SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20543
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED September 30, 1996
COMMISSION FILE NO. 1-11706
CARRAMERICA REALTY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1796339
- ----------------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1700 Pennsylvania Avenue, N.W., Washington, D.C. 20006
- --------------------------------------------------------------------------------
(Address or principal executive office) (Zip code)
Registrant's telephone number, including area code (202) 624-7500
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Number of shares outstanding of each of the registrant's
classes of common stock, as of November 5, 1996:
Common Stock, par value $.01 per share: 35,536,189
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or such shorter period that the Registrant was
required to file such report) and (2) has been subject to such filing
requirements for the past ninety (90) days.
YES X NO
--- --
<PAGE>
Index
Page
----
Part I: Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets of
CarrAmerica Realty Corporation and subsidiaries as
of September 30, 1996 (unaudited) and December 31,
1995.................................................4
Condensed consolidated statements of operations of
CarrAmerica Realty Corporation and subsidiaries for
the three months ended September 30, 1996 and 1995
(unaudited)
.....................................................5
Condensed consolidated statements of operations of
CarrAmerica Realty Corporation and subsidiaries for
the nine months ended September 30, 1996 and 1995
(unaudited)
.....................................................6
Condensed consolidated statements of cash flows of
CarrAmerica Realty Corporation and subsidiaries for
the three months ended September 30, 1996 and 1995
(unaudited)
.....................................................7
Condensed consolidated statements of cash flows of
CarrAmerica Realty Corporation and subsidiaries for
the nine months ended September 30, 1996 and 1995
(unaudited)..........................................8
Notes to condensed consolidated financial
statements.....................................9 to 16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........17 to 25
Part II: Other Information
Item 1. Legal Proceedings.................................. 26
Item 2. Changes in Securities...............................26
Item 3. Defaults Upon Senior Securities.....................26
Item 4. Submission of Matters to a Vote of Security Holders.26
Item 5. Other Information.................................. 26
Item 6. Exhibits and Reports on Form 8-K....................27
2
<PAGE>
Part I
Item 1. Financial Information
The information furnished in the accompanying condensed consolidated
balance sheets, condensed consolidated statements of operations and condensed
consolidated statements of cash flows of CarrAmerica Realty Corporation and
subsidiaries (the Company) reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the aforementioned financial
statements for the interim periods.
The aforementioned financial statements should be read in conjunction
with the notes to such financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations.
3
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of September 30, 1996 and December 31, 1995
- --------------------------------------------------------------------------------
(Unaudited and in thousands, except common share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Assets
- ------
Rental property:
Land $ 226,572 115,565
Buildings 700,133 301,537
Tenant improvements 92,664 60,060
Furniture, fixtures and equipment 2,682 3,427
-------------- -----------
1,022,051 480,589
Less - accumulated depreciation (115,709) (98,873)
-------------- -----------
Total rental property 906,342 381,716
-------------- -----------
Cash and cash equivalents 14,238 9,217
Restricted cash and cash equivalents (note 2) 8,644 2,249
Accounts receivable and notes receivable 10,002 8,728
Accrued straight-line rents 22,915 22,437
Investments 12,155 10,745
Land held for development 28,409 --
Construction in process 12,040 --
Tenant leasing costs, net 10,520 10,746
Deferred financing costs, net 3,117 2,267
Prepaid expenses and other assets, net 15,526 10,755
-------------- -----------
$1,043,908 458,860
============== ===========
Liabilities, Minority Interest, and Stockholders' Equity
- --------------------------------------------------------
Liabilities:
Mortgages and notes payable (note 2) 426,069 317,374
Accounts payable and accrued expenses 14,676 9,357
Rent received in advance and security deposits 5,804 1,736
-------------- -----------
Total liabilities 446,549 328,467
-------------- -----------
Minority interest (note 3) 51,611 34,850
Stockholders' equity:
Common stock, $.01 par value, authorized 90,000,000
shares, issued and outstanding 35,473,493 at September
30, 1996 and 13,409,177 at December 31, 1995 355 134
Additional paid in capital 588,684 126,835
Cumulative dividends paid in excess of net income (43,291) (31,426)
-------------- -----------
Total stockholders' equity 545,748 95,543
-------------- -----------
Commitments (note 4)
$1,043,908 458,860
============== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended September 30, 1996 and 1995
- --------------------------------------------------------------------------------
(Unaudited and in thousands, except per common share amounts)
<TABLE>
<CAPTION>
1996 1995
------------------ ---------------
<S> <C> <C>
Real estate operating revenue:
Rental revenue (note 4):
Minimum base rent $ 37,011 20,211
Recoveries from tenants 4,310 1,428
Parking and other tenant charges 1,185 1,103
-------------- -----------
Total rental revenue 42,506 22,742
Real estate service income 3,634 2,640
-------------- -----------
Total revenue 46,140 25,382
-------------- -----------
Real estate operating expenses:
Property operating expenses:
Operating expenses 9,898 5,746
Real estate taxes 4,014 2,307
Interest expense 7,911 5,575
General and administrative 4,002 2,556
Depreciation and amortization 11,645 4,579
-------------- -----------
Total operating expenses 37,470 20,763
-------------- -----------
Real estate operating income 8,670 4,619
-------------- -----------
Other operating income (expense):
Interest income 434 292
Equity in earnings (losses) of unconsolidated partnerships 99 (32)
-------------- -----------
Total other operating income 533 260
-------------- -----------
Net operating income before minority interest 9,203 4,879
Minority interest (note 3) (1,293) (1,444)
-------------- -----------
Net income $ 7,910 3,435
============== ===========
Net income per common share $ 0.24 0.26
============== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Nine Months Ended September 30, 1996 and 1995
- --------------------------------------------------------------------------------
(Unaudited and in thousands, except per common share amounts)
<TABLE>
<CAPTION>
1996 1995
------------------ ---------------
<S> <C> <C>
Real estate operating revenue:
Rental revenue (note 4):
Minimum base rent $ 88,088 59,540
Recoveries from tenants 8,820 3,843
Parking and other tenant charges 3,731 3,296
-------------- -----------
Total rental revenue 100,639 66,679
Real estate service income 9,265 7,748
-------------- -----------
Total revenue 109,904 74,427
-------------- -----------
Real estate operating expenses:
Property operating expenses:
Operating expenses 23,545 15,731
Real estate taxes 9,826 7,126
Interest expense 21,857 16,260
General and administrative 10,661 7,850
Depreciation and amortization 25,744 13,306
-------------- -----------
Total operating expenses 91,633 60,273
-------------- -----------
Real estate operating income 18,271 14,154
-------------- -----------
Other operating income (expense):
Interest income 1,253 839
Equity in earnings (losses) of unconsolidated partnerships 357 (108)
-------------- -----------
Total other operating income 1,610 731
-------------- -----------
Net operating income before minority interest and
extraordinary item 19,881 14,885
Minority interest (note 3) (3,895) (4,509)
-------------- -----------
Income before extraordinary item 15,986 10,376
Extraordinary item-loss on early extinguishment of debt (484) --
-------------- -----------
Net income $ 15,502 10,376
============== ===========
Net income per common share:
Income before extraordinary item $ 0.70 0.78
Extraordinary item-loss on early extinguishment
of debt (0.02) --
-------------- -----------
Net income per common share $ 0.68 0.78
============== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended September 30, 1996 and 1995
- --------------------------------------------------------------------------------
(Unaudited and in thousands)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,910 3,435
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,645 4,579
Minority interest in income 1,293 1,444
Equity in (earnings) losses of unconsolidated partnerships (93) 40
Increase in accounts receivable (1,081) (299)
Decrease (increase) in accrued straight-line rents (333) 229
Additions to tenant leasing costs (768) (295)
Decrease (increase) in prepaid expenses and other assets 2,501 (1,024)
Increase (decrease) in accounts payable and accrued expenses 3,331 (1,509)
Increase (decrease) in rent received in advance and
security deposits 2,627 (170)
------------ ------------
Total adjustments 19,122 2,995
------------ ------------
Net cash provided by operating activities 27,032 6,430
------------ ------------
Cash flows from investing activities:
Acquisitions of property (135,767) (18,408)
Additions to rental property (3,946) (2,721)
Additions to land held for development (9,548) --
Additions to construction in process (12,040) --
Investments in unconsolidated partnerships (1,214) (153)
Distributions from unconsolidated partnerships 197 3,054
Increase in restricted cash and cash equivalents (10) (31)
------------ ------------
Net cash used by investing activities (162,328) (18,259)
------------ ------------
Cash flows from financing activities:
Net proceeds from sale of common stock 216,656 --
Net proceeds from exercise of options 18 --
Net borrowings (repayments) on line of credit (62,000) 8,000
Borrowings on mortgages payable -- 6,280
Dividends paid (15,515) (5,846)
Repayment of mortgages payable (606) (670)
Additions to deferred financing costs (272) (292)
Distributions to minority interest (1,769) (1,881)
------------ ------------
Net cash provided by financing activities 136,512 5,591
------------ ------------
Increase (decrease) in unrestricted cash and cash equivalents 1,216 (6,238)
Unrestricted cash and cash equivalents, beginning of the period 13,022 14,162
------------ ------------
Unrestricted cash and cash equivalents, end of the period $ 14,238 7,924
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest
of $969 and $0 for the three months ended
September 30, 1996 and 1995, respectively. $ 7,315 5,623
============ ============
During the three month period ended September 30, 1996,
the Company assumed $35.7 million of mortgages payable
and issued $17.6 million of Units in connection with
acquisitions of office properties and land held for
development.
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995
- --------------------------------------------------------------------------------
(Unaudited and in thousands)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,502 10,376
------------ -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 25,744 13,306
Minority interest in income 3,895 4,509
Equity in (earnings) losses of unconsolidated partnerships (337) 131
Extraordinary item - loss on early extinguishment of debt 484 --
Increase in accounts receivable (1,274) (1,007)
(Increase) decrease in accrued straight-line rents (478) 1,113
Additions to tenant leasing costs (1,793) (683)
Increase in prepaid expenses and other assets (4,776) (1,704)
Increase (decrease) in accounts payable and accrued expenses 6,317 (1,280)
Increase (decrease) in rent received in advance and
security deposits 4,068 (405)
------------ -----------
Total adjustments 31,850 13,980
------------ -----------
Net cash provided by operating activities 47,352 24,356
------------ -----------
Cash flows from investing activities:
Acquisition of real estate service contracts (1,750) (7,419)
Acquisitions of property (438,427) (18,408)
Additions to rental property (5,782) (7,681)
Additions to land held for development (19,153) --
Additions to construction in process (12,040) --
Investments in unconsolidated partnerships (2,678) (2,930)
Acquisition of minority interest (3) --
Distributions from unconsolidated partnerships 1,605 4,395
Increase in restricted cash and cash equivalents (6,395) (251)
Notes receivable issued -- (1,500)
------------ -----------
Net cash used by investing activities (484,623) (33,794)
------------ -----------
Cash flows from financing activities:
Net proceeds from sale of common stock 461,348 --
Net proceeds from exercise of options 35 --
Net borrowings on line of credit 72,000 12,000
Borrowings on mortgages payable -- 12,000
Contributions from minority interests -- 17
Dividends paid (27,367) (17,479)
Repayment of mortgages payable (56,419) (1,574)
Additions to deferred financing costs (1,966) (308)
Distributions to minority interests (5,339) (5,756)
------------ -----------
Net cash provided (used) by financing activities 442,292 (1,100)
------------ -----------
Increase (decrease) in unrestricted cash and cash equivalents 5,021 (10,538)
Unrestricted cash and cash equivalents, beginning of the period 9,217 18,462
------------ -----------
Unrestricted cash and cash equivalents, end of the period $ 14,238 7,924
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest of $1,410 and $0
for the nine months ended September 30, 1996 and 1995 respectively $ 21,130 16,222
============ ===========
During the nine month period ended September 30, 1996, the Company
assumed $93.0 million of mortgages payable and issued
$17.9 million of Units in connection with acquisitions
of office properties and as a payment of a liability.
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(1) Organization, Business and Summary of Significant Accounting Policies
(a) Organization and Business
CarrAmerica Realty Corporation (formerly Carr Realty
Corporation) (the Company) is a self-administered and
self-managed equity real estate investment trust (REIT),
organized under the laws of Maryland, which owns, develops,
acquires and operates office buildings.
(b) Principles of Consolidation
The accounts of the Company and its majority-owned
subsidiaries are consolidated in the accompanying financial
statements. All significant intercompany balances and
transactions have been eliminated in consolidation. As used
hereafter, the Company refers to CarrAmerica Realty
Corporation and its consolidated subsidiaries.
(c) Interim Financial Statements
The information furnished reflects all adjustments which are,
in the opinion of management, necessary to reflect a fair
presentation of the results for the interim periods, and all
such adjustments are of a normal, recurring nature.
(d) Rental Property
Rental property is recorded at cost less accumulated
depreciation (which is less than the net realizable value of
the property). Depreciation is computed on the straight-line
basis over the estimated useful lives of the assets, as
follows:
Base building............... 20 to 50 years
Building components......... 7 to 20 years
Tenant improvements......... Terms of the leases or
useful lives, whichever
is shorter
Furniture, fixtures and
equipment................ 5 to 15 years
Expenditures for maintenance and repairs are charged to
operations as incurred. Significant renovations are
capitalized.
(e) Tenant Leasing Costs
Fees and costs incurred in the successful negotiation of
leases have been deferred and are being amortized on the
straight-line basis over the terms of the respective leases.
9
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(f) Deferred Financing Costs
Deferred financing costs include fees and costs incurred to
obtain long-term financing and are being amortized over the
terms of the respective loans on a basis which approximates
the interest method.
(g) Fair Value of Financial Instruments
The carrying amount of the following financial instruments
approximates fair value because of their short-term maturity:
cash and cash equivalents; accounts and notes receivable;
accounts payable and accrued expenses.
(h) Real Estate Service Contracts and Other Intangible Assets
Real estate service contracts and other intangible assets,
including goodwill, represent the purchase price of net assets
of real estate service operations acquired and are amortized
on the straight-line basis over the expected lives of the
respective real estate service contracts. Goodwill, which
represents the excess of purchase price over the fair value of
net assets acquired, is amortized on the straight-line basis
over the expected periods to be benefited, generally 15 years.
The Company assesses the recoverability of these intangible
assets by determining whether the amortization of the balance
over its remaining life can be recovered through undiscounted
future operating cash flows of the acquired operation. The
amount of impairment loss, if any, is measured as the amount
by which the carrying amount of the assets exceeds the fair
value of the assets. The assessment of the recoverability of
these intangible assets will be impacted if estimated future
operating cash flows are not achieved.
(i) Revenue Recognition
The Company reports base rental revenue for financial
statement purposes straight-line over the terms of the
respective leases. Accrued straight-line rents represent the
amount that straight-line rental revenue exceeds rents
collected in accordance with the lease agreements. Management,
considering current information and events regarding the
tenants' ability to fulfill their lease obligations, considers
accrued straight-line rents to be impaired if it is probable
that the Company will be unable to collect all rents due
according to the contractual lease terms. If accrued
straight-line rents associated with a tenant are considered to
be impaired, the amount of the impairment is measured based on
the present value of expected future cash flows. Impairment
losses, if any, are recorded through a loss on the write-off
of assets. Cash receipts on impaired accrued straight-line
rents are applied to reduce the remaining outstanding balance
and as rental revenue, thereafter.
The Company receives monthly management fees generally equal
to 2% to 3% of the gross monthly revenue of each property it
manages. Management fees are recognized as revenue as they are
earned.
10
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
The Company receives monthly leasing fees generally equal to
1.5% to 2.0% of the gross monthly revenue of certain
properties it manages. These leasing fees are recognized as
revenue as they are earned. For certain other managed
properties, leasing commissions are received at the time a
lease is executed or at lease commencement. Such leasing fees
are recognized as revenue upon lease execution or lease
commencement, when earned.
(j) Income and Other Taxes
The Company qualifies as a REIT under Sections 856 through 860
of the Internal Revenue Code of 1986, as amended. A REIT will
generally not be subject to federal income taxation on that
portion of its income that qualifies as REIT taxable income to
the extent that it distributes at least 95 percent of its
taxable income to its shareholders and complies with certain
other requirements. Accordingly, no provision has been made
for federal income taxes for the Company and certain of its
subsidiaries in the accompanying condensed consolidated
financial statements.
Certain consolidated subsidiaries of the Company are subject
to District of Columbia franchise tax. These consolidated
subsidiaries file separate tax returns and are subject to
federal and state income taxes. Income taxes are accounted for
using the asset and liability method of accounting. These
taxes are recorded as general and administrative expenses in
the accompanying condensed consolidated financial statements.
(k) Investments in Unconsolidated Partnerships
The Company uses the equity method of accounting for its
investments in and earnings (losses) of unconsolidated
partnerships.
(l) Per Share Data
The computation of earnings per share in each year is based
upon the weighted average number of common shares outstanding.
When dilutive, stock options are included as share equivalents
using the treasury stock method. The weighted average number
of shares used in computing earnings per share was 38,765,122,
including 5,200,940 Units which are considered common stock
equivalents, and 13,361,992 for the three month periods ended
September 30, 1996 and 1995, respectively, and 27,723,006, in-
cluding 4,832,212 Units which are considered common stock
equivalents, and 13,324,269 for the nine month periods ended
September 30, 1996 and 1995, respectively.
(m) Cash Equivalents
For the purposes of reporting cash flows, the Company
considers all highly liquid investments with a maturity of
three months or less at the time of purchase to be cash
equivalents.
(n) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and
liabilities to prepare these financial statements in
conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
11
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(2) Mortgages and Notes Payable
Mortgages and notes payable generally require monthly principal and/or
interest payments. Following is a summary of the Company's mortgages
and notes payable as of September 30, 1996 (in thousands):
<TABLE>
<CAPTION>
September 30,
1996
-------------------
<S> <C>
Mortgages payable to The Northwestern Mutual Life
Insurance Company (NML); bearing interest at
rates ranging from 7.55 percent to 8.80 percent;
interest only is payable monthly through
February 1, 1998; thereafter principal and
interest payments are due monthly based on a
25-year amortization schedule through maturity
in February, 2003. $ 183,500
Mortgage payable to NML; bearing interest at 8.90
percent monthly; principal and interest payments
of $346 thousand through maturity in June 2002;
additional annual principal curtailments of $500
thousand are due through 2000, $2 million in
2001 and $1 million in 2002. 38,471
Mortgages payable to the Aid Association for
Lutherans (AAL) under two notes; $16.5 million
note bearing interest at 9.50 percent requires
monthly principal and interest payments of $144
thousand through maturity on July 1, 2017;
callable after June 30, 2002 by AAL; $21.6
million note bearing interest at 8.25 percent
requires monthly principal and interest payments
of $138 thousand through maturity on July 15,
2019; callable by AAL after July 1, 2004. 32,694
</TABLE>
12
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30,
1996
-------------------
<S> <C>
Note payable to Morgan Guaranty Trust Company of
New York, as agent for a group of banks; $325.0
million unsecured credit facility bearing
interest, as selected by the Company, at either
(i) the higher of the prime interest rate or the
sum of .5 percent plus the Federal Funds Rate
for such day or (ii) an interest rate equal to
1.75 percent above LIBOR. 72,000
Mortgage payable to Salomon Brothers Realty Corp.;
bearing interest at 8.375 percent; principal and
interest payments of $221 thousand are due
monthly through maturity in January 2006. * 28,110
Mortgage payable to CBA Conduit, Inc.; bearing
interest at 7.96 percent; interest only payments
of $194 thousand are due monthly through
maturity in December 2003. 29,250
Mortgage payable to CIGNA; bearing interest at 7.4
percent; interest only payments of $160 thousand
are due monthly through maturity in December
2000. 26,000
Mortgage payable to Metropolitan Life Insurance
Company; bearing interest at 7.375 percent;
principal and interest payments of $72 thousand
are due monthly through maturity in March 1999. 9,669
Mortgage payable to The Riggs National Bank of
Washington, D.C.; bearing interest at 7.50
percent; principal and interest payments of $49
thousand are due monthly through maturity in
February 1999. 6,375
----------
$ 426,069
==========
</TABLE>
13
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
As of September 30, 1996, the scheduled maturities of mortgages payable
for years ended December 31 are as follows (in thousands):
1996 $ 547
1997 2,413
1998 76,348
1999 20,408
2000 31,450
Thereafter 294,903
-----------
$ 426,069
===========
Restricted cash and cash equivalents primarily consist of escrow
deposits required by lenders to be used for future building
renovations, tenant improvements, or as additional collateral for a
loan or for letters of credit.
* This mortgage payable is held by Carr Redmond Corporation, a
wholly-owned subsidiary of the Company which owns the Redmond East
office campus. The accounts of Carr Redmond Corporation are
consolidated in the Company's financial statements.
14
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(3) Minority Interest
In conjunction with the formation of the Company and its majority-owned
subsidiary, Carr Realty, L.P., persons contributing interests in
properties to Carr Realty, L.P. had the right to elect to receive
either common stock of the Company or Units in Carr Realty, L.P. In
addition, the Company has acquired certain assets since its formation
by issuing dividend paying Units and non-dividend paying Units of Carr
Realty, L.P. and CarrAmerica Realty, L.P. The non-dividend paying Units
are not entitled to any distributions until they automatically convert
into dividend paying Units at various dates in the future. Each
dividend paying Unit, subject to certain restrictions, may be redeemed
for either one share of common stock or, at the option of the Company,
cash equal to the fair market value of a share of common stock at the
time of the redemption. When a Unitholder redeems a dividend paying
Unit for a share of common stock or cash, minority interest is reduced
and the Company's investment in Carr Realty, L.P. or CarrAmerica
Realty, L.P., as the case may be, is increased. During the three and
nine month periods ended September 30, 1996, 11,310 and 173,695
dividend paying Units, of Carr Realty, L.P. or CarrAmerica Realty,
L.P., respectively, were redeemed for common stock of the Company.
The following table sets forth the operating partnership Units
outstanding at September 30, 1996 and December 31, 1995:
September 30, December 31,
1996 1995
--------------- --------------
Operating partnership Units
owned by the Company 18,597,845 13,409,177
Operating partnership Units
owned by minority interest:
Dividend paying Units 4,304,725 4,079,615
Non-dividend paying Units 1,207,338 667,745
-------------- -------------
Total operating partnership
Units outstanding 24,109,908 18,156,537
============== =============
Minority interest in the accompanying condensed consolidated financial
statements relates primarily to holders of dividend paying and
non-dividend paying Units.
(4) Lease Agreements
The Company receives minimum rentals under noncancelable tenant leases.
Certain leases provide for additional rentals based on increases in the
Consumer Price Index (CPI) and increases in operating expenses. The
increased rentals from operating expenses are generally payable in
equal installments throughout the year, based on estimated increases,
with any differences being adjusted in the succeeding year.
15
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------------
(5) Transactions With Affiliates
In May 1996, the Company purchased the development business of The
Oliver Carr Company for $1.75 million. The principal shareholder of The
Oliver Carr Company is also a director, officer and shareholder of the
Company.
(6) Subsequent Events
From October 1, 1996 to November 1, 1996, the Company has acquired 12
operating office properties, consisting of 39 buildings totaling
approximately 1.4 million square feet, one property currently under
construction totaling 128,000 square feet and land which will support
the development of up to 95,000 square feet of additional office space.
The total purchase price for the properties and land was approximately
$130 million. The purchase of the properties was financed by the
assumption of $22 million in debt, the issuance of $1.5 million in
shares of common stock of the Company and payment of $106.5 million in
cash.
On October 18, 1996, the Company signed an agreement to extend its
borrowing capacity under its unsecured line of credit from $215 million
to $325 million.
On October 25, 1996, the Company sold 1,740,000 shares of Series A
Cumulative Convertible Redeemable Preferred Stock at $25.00 per share.
The proceeds derived from the sale of preferred stock were used to fund
a portion of the acquisition of a portfolio of properties located in
suburban Atlanta, Georgia.
16
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- --------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion is based primarily on the Condensed
Consolidated Financial Statements of CarrAmerica Realty Corporation and
subsidiaries (the Company) as of September 30, 1996 and December 31, 1995, and
for the three and nine months ended September 30, 1996 and 1995. This
information should be read in conjunction with the accompanying condensed
consolidated financial statements and notes thereto. These financial statements
include all adjustments which are, in the opinion of management, necessary to
reflect a fair presentation of the results for the interim periods, and all such
adjustments are of a normal, recurring nature.
Results of Operations - Three Months Ended September 30, 1996 and 1995
Real Estate Operating Revenue
Total real estate operating revenue increased $20.8 million, or 81.8%,
to $46.1 million for the three months ended September 30, 1996 as compared to
$25.4 million for the three months ended September 30, 1995. The increase in
revenue was primarily attributable to a $19.8 million and a $1.0 million
increase in rental revenue and real estate service revenue, respectively. The
Company experienced net growth in its rental revenue as a result of its
acquisitions since the third quarter of 1995 which contributed approximately
$21.6 million of additional rental revenue in the three month period ended
September 30, 1996. Rental revenue from properties that were fully operating
throughout both periods decreased by approximately $1.8 million as a result of
increased vacancies experienced in these properties. Real estate service revenue
increased by $1.0 million, or 37.7%, for the three months ended September 30,
1996 to $3.6 million as compared to $2.6 million for the three months ended
September 30, 1995, primarily as a result of development fees earned by Carr
Development & Construction, Inc., which was acquired by the Company in May 1996.
Real Estate Operating Expenses
Total real estate operating expenses increased $16.7 million for the
three months ended September 30, 1996, or 80.5%, to $37.5 million as compared to
$20.8 million for the three months ended September 30, 1995. The net increase in
operating expenses was attributable to a $5.9 million increase in property
operating expenses, a $2.3 million increase in interest expense, a $1.4 million
increase in general and administrative expenses, and a $7.1 million increase in
depreciation and amortization. The increase in property operating expenses was
primarily attributable to property acquisitions since the third quarter of 1995.
The increase in the Company's interest expense is primarily related to
borrowings for acquisitions. The increase in general and administrative expenses
is predominately a result of the addition of new staff to implement the
Company's new business strategy, the addition of approximately $.6 million of
expenses associated with Carr Development & Construction, Inc., and inflation.
The increase in depreciation and amortization is predominately a result of
additional depreciation and amortization on the Company's real estate
acquisitions.
Other Operating Income (Expense)
Other operating income increased $.3 million for the three months ended
September 30, 1996, to $.5 million as compared to $.2 million for the three
months ended September 30, 1995, primarily due to an increase in interest income
and the addition of equity in earnings of CC-JM II Associates. The Company is a
50% venturer in this entity, which constructed the Booz-Allen & Hamilton
Building that was placed in service in January 1996.
17
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- --------------------------------------------------------------------------------
Net Income
Net income of $7.9 million was earned for the three months ended
September 30, 1996 as compared to $3.4 million during the three month period
ended September 30, 1995. The comparability of net income between the two
periods is impacted by the acquisitions the Company made and the other changes
described above.
Cash Flows
Net cash provided by operating activities increased $20.6 million, or
320.4%, to $27.0 million for the three months ended September 30, 1996 as
compared to $6.4 million for the three months ended September 30, 1995,
primarily as a result of the acquisitions made by the Company. Net cash used by
investing activities increased $144.0 million, to $162.3 million for the three
months ended September 30, 1996 as compared to $18.3 million for the three
months ended September 30, 1995, primarily as a result of capital deployed by
the Company for acquisitions of office properties, land held for future
development and construction in process. Net cash provided by financing
activities increased $130.9 million to $136.5 million for the three months ended
September 30, 1996 as compared to $5.6 million provided for the three months
ended September 30, 1995, primarily as a result of proceeds from the sale of
common stock, partially offset by net repayments on the Company's line of
credit.
Results of Operations - Nine Months Ended September 30, 1996 and 1995
Real Estate Operating Revenue
Total real estate operating revenue increased $35.5 million, or 47.7%,
to $109.9 million for the nine months ended September 30, 1996 as compared to
$74.4 million for the nine months ended September 30, 1995. The increase in
revenue was primarily attributable to a $34.0 million and a $1.5 million
increase in rental revenue and real estate service revenue, respectively. The
Company experienced net growth in its rental revenue as a result of its
acquisitions since the third quarter of 1995 which contributed approximately
$36.8 million of additional rental revenue in the nine month period ended
September 30, 1996. Rental revenue from properties that were fully operating
throughout both periods decreased by approximately $2.8 million due to increased
vacancies experienced in those properties. Real estate service revenue increased
by $1.5 million, or 19.6%, for the nine months ended September 30, 1996 to $9.3
million as compared to $7.7 million for the nine months ended September 30,
1995. The increase was primarily as a result of an increase in leasing
commissions earned in the first quarter of 1996 and development fees earned by
Carr Development & Construction, Inc., which was acquired by the Company in May
1996.
Real Estate Operating Expenses
Total real estate operating expenses increased $31.3 million for the
nine months ended September 30, 1996, or 52.0%, to $91.6 million as compared to
$60.3 million for the nine months ended September 30, 1995. The net increase in
operating expenses was attributable to a $10.5 million increase in property
operating expenses, a $5.6 million increase in interest expense, a $2.8 million
increase in general and administrative expenses, and a $12.4 million increase in
depreciation and amortization. The increase in property operating expenses was
primarily attributable to $9.7 million in operating expenses associated with
property acquisitions since September 30, 1995. Exclusive of operating expenses
attributable to new property acquisitions, property operating expenses increased
by $.8 million for the nine months ended September 30, 1996 predominately as a
result of higher real estate tax assessments and repairs and maintenance costs.
The increase in the Company's interest expense is primarily related to
borrowings for acquisitions. The increase in general and administrative expenses
is predominately a result of the addition of new staff to implement the
Company's new business strategy, the addition of approximately $1.1 million of
expenses associated with Carr Development & Construction, Inc., and inflation.
The increase in depreciation and amortization
18
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- --------------------------------------------------------------------------------
is predominately a result of additional depreciation and amortization on the
Company's real estate acquisitions.
Other Operating Income (Expense)
Other operating income increased $.9 million for the nine months ended
September 30, 1996, to $1.6 million as compared to $.7 million for the nine
months ended September 30, 1995; primarily due to an increase in interest income
and the addition of equity in earnings of CC-JM II Associates. The Company is a
50% venturer in this entity, which constructed the Booz-Allen & Hamilton
Building that was placed in service in January 1996.
Net Income
Net income of $15.5 million was earned for the nine months ended
September 30, 1996 as compared to $10.4 million during the nine month period
ended September 30, 1995. The comparability of net income between the two
periods is impacted by the acquisitions the Company made and the other changes
described above.
Cash Flows
Net cash provided by operating activities increased $23.0 million, or
94.4%, to $47.4 million for the nine months ended September 30, 1996 as compared
to $24.4 million for the nine months ended September 30, 1995, primarily as a
result of the acquisitions made by the Company. Net cash used by investing
activities increased $450.8 million, to $484.6 million for the nine months ended
September 30, 1996 as compared to $33.8 million for the nine months ended
September 30, 1995, primarily as a result of capital deployed by the Company for
acquisitions of office properties, land held for future development and
construction in process. Net cash provided by financing activities increased
$443.4 million to $442.3 million for the nine months ended September 30, 1996 as
compared to $1.1 million used for the nine months ended September 30, 1995,
primarily as a result of proceeds from the sale of common stock and the net
borrowings necessary for the Company's acquisitions.
19
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
Liquidity and Capital Resources
The Company's total indebtedness at September 30, 1996 was $426.1
million, of which $72.0 million, or 16.9%, had a LIBOR-based floating interest
rate. The Company's fixed rate indebtedness had a weighted average interest rate
of 8.3% and had a weighted average term to maturity of 6.2 years. In addition to
the indebtedness outstanding, the Company can borrow up to an additional $143.0
million under its unsecured revolving line of credit which bears a LIBOR-based
floating interest rate (see below). Based upon the Company's total market
capitalization at September 30, 1996 of $1,450.7 million (the stock price was
$25.00 per share and the total shares/Units outstanding were 40,985,556, the
Company's debt represented 29.4% of its total market capitalization.
On October 18, 1996, the Company expanded its unsecured credit facility
from $215 million to $325 million. The Company intends to use the line of credit
to finance acquisitions and development activities, for capital expenditures and
for working capital purposes. The Company has drawn $145.0 million on its
unsecured line of credit in conjunction with various acquisitions since
September 30, 1996.
The Company's operating properties require periodic investments of
capital for tenant-related capital expenditures and for general capital
improvement projects. The Company has recently completed large-scale renovations
of certain of the Company's Washington, D.C. properties to improve these
properties' market position and to bring the properties into compliance with
certain new local and federal laws. As a result, the Company expects that
general capital expenditures for its Washington, D.C. properties will be lower
than the general capital expenditures the Company has incurred for these
properties over the last three years. The Company has recently begun renovating
several garages at its Washington, D.C. properties at an estimated total cost of
approximately $3.5 million, or $1.45 per square foot of the Company's
Washington, D.C. properties, to be spent over the next two years. Exclusive of
the garage renovations, general capital expenditures for the Company's
Washington, D.C. properties are expected to be approximately $1.0 million or
less annually, or $.40 or less per square foot annually. With respect to the
Company's recent acquisitions in select suburban growth markets, the Company
expects that the annual capital expenditures for these properties will be
substantially less than the Company has incurred for its Washington, D.C.
properties. Based on current market conditions in its target markets, the
Company expects that tenant-related capital expenditures for its recent
acquisitions will be approximately $7.75 to $8.25 per square foot leased for
leases entered into in the next 12 months. The Company expects that this amount
should decline if market conditions in its target markets continue to improve.
The Company believes that general capital expenditures will average
approximately $.30 per square foot owned on an annual basis for its recent
acquisitions. The Company anticipates funding the capital requirements of its
Washington, D.C. properties and of its new acquisitions with cash flow from
operations and, if necessary, with proceeds from its line of credit.
The Company's estimates regarding capital expenditures set forth above
are forward-looking information representing the Company's best estimates based
on currently available information. As with any estimates, they are based on a
number of assumptions, any of which, if unrealized, could adversely affect the
accuracy of the estimates. These assumptions include that (i) the Company
experiences tenant retention rates consistent with its expectations, (ii) the
supply/demand characteristics for office space in the Company's target markets
do not vary materially from the Company's expectations, (iii) leasing
commissions associated with obtaining new tenants or retaining existing tenants
are consistent with the Company's past experience and future expectation, and
(iv) the Company does not acquire operating office properties in the future that
require substantial renovations.
20
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
Net cash provided by operating activities was $27.0 million for the
three months ended September 30, 1996, compared to $6.4 million for the three
months ended September 30, 1995. The increase in net cash provided by operating
activities was primarily as a result of acquisitions made by the Company,
partially offset by decreased net income at certain of its operating properties.
The Company's investing activities used approximately $162.3 million and $18.3
million for the three months ended September 30, 1996 and 1995, respectively.
The Company's investment activities included the acquisitions of office
buildings, land held for development, and additions to construction in process,
for approximately $157.4 million for the three months ended September 30, 1996,
as compared to $18.4 million in acquisitions during the same period in 1995.
Additionally, the Company invested approximately $3.9 million and $2.7 million
in the existing real estate assets for the three months ended September 30, 1996
and 1995, respectively. Exclusive of distributions to the Company's shareholders
and minority interests, the Company's financing activities provided net cash of
$153.8 million and $13.3 million for the three months ended September 30, 1996
and 1995 respectively. For the three months ended September 30, 1996, the
Company raised $216.7 million through the sale of common stock which was used to
repay $62.0 million of its line of credit and to fund acquisitions. For the
three months ended September 30, 1995, the Company borrowed approximately $14.3
million to provide adequate capital for the Company's investing activities.
Net cash provided by operating activities was $47.4 million for the
nine months ended September 30, 1996, compared to $24.4 million for the nine
months ended September 30, 1995. The increase in net cash provided by operating
activities was primarily as a result of acquisitions made by the Company,
partially offset by decreased net income at certain of its operating properties.
The Company's investing activities used approximately $484.6 million and $33.8
million for the nine months ended September 30, 1996 and 1995, respectively. The
Company's investment activities included the acquisitions of office buildings,
land held for future development and additions to construction in process for
approximately $469.6 million and the acquisition of real estate service
contracts for approximately $1.8 million for the nine months ended September 30,
1996, as compared to acquisition activity of $18.4 million of office buildings
and $7.4 million of real estate service contracts during the same period in
1995. Additionally, the Company invested approximately $5.8 million and $7.7
million in the existing real estate assets for the nine months ended September
30, 1996 and 1995, respectively. Exclusive of distributions to the Company's
shareholders and minority interests, the Company's financing activities provided
net cash of $475.0 million and $22.1 million for the nine months ended September
30, 1996 and 1995 respectively. For the nine months ended September 30, 1996,
the Company raised $461.3 million through the sale of common stock, borrowed
$72.0 million on the Company's line of credit and repaid $56.4 million of
indebtedness to provide adequate capital for the Company's investing activities,
as compared to approximately borrowing $24.0 million for the nine months ended
September 30, 1995.
Rental revenue and real estate service revenue have been the principal
sources of capital to fund the Company's operating expenses, debt service and
capital expenditures, excluding nonrecurring capital expenditures. The Company
believes that rental revenue and real estate service revenue will continue to
provide the necessary funds for its operating expenses and debt service. The
Company expects to fund capital expenditures, including tenant concession
packages and building renovations from (a) available cash flow from operations;
(b) existing capital reserves; and (c) if necessary, credit facilities
established with third party lenders. If these sources of funds are
insufficient, the Company's ability to make expected dividends may be adversely
impacted. At September 30, 1996, the Company had cash of $22.9 million, of which
$8.6 million was restricted.
The Company's dividends are paid quarterly. Amounts accumulated for
distribution will predominately be invested by the Company in short-term
investments that are collateralized by securities of the United States
Government or any of its agencies.
21
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
Management believes that the Company will have access to the capital
resources necessary to expand and develop its business. Accordingly, the Company
may seek to obtain funds through additional equity offerings, joint ventures,
asset sales, or debt financing in a manner consistent with its intention to
operate with a conservative borrowing policy. The Company anticipates that
adequate cash will be available to fund its operating and administrative
expenses, to continue debt service obligations, to pay dividends in accordance
with REIT requirements, and to acquire additional rental properties.
The Company believes that funds from operations is an appropriate
measure of the performance of an equity REIT because industry analysts have
accepted it as a performance measure of equity REITs. In accordance with the
final NAREIT White Paper on Funds From Operations as approved by the Board of
Governors of NAREIT on March 3, 1995, funds from operations represents net
income (loss) (computed in accordance with generally accepted accounting
principles), excluding gains (losses) from debt restructuring or sales of
property, plus depreciation and amortization of assets uniquely significant to
the real estate industry and after adjustments for unconsolidated partnerships
and joint ventures. Adjustments for unconsolidated partnerships and joint
ventures will be calculated to reflect funds from operations on the same basis.
The Company's funds from operations for the three and nine month periods ended
September 30, 1995 have been restated to conform to the new NAREIT definition of
funds from operations. Funds from operations does not represent net income or
cash flows generated from operating activities in accordance with generally
accepted accounting principles and should not be considered an alternative to
net income as an indication of the Company's performance or to cash flows as a
measure of liquidity or the Company's ability to make distributions.
The following table provides the calculation of the Company's funds
from operations for the three and nine month periods ended September 30, 1996
and 1995 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income before minority interest and
extraordinary item $ 9,203 4,879 $ 19,881 14,885
Adjustments to derive funds from operations:
Add:
Depreciation and amortization 10,974 4,327 24,171 12,650
Deduct:
Minority interests' (non Unitholders)
share of depreciation, amortization and
net income (146) (408) (763) (1,327)
------- ------ ----- ------
Funds from operations before allocation to
the minority Unitholders 20,031 8,798 43,289 26,208
Less: Funds from operations allocable to the
minority Unitholders (2,390) (2,076) (6,761) (6,240)
--------- ------- ------- -------
Funds from operations allocable
to CarrAmerica Realty Corporation $ 17,641 6,722 $ 36,528 19,968
======== ===== ======== ======
</TABLE>
Changes in funds from operations are largely attributable to changes in
net income between the periods as previously discussed.
22
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
Building and Lease Information
The following table sets forth certain lease related information about
each operating property as of September 30, 1996:
<TABLE>
<CAPTION>
Company's
Effective Net
Property Rentable Area Percent
Property Ownership (Square Feet) (1) Leased (2)
- -------- --------- ----------------- ----------
<S> <C> <C> <C>
Consolidated Properties
- -----------------------
Washington, D.C.:
International Square (3 Properties) 100.0 % 1,017,899 90.7 %
1730 Pennsylvania Avenue 100.0 229,500 96.2
2550 M Street 100.0 187,931 100.0
1775 Pennsylvania Avenue 100.0 143,981 99.1
900 19th Street 100.0 101,186 89.3
1747 Pennsylvania Avenue 89.7 152,314 74.9
1255 23rd Street 75.0 303,831 70.3
2445 M Street 74.0 266,902 89.4
Suburban Maryland:
One Rock Spring Plaza 100.0 205,298 98.3
Northern Virginia:
Tycon Courthouse 100.0 414,595 96.5
Three Ballston Plaza 100.0 302,797 99.1
Reston Quadrangle (3 Properties) 100.0 261,175 99.8
Parkway One 100.0 87,842 100.0
Southern California:
Scenic Business Park (4 Properties) 100.0 137,436 89.7
Harbor Corporate Park(4 Properties) 100.0 149,938 54.1
Plaza PacifiCare 100.0 104,377 100.0
Katella Corporate Center 100.0 80,204 92.7
Warner Center (12 Properties) 100.0 342,959 94.5
Northern, California:
AT&T Center (6 Properties) 100.0 1,082,032 100.0
Sunnyvale Research Plaza (3 Properties) 100.0 126,000 100.0
Denver :
Harlequin Plaza (2 Properties) 100.0 327,623 94.4
Quebec Court I & II (2 Properties) 100.0 285,829 100.0
The Quorum (2 Properties) 100.0 123,900 80.8
Greenwood Center 100.0 74,853 94.1
Quebec Center (3 Properties) 100.0 106,786 97.7
Seattle:
Redmond East (10 Properties) 100.0 400,297 98.1
Suburban Chicago:
Parkway North (2 Properties) 100.0 514,029 96.4
Austin, Texas:
Norwood Tower 100.0 111,444 86.5
Littlefield Complex (2 Properties) 100.0 128,625 46.9
First State Bank Tower 100.0 268,244 68.0
Great Hills Plaza 100.0 135,335 87.3
Balcones Center 100.0 75,761 83.5
Park North (2 Properties) 100.0 132,935 98.3
The Settings (3 Properties) 100.0 136,183 95.3
Total Consolidated Properties: 8,520,041
=========
Weighted Average 92.0
</TABLE>
23
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Company's
Effective Net
Property Rentable Area Percent
Property Ownership (Square Feet) (1) Leased (2)
- -------- --------- ----------------- ----------
<S> <C> <C> <C>
Unconsolidated Properties:
- --------------------------
Washington, DC:
AARP Headquarters 24.0 477,187 98.9
Bond Building 15.0 162,097 100.0
1776 Eye Street 5.0 212,774 92.8
Willard Office/Hotel 5.0 242,787 93.0
1575 Eye Street 2.0 205,441 52.5
Virginia:
Booz-Allen & Hamilton Building 50.0 222,989 100.0
---------- -----
Total Unconsolidated Properties: 1,523,275
---------
Weighted Average 91.1
======
All Operating Properties
Total: 10,043,316
----------
Weighted Average 91.9
======
</TABLE>
- ------------
(1) Excludes storage space.
(2) Includes space for leases that have been executed and have commenced as of
September 30, 1996.
The following table sets forth a schedule of lease expirations for
executed leases as of September 30, 1996, for each of the 10 years beginning
with 1996, for the 81 operating properties consolidated for financial statement
purposes, assuming that no tenants exercise renewal options:
Percent of Total
Net Rentable Leased Square
Year of Area Subject to Footage
Lease Expiring Leases Represented by
Expiration (Square Feet) Expiring Leases*
---------------- ------------------ ------------------
1996 235,632 3.0 %
1997 673,759 8.6
1998 1,608,517 20.5
1999 846,018 10.8
2000 764,188 9.7
2001 913,225 11.6
2002 791,723 10.1
2003 484,965 6.2
2004 227,022 2.9
2005 342,593 4.4
and thereafter 958,345 12.2
============= =========
- ------------
* Excludes 674,064 square feet of space vacant and uncommitted as of September
30, 1996.
24
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company
- -------------------------------------------------------------------------------
The following table sets forth certain lease-related information for
the consolidated operating properties presented in order to show downtown
Washington, D.C. operating properties separate from other operating properties.
The table presents leases that commenced during the twelve month period from
October 1, 1995 to September 30, 1996, excluding the leases for operating
properties that were executed prior to the date of acquisition:
<TABLE>
<CAPTION>
Calculated on a Weighted Average Basis
--------------------------------------------------------------------
Downtown Tenant
Washington, D.C. Improvements Base
Properties Total & Cash Rent Leasing
Square Allowances per Lease Abatements Commission
Feet per Square Life in in Per Square
Type of Lease Leased Square Foot Foot Years Months Foot
- -------------- ------ ----------- ------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Office 103,094 $ 29.09 $ 31.38 8.6 3.1 $ 7.36
Retail 10,765 4.16 26.25 3.8 1.6 2.88
------------
Total 113,859 26.73 30.90 8.2 3.0 6.94
============ =============== ======== ======= ============= =============
New leases or
expansion space 55,996 27.34 30.46 6.6 2.3 5.33
Renewals of existing
tenants' space 57,863 26.14 31.33 9.7 3.6 8.49
------------
Total 113,859 26.73 30.90 8.2 3.0 6.94
============ =============== ======== ======= ============= =============
Calculated on a Weighted Average Basis
--------------------------------------------------------------------
Tenant
All Other Operating Improvements Base
Properties Total & Cash Rent Leasing
Square Allowances per Lease Abatements Commission
Feet per Square Life in in Per Square
Type of Lease Leased Square Foot Foot Years Months Foot
- -------------- ------ ----------- ------- ------- ----------- ----------
Office 161,446 $ 3.61 $ 17.42 4.1 0.7 $ 0.28
Retail 0 0.00 0.00 0.0 0.0 0.00
------------
Total 161,446 3.61 17.42 4.1 0.7 0.28
============ =============== ======== ======= ============= =============
New leases or
expansion space 96,425 6.03 16.93 5.1 1.2 0.48
Renewals of existing
tenants' space 65,021 0.03 18.15 2.5 0.0 0.00
------------
Total 161,446 3.61 17.42 4.1 0.7 0.28
============ =============== ======== ======= =============================
</TABLE>
25
<PAGE>
Part II
OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
On October 25, 1996, the Board of Directors of the Company adopted a
Second Amendment and Restatement of By-Laws which incorporated all previously
approved amendments to the By-Laws and two new amendments: an amendment of
Section 3.01 of the By-Laws to provide that the annual Meeting of Stockholders
of the Corporation shall be held each year between May 1 and May 31; and the
amendment of Section 3.02 of the By-Laws to provide that, in accordance with
recent legislation from the State of Maryland (H.B. 636), a special meeting of
stockholders called at the request of stockholders must be requested by holders
of 35% or more of the issued and outstanding shares of capital stock of the
Corporation entitled to vote at the meeting. A copy of the Second Amendment and
Restatement of By-Laws is attached as Exhibit 3.1 to this Form 10-Q.
On October 24, 1996, the Company filed with the Maryland State
Department of Assessments and Taxation Articles Supplementary of Series A
Cumulative Convertible Redeemable Preferred Stock (the "Series A Preferred
Stock") in connection with the sale, on October 25, 1996, of 1,740,000 shares of
the Series A Preferred Stock. A copy of the Articles Supplementary is attached
as Exhibit 4.1 to this Form 10-Q.
On November 1, 1996, the Company acquired 38 operating office
buildings and one office building currently under construction in Atlanta,
Georgia and one operating property located in Boca Raton, Florida for an
aggregate purchase price of approximately $128 million. The consideration for
these acquisitions was paid through a combination of cash, issuance of common
stock of the Company and the assumption of approximately $22 million in debt
that bears interest at an annual rate of 7.2% and matures in 2006. The 39
operating office properties (the "Peterson Portfolio") contain approximately
1,437,000 square feet of space. The building under construction will contain
approximately 128,000 square feet when completed.
The historical financial statements relating to the Peterson
Portfolio required by Item 7 (a) of Form 8-K were filed with the Commission on a
Current Report on Form 8-K on October 24, 1996. It is impracticable at this time
to file the pro forma financial information relating to the Peterson Portfolio
required by Item 7 (b) of Form 8-K. The Company will file such pro forma
financial statements with the Commission as soon as they are available but not
later than January 14, 1997.
26
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
3.1 Second Amendment and Restatement of By-Laws of CarrAmerica
Realty Corporation dated as of October 25, 1996.
4.1 Articles Supplementary of Series A Cumulative Convertible Re-
deemeable Preferred Stock
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
a. Current Report on Form 8-K dated October 16, 1996 and filed on
October 16, 1996 relating to the closing of the purchase of
the Littlefield Portfolio located in Austin, Texas and pro
forma financial statements.
b. Current Report on Form 8-K dated October 24, 1996 and filed on
October 24, 1996 relating to certain historical summaries and
pro forma financial information.
c. Current Report as Form 8-K dated October 24, 1996 and filed on
October 24, 1996 relating to the sale by the Company of
1,740,000 shares of Series A Cumulative Convertible Preferred
Stock.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARRAMERICA REALTY CORPORATION
/s/ Thomas A. Carr
- -------------------------------
Thomas A. Carr, President and
Chief Operating Officer
/s/ Brian K. Fields
- ----------------------------------------
Brian K. Fields, Chief Financial Officer
Date: November 5, 1996
28
<PAGE>
Exhibit Index
Exhibit Description
- ------- -----------
3.1 Second Amendment and Restatement of By-Laws of CarrAmerica
Realty Corporation dated as of October 25, 1996.
4.1 Articles Supplementary of Series A Cumulative Convertible
Redeemeable Preferred Stock
27 Financial Data Schedule
29
Exhibit 3.1
3.1 Second Amendment and Restatement of By-Laws of CarrAmerica
Realty Corporation dated as of October 25, 1996.
30
<PAGE>
SECOND AMENDMENT AND RESTATEMENT
OF
CARRAMERICA REALTY CORPORATION
BY-LAWS
CarrAmerica Realty Corporation, a Maryland Corporation (the "Corporation")
having its principal office in Maryland in Baltimore, Maryland, and having the
Corporation Trust, Incorporated as its resident agent located at 23 South
Street, Baltimore, Maryland, hereby amends and restates the By-laws of the
Corporation adopted as of July 9, 1992, as follows:
ARTICLE 1
The name of the Corporation is: CarrAmerica Realty Corporation.
ARTICLE 2
OFFICES
The Corporation shall maintain a registered office in the State of Maryland
as required by law. The Corporation may also have offices at other places,
within or without the State of Maryland, as the business of the Corporation may
require.
ARTICLE 3
STOCKHOLDERS
Section 3.01. Annual Meeting. The annual meeting of the stockholders shall
be held each year between June 1 and July 1 on such date and at such time as the
Board of Directors designates. At each annual meeting, the stockholders shall
elect the members of the Board of Directors and transact such other business as
may be properly brought before the meeting.
Section 3.02. Special Meetings. Special meetings of stockholders for any
purpose or purposes, described in the meeting notice, may be called by the
President or the Chairman of the Board of Directors and shall be called by the
President or the Chairman of the Board of Directors or the Secretary at the
request in writing of one (1) or more Directors or of the holders of 25 percent
or more of the issued and outstanding shares of capital stock of the Corporation
entitled to be voted at the meeting. Such a request shall state the purpose or
purposes of the proposed meeting.
<PAGE>
Section 3.03. Place of Meetings. Meetings of stockholders possessing voting
shares shall be held at such place, within or without the State of Maryland, as
the Board of Directors designates.
Section 3.04. Notice of Stockholder Meetings.
(a) Required notice. Written notice stating the place, day and hour of any
annual or special stockholder meeting shall be delivered not less than 10 nor
more than 60 days before the date of the meeting, either personally or by mail,
by or at the direction of the President, the Board of Directors, or other
persons calling the meeting, to each stockholder of record entitled to vote at
such meeting and to any other stockholder entitled by the Maryland General
Corporation Law or the Articles of Incorporation to receive notice of the
meeting. Notice shall be deemed to be effective at the earlier of: (1) when
deposited in the United States mail, addressed to the stockholder at his address
as it appears on the stock transfer books of the corporation, with postage
thereon prepaid; (2) on the date shown on the return receipt if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee; or (3) when received.
(b) Adjourned Meeting. If any stockholder meeting is adjourned to a
different date, time, or place, notice need not be given of the new date, time,
and place, if the new date, time, and place is announced at the meeting before
adjournment. But if the new record date for the adjourned meeting is or must be
fixed, then notice must be given pursuant to the requirements of paragraph (a)
of this Section 3.04, to those persons who are stockholders as of the new record
date.
(c) Waiver of Notice. A stockholder may waive notice of the meeting (or any
notice required by the Maryland General Corporation Law, Articles of
Incorporation, or these By-laws), by a writing signed by the stockholder
entitled to the notice, which is delivered to the Corporation (either before or
after the date and time stated in the notice) for inclusion in the minutes or
filing with the corporate records.
A stockholder's attendance at a meeting:
(1) waives objection to lack of notice or defective notice of the meeting
unless the stockholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting; or
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(2) waives objection to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting
notice, unless the stockholder objects to considering the matter when
it is presented.
(d) Contents of Notice. The notice of each special stockholder meeting
shall include a description of the purpose or purposes for which the meeting is
called. Except as provided in this Section 3.04 (d), or as provided in the
Corporation's Articles of Incorporation, or otherwise in the Maryland General
Corporation Law, the notice of an annual stockholder meeting need not include a
description of the purpose or purposes for which the meeting is called.
Section 3.05. Fixing of Record Date; List of Stockholders. The Board of
Directors may fix, in advance, a record date not less than thirty nor more than
ninety days before the date then fixed for the holding of any meeting of the
stockholders. The record date shall not be prior to the close of business on the
day the record date is fixed. All persons who were holders of record of shares
at such time, and no others, shall be entitled to vote at such meeting and any
adjournment thereof. At each meeting of stockholders, a true, full and complete
list of all stockholders entitled to vote at each meeting, showing the number
and class of shares held by each and certified by the transfer agent for such
class or by the Secretary, shall be furnished by the Secretary to the Board of
Directors.
Section 3.06. Quorum. The holders, present in person or represented by
proxy, of a majority of the issued and outstanding shares of capital stock
entitled to be voted at a meeting shall constitute a quorum for the transaction
of business at the meeting. If less than a quorum is present, the holders of a
majority of such shares whose holders are so present or represented may from
time to time adjourn the meeting to another place, date or hour until a quorum
is present, whereupon the meeting may be held, as adjourned, without further
notice except as required by law or by Section 3.04.
Section 3.07. Voting. When a quorum is present at a meeting of the
stockholders, the vote of the holders of a majority of the shares of capital
stock entitled to be voted whose holders are present in person or represented by
proxy shall decide any question brought before the meeting, unless the question
is one upon which, by express provision of law or of the Articles of
Incorporation or of these By-laws, a different vote is required. Unless
otherwise provided in the Articles of Incorporation, each stockholder shall at a
meeting of the
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stockholders be entitled to one (1) vote in person or by proxy for each share of
capital stock entitled to be voted held by such stockholders. At a meeting of
the stockholders, all questions relating to the qualifications of voters, the
validity of proxies, and the acceptance or rejection of votes shall be decided
by the presiding officer of the meeting.
Section 3.08. Presiding Officer of Meetings. The Chairman of the Board of
Directors, or in his absence the Chief Executive Officer, or in both their
absence the President, shall preside at all meetings of the stockholders. In the
absence of the Chairman of the Board, the Chief Executive Officer and the
President, the presiding officer shall be elected by vote of the holders of a
majority of the shares of capital stock entitled to be voted whose holders are
present in person or represented by proxy at the meeting.
Section 3.09. Secretary of Meetings. The Secretary of the Corporation shall
act as secretary of all meetings of the stockholders. In the absence of the
Secretary, the presiding officer of the meeting shall appoint any other person
to act as secretary of the meeting.
Section 3.10. Proxies. At all meetings of stockholders, a stockholder may
vote in person or vote by proxy which is executed in writing by the stockholder
or which is executed by his duly authorized attorney-in-fact. Such proxy shall
be filed with the Secretary of the Corporation or other persons authorized to
tabulate votes before or at the time of the meeting. No proxy shall be valid
after 11 months from the date of its execution unless otherwise provided in the
proxy.
Section 3.11. Nominations and Stockholder Business.
(a) Annual Meeting of Stockholders.
(1) With respect to an annual meeting of stockholders, nominations of
persons for election to the Board of Directors and the proposal of
business to be considered by the stockholders may be made only (i) by
or at the direction of the Board of Directors or (ii) by any
stockholder of the Corporation who was a stockholder of record at the
time of giving notice of such nomination, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in
this Section 3.11(a).
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder
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pursuant to clause (ii) of paragraph (a)(1) of this Section 3.11, the
stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice
shall be delivered to the Secretary at the principal executive offices
of the Corporation not less than 60 days nor more than 90 days prior to
the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from such
anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting
and not later than the close of business on the later of the 60th day
prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first made.
Such stockholder's notice shall set forth: (i) as to each person whom
the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including such person's
written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); (ii) as to any other business
that the stockholder proposed to bring before the meeting, the reasons
for conducting such business at the meeting and any material interest
in such business of such stockholder and of the beneficial owner, if
any, on whose behalf the proposal is made; and (iii) as to the
stockholder giving notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, the name and address of such
stockholder, as they appear on the Corporation's books and of such
beneficial owner and the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of Section 3.11(a)(2)
to the contrary, in the event that the number of directors to be
elected to the Board of Directors is increased and there is no public
announcement naming all of the nominees for
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director or specifying the size of the increased Board of Directors
made by the Corporation at least 70 days prior to the first anniversary
of the preceding year's annual meeting, a stockholder's notice required
by this Section 3.11(a) shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the
tenth day following the day on which such public announcement is first
made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be conducted
at a special meeting of stockholders as shall have been brought before the
meeting pursuant to the Corporation's notice of meeting. Nominations of persons
for election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the Corporation's
notice of meeting (i) by or at the direction of the Board of Directors or (ii)
provided that the Board of Directors has determined that directors shall be
elected at such special meeting, by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section 3.11(b), who is entitled to vote at the meeting and who complied with
the notice procedures set forth in this Section 3.11(b). In the event the
Corporation calls a special meeting of stockholders for the purpose of electing
one or more directors to the Board of Directors, any such stockholder may
nominate a person or persons (as the case may be) for election to such position
as specified in the Corporation's notice of meeting, if the stockholder's notice
complies with the requirements of Section 3.11(a)(2) and is delivered to the
Secretary at the principal executive offices of the Corporation not earlier than
the 90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the tenth
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the directors to be elected
at such meeting.
(c) General.
(1) Only such persons who are nominated in accordance with the procedures
set forth in Section 3.11 shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as
shall have been brought before the meeting in accordance with the
procedures set forth in this Section 3.11. The presiding officer of the
meeting shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was made in
accordance with the procedures set
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forth in this section 3.11 and, if any proposed nomination or business
is not in compliance with this Section 3.11, to declare that such
defective nomination or proposal be disregarded.
(2) For purposes of this Section 3.11, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(3) Notwithstanding the foregoing provisions of this Section 3.11, a
stockholder shall also comply with all applicable requirements of state
law and of the Exchange Act and the rules and regulations thereunder
with respect to the matters set forth in this Section 3.11. Nothing in
this Section 3.11 shall be deemed to affect any rights of stockholders
to request inclusion of proposals in the Corporation's proxy statement
pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE 4
BOARD OF DIRECTORS
Section 4.01. Powers. The business of the Corporation shall be managed
under the direction of the Board of Directors, which shall exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
law or by the Articles of Incorporation or by these By-laws directed or required
to be exercised or done by the stockholder.
Section 4.02. Number; Election; Qualification; Term.
(a) The Board of Directors shall consist of twelve members or such number
as determined from time to time by amendment of this subsection. The number of
Directors shall in no event be less than three. The term of office of a Director
shall not be affected by any decrease in the authorized number of Directors.
(b) The Board of Director shall initially consist of the persons named as
the Directors of the Corporation by the incorporater in the Articles of
Incorporation and any Directors selected in accordance with Section 4.03.
Beginning with the annual meeting of stockholders in 1994, at the first meeting
and at each subsequent annual meeting of the stockholders, the stockholders
shall elect Directors as set forth in paragraph (d) below.
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<PAGE>
(c) Unless by the terms of the action pursuant to which he was elected any
special condition or conditions must be fulfilled in order for him to be
qualified, a person elected as a Director shall be deemed to be qualified (1)
upon his receipt of notice of election and his indication of acceptance thereof
or (2) upon the expiration of ten days after notice of election is given to him
without his having given notice of inability or unwillingness to serve.
Directors do not need to be residents of Maryland or stockholders of the
Corporation.
(d) The initial Directors shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible. One class shall serve for a term expiring at the annual meeting of
stockholders to be held in 1994. Another class shall serve for a term expiring
at the annual meeting of stockholders to be held in 1995. Another class shall
serve for a term expiring at the annual meeting of stockholders to be held in
1996. Each class will hold office until its successors are elected and
qualified. At each annual meeting of the stockholders of the Corporation, the
successors of the class of directors whose terms expire at that meeting shall be
elected to hold office for a term expiring at the annual meeting of stockholders
held in the third year following the year of their election.
Section 4.03. Vacancies. Whenever between annual meetings of the
stockholders any vacancy exists in the Board of Directors by reason of death,
resignation, removal, or increase in the authorized number of Directors, or
otherwise, it may be filled by vote of a majority of the Directors in office. A
director elected by the Board of Directors to fill a vacancy shall hold office
until the next annual meeting of the Corporation, at which time a successor
shall be elected to fill the remaining term of the position filled by such
director.
Section 4.04. Place of Meetings. Any meeting of the Board of Directors may
be held either within or without the State of Maryland.
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Section 4.05. Annual Meeting. There shall be an annual meeting of the Board
of Directors for an election of officers and the transaction of such other
business as may be brought before the meeting. The annual meeting of the Board
shall be held immediately following the annual meeting of the stockholders or
any adjournment thereof, at the place where the annual meeting of the
stockholders was held or at such other place as a majority of the Directors who
are then present determine. If the annual meeting is not so held, it shall be
called and held in the manner provided herein for special meetings of the Board
or conducted pursuant to Section 4.12.
Section 4.06 Regular Meetings. Regular meetings of the Board of Directors,
other than the annual meeting, may be held without notice at such times and
places as the Board may have fixed by resolution.
Section 4.07. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President and shall be called
on the written request of any Director.
Section 4.08. Notice of, and Waiver of Notice for, Special Directors
Meetings. Unless the Articles of Incorporation provide for a longer or shorter
period, notice of any special director meeting shall be given at least two days
previously thereto either orally or in writing. If notice is given in writing,
notice of any director meeting shall be deemed to be effective at the earlier
of: (1) when received; or (2) the date shown on the return receipt if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the Director. Any Director may waive notice of any
meeting. Except as provided in the next sentence, the waiver must be in writing,
signed by the Director entitled to the notice, and filed with the minutes or
corporate records. The attendance of a Director at a meeting shall constitute a
waiver of notice of such meeting, except where a Director attends a meeting for
the express purpose of objecting to the transaction of any business and at the
beginning of the meeting (or promptly upon his arrival) objects to holding the
meeting or transacting business at the meeting, and does not thereafter vote for
or assent to action taken at the meeting. Unless required by the Articles of
Incorporation, neither the business to be transacted at, nor the purpose of, any
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
Section 4.09. Organization. Every meeting of the Board of Directors shall
be presided over by the Chairman of the Board or in his absence by the Chief
Executive Officer or in both
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their absence the President. In the absence of the Chairman of the Board, the
Chief Executive Officer, and the President, a presiding officer shall be chosen
by a majority of the Directors present. The Secretary of the Corporation shall
act as secretary of the meeting. In his absence the presiding officer shall
appoint another person to act as secretary of the meeting.
Section 4.10. Quorum. The presence of a majority or more of the number of
Directors fixed by Section 4.02(a) shall be necessary to constitute a quorum for
the transaction of business at a meeting of the Board of Directors; provided,
however, that if any one (1) or more of the Directors recuse themselves from
consideration of a particular matter or matters at a meeting of the Board of
Directors, the presence of a majority or more of (i) the number of Directors
fixed by Section 4.02(a), less (ii) the number of Directors who have so recused
themselves, shall be sufficient to constitute a quorum for the transaction of
business at such meeting of the Board of Directors; provided further, however,
that in no event shall the number of Directors sufficient to constitute a quorum
for the transaction of business at a meeting of the Board of Directors be less
than one-third of the number of Directors fixed by Section 4.02(a). If less than
quorum is present, a majority of the Directors present may from time to time
adjourn the meeting to another time or place until a quorum is present,
whereupon the meeting may be held, as adjourned, without further notice.
Section 4.11. Vote. The act of a majority of the Directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by law, by the Articles of
Incorporation, or by these By-laws. Where a vote of the Directors present
results in a tie, the action proposed shall not constitute an act of the Board
of Directors.
Section 4.12. Action in Lieu of a Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if a unanimous written consent of the members of
the Board or committee, as the case may be, is signed by each member of the
Board or committee, and the writing or writings are filed with the minutes of
the proceedings of the Board or committee.
Section 4.13. Conference Call Meeting. Members of the Board of Directors or
of any committee thereof may participate in a meeting of the Board or committee,
as the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
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Section 4.14. Removal of Director. Any Director shall be subject to removal
as provided in the Articles of Incorporation.
Section 4.15. Chairman of the Board. The Board of Directors may choose a
Chairman of the Board who shall, if present, preside at meetings of the Board
and of the stockholders. The Chairman of the Board may be an officer of the
Corporation elected pursuant to Article 6.
Section 4.16. Compensation. Unless otherwise provided in the Articles of
Incorporation, each Director may receive compensation for services to the
Corporation in his capacity as a Director in such manner and in such amounts as
may be fixed from time to time pursuant to resolution of the Board of Directors,
and expenses of attendance at each regular or special meetings of the Board of
Directors. Officers of the Corporation who are Directors will not be paid
director fees.
ARTICLE 5
COMMITTEES
Section 5.01. Committees of the Board. The Board of Directors may, by
resolution passed by a majority of the Directors in office, establish one or
more committees, each committee to consist of two or more of the Directors. The
Board may designate one or more Directors as alternate members of any committee,
who may replace any absent or disqualified member or members at any meeting of
the committee. Any such committee, to the extent provided in the resolution of
the Board, shall have and may exercise all the power and authority of the Board
for direction and supervision of the management of the business and affairs of
the Corporation, and may authorize the seal of the Corporation to the affixed to
all papers that may require it. No such committee, however, shall have power or
authority to (i) amend the Articles of Incorporation or the By-laws, (ii) adopt
an agreement of merger or consolidation, (iii) recommend to the stockholders the
sale, lease, or exchange of all or substantially all the Corporation's property
and assets, (iv) recommend to the stockholders a dissolution of the Corporation
or a revocation of a dissolution, or (v) declare a dividend or authorize the
issuance of stock.
Section 5.02. Procedures; Minutes of Meetings. Each committee shall
determine its rules with respect to notice, quorum, voting, and the taking of
action, provided that such rules shall be consistent with law, the rules in
these By-laws applicable to the Board of Directors, and the resolution of the
Board establishing the committee. Each committee shall keep
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regular minutes of its meetings and report the same to the Board of Directors
when required.
ARTICLE 6
OFFICERS
Section 6.01. General. The Board of Directors shall elect the officers of
the Corporation, which shall include a Chief Executive Officer, a President, a
Secretary, and a Treasurer, and such other officers as in the Board's opinion
are desirable for the conduct of the business of the Corporation. Any two or
more offices may be held by the same person except that the President shall not
hold the Office of Secretary. If specifically authorized by the Board of
Directors, an officer may appoint one or more officers or assistant officers.
Section 6.02. Power and Duties. Each of the officers of the Corporation
shall, unless otherwise ordered by the Board of Directors, have such powers and
duties as generally pertain to his respective office, as well as such powers and
duties as from time to time may be conferred upon him by the Board.
Section 6.03. Term of Office; Removal and Vacancy. Each officer shall hold
his office until his successor is elected and qualified or until his earlier
resignation or removal and shall be subject to removal with or without cause at
any time by the affirmative vote of a majority of the Directors in office. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors.
Section 6.04. Chief Executive Officer. The Chief Executive Officer shall be
the principal executive officer of the Corporation and, subject to the control
of the Board of Directors and with the President, shall in general supervise and
control all of the business and affairs of the Corporation and perform all
duties incident to the office of Chief Executive Officer and such other duties
as may be prescribed by the Board of Directors from time to time. He shall, when
present and in the absence of the Chairman of the Board, preside at all meetings
of the stockholders and of the Board of Directors.
Section 6.05. President. The President, subject to the control of the Board
of Directors and at the direction of and with the Chief Executive Officer, shall
in general supervise and control all of the business and affairs of the
Corporation. He shall, when present and in the absence of the Chairman of the
Board and the Chief Executive Officer, preside at all meetings of the
stockholders and the Board of Directors. He may sign, with the Secretary or any
other proper officer of the Corporation authorized by the Board of Directors,
certificates for shares of
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the Corporation and deeds, mortgages, bonds, contracts, or other instruments
which the Board of Directors has authorized to be executed, except in cases
where the signing and execution thereof shall be expressly delegated by the
Board of Directors or by these By-laws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of President and such
other duties as may be prescribed by Chief Executive Officer or the Board of
Directors from time to time.
Section 6.06. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the stockholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-laws or as required by law; (c) be
custodian of the corporate records and of any seal of the Corporation and if
there is a seal of the Corporation, see that it is affixed to all documents the
execution of which on behalf of the Corporation under its seal is duly
authorized; (d) when requested or required, authenticate any records of the
Corporation; (e) keep a register of the post office address of each stockholder
which shall be furnished to the Secretary by such stockholder; (f) sign with the
President, or a Vice-president, certificates for shares of the Corporation, the
issuance of which shall have authorized by resolution of the Board of Directors;
(g) have general charge of the stock transfer books of the Corporation; and (h)
in general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Chief Executive
Officer, the President or the Board of Directors.
Section 6.07. Treasurer. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the Corporation; (b)
receive and give receipts for money due and payable to the Corporation from any
source whatsoever, and deposit all such moneys in the name of the Corporation in
such banks, trust companies, or other depositories as shall be selected by the
Board of Directors; and (c) in general, perform all of the duties incident to
the office of Treasurer and such other duties as from time to time may be
assigned to him by the Chief Executive Officer, the President or the Board of
Directors. If required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his duties in such sum and with such surety
or sureties as the Board of Directors shall determine.
Section 6.08. Compensation. The compensation of the officers shall be fixed
from time to time by the Board of Directors.
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ARTICLE 7
CAPITAL STOCK
Section 7.01. Certificates of Stock. Each stockholder is entitled to a
certificate which represents and certifies the shares of capital stock he or she
holds in the Corporation. A certificate may not be issued until the stock
represented by it is fully paid. Certificates for shares of capital stock of the
Corporation shall be in such form as the Board of Directors may from time to
time prescribe and shall be signed by the President or a Vice-President and by
the Secretary or the Treasurer. Any or each of the signatures on a stock
certificate, including that of any transfer agent or registrar, may be a
facsimile. If any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate has ceased to be such
officer, transfer agent, or registrar before the certificate is issued, the
certificate may be issued by the Corporation with the same effect as if the
officer, transfer agent, or registrar were the officer, transfer agent, or
registrar at the date of issuance.
Section 7.02. Transfer of Stock. Subject to restrictions provided in the
Articles of Incorporation, shares of stock of the Corporation shall be
transferable on the books of the Corporation only by the holder of record
thereof, in person or by duly authorized attorney, upon surrender and
cancellation of a certificate or certificates for a like number of shares, with
an assignment or power of transfer endorsed thereon or delivered therewith, duly
executed, and with such proof of the authenticity of the signature and of
authority to transfer, and of payment of transfer taxes, as the Corporation or
its agents may require.
Section 7.03. Ownership of Stock. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the owner thereof
in fact and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it has express or other notice thereof, except as otherwise expressly provided
by law.
Section 7.04. Lost, Stolen, or Destroyed Certificates. In case any
certificate for stock of the Corporation is lost, stolen, or destroyed, the
Corporation may require such proof of the fact and such indemnity to be given to
it, to its transfer agent, or to its registrar, if any, as deemed necessary or
advisable by it.
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ARTICLE 8
MISCELLANEOUS
Section 8.01. Corporate Seal. The seal of the Corporation shall be circular
in form and shall contain the name of the Corporation, the year of
incorporation, and the words "Maryland" and "Corporate Seal."
Section 8.02. Fiscal Year. The Board of Directors shall have power to fix,
and from time to time to change, the fiscal year of the Corporation. The fiscal
year of the Corporation initially shall be the calendar year.
Section 8.03. Stock Ledger. The Corporation shall maintain in its principal
office a stock ledger which contains: (1) the name and address of each
stockholder; and (2) the number of shares of stock of each class which the
stockholder holds. The stock ledger shall at all times be conclusive evidence of
the ownership of all outstanding shares of stock of the Corporation, and the
registered holder shown on such ledger shall be the stockholder with respect to
the shares allocated to such registered holder thereon for purposes of these
By-laws and for all other purposes. The stock ledger may be in written form or
in any other form which can be converted within a reasonable time into written
form for visual inspection. There shall be made available upon request of any
stockholder, in accordance with the General Laws of the State of Maryland, a
record containing the number of shares of stock issued during a specified period
not to exceed twelve (12) months and the consideration received by the
Corporation for each such share.
Section 8.04. Books and Records. The Corporation shall keep accurate and
complete: (1) books and records of its accounts and transactions; and (2)
minutes of the proceedings of its stockholders and Board of Directors and of any
executive or other committee when exercising any of the powers of the Board of
Directors. The books and records of the Corporation may be in written form or in
any other form which can be converted within a reasonable time into written form
for visual inspection. Minutes shall be recorded in written form but may be
maintained in the form of a reproduction.
Section 8.05. Distributions. The Board of Directors may authorize, and the
Corporation may make, distributions (including dividends on its outstanding
shares) in the manner and upon the terms and conditions provided by applicable
law and in the Articles of Incorporation.
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ARTICLE 9
INDEMNIFICATION; TRANSACTIONS
WITH INTERESTED PERSONS
Section 9.01. Indemnification. The Corporation shall, to the fullest extent
permitted by Section 2-418 of the Maryland General Corporation Law as in effect
from time to time, indemnify any person who is or was, or is the personal
representative of a deceased person who was a Director or officer of the
Corporation against any judgments, penalties, fines, settlements and reasonable
expenses and any other liabilities, provided that, unless applicable law
otherwise requires, indemnification shall be contingent upon a determination, by
the Board of Directors by a majority vote of a quorum consisting of Directors
not, at the time, parties to the proceeding, or, if such a quorum cannot be
obtained, then by a majority vote of a committee of the Board of Directors
consisting solely of two or more Directors not, at the time, parties to such
proceeding and who were duly designated to act in the matter by a majority vote
of the full Board in which the designated Directors who are parties may
participate or by special legal counsel selected by and if directed by the Board
of Directors as set forth above, that indemnification is proper in the
circumstances because such Director, officer, employee, or agent has met the
applicable standard of conduct prescribed by Section 2-418(b) of the Maryland
General Corporation Law.
Section 9.02. Transactions with Interested Persons. No contract or
transaction between the Corporation and any of its Directors or officers, or
between the Corporation and any other corporation, partnership, association,
firm or other entity in which any of its Directors or officers is a director or
officer or has a material financial interest, shall be void or voidable solely
for that reason, or solely because the Director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof at
which the contract or transaction is authorized, approved or ratified, if --
(a) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee
authorizes, approves or ratifies the contract or transaction by the
affirmative vote of a majority or the disinterested Directors, even though
the disinterested Directors constitute less than a quorum; or
(b) the material facts as to his relationship or interest and as the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
authorized, approved or ratified by a majority of the votes cast by the
stockholders entitled to
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vote other than the votes of shares owned of record or beneficially by the
interested Director, officer, corporation, firm or other entity.
No such contract or transaction shall be entered into by the Corporation unless
the terms of the contract or transaction have been approved by action of the
Board of Directors with the interested Director abstaining.
Section 9.03. Corporate Opportunity. Any Director or officer of the
Corporation who simultaneously serves as a director, officer or employee of any
other corporation, partnership, association, firm or other entity ("Other
Company") shall refrain from communicating to such Other Company, and from using
or otherwise acting on behalf of such Other Company, any information acquired
solely as a result of his position as a Director or officer of the Corporation
concerning any business opportunity under consideration by the Corporation for
itself, Carr Realty, L.P. or any direct or indirect subsidiary of either. If the
Other Company has independently learned about a business opportunity also under
consideration by the Corporation, and if such Director or officer has not
participated in the consideration of the opportunity by the Corporation, then
such Director or officer may participate in the consideration of that
opportunity by such Other Company provided that such Director or officer
abstains from all participation in the consideration of that opportunity by the
Corporation unless and until such Other Company has concluded its consideration
of such opportunity and determined not to pursue such opportunity further. If
such Director or officer has participated or wishes to participate in the
consideration of such an opportunity by the Corporation, then such Director or
officer shall abstain from all participation in the consideration of the
opportunity by the Other Company unless and until the Corporation has concluded
its consideration of such opportunity and determined not to pursue the
opportunity further. In connection with the foregoing, each such Director and
officer shall be afforded a reasonable opportunity to make a judgment whether he
will participate with the Corporation in the consideration of any such business
opportunity, including without limitation, a reasonable time to determine
whether any Other Company which such Director or officer serves has learned
about any such business opportunity; provided, however, that in making such
judgment such Director or officer shall not have taken (or omitted to take) any
action inconsistent with the first sentence of this Section 9.03. No such
Director or officer shall be deemed to have participated in the consideration of
any business opportunity by the Corporation unless and until such Director or
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officer has been afforded a reasonable opportunity to make such judgment and
decision. The provisions of this Section 9.03 are in addition to any other
restrictions imposed by law or otherwise.
ARTICLE 10
NOTICES
Section 10.01. Notice. Whenever notice, is required or permitted by these
By-laws to be given to any person, it may be either (a) oral and communicated in
person, by telephone, or by radio, television, or other form of voice
communication, effective upon receipt by the person, or (b) in writing and
communicated by being delivered by hand, by mail, or by telegraph, teletype, or
other form of record communication, effective upon receipt by the person or, if
earlier, upon delivery at his address as registered in the records of the
Corporation for purposes of notice-giving ("notice address"); provided that (1)
notice of a meeting of the stockholders shall be in writing, and (2) a written
notice, if mailed postpaid and correctly addressed to a person at his notice
address shall be effective three business days after its deposit by the sender
in the United States mail.
Section 10.02. Waiver. Whenever any notice is required to be given under
the provisions of law of the Articles of Incorporation or of these By-laws, a
waiver thereof in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance at a meeting for which notice is required shall
be deemed waiver of such notice unless such attendance is for the purpose of
objecting, at the beginning of the meeting, to the transaction of business on
the ground that the meeting is not lawfully called or convened.
ARTICLE 11
AMENDMENT
These By-laws may be amended or repealed, or new By-laws may be adopted, by
the stockholders at any meeting of the stockholders, or by the Board of
Directors at any meeting of the Board of Directors or pursuant to Section 4.12
of these By-laws; provided that the Board of Directors may not amend or repeal
this Article, Article 9.02 or Article 9.03 or any part of these By-laws that has
been adopted by the stockholders subject to the express condition that it may
not be amended or repealed except by holders of a majority of the issued and
outstanding shares of Common Stock.
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The undersigned, being the Secretary of CarrAmerica Realty Corporation,
hereby certifies the foregoing to be the Second Amendment and Restatement of the
By-laws of that Corporation duly adopted by the Board of Directors as of the
25th day of October, 1996.
/s/Andrea Fish Bradley
----------------------
Andrea Fish Bradley
Secretary
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Exhibit 4.1
4.1 Articles Supplementary of Series A Cumulative Convertible
Redeemeable Preferred Stock
<PAGE>
ARTICLES SUPPLEMENTARY OF
SERIES A CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK
OF
CARRAMERICA REALTY CORPORATION
Pursuant to Section 2-208(b) of the
General Corporation Law of Maryland
CarrAmerica Realty Corporation, a Maryland corporation (the "Corporation"),
hereby certifies that, pursuant to the authority conferred upon the Board of
Directors of the Corporation by Section 4.4 of the Charter and in accordance
with Section 2-208(b) of the General Corporation Law of Maryland, the Board of
Directors on October 10, 1996 duly classified unissued shares of Preferred Stock
of the Corporation, and the description of the Preferred Stock, including the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption thereof, as set by the Board of Directors, are as follows:
Section 1. Number of Shares and Designation. This class of Preferred Stock
shall be designated as Series A Cumulative Convertible Redeemable Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"). The number of
shares of preferred stock constituting the Series A Preferred Stock is
1,740,000.
Section 2. Definitions. The following terms shall have the following
meanings herein:
a."Board of Directors" shall mean the Board of Directors of the Corporation
or any committee authorized by the Board of Directors to perform any of its
responsibilities with respect to the Series A Preferred Stock.
b."Business Day" shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York City, New
York are not required to be open.
c."Call Date" shall have the meaning set forth in Section 6(b).
d."Charter" means the Articles of Amendment and Restatement of Articles of
Incorporation of the Corporation, as amended to the date hereof and as the same
may be amended hereafter from time to time.
e."Code" shall have the meaning set forth in Section 12.
f."Common Stock" shall mean the common stock of the Corporation, par value
$.01 per share.
<PAGE>
g."Constituent Person" shall have the meaning set forth in Section 5(e).
h."Conversion Price" shall mean the conversion price per share of Common
Stock for which the shares of Series A Preferred Stock are convertible, as such
Conversion Price may be adjusted pursuant to Section 5. The initial conversion
price shall be $25.00 (equivalent to a conversion rate of one share of Common
Stock for each share of Series A Preferred Stock).
i."Current Market Price" of publicly traded shares of Common Stock or any
other class of capital stock or other security of the Corporation or any other
issuer for any day shall mean the last reported sales price, regular way, on
such day, or, if no sale takes place on such day, the average of the reported
closing bid and asked prices on such day, regular way, in either case as
reported on the New York Stock Exchange ("NYSE") or, if such security is not
listed or admitted for trading on the NYSE, on the principal national securities
exchange on which such security is listed or admitted for trading or, if not
listed or admitted for trading on any national securities exchange, on the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotations System ("NASDAQ") or, if such security is not quoted on
such National Market System, the average of the closing bid and asked prices on
such day in the over-the-counter market as reported by NASDAQ or, if bid and
asked prices for such security on such day shall not have been reported through
NASDAQ, the average of the bid and asked prices on such day as furnished by any
NYSE member firm regularly making a market in such security selected for such
purpose by the Board of Directors.
j."Dividend Payment Date" shall mean the last calendar day (or, if such day
is not a Business Day, the next Business Day thereafter) of each February, May,
August, and November, commencing on November 30, 1996.
k."Dividend Periods" shall mean quarterly dividend periods commencing on
March 1, June 1, September 1 and December 1 of each year and ending on and
including the day of the next succeeding Dividend Payment Date (other than the
initial Dividend Payment Date, which shall commence on the Issue Date, and other
than the Dividend Period during which any shares of Series A Preferred Stock
shall be redeemed pursuant to Section 6, which shall end on and include the Call
Date with respect to the shares of Series A Preferred Stock being redeemed).
l."Exempted Person" shall have the meaning set forth in Section 12.
m."Fair Market Value" shall mean the average of the daily Current Market
Prices of a share of Common Stock during the five (5) consecutive Trading Days
selected by the Corporation commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and the
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day before the "ex date" with respect to the issuance or distribution requiring
such computation. The term "ex date," with respect to any issuance or
distribution, means the first day on which shares of the Common Stock trade,
regular way, without the right to receive such issuance or distribution, on the
exchange or in the market, as the case may be, used to determine that day's
Current Market Price.
n."Fully Junior Stock" shall mean the Common Stock and any other class or
series of shares of capital stock of the Corporation now or hereafter issued and
outstanding over which the Series A Preferred Stock has preference or priority
in both (i) the payment of dividends and (ii) the distribution of assets on any
liquidation, dissolution or winding up of the Corporation.
o."Issue Date" shall mean the first date on which shares of the Series A
Preferred Stock are issued and sold.
p."Junior Stock" shall mean the Common Stock and any other class or series
of shares of capital stock of the Corporation now or hereafter issued and
outstanding over which the Series A Preferred Stock has preference or priority
in the payment of dividends or in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation.
q."Non-Electing Share" shall have the meaning set forth in Section 5(e).
r."Parity Stock" shall have the meaning set forth in Section 8(b).
s."Person" shall mean any individual, firm, partnership, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
t."Preferred Stock" shall mean the preferred stock of the Corporation, par
value $.01 per share.
u."Securities" and "Security" shall have the meanings set forth in Section
5(d)(iii).
v."Series A Preferred Stock" shall have the meaning set forth in Section 1.
w."set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of dividends or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of shares of capital
stock of the Corporation; provided, however, that if any funds for any class or
series of Junior Stock or Fully Junior Stock or any class or series of shares of
capital stock
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ranking on a parity with the Series A Preferred Stock as to the payment of
dividends are placed in a separate account of the Corporation or delivered to a
disbursing, paying or other similar agent, then "set apart for payment" with
respect to the Series A Preferred Stock shall mean placing such funds in a
separate account or delivering such funds to a disbursing, paying or other
similar agent.
x."Trading Day" shall mean any day on which the securities in question are
traded on the NYSE, or if such securities are not listed or admitted for trading
on the NYSE, on the principal national securities exchange on which such
securities are listed or admitted, or if not listed or admitted for trading on
any national securities exchange, on the National Market System of NASDAQ, or if
such securities are not quoted on such National Market System, in the applicable
securities market in which the securities are traded.
y."Transaction" shall have the meaning set forth in Section 5(e).
z."Transfer Agent" means Boston EquiServe, Boston, Massachusetts, or such
other agent or agents of the Corporation as may be designated by the Board of
Directors or their designee as the transfer agent, registrar and dividend
disbursing agent for the Series A Preferred Stock.
Section 3.Dividends.
(a)The holders of Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for that purpose, dividends payable in cash in an amount per share
equal to the greater of (i) $1.75 per annum or (ii) the cash dividends
(determined on each Dividend Payment Date) paid on the shares of Common Stock,
or portion thereof, into which a share of Series A Preferred Stock is
convertible. The dividends referred to in clause (ii) of the immediately
preceding sentence shall equal the number of shares of Common Stock, or portion
thereof, into which a share of Series A Preferred Stock is convertible,
multiplied by the most current quarterly dividend paid on a share of Common
Stock on or before the applicable Dividend Payment Date. Such dividends shall
begin to accrue and shall be fully cumulative from the Issue Date, whether or
not in any Dividend Period or Periods there shall be funds of the Corporation
legally available for the payment of such dividends, and shall be payable
quarterly, when, as and if declared by the Board of Directors, in arrears on
Dividend Payment Dates, commencing on the first Dividend Payment Date after the
Issue Date. Such dividends shall be payable in arrears to the holders of record
of Series A Preferred Stock, as they appear on the stock records of the
Corporation at the close of business on the record date, not more than 50 days
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preceding the relevant Dividend Payment Date, as shall be fixed by the Board of
Directors. Accrued and unpaid dividends for any past Dividend Periods may be
declared and paid at any time and for such interim periods, without reference to
any regular Dividend Payment Date, to holders of record on such date, not
exceeding 50 days preceding the payment date thereof, as may be fixed by the
Board of Directors. Any dividend payment made on the Series A Preferred Stock
shall first be credited against the earliest accrued but unpaid dividend due
with respect to the Series A Preferred Stock which remains payable.
(b) The amount of dividends referred to in clause (i) of Section 3(a)
payable for each full Dividend Period for the Series A Preferred Stock shall be
computed by dividing the annual dividend rate by four. The initial Dividend
Period will include a partial dividend for the period from the Issue Date until
November 30, 1996. The amount of dividends payable for the initial Dividend
Period, or any other period shorter or longer than a full Dividend Period, on
the Series A Preferred Stock shall be computed on the basis of the actual number
of days in such Dividend Period. Holders of Series A Preferred Stock shall not
be entitled to any dividends, whether payable in cash, property or shares of
stock, in excess of cumulative dividends, as herein provided, on the Series A
Preferred Stock. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series A Preferred
Stock that may be in arrears.
(c) So long as any shares of Series A Preferred Stock are outstanding, no
dividends, except as described in the immediately following sentence, shall be
declared or paid or set apart for payment on any class or series of Parity Stock
for any period unless full cumulative dividends have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for such payment on the Series A Preferred Stock for all Dividend
Periods terminating on or prior to the dividend payment date for such class or
series of Parity Stock. When dividends are not paid in full or a sum sufficient
for such payment is not set apart, as aforesaid, all dividends declared upon
Series A Preferred Stock and all dividends declared upon any other class or
series of Parity Stock shall be declared ratably in proportion to the respective
amounts of dividends accumulated and unpaid on the Series A Preferred Stock and
accumulated and unpaid on such Parity Stock.
(d) So long as any shares of Series A Preferred Stock are outstanding, no
dividends (other than dividends or distributions paid solely in shares of, or
options, warrants or rights to subscribe for or purchase shares of, Fully Junior
Stock) shall be declared or paid or set apart for payment or other distribution
declared or made upon Junior Stock or Fully Junior Stock, nor shall any Junior
Stock or Fully Junior Stock be redeemed, purchased or otherwise acquired (other
than a redemption, purchase or other acquisition of shares of Common Stock made
for purposes of any employee incentive or benefit plan of the Corporation or any
subsidiary) for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any such shares) by the Corporation,
directly or indirectly (except by conversion into or exchange for shares of
Fully Junior Stock), unless in each case (i) the full cumulative dividends on
all outstanding shares of Series A Preferred Stock and any other Parity Stock of
the
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Corporation shall have been or contemporaneously are declared and paid or
declared and set apart for payment for all past Dividend Periods with respect to
the Series A Preferred Stock and all past dividend periods with respect to such
Parity Stock and (ii) sufficient funds shall have been or contemporaneously are
declared and paid or declared and set apart for the payment of the dividend for
the current Dividend Period with respect to the Series A Preferred Stock and the
current dividend period with respect to such Parity Stock.
(e) No distributions on Series A Preferred Stock shall be declared by the
Board of Directors or paid or set apart for payment by the Corporation at such
time as the terms and provisions of any agreement of the Corporation, including
any agreement relating to its indebtedness, prohibits such declaration, payment
or setting apart for payment or provides that such declaration, payment or
setting apart for payment would constitute a breach thereof or a default
thereunder, or if such declaration or payment shall be restricted or prohibited
by law.
Section 4.Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Junior Stock, the holders of the
Series A Preferred Stock shall be entitled to receive $25.00 per share of Series
A Preferred Stock plus an amount equal to all dividends (whether or not earned
or declared) accrued and unpaid thereon to the date of final distribution to
such holders; but such holders shall not be entitled to any further payment. If,
upon any liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation, or proceeds thereof, distributable among the holders of the
Series A Preferred Stock shall be insufficient to pay in full the preferential
amount aforesaid and liquidating payments on any other shares of any class or
series of Parity Stock, then such assets, or the proceeds thereof, shall be
distributed among the holders of the Series A Preferred Stock and any such other
Parity Stock ratably in accordance with the respective amounts that would be
payable on such Series A Preferred Stock and any such other Parity Stock if all
amounts payable thereon were paid in full. For the purposes of this Section 4,
(i) a consolidation or merger of the Corporation with one or more corporations,
real estate investment trusts, or other entities, (ii) a sale, lease or transfer
of all or substantially all of the Corporation's assets, or (iii) a statutory
share exchange shall not be deemed to be a liquidation, dissolution or winding
up, voluntary or involuntary, of the Corporation.
(b) Subject to the rights of the holders of shares of any series or class
or classes of capital stock ranking on a parity with or prior to the Series A
Preferred Stock upon liquidation, dissolution or winding up, upon any
liquidation, dissolution or winding up of the Corporation, after payment shall
have been made in full to the holders of the Series A Preferred Stock, as
provided in this Section 4,
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<PAGE>
any other series or class or classes of Junior Stock or Fully Junior Stock
shall, subject to the respective terms and provisions (if any) applying thereto,
be entitled to receive any and all assets remaining to be paid or distributed,
and the holders of the Series A Preferred Stock shall not be entitled to share
therein.
Section 5.Conversion. Holders of Series A Preferred Stock shall have the
right to convert all or a portion of such shares into shares of Common Stock, as
follows:
(a) The Series A Preferred Stock shall not be convertible by the holders
thereof prior to the date that is six (6) months following the Issue Date. On
and after the date that is six (6) months following the Issue Date and subject
to and upon compliance with the provisions of this Section 5, a holder of Series
A Preferred Stock shall have the right, at his or her option, at any time to
convert such shares into the number of fully paid and non- assessable shares of
Common Stock obtained by dividing the aggregate liquidation preference of such
shares by the Conversion Price (as in effect at the time and on the date
provided for in the last paragraph of Section 5(b)) by surrendering such shares
to be converted, such surrender to be made in the manner provided in Section
5(b); provided, however, that the right to convert shares called for redemption
pursuant to Section 6 shall terminate at the close of business on the fifth
Business Day prior to the Call Date fixed for such redemption, unless the
Corporation shall default in making payment of the cash payable upon such
redemption under Section 6.
(b) In order to exercise the conversion right, the holder of each share of
Series A Preferred Stock to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Corporation or in
blank, at the office of the Transfer Agent, accompanied by written notice to the
Corporation that the holder thereof elects to convert such shares of Series A
Preferred Stock. Unless the shares issuable on conversion are to be issued in
the same name as the name in which such shares of Series A Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax (or evidence reasonably satisfactory to the
Corporation demonstrating t hat such taxes have been paid).
Holders of Series A Preferred Stock at the close of business on a dividend
payment record date shall be entitled to receive the dividend payable on such
shares on the corresponding Dividend Payment Date notwithstanding the conversion
thereof following such dividend payment record date and prior to such Dividend
Payment Date. However, Series A Preferred Stock surrendered for conversion
during the period between the close of business on any dividend payment record
date and the opening of business on the corresponding Dividend Payment Date
(except shares converted after the issuance of notice of redemption
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with respect to a Call Date during such period, such shares of Series A
Preferred Stock being entitled to such dividend on the Dividend Payment Date)
must be accompanied by payment of an amount equal to the dividend payable on
such shares on such Dividend Payment Date. A holder of shares of Series A
Preferred Stock on a dividend payment record date who (or whose transferee)
tenders any such shares for conversion into shares of Common Stock on the
corresponding Dividend Payment Date will receive the dividend payable by the
Corporation on such shares of Series A Preferred Stock on such date, and the
converting holder need not include payment of the amount of such dividend upon
surrender of such shares of Series A Preferred Stock for conversion. Except as
provided above, the Corporation shall make no payment or allowance for unpaid
dividends, whether or not in arrears, on converted shares or for dividends on
the shares of Common Stock issued upon such conversion.
As promptly as practicable after the surrender of certificates for shares
of Series A Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver at such office to such holder, or on his or her written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with the provisions of
this Section 5, and any fractional interest in respect of a share of Common
Stock arising upon such conversion shall be settled as provided in Section 5(c).
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of Series
A Preferred Stock shall have been surrendered and such notice (and if
applicable, payment of an amount equal to the dividend payable on such shares)
received by the Corporation as aforesaid, and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date,
and such conversion shall be at the Conversion Price in effect at such time on
such date unless the stock transfer books of the Corporation shall be closed on
that date, in which event such person or persons shall be deemed to have become
such holder or holders of record at the close of business on the next succeeding
day on which such share transfer books are open, but such conversion shall be at
the Conversion Price in effect on the date on which such shares shall have been
surrendered and such notice received by the Corporation
(c) No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon conversion of the Series A Preferred Stock.
Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Series A Preferred
Stock, the Corporation shall pay to the holder of such share an amount in cash
based upon the Current Market Price of Common Stock on the Trading Day
immediately preceding the date of conversion. If more than one share shall be
surrendered for conversion
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at one time by the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Series A Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time as follows:
(i) If the Corporation shall after the Issue Date (A) pay a dividend
or make a distribution on its shares of stock, in either case, in shares of
Common Stock, (B) subdivide its outstanding shares of Common Stock into a
greater number of shares, (C) combine its outstanding shares of Common
Stock into a smaller number of shares or (D) issue any stock by
reclassification of its shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the date fixed for
the determination of shareholders entitled to receive such dividend or
distribution or at the opening of business on the Business Day next
following the day on which such subdivision, combination or
reclassification becomes effective, as the case may be, shall be adjusted
so that the holder of any shares of Series A Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock that such holder would have owned or have been
entitled to receive after the happening of any of the events described
above as if such shares of Series A Preferred Stock had been converted
immediately prior to the record date in the case of a dividend or
distribution or the effective date in the case of a subdivision,
combination or reclassification. An adjustment made pursuant to this
subparagraph (i) shall become effective immediately after the opening of
business on the Business Day next following the record date (except as
provided in Section 5(h)) in the case of a dividend or distribution and
shall become effective immediately after the opening of business on the
Business Day next following the effective date in the case of a
subdivision, combination or reclass ification.
(ii) If the Corporation shall issue after the Issue Date rights,
options or warrants to all holders of Common Stock entitling them (for a
period expiring within 45 days after the record date mentioned below) to
subscribe for or purchase Common Stock at a price per share less than 94%
(100% if a stand-by underwriter is used and charges the Corporation a
commission) of the Fair Market Value per share of Common Stock on the
record date for the determination of shareholders entitled to receive such
rights, options or warrants, then the Conversion Price in effect at the
opening of business on the Business Day next following such record date
shall be adjusted to equal the price determined by multiplying (I) the
Conversion Price in effect immediately prior to the opening of business on
the Business Day next following the date fixed for such determination by
(II) a fraction, the numerator of which shall be the sum of (A) the number
of shares of Common
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Stock outstanding on the close of business on the date fixed for such
determination and (B) the number of shares that the aggregate proceeds to
the Corporation from the exercise of such rights, options or warrants for
shares of Common Stock would purchase at 94% of such Fair Market Value (or
100% in the case of a stand-by underwriting), and the denominator of which
shall be the sum of (A) the number of shares of Common Stock outstanding on
the close of business on the date fixed for such determination and (B) the
number of additional shares of Common Stock offered for subscription or
purchase pursuant to such rights, options or warrants. Such adjustment
shall become effective immediately after the opening of business on the day
next following such record date (except as provided in Section 5(h)). In
determining whether any rights, options or warrants entitle the holders of
Common Stock to subscribe for or purchase Common Stock at less than 94% of
such Fair Market Value (or 100% in the case of a stand-by underwriting),
there shall be taken into account any consideration received by the
Corporation upon issuance and upon exercise of such rights, options or
warrants, the value of such consideration, if other than cash, to be
determined by the Board of Directors.
(iii) If the Corporation shall distribute to all holders of its Common
Stock any stock of the Corporation (other than Common Stock) or evidence of
its indebtedness or assets (excluding cumulative cash dividends or
distributions paid with respect to the Common Stock after December 31, 1995
which are not in excess of the following: the sum of (A) the Corporation's
cumulative undistributed funds from operations at December 31, 1995, plus
(B) the cumulative amount of funds from operations, as determined by the
Board of Directors, after December 31, 1995, minus (C) the cumulative
amount of dividends accrued or paid in respect of the Series A Preferred
Stock or any other class or series of Preferred Stock of the Corporation
after the Issue Date) or rights, options or warrants to subscribe for or
purchase any of its securities (excluding those rights, options and
warrants issued to all holders of Common Stock entitling them for a period
expiring within 45 days after the record date referred to in subparagraph
(ii) above to subscribe for or purchase shares of Common Stock, which
rights, options and warrants are referred to in and treated under
subparagraph (ii) above) (any of the foregoing being hereinafter in this
subparagraph (iii) collectively called the "Securities" and individually a
"Security"), then in each such case the Conversion Price shall be adjusted
so that it shall equal the price determined by multiplying (I) the
Conversion Price in effect immediately prior to the close of business on
the date fixed for the determination of shareholders entitled to receive
such distribution by (II) a fraction, the numerator of which shall be the
Fair Market Value per share of Common Stock on the record date mentioned
below less the then fair market value (as determined by the Board of
Directors, whose determination shall be conclusive), of the portion of the
stock or assets or evidences of indebtedness so distributed or of such
rights,
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options or warrants applicable to one share of Common Stock, and the
denominator of which shall be the Fair Market Value per share of Common
Stock on the record date mentioned below. Such adjustment shall become
effective immediately at the opening of business on the Business Day next
following (except as provided in paragraph (h) below) the record date for
the determination of shareholders entitled to receive such distribution.
For the purposes of this clause (iii), the distribution of a Security,
which is distributed not only to the holders of the Common Stock on the
date fixed for the determination of shareholders entitled to such
distribution of such Security, but also is distributed with each share of
Common Stock delivered to a Person converting a share of Series A Preferred
Stock after such determination date, shall not require an adjustment of the
Conversion Price pursuant to this clause (iii); provided, that on the date,
if any, on which a Person converting a share of Series A Preferred Stock
would no longer be entitled to receive such Security with a share of Common
Stock (other than as a result of the termination of all such Securities), a
distribution of such Securities shall be deemed to have occurred and the
Conversion Price shall be adjusted as provided in this clause (iii) (and
such day shall be deemed to be "the date fixed for the determination of the
shareholders entitled to receive such distribution" and "the record date"
within the meaning of th e two preceding sentences).
(iv) No adjustment in the Conversion Price shall be required unless
such adjustment would require a cumulative increase or decrease of at least
1% in such price; provided, however, that any adjustments that by reason of
this subparagraph (iv) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment until made; and
provided, further, that any adjustment shall be required and made in
accordance with the provisions of this Section 5 (other than this
subparagraph (iv)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the holders of Common
Stock. Notwithstanding any other provisions of this Section 5, the
Corporation shall not be required to make any adjustment of the Conversion
Price for the issuance of any shares of Common Stock pursuant to any plan
providing for the reinvestment of dividends or interest payable on
securities of the Corporation and the investment of additional optional
amounts in Common Stock under such plan. All calculations under this
Section 5 shall be made to the nearest cent (with $.005 being rounded
upward) or to the nearest one-tenth of a share (with .05 of a share being
rounded upward), as the case may be. Anything in this Section 5(d) to the
contrary notwithstanding, the Corporation shall be entitled, to the extent
permitted by law, to make such reductions in the Conversion Price, in
addition to those required by this Section 5(d), as it in its discretion
shall determine to be advisable in order that any share dividends,
subdivision of shares, reclassification or combination of shares,
distribution of rights or warrants to purchase stock or
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securities, or a distribution of other assets (other than cash dividends)
hereafter made by the Corporation to its shareholders shall not be taxable.
(e) If the Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, statutory share exchange, self
tender offer for all or substantially all shares of Common Stock, sale of all or
substantially all of the Corporation's assets or recapitalization of the Common
Stock and excluding any transaction as to which Section 5(d)(i) applies) (each
of the foregoing being referred to herein as a "Transaction"), in each case as a
result of which all or substantially all shares of Common Stock are converted
into the right to receive stock, securities or other property (including cash or
any combination thereof), each share of Series A Preferred Stock which is not
redeemed or converted into the right to receive stock, securities or other
property prior to such Transaction shall thereafter be convertible into the kind
and amount of shares of stock, securities and other property (including cash or
any combination thereof) receivable upon the consummation of such Transaction by
a holder of that number of shares of Common Stock into which one share of Series
A Preferred Stock was convertible immediately prior to such Transaction,
assuming such holder of shares of Common Stock (i) is not a Person with which
the Corporation consolidated or into which the Corporation merged or which
merged into the Corporation or to which such sale or transfer was made, as the
case may be ("Constituent Person"), or an affiliate of a Constituent Person and
(ii) failed to exercise his rights of election, if any, as to the kind or amount
of stock, securities and other property (including cash) receivable upon such
Transaction (provided that if the kind or amount of stock, securities and other
property (including cash) receivable upon such Transaction is not the same for
each share of Common Stock held immediately prior to such Transaction by other
than a Constituent Person or an affiliate thereof and in respect of which such
rights of election shall not have been exercised ("Non-Electing Share"), then
for the purpose of this Section 5(e) the kind and amount of stock, securities
and other property (including cash) receivable upon such Transaction by each
Non-Electing Share shall be deemed to be the kind and amount so receivable per
share by a plurality of the Non-Electing Shares). The Corporation shall not be a
party to any Transaction unless the terms of such Transaction are consistent
with the provisions of this Section 5(e), and it shall not consent or agree to
the occurrence of any Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the shares of Series A Preferred Stock that will
contain provisions enabling the holders of the shares of Series A Preferred
Stock that remain outstanding after such Transaction to convert into the
consideration received by holders of Common Stock at the Conversion Price in
effect immediately prior to such Transaction. The provisions of this Section
5(e) shall similarly apply to successive Transactions.
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(f) If:
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than cash dividends or
distributions paid with respect to the Common Stock after December 31, 1995
not in excess of the sum of the Corporation's cumulative undistributed
funds from operations at December 31, 1995, plus the cumulative amount of
funds from operations, as determined by the Board of Directors, after
December 31, 1995, minus the cumulative amount of dividends accrued or paid
in respect of the shares of Series A Preferred Stock or any other class or
series of Prefer red Stock of the Corporation after the Issue Date); or
(ii) the Corporation shall authorize the granting to the holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase any shares of stock of any class or any other rights, options or
warrants, which granting requires an adjustment of the Conversion Price
pursuan t to Section 5(d)(ii) above; or
(iii) there shall be any reclassification of the Common Stock (other
than an event to which Section 5(d)(i) applies) or any consolidation or
merger to which the Corporation is a party and for which approval of any
shareholders of the Corporation is required, or a statutory share exchange,
or a self tender offer by the Corporation for all or substantially all of
its outstanding Common Stock or the sale or transfer of all or
substantially all of the assets of the Corporation as an entirety; or
(iv) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to the holders of shares of Series A Preferred Stock at their
addresses as shown on the stock records of the Corporation, as promptly as
possible, but at least 10 days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights, options or
warrants, or, if a record is not to be taken, the date as of which the holders
of shares of Common Stock of record to be entitled to such dividend,
distribution or rights, options or warrants are to be determined or (B) the date
on which such reclassification, consolidation, merger, statutory share exchange,
sale, transfer, liquidation dissolution or winding up is expected to become
effective, and the date as of which it is expected that holders of shares of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution or winding up. Failure to give or receive
such notice or any
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defect therein shall not affect the legality or validity of the proceedings
described in this Section 5.
(g) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an officer's certificate
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment, which certificate shall
be conclusive evidence of the correctness of such adjustment absent manifest
error. Promptly after delivery of such certificate, the Corporation shall
prepare a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the effective date of such adjustment and shall
mail such notice of such adjustment of the Conversion Price to the holder of
each share of Series A Preferred Stock at such holder's last address as shown on
the share records of the Corporation.
(h) In any case in which Section 5(d) provides that an adjustment shall
become effective on the day next following the record date for an event, the
Corporation may defer until the occurrence of such event (A) issuing to the
holder of any share of Series A Preferred Stock converted after such record date
and before the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by such event
over and above the shares of Common Stock issuable upon such conversion before
giving effect to such adjustment and (B) paying t o such holder any amount of
cash in lieu of any fraction pursuant to Section 5(c).
(i) There shall be no adjustment of the Conversion Price in case of the
issuance of any stock or other security of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set forth in
this Section 5. If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one paragraph of this Section 5, only one
adjustment shall be made and such adjustment shall be the amount of adjustment
that has the highest absolute value.
(j) If the Corporation shall take any action affecting the Common Stock,
other than action described in this Section 5, that in the opinion of the Board
of Directors would materially and adversely affect the conversion rights of the
holders of the shares of Series A Preferred Stock, the Conversion Price for the
Series A Preferred Stock may be adjusted, to the extent permitted by law, in
such manner, if any, and at such time, as the Board of Directors, in its sole
discretion, may determine to be equitable in the circumstances.
(k) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock, for the purpose of effecting conversion of
the shares of Series A Preferred Stock, the full number of shares of Common
Stock
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deliverable upon the conversion of all outstanding shares of Series A Preferred
Stock not theretofore converted. For purposes of this Section 5(k), the number
of shares of Common Stock that shall be deliverable upon the conversion of all
outstanding shares of Series A Preferred Stock shall be computed as if at the
time of computation all such outstanding shares were held by a single holder.
The Corporation covenants that any shares of Common Stock issued upon
conversion of the shares of Series A Preferred Stock shall be validly issued,
fully paid and non-assessable. Before taking any action that would cause an
adjustment reducing the Conversion Price below the then- par value of the shares
of Common Stock deliverable upon conversion of the shares of Series A Preferred
Stock, the Corporation will take any corporate action that, in the opinion of
its counsel, may be necessary in order that the Corporation may validly and
legally issue fully paid and non- assessable shares of Common Stock at such
adjusted Conversion Price.
The Corporation shall endeavor to list the shares of Common Stock required
to be delivered upon conversion of the Series A Preferred Stock, prior to such
delivery, upon each national securities exchange, if any, upon which the
outstanding shares of Common Stock are listed at the time of such delivery.
Prior to the delivery of any securities that the Corporation shall be
obligated to deliver upon conversion of the shares of Series A Preferred Stock,
the Corporation shall endeavor to comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with, or
any approval of or consent to the delivery thereof by, any governmental
authority.
(l) The Corporation will pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock or other securities or property on conversion of the shares of
Series A Preferred Stock pursuant hereto; provided, however, that the
Corporation shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issue or delivery of Common Stock or other
securities or property in a name other than that of the holder of the shares of
Series A Preferred Stock to be converted, and no such issue or delivery shall be
made unless and until the person requesting such issue or delivery has paid to
the Corporation the amount of any such tax or established, to the reasonable
satisfaction of the Corporation, that such tax has been paid.
Section 6. Redemption at the Option of the Corporation.
(a) The Series A Preferred Stock shall not be redeemable by the Corporation
prior to the third (3rd) anniversary of the Issue Date. On and after the third
(3rd) anniversary of the Issue Date, the Corporation, at its option, may redeem
the Series A Preferred Stock, in whole or in part at any time or from time to
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time at a redemption price of Twenty Five Dollars ($25.00) per share of Series A
Preferred Stock, plus the amounts indicated in Section 6(b).
(b) Upon any redemption of the Series A Preferred Stock pursuant to this
Section 6, the Corporation shall pay all accrued and unpaid dividends, if any,
thereon ending on or prior to the date of such redemption (the "Call Date"),
without interest. If the Call Date falls after a dividend payment record date
and prior to the corresponding Dividend Payment Date, then each holder of Series
A Preferred Stock at the close of business on such dividend payment record date
shall be entitled to the dividend payable on such shares on the corresponding
Dividend Payment Date notwithstanding the redemption of such shares before such
Dividend Payment Date. Except as provided above, the Corporation shall make no
payment or allowance for unpaid dividends, whether or not in arrears, on shares
of Series A Preferred Stock called for redemption.
(c) If full cumulative dividends on the Series A Preferred Stock and any
other class or series of Parity Stock of the Corporation have not been declared
and paid or declared and set apart for payment, the Series A Preferred Stock may
not be redeemed under this Section 6 in part and the Corporation may not
purchase or acquire the Series A Preferred Stock, otherwise than pursuant to a
purchase or exchange offer made on the same terms to all holders of Series A
Preferred Stock.
(d) Notice of the redemption of any Series A Preferred Stock under this
Section 6 shall be mailed by first-class mail to each holder of record of Series
A Preferred Stock to be redeemed at the address of each such holder as shown on
the Corporation's records, not less than 30 nor more than 90 days prior to the
Call Date. Neither the failure to mail any notice required by this Section 6(d),
nor any defect therein or in the mailing thereof, to any particular holder,
shall affect the sufficiency of the notice or the validity of the proceedings
for redemption with respect to the other holders. Any notice which was mailed in
the manner herein provided shall be conclusively presumed to have been duly
given on the date mailed whether or not the holder receives the notice. Each
such mailed notice shall state, as appropriate: (1) the Call Date; (2) the
number of shares of Series A Preferred Stock to be redeemed and, if fewer than
all the shares held by such holder are to be redeemed, the number of such shares
to be redeemed from such holder; (3) the place or places at which certificates
for such shares are to be surrendered; (4) the then-current Conversion Price;
and (5) that dividends on the shares to be redeemed shall cease to accrue on
such Call Date except as otherwise provided herein. Notice having been mailed as
aforesaid, from and after the Call Date (unless the Corporation shall fail to
make available an amount of cash necessary to effect such redemption), (i)
except as otherwise provided herein, dividends on the Series A Preferred Stock
so called for redemption shall cease to accrue, (ii) shares of Series A
Preferred Stock shall no longer be deemed to be outstanding, and (iii) all
rights of the holders thereof as holders of Series A Preferred Stock of the
Corporation shall cease (except the right to receive cash payable upon such
redemption, without
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interest thereon, upon surrender and endorsement of their certificates if so
required and to receive any dividends payable thereon). The Corporation's
obligation to provide cash in accordance with the preceding sentence shall be
deemed fulfilled if, on or before the Call Date, the Corporation shall deposit
with a bank or trust company (which may be an affiliate of the Corporation) that
has an office in Washington, D.C., and that has, or is an affiliate of a bank or
trust company that has, capital and surplus of at least $50,000,000, the amount
of cash necessary for such redemption, in trust, with irrevocable instructions
that such cash be applied to the redemption of the Series A Preferred Stock so
called for redemption. No interest shall accrue for the benefit of the holders
of Series A Preferred Stock to be redeemed on any cash so set aside by the
Corporation. Subject to applicable escheat laws, any such cash unclaimed at the
end of two years from the Call Date shall revert to the general funds of the
Corporation, after which reversion the holders of such shares so called for
redemption shall look only to the general funds of the Corporation for the
payment of such cash.
As promptly as practicable after the surrender in accordance with said
notice of the certificates for any such shares so redeemed (properly endorsed or
assigned for transfer, if the Corporation shall so require and if the notice
shall so state), such shares shall be exchanged for any cash (without interest
thereon) for which such shares have been redeemed. If fewer than all the
outstanding shares of Series A Preferred Stock are to redeemed, shares to be
redeemed shall be selected by the Corporation from outstanding shares of Series
A Preferred Stock not previously called for redemption by lot or pro rata (as
nearly as may be) or by any other method determined by the Corporation in its
sole discretion to be equitable. If fewer than all the shares of Series A
Preferred Stock represented by any certificate are redeemed, then new
certificates representing the unredeemed shares shall be issued without cost to
the holder thereof.
Section 7. Shares of Stock To Be Retired. All shares of Series A Preferred
Stock which shall have been issued and reacquired in any manner by the
Corporation shall be restored to the status of authorized but unissued shares of
capital stock of the Corporation, without designation as to class or series.
Section 8. Ranking. Any class or series of shares of capital stock of the
Corporation shall be deemed to rank:
(a) prior to the Series A Preferred Stock, as to the payment of dividends
and as to distribution of assets upon liquidation, dissolution or winding up, if
the holders of such class or series shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or winding
up, as the case may be, in preference or priority to the holders of Series A
Preferred Stock;
(b) on a parity with the Series A Preferred Stock, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding
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up, whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share thereof be different from those of the Series A
Preferred Stock, if the holders of such class or series of shares of stock and
the Series A Preferred Stock shall be entitled to the receipt of dividends and
of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Parity Stock");
(c) junior to the Series A Preferred Stock, as to the payment of dividends
or as to the distribution of assets upon liquidation, dissolution or winding up,
if such shares of stock shall be Junior Stock; and
(d) junior to the Series A Preferred Stock, as to the payment of dividends
and as to the distribution of assets upon liquidation dissolution or winding up,
if such shares of stock shall be Fully Junior Stock.
Section 9. Voting. If and whenever six consecutive quarterly dividends
payable on the Series A Preferred Stock or any series or class of Parity Stock
shall be in arrears (which shall, with respect to any such quarterly dividend,
mean that any such dividend has not been paid in full), whether or not declared,
the number of directors then constituting the Board of Directors shall be
increased by two, and the holders of Series A Preferred Stock, together with the
holders of shares of every other series of Parity Stock, voting as a single
class regardless of series, shall be entitled to elect the two additional
directors to serve on the Board of Directors at any annual meeting of
shareholders or special meeting held in place thereof, or at a special meeting
of the holders of the Series A Preferred Stock and the Parity Stock called as
hereinafter provided. Whenever all arrears in dividends on the Series A
Preferred Stock and the Parity Stock then outstanding shall have been paid and
dividends thereon for the current quarterly dividend period shall have been paid
or declared and set apart for payment, then the right of the holders of the
Series A Preferred Stock and the Parity Stock to elect such additional two
directors shall immediately cease (but subject always to the same provision for
the vesting of such voting rights in the case of any similar future arrearages
in six consecutive quarterly dividends), and the terms of office of all persons
elected as directors by the holders of the Series A Preferred Stock and the
Parity Stock shall immediately terminate and the number of the Board of
Directors shall be reduced accordingly. At any time after such voting rights
shall have been so vested in the holders of Series A Preferred Stock and the
Parity Stock, the secretary of the Corporation may, and upon the written request
of any holder of Series A Preferred Stock (addressed to the secretary at the
principal office of the Corporation) shall, call a special meeting of the
holders of the Series A Preferred Stock and of the Parity Stock for the election
of the two directors to be elected by them as herein provided, such call to be
made by notice similar to that provided in the Bylaws of the Corporation for a
special meeting of the shareholders or as required by law. If any such special
meeting required to be called as above provided shall not be called
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by the secretary within 20 days after receipt of any such request, then any
holder of Series A Preferred Stock may call such meeting, upon the notice above
provided, and for that purpose shall have access to the stock records of the
Corporation. The directors elected at any such special meeting shall hold office
until the next annual meeting of the shareholders or special meeting held in
lieu thereof if such office shall not have previously terminated as above
provided. If any vacancy shall occur among the directors elected by the holders
of the Series A Preferred Stock and the Parity Stock, a successor shall be
elected by the Board of Directors, upon the nomination of the then-remaining
director elected by the holders of the Series A Preferred Stock and the Parity
Stock or the successor of such remaining director, to serve until the next
annual meeting of the shareholders or special meeting held in place thereof if
such office shall not have previously terminated as provided above.
So long as any shares of Series A Preferred Stock are outstanding, in
addition to any other vote or consent of shareholders required by law or by the
Charter of the Corporation, the affirmative vote of at least 66-2/3% of the
votes entitled to be cast by the holders of the Series A Preferred Stock and the
Parity Stock, at the time outstanding, acting as a single class regardless of
series, given in person or by proxy, either in writing without a meeting or by
vote at any meeting called for the purpose, shall be necessary for effecting or
validating:
(a) Any amendment, alteration or repeal of any of the provisions of the
Charter of the Corporation (including these Articles Supplementary) that
materially and adversely affects the voting powers, rights or preferences of the
holders of the Series A Preferred Stock or the Parity Stock; provided, however,
that the amendment of the provisions of the Charter of the Corporation so as to
authorize or create or to increase the authorized amount of any Fully Junior
Stock or Junior Stock that are not senior in any respect to the Series A
Preferred Stock, or any shares of any class ranking on a parity with the Series
A Preferred Stock or the Parity Stock, shall not be deemed to materially
adversely affect the voting powers, rights or preferences of the holders of
Series A Preferred Stock; and provided further, that if any such amendment,
alteration or repeal would materially and adversely affect any voting powers,
rights or preferences of the Series A Preferred Stock or another series of
Parity Stock that are not enjoyed by some or all of the other series otherwise
entitled to vote in accordance herewith, the affirmative vote of at least
66-2/3% of the votes entitled to be cast by the holders of all series similarly
affected, similarly given, shall be required in lieu of the affirmative vote of
at least 66-2/3% of the votes entitled to be cast by the holders of the Series A
Preferred Stock and the Parity Stock otherwise entitled to vote in accordance
herewith; or
(b) A share exchange that affects the Series A Preferred Stock, a
consolidation with or merger of the Corporation into another entity, or a
consolidation with or merger of another entity into the Corporation, unless in
each such case each share of Series A Preferred Stock (i) shall remain
outstanding
-19-
<PAGE>
without a material and adverse change to its terms and rights or (ii) shall be
converted into or exchanged for convertible preferred stock of the surviving
entity having preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption thereof identical to that of a share of Series A
Preferred Stock (except for changes that do not materially and adversely affect
the holders of the Series A Preferred Stock); or
(c) The authorization or creation of, or the increase in the authorized
amount of, any shares of any class or any security convertible into shares of
any class ranking prior to the Series A Preferred Stock in the distribution of
assets on any liquidation, dissolution or winding up of the Corporati on or in
the payment of dividends;
provided, however, that no such vote of the holders of Series A Preferred Stock
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the issuance of any such shares or convertible
securities is to be made, as the case may be, provision is made for the
redemption of all shares of Series A Preferred Stock at the time outstanding.
For purposes of the foregoing provisions of this Section 9, each share of
Series A Preferred Stock shall have one (1) vote per share, except that when
shares of any other series of Preferred Stock shall have the right to vote with
the Series A Preferred Stock as a single class on any matter, then the Series A
Preferred Stock and such other series shall have with respect to such matters
one (1) vote per $25.00 of stated liquidation preference. Except as otherwise
required by applicable law or as set forth herein, the Series A Preferred Stock
shall not have any relative, participating, optional or other special voting
rights and powers, and the consent of the holders thereof shall not be required
for the taking of any corporate action.
Section 10. Record Holders. The Corporation and the Transfer Agent may deem
and treat the record holder of any Series A Preferred Stock as the true and
lawful owner thereof for all purposes, and neither the Corporation nor the
Transfer Agent shall be affected by any notice to the contrary.
Section 11. Sinking Fund. The Series A Preferred Stock shall not be
entitled to the benefits of any retirement or sinking fund.
Section 12. Ownership Limitation. Pursuant to the authority granted to the
Board of Directors under Section 5.10 of the Charter, any Person (as defined in
the Charter) who is not an individual within the meaning of Section 542(a)(2) of
the Internal Revenue Code of 1986, as amended (the "Code"), as modified by
Section 856(h)(3) of the Code (referred to as an "Exempted Person"), that
Acquires (as defined in the Charter) Beneficial Ownership (as defined in the
Charter) of shares of Series A Preferred Stock is exempted from clause (ii) of
the Ownership Limit (as defined in the Charter) with respect to the Series A
Preferred Stock, subject to the
-20-
<PAGE>
condition that no Person (as defined in the Charter) who is an individual within
the meaning of Section 542(a)(2) of the Code, as modified by Section 856(h)(3)
of the Code and who Beneficially Owns (as defined in the Charter) any of the
shares of Series A Preferred Stock owned directly by the Exempted Person at any
time Beneficially Owns an amount of Series A Preferred Stock in excess of the
Ownership Limit. Each Exempted Person who acquires shares of Series A Preferred
Stock in reliance upon the conditional exemption set forth in the preceding
sentence represents and warrants to the Corporation as a condition of such
reliance that the condition set forth therein is satisfied at the time such
Exempted Person Acquired the shares of Series A Preferred Stock and will be
satisfied throughout the period during which such Exempted Person Beneficially
Owns the shares of Series A Preferred Stock. Each Exempted Person who acquires
shares of Series A Preferred Stock in reliance upon the conditional exemption
set forth in the second preceding sentence further agrees that in the event the
condition set forth in the second preceding sentence is at any time not
satisfied, the exemption granted under this Section 12 no longer shall apply to
such Exempted Person and all of the shares of Series A Preferred Stock
Beneficially Owned by such Exempted Person shall be subject to all of the
restrictions and remedies set forth in Article V of the Charter (including,
without limitation, the remedies set forth in Section 5.3 of the Charter).
-21-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be signed in its name and on its behalf by its President and attested by its
Secretary on October __, 1996.
CARRAMERICA REALTY CORPORATION
By: /s/ Thomas A. Carr
--------------------------
Thomas A. Carr
President
(SEAL)
Attest: /s/ Andrea F. Bradley
---------------------
Andrea F. Bradley
Secretary
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CARRAMERICA
REALTY CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET AS OF
SEPTEMBER 30, 1996 AND FROM CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-31-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 22,882
<SECURITIES> 0
<RECEIVABLES> 10,002
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,022,051
<DEPRECIATION> 115,709
<TOTAL-ASSETS> 1,043,908
<CURRENT-LIABILITIES> 0
<BONDS> 426,069
0
0
<COMMON> 355
<OTHER-SE> 545,393
<TOTAL-LIABILITY-AND-EQUITY> 1,043,908
<SALES> 0
<TOTAL-REVENUES> 109,904
<CGS> 0
<TOTAL-COSTS> 91,633
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,881
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,881
<DISCONTINUED> 0
<EXTRAORDINARY> 484
<CHANGES> 0
<NET-INCOME> 15,502
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.00
<FN>
<F1>
(1) Notes and accounts receivable are presented net of allowance for doubtful
accounts as the allowance is immaterial.
</FN>
</TABLE>
