such opportunities to
discuss the business of the Company with its officers, its counsel and the
independent public accountants who have certified its financial statements as
shall be
-10-<PAGE>
necessary, in the opinion of Buyer's and such underwriters' respective counsel,
to conduct a reasonable investigation within the meaning of the Securities Act.
Section 7. Tag-Along Rights. From and after the date hereof until
the earlier of (i) the date on which Buyer shall own shares of Company Stock
representing less than 10% of the then outstanding shares of Company Stock on a
fully diluted basis, or (ii) the date on which Buyer shall no longer be subject
to the standstill restrictions set forth in Section 5.2(a) of the Stockholders
Agreement (unless Buyer is not subject to such restrictions as a result of an
Early Termination Event (as that term is defined in the Stockholders
Agreement)), Buyer shall be entitled to the rights set forth in this Section 7.
(a) Rights and Notice. The Company shall not directly or indirectly
sell or otherwise dispose of shares of Company Stock to any person (a "Third
Party") in connection with an Extraordinary Transaction in which the
consideration for some or all of the shares of Company Stock is cash or cash
equivalents (as determined under GAAP), unless the terms and conditions of such
sale or other disposition shall include an offer to Buyer to include, at the
option of Buyer, in such sale or other disposition the Registrable Securities
owned by Buyer at the time of such sale or other disposition determined in ac-
cordance with Section 7(b) (the "Tag-Along Shares"). The Company shall send a
written notice (the "Tag-Along Notice") to Buyer setting forth the number of
shares of Company Stock proposed to be sold or otherwise disposed of in the
Extraordinary Transaction (the "Extraordinary Transaction Shares"), and the
price at which such shares are proposed to be sold (or the method by which such
price is proposed to be determined). At any time within 15 days after its re-
ceipt of the Tag-Along Notice, Buyer may exercise its option to sell the Tag-
Along Shares by furnishing written notice of such exercise (the "Exercise No-
tice") to the Company.
(b) Number of Shares to be Included. If the proposed sale or other
disposition by the Company in connection with an Extraordinary Transaction is
consummated, Buyer shall have the right to sell to the Third Party as part of
such proposed sale or other disposition such number of Registrable Securities
owned by Buyer equal to the product of (i) the ratio (which in no event shall
exceed 30% for purposes of this Section 7) of the total number of Registrable
Securities owned by Buyer at the time that Buyer receives the Tag-Along Notice
to the total number of outstanding shares of Company Stock at the time that
Buyer receives the Tag-Along Notice, and (ii) the number of Extraordinary
Transaction Shares; provided, however, that if the number of Tag-Along Shares
is greater than the number of Registrable Securities owned by Buyer at the time
that Buyer receives the Tag-Along Notice, then Buyer shall have the right to
sell to the Third Party as part of the proposed sale or other disposition to
the Third Party by the Company in connection with an Extraordinary Transaction
the total number of Registrable Securities owned by Buyer at the time that
Buyer receives the Tag-Along Notice. All calculations pursuant to this
paragraph shall exclude and ignore any unissued shares of Company Stock issu-
able pursuant to stock options, warrants and other rights to acquire shares of
Company Stock and pursuant to convertible or exchangeable securities, but shall
include shares of Company Common Stock issuable upon redemption of limited
partnership interests in Carr Realty, L.P. (all of which shares shall be deemed
to be outstanding for purposes of this calculation).
-11-<PAGE>
(c) Abandonment of Sale. Each of the Company and the Third Party
shall have the right, in its sole discretion, at all times prior to
consummation of the proposed sale or other disposition giving rise to the tag-
along right granted by this Section 7 to abandon, rescind, annul, withdraw or
otherwise terminate such sale or other disposition, whereupon all tag-along
rights in respect of such sale or other disposition pursuant to this Section 7
shall become null and void, and neither the Company nor the Third Party shall
have any liability or obligation to Buyer with respect thereto by virtue of
such abandonment, rescission, annulment, withdrawal or termination.
(d) Terms of Sale. The purchase from Buyer pursuant to this Section
7 shall be on the same terms and conditions, including the per share price and
the date of sale or other disposition, as are applicable to the Company, and
which shall be consistent with the relevant Tag-Along Notice.
(e) Timing of Sale. If, with respect to any Tag-Along Notice, Buyer
fails to deliver an Exercise Notice within the requisite time period, the
Company shall have 120 days after the expiration of the time in which the
Exercise Notice is required to be delivered in which to sell or otherwise
dispose of not more than the number of shares of Company Stock described in the
Tag-Along Notice on terms not more favorable to the Company than were set forth
in the Tag-Along Notice. If, at the end of 120 days following the receipt of
the Tag-Along Notice, the Company has not completed the sale or other dis-
position of Company Stock in accordance with the terms described in the Tag-
Along Notice, the Company shall again be obligated to comply with the provi-
sions of this Section 7 with respect to, and provide Buyer with the opportunity
to participate in, any proposed sale or other disposition of shares of Company
Stock in connection with an Extraordinary Transaction.
Section 8. Indemnification. (a) Indemnification by the Company.
In the event of any registration of any Registrable Securities of the Company
under the Securities Act, the Company will, and hereby does, indemnify and hold
harmless Buyer, each other person who participates as an underwriter in the
offering or sale of such securities and each other person who controls any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which Buyer or any such
underwriter or controlling person may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the registration statement under which such
Registrable Securities were registered under the Securities Act, any prelimi-
nary prospectus, final prospectus or summary prospectus contained therein, or
any amendment or supplement thereto, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, and the Company will reimburse Buyer and each such
underwriter and controlling person for any reasonable legal or any other ex-
penses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceedings; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or
-12-<PAGE>
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by Buyer or any
other person who participates as an underwriter in the offering or sale of such
securities, in either case, specifically stating that it is for use in the
preparation thereof, and provided, further, that the Company shall not be
liable to any person who participates as an underwriter in the offering or sale
of Registrable Securities or any other person, if any, who controls such under-
writer within the meaning of the Securities Act in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such person's failure to send or give
a copy of the final prospectus or supplement to the persons asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such final prospectus or
supplement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of Buyer or any such underwriter or con-
trolling person and shall survive the transfer of such securities by Buyer.
(b) Indemnification by Buyer. The Company may require, as a
condition to including any Registrable Securities in any registration statement
pursuant to Section 2 or Section 3, that the Company shall have received an
undertaking satisfactory to it from Buyer to indemnify and hold harmless (in
the same manner and to the same extent as set forth in paragraph (a) of this
Section 8) the Company, each director of the Company, each officer of the
Company and each other person, if any, who controls the Company within the
meaning of the Securities Act, and each other person who participates as an
underwriter in the offering or sale of such securities and each other person
who controls any such underwriter within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement of a material
fact in or omission or alleged omission to state a material fact from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by Buyer specifically stating that it is for use in the prepara-
tion of such registration statement, preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer, or controlling person and shall
survive the transfer of such securities by Buyer.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 8,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any indem-
nified party to give notice as provided herein shall not relieve the indemnify-
ing party of its obligations under the preceding paragraphs of this Section 8,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified
-13-<PAGE>
and indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the extent that
it may wish, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to the indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding paragraphs of this Section 8 (with appropriate
modifications) shall be given by the Company and Buyer with respect to any
required registration or other qualification of securities under any federal or
state law or regulation of Governmental Authority other than the Securities
Act.
(e) Indemnification Payments. The indemnification required by this
Section 8 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If, for any reason, the foregoing indemnity is
unavailable, or is insufficient to hold harmless an indemnified party, then the
indemnifying party shall contribute to the amount paid or payable by the indem-
nified party as a result of the expense, loss, damage or liability, (i) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other (determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission), or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in the proportion as
is appropriate to reflect not only the relative fault of the indemnifying party
and the indemnified party, but also the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other, as
well as any other relevant equitable considerations. No indemnified party
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any indemnifying
party who was not guilty of such fraudulent misrepresentation.
Section 9. Covenants Relating to Rule 144. The Company will file in
a timely manner, information, documents and reports in compliance with the
Exchange Act and will, at its expense, forthwith upon the request of Buyer,
deliver to Buyer a certificate, signed by the Company's principal financial
officer, stating (a) the Company's name, address and telephone number
(including area code), (b) the Company's Internal Revenue Service identifica-
tion number, (c) the Company's Commission file number, (d) the number of shares
of Company Common Stock and the number of shares of Company Preferred Stock
outstanding as shown by the most recent report or statement published by the
Company, and (e) whether the Company has filed the reports required to be filed
-14-<PAGE>
under the Exchange Act for a period of at least 90 days prior to the date of
such certificate and in addition has filed the most recent annual report re-
quired to be filed thereunder. If at any time the Company is not required to
file reports in compliance with either Section 13 or Section 15(d) of the Ex-
change Act, the Company will, at its expense, forthwith upon the written
request of Buyer, make available adequate current public information with re-
spect to the Company within the meaning of paragraph (c)(2) of Rule 144 of the
General Rules and Regulations promulgated under the Securities Act.
Section 10. Miscellaneous. (a) Counterparts. This Agreement may
be executed in one or more counterparts, all of which shall be considered one
and the same agreement, and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
party. Copies of executed counterparts transmitted by telecopy, telefax or
other electronic transmission service shall be considered original executed
counterparts for purposes of this Section 10, provided receipt of copies of
such counterparts is confirmed.
(b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT
REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
(c) Entire Agreement. This Agreement (including agreements incorpo-
rated herein) contains the entire agreement between the parties with respect to
the subject matter hereof and there are no agreements or understandings between
the parties other than those set forth or referred to herein. This Agreement
is not intended to confer upon any person not a party hereto (and their succes-
sors and assigns) any rights or remedies hereunder.
(d) Notices. All notices and other communications hereunder shall
be sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is confirmed, telecopy, telefax or other electronic transmission
service to the appropriate address or number as set forth below. Notices to
the Company shall be addressed to:
Carr Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: Thomas A. Carr
Telecopy Number: (202) 638-0102
with a copy to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attention: J. Warren Gorrell, Jr., Esq.
Telecopy Number: (202) 637-5910
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or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer. Notices to Buyer shall be
addressed to:
Security Capital Holdings S.A.
69, route d'Esch
L-2953 Luxembourg
Attention: Managing Director
Telecopy Number: (352) 4590-3331
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Telecopy Number: (212) 403-2000
(e) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors.
Neither party shall be permitted to assign any of its rights hereunder to any
third party, except that if (i) Buyer transfers or pledges any or all
Registrable Securities to a bona fide financial institution as security for any
bona fide indebtedness of any Buyer and such financial institution agrees to be
bound by the Stockholders Agreement, the pledgee of the Registrable Securities
shall be considered an intended beneficiary hereof and may exercise all rights
of Buyer hereunder, and (ii) any person included within the definition of the
term Buyer shall be permitted to assign its rights hereunder to any other per-
son included within such definition.
(f) Headings. The Section and other headings contained in this
Agreement are inserted for convenience of reference only and will not affect
the meaning or interpretation of this Agreement. All references to Sections or
other headings contained herein mean Sections or other headings of this
Agreement unless otherwise stated.
(g) Amendments and Waivers. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Ei-
ther party hereto may, only by an instrument in writing, waive compliance by
the other party hereto with any term or provision hereof on the part of such
other party hereto to be performed or complied with. The waiver by any party
hereto of a breach of any term or provision hereof shall not be construed as a
waiver of any subsequent breach.
(h) Interpretation; Absence of Presumption. For the purposes
hereof, (i) words in the singular shall be held to include the plural and vice
versa and words of one gender shall be held to include the other gender as the
context requires, (ii) the terms "hereof", "herein", and "herewith" and words
of similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section, paragraph or other references are to the Sections, paragraphs, or
other references to this Agreement unless otherwise specified, (iii) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise requires or
unless otherwise
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specified, (iv) the word "or" shall not be exclusive, and (v) provisions shall
apply, when appropriate, to successive events and transactions.
This Agreement shall be construed without regard to any presumption
or rule requiring construction or interpretation against the party drafting or
causing any instrument to be drafted.
(i) Severability. Any provision hereof which is invalid or unen-
forceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties hereto as of the day first above written.
CARR REALTY CORPORATION
By: /s/ Brian K. Fields
Name: Brian K. Fields
Title: Chief Financial Officer
SECURITY CAPITAL U.S. REALTY
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
SECURITY CAPITAL HOLDINGS S.A.
By: /s/ Paul E. Szurek
Name: Paul E. Szurek
Title: Managing Director
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