SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ________ from to ________
Commission File Number 1-11706
CARRAMERICA REALTY CORPORATION
Formerly CARR REALTY CORPORATION
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(Exact name of registrant as specified in its charter)
Maryland 52-1796339
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(State of Incorporation) (I.R.S. Employer Identification No.)
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 624-7500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, New York Stock Exchange
$0.01 Par Value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___
As of March 15, 1997, the aggregate market value of the 28,121,529 shares of
Common Stock held by non-affiliates of the registrant was approximately $903.4
million, based upon the closing price of $32.125 on the New York Stock Exchange
composite tape on such date.
Number of shares of Common Stock outstanding as of March 15, 1997:
48,734,335
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the proxy statement for the
Annual Stockholders Meeting to be held in 1997 are incorporated by reference
into Part III.
<PAGE>
PART 1
Item 1. Business
THE COMPANY
General
CarrAmerica Realty Corporation (the "Company") is a publicly-traded real estate
investment trust ("REIT") that focuses primarily on the acquisition,
development, ownership and operation of office properties in select suburban
growth markets across the United States. The Company's national office strategy
is responsive to the growing number of corporate office space users that are
relocating their operations from central business districts to suburban markets
to reduce operating costs and improve their employees' quality of life.
As of March 15, 1997, the Company owned a greater than 50% interest in a
portfolio of 170 operating office properties, and six properties currently under
construction, all of which are located in strategic markets across the United
States. These markets include Southern California, Northern California, Seattle,
Denver, Phoenix, Austin, Dallas, Chicago, Atlanta, South Florida and
metropolitan Washington, D.C. These 170 operating properties contain an
aggregate of approximately 13.4 million square feet of space (including
approximately 910,000 square feet under construction). The operating properties
owned by the Company as of December 31, 1996 were 93.6% leased as of that date,
with approximately 1,000 tenants.
The Company and its predecessor, The Oliver Carr Company ("OCCO"), have
successfully developed, owned and operated office buildings in the Washington,
D.C. metropolitan area for more than 30 years. In November 1995, the Company
announced a strategic alliance with a wholly-owned subsidiary of Security
Capital U.S. Realty (together with Security Capital U.S. Realty, "USRealty"), a
European real estate operating company which owns strategic positions in
selected real estate companies in the United States. USRealty initially invested
approximately $250 million in the Company in April 1996 for a 39% interest in
the Company on a fully-diluted basis. As of March 15, 1997, USRealty owned
approximately 39.7% of the outstanding common stock of the Company (35.6% on a
fully diluted basis). In April 1996, the Company changed its name to CarrAmerica
Realty Corporation.
The Company's experienced staff of over 625 employees, including over 425
on-site building employees, provides a full range of real estate services. The
Company's principal executive offices are located at 1700 Pennsylvania Avenue,
N.W., Washington, D.C. 20006, and its telephone number is (202) 624-7500. The
Company's web site can be found at www.carramerica.com. The Company was
organized as a Maryland corporation on July 9, 1992.
Business Strategy
The Company's primary business objective is to achieve long-term sustainable per
share cash flow growth by (i) acquiring, developing, owning and operating office
properties in suburban markets throughout the United States that exhibit strong,
long-term growth characteristics and (ii) developing a national operating system
that satisfies and capitalizes on the financial and operational demands of
corporate office space users. The Company believes that growth-oriented
companies are relocating to and expanding in suburban locations that offer lower
operating costs, greater convenience and a higher quality of life than
traditional central business districts. The Company seeks to provide suburban
office space which will meet the changing needs of corporate users of office
space.
The Company's business strategy is predicated on becoming one of the major
owners and operators of office space in each of its selected suburban target
markets; therefore, the Company is undertaking a major acquisition initiative as
the initial stage of its national office strategy. The Company focuses its
acquisition efforts in regions of the United States which possess strong,
long-term growth characteristics, and within those regions the Company targets,
in general, markets in which operating costs for businesses are relatively low,
long-term population and job growth are expected to exceed the national average,
and barriers to entry exist for new supply of office space. Additionally, the
<PAGE>
Company's market officers coordinate with local third-party brokers to ensure
the identification of the best available locations. As of December 31, 1996 (on
a rentable square foot basis), 32% of the Company's portfolio was located in its
Pacific region, primarily in the suburban Seattle and the California markets of
San Jose, Silicon Valley, Pleasanton, Orange County, and San Diego; 41% in its
Southeast region, primarily in the metropolitan Washington, D.C. and suburban
Atlanta markets; and 27% in its Central and Mountain regions, primarily in the
southeast suburban Denver, suburban Chicago and Austin, Texas markets. Downtown
Washington, D.C., which represented 100% of the Company's portfolio in 1993,
accounted for approximately 19% of the Company's portfolio (on a rentable square
foot basis) at the end of 1996.
The Company has established a set of general guidelines and physical
characteristics to evaluate the acquisition opportunities available to the
Company in each identified target market. These guidelines include (i) the
purchase price of an office property typically should be at a discount to the
replacement cost of a comparable office property, (ii) rents of existing
customers with leases expiring in the near-term typically should be at or below
the current market rents for the given target market, and (iii) an office
property generally should be low-rise, with flexible floor plates that are
conducive to accommodating a variety of office space user needs. In addition,
the Company looks for office properties that have ample parking and that are
conveniently located near amenities and major transportation arteries.
To execute its national suburban office strategy, the Company is
implementing a national operating system that will provide nationally
coordinated customer service, marketing and development. The Company's national
operating system consists of three components: (i) a Market Officer Group; (ii)
a National Development Group; and (iii) a Corporate Services Group.
Market Officer Group. The Market Officer Group currently consists of nine
market officers who cover ten of the eleven target markets in which the Company
currently owns properties. These market officers are responsible for maximizing
the performance of the Company's properties in their markets and ensuring that
the needs of the Company's customers are consistently being met. Because they
meet with the Company's customers on a regular basis, they are cognizant of and
responsive to customers' relocation or expansion needs. The market officers have
extensive knowledge of local conditions in their respective markets and,
therefore, are invaluable in identifying attractive investment opportunities in
their markets. In addition, through their contact with customers, market
officers are well positioned to help the Corporate Services Group identify
customers with new build-to-suit and multi-market requirements.
National Development Group. The National Development Group is responsible
for developing suburban office properties, build-to-suit facilities and business
parks. The architects, engineers, and construction professionals who comprise
the National Development Group oversee every aspect of the Company's land
planning, building design, construction and development of office properties,
ensuring that all projects meet the same high standards and uniform
specifications in building design and systems. As the Company implements its
national strategy, the National Development Group's expertise should give the
Company a competitive edge in marketing its facilities and services to
customers. As of March 15, 1997, the Company owned (or held options to acquire)
land in six of its eleven target markets which will support the future
development of up to 3.3 million square feet of office space. The Company's goal
is to allocate approximately 5% of its invested capital to investments in
developable land. As of March 15, 1997, the Company had six suburban office
properties under construction: a 58,000 square foot building in suburban
Washington, D.C.; a 128,000 square foot building in suburban Atlanta; two
buildings totaling 295,000 square feet in southeast Denver; a 129,000 square
foot building in suburban Austin, Texas; and a 300,000 square foot building in
San Jose, California.
Corporate Services Group. The Company plans to establish the Corporate
Services Group during 1997. This group will be responsible for marketing the
Company's properties, build-to-suit capabilities, and the national scope of the
Company's operations to a targeted list of major corporate users of office
space. The Corporate Services Group will act as a primary point of contact for
national customers, coordinating all the
<PAGE>
services the Company offers and giving corporate customers the opportunity to
address their national space requirements efficiently and economically.
Recent Developments
In 1996, the Company invested $1.1 billion ($855.4 million in cash, the
assumption of $184.4 million of debt and the issuance of $19.5 million in common
stock and partnership interests ("Units")) in 146 operating office properties,
552,000 square feet of office space under construction, and 142 acres of land
and land options held for future development. From January 1, 1997 to March 15,
1997, the Company invested $140.7 million in 10 operating office properties,
placed 1 development project of approximately 101,000 square feet into service
and acquired land which in the aggregate will support the development of 636,000
square feet of office space, 358,000 of which is currently under construction.
The 1997 acquisitions were funded through $122.6 million in cash and the
assumption of $18.1 million in debt. The table below shows the operating office
properties purchased or placed in service between January 1, 1996 and March 15,
1997.
<TABLE>
<CAPTION>
Net Rentable
Number of Area
Property Location Properties (SF in 000's) Month/Year of Acquisition
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PACIFIC REGION:
Scenic Business Park Southern California 4 137 March 1996
Harbor Corporate Park Southern California 4 147 March 1996
AT&T Center Northern California 6 949 March 1996
Redmond East Suburban Seattle 10 399 June 1996
Plaza PacifiCare Southern California 1 104 June 1996
Katella Corporate Center Southern California 1 80 July 1996
Warner Center Southern California 12 342 July 1996
Sunnyvale Research Plaza Northern California 3 126 September 1996
NELO/Orchard Portfolio Northern California 21 1,014 November 1996
Rio Robles Northern California 7 368 November 1996
Del Mar Corporate Plaza Southern California 2 123 December 1996
South Coast Executive Center Southern California 2 162 December 1996
Warner Premier Southern California 1 62 February 1997
3745 North First Street Northern California 1 68 February 1997
Wateridge Pavilion Southern California 1 62 March 1997
---- ------
Subtotal 76 4,143
---- ------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Rentable
Number of Area
Property Location Properties (SF in 000's) Month/Year of Acquisition
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CENTRAL REGION:
Parkway North Center Suburban Chicago 2 508 June 1996
Norwood Tower Austin, Texas 1 111 June 1996
Littlefield Portfolio Austin, Texas 10 865 August 1996
Greyhound Suburban Dallas 1 93 November 1996
Search Plaza Suburban Dallas 1 151 December 1996
Unisys Suburban Chicago 2 365 December 1996
The Crossings Suburban Chicago 2 298 January 1997
Cedar Maple Suburban Dallas 3 113 January 1997
Quorum North Suburban Dallas 1 116 February 1997
Quorum Place Suburban Dallas 1 178 March 1997
---- -------
Subtotal 24 2,798
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SOUTHEAST REGION:
Reston Quadrangle Suburban Washington, D.C. 3 261 March 1996
Parkway One Suburban Washington, D.C. 1 88 June 1996
Peterson Portfolio Suburban Atlanta 38 1,263 November 1996
Lake Wyman Plaza South Florida 1 160 November 1996
---- -------
Subtotal 43 1,772
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MOUNTAIN REGION:
Harlequin Plaza Southeast Denver 2 324 May 1996
Quebec Court I & II Southeast Denver 2 286 May 1996
The Quorum Southeast Denver 2 124 June 1996
Greenwood Center Southeast Denver 1 75 July 1996
Quebec Center Southeast Denver 3 104 August 1996
Pointe Corridor IV Suburban Phoenix 1 172 December 1996
Camelback Lakes Suburban Phoenix 2 200 December 1996
Panorama I Southeast Denver 1 101 January 1997
---- -------
Subtotal 14 1,386
---- -------
TOTAL ACQUIRED 157 10,099
==== =======
</TABLE>
<PAGE>
The following table shows the Company's land and land options held for
future development, all of which were acquired between January 1, 1996 and March
15, 1997.
<TABLE>
<CAPTION>
Square Feet Acres Rentable
Under Held For Square Feet
Region Construction Development Held For Development
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Region:
Northern California 300,000 N/A N/A
Suburban Seattle N/A 4 95,000
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Subtotal 300,000 4 95,000
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Mountain Region:
Southeast Denver 295,000 39 720,000
Phoenix N/A 7 240,000
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Subtotal 295,000 46 960,000
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Central Region:
Austin, Texas 129,000 69 1,524,000
Dallas, Texas N/A 1 38,000
Suburban Chicago N/A 30 723,000
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Subtotal 129,000 100 2,285,000
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Southeast Region:
Suburban Washington, D.C. 58,000 N/A N/A
Suburban Atlanta 128,000 N/A N/A
-------- ---- ----------
Subtotal 186,000 N/A N/A
-------- ---- ----------
TOTAL 910,000 150 3,340,000
======== ==== ==========
</TABLE>
Capital Transactions
During the fourth quarter of 1996, the Company raised aggregate net proceeds of
$249 million through the sale of 1.7 million shares of Series A Cumulative
Convertible Redeemable Preferred Stock in October, from which the Company raised
net proceeds of $43 million, and the sale of 8.2 million shares of its common
stock to the public and a concurrent offering to USRealty in November, from
which the Company raised net proceeds of $206 million. The net proceeds of these
offerings were used to acquire the suburban office properties and land described
above and to pay down indebtedness under the Company's unsecured line of credit.
In January 1997, the Company consummated a public offering and a concurrent
offering to USRealty of 4.9 million shares of its common stock that raised net
proceeds of approximately $136 million. The net proceeds were used to acquire
the suburban office properties and land described above and to pay down
indebtedness under the Company's unsecured line of credit.
In January 1997, the Company entered into a short-term, revolving credit
agreement with Morgan Guaranty Trust of New York to borrow up to $150 million,
secured by certain properties in the Company's portfolio.
<PAGE>
Directors of the Company
The directors of the Company are divided into three classes, with approximately
one-third of the directors elected by the stockholders annually. As of March 15,
1997, the Board of Directors of the Company consisted of the following persons:
Oliver T. Carr, Jr., 71, has been the Chief Executive Officer and Chairman
of the Board of Directors of the Company since it commenced operations in
February 1993. Mr. Carr's term as a director of the Company expires at the 1999
Annual Meeting of Stockholders. Mr. Carr founded OCCO in 1962 and since that
time has been its Chairman of the Board and a director. In addition, Mr. Carr
has served as President of OCCO since February 1993. Mr. Carr is also on the
Board of Directors of Carr Park, Inc., a subsidiary of OCCO. He was Chairman of
the Board of Trustees of The George Washington University until May 1995. Mr.
Carr is the father of Thomas A. Carr and Robert O. Carr. Mr. Carr is a member of
the Investment Committee and the Executive Committee of the Board of Directors.
Thomas A. Carr, 38, has been President and a director of the Company since
February 1993. Mr. Carr's term as a director of the Company expires at the 1998
Annual Meeting of Stockholders. In May 1995, Mr. Carr was also appointed the
Chief Operating Officer of the Company, at which time he resigned as the
Company's Chief Financial Officer, a position he had held since February 1993.
Mr. Carr was President of Carr Partners, Inc., a financial services affiliate of
OCCO, from 1991 until February 1993, when Carr Partners, Inc. ceased operations.
Prior to becoming President of Carr Partners, Inc., Mr. Carr was Vice President
of Suburban Development and Regional Development Partner for Montgomery County
for OCCO, beginning in 1985. Mr. Carr is a director of OCCO. Mr. Carr holds a
Masters degree in Business Administration from Harvard Business School, and a
Bachelor of Arts degree from Brown University. Mr. Carr is a member of the Board
of Governors of the National Association of Real Estate Investment Trusts and a
director of Lafayette Square Partners, Inc. Mr. Carr is the son of Oliver T.
Carr, Jr. and the brother of Robert O. Carr. Mr. Carr is a member of the
Investment Committee and the Executive Committee of the Board of Directors. In
addition, Mr. Carr is a member of management's Operating Committee and
Investment Committee.
Robert O. Carr, 47, has been a director of the Company and President and
Chairman of the Board of Directors of Carr Real Estate Services, Inc. ("Carr
Services, Inc."), a subsidiary of the Company, since February 1993. Mr. Carr's
term as a director of the Company expires at the 1997 Annual Meeting of
Stockholders. Mr. Carr is a director of OCCO and, from 1987 until February 1993,
served as its President and Chief Executive Officer. Mr. Carr joined OCCO in
1973 and has served in a number of positions which have included the supervision
of all development operations since 1979 and all day-to-day company operations
since 1982 as Executive Vice President. Mr. Carr is a member of the Boards of
Directors for the Greater Washington Research Center, the Corcoran School of
Art, and the National Cathedral School for Girls. Mr. Carr is also a member of
the Greater Washington Board of Trade, the Urban Land Institute, and the D.C.
Chamber of Commerce. Mr. Carr holds a Bachelor of Arts degree from Trinity
College. Mr. Carr is the son of Oliver T. Carr, Jr. and the brother of Thomas A.
Carr. Mr. Carr is a member of the Executive Committee of the Board of Directors.
David Bonderman, 54, has been a director of the Company since its
commencement of operations. Mr. Bonderman's term expires at the 1997 Annual
Meeting of Stockholders. He is the managing general partner of TPG Partners,
L.P., a private investment partnership. From October 1971 through June 1983, Mr.
Bonderman was an associate and then partner in the law firm of Arnold & Porter,
Washington, D.C. From July 1983 through August 1992, Mr. Bonderman served as the
Vice President and Chief Operating Officer of Keystone, Inc. (formerly the
Robert M. Bass Group, Inc.). Mr. Bonderman also serves as a director of Bell &
Howell Holdings Company, Washington Mutual, Inc., Denbury Resources, Inc.,
National Education Corporation and Continental Airlines, Inc. Mr. Bonderman
holds a Bachelor of Arts degree from the University of Washington and an L.L.B.
degree from Harvard University. Mr. Bonderman is a member of the Executive
Compensation Committee of the Board of Directors.
Andrew F. Brimmer, 70, has been a director of the Company since February
1993. Dr. Brimmer's term as a director of the Company expires at the 1999 Annual
Meeting of Stockholders. He has been the President of Brimmer & Company, Inc.,
an economic and financial consulting firm, since 1976. Since
<PAGE>
1995, Dr. Brimmer has served as the chairman of the District of Columbia
Financial Control Board. Dr. Brimmer was a member of the Board of Governors of
the Federal Reserve System from 1966 through 1974. He is also the Wilmer D.
Barrett Professor of Economics at the University of Massachusetts-Amherst. Dr.
Brimmer serves as a director of BankAmerica Corporation and Bank of America,
BlackRock Investment Income Trust, Inc. (and other funds), PHH Corporation, E.l.
du Pont de Nemours & Company, Navistar International Corporation, Gannett
Company, Borg-Warner Automotive, Inc. and Airborne Express. Dr. Brimmer received
a Bachelor of Arts and a Masters degree in Economics from University of
Washington and holds a Ph.D. in Economics from Harvard University. Dr. Brimmer
is a member of the Audit Committee of the Board of Directors.
A. James Clark, 69, has been a director of the Company since February 1993.
Mr. Clark's term as a director of the Company expires at the 1998 Annual Meeting
of Stockholders. He has been Chairman of the Board and President of Clark
Enterprises, Inc., a Bethesda, Maryland-based company involved in real estate,
communications, and commercial and residential construction, since 1972. Mr.
Clark is a member of the University of Maryland Foundation, and serves on the
Board of Trustees of The Johns Hopkins University. He is also a member of the
PGA Tour Investments Policy Board and a director of Lockheed Martin Corporation
and Potomac Electric Power Company. Mr. Clark is a graduate of the University of
Maryland. Mr. Clark is a member of the Investment Committee, the Executive
Compensation Committee, the Executive Committee and the Nominating Committee of
the Board of Directors.
Anthony R. Manno, Jr., 44, has been a director of the Company since May
1996. Mr. Manno's term as a director of the Company expires at the 1997 Annual
Meeting of Stockholders. Mr. Manno is a Managing Director of Security Capital
Investment Research Incorporated, an affiliate of USRealty. Prior to joining
Security Capital Investment Research Incorporated in 1993, Mr. Manno was a
managing director of LaSalle Partners Limited where he served in various
capacities from 1980 to 1993, including client manager for LaSalle Partners
Limited's joint venture partner, Dai-ichi Mutual Life Insurance Company; manager
of LaSalle Partners Limited's property finance group; and a member of LaSalle
Partners Limited's investment committee. Prior thereto, Mr. Manno was a
commercial real estate loan officer of The First National Bank of Chicago. Mr.
Manno is a Certified Public Accountant. Mr. Manno received his Masters in
Business Administration, with a concentration in Finance, from the University of
Chicago School of Business and his M.A. and B.A. in Economics from Northwestern
University.
Caroline S. McBride, 43, has been a director of the Company since July 1996.
Mrs. McBride's term as a director of the Company expires at the 1997 Annual
Meeting of Stockholders. Mrs. McBride is a Managing Director of Security Capital
Investment Research Incorporated. From January 1993 to June 1996, Mrs. McBride
was the director of private market investments for the IBM Retirement Fund and
from January 1992 to January 1995, she was the director of real estate
investments for such fund. Prior to joining the IBM Retirement Fund in 1992,
Mrs. McBride was director of finance, investments and asset management for IBM's
corporate real estate division. Mrs. McBride is on the Boards of Directors of
the Pension Real Estate Association (PREA) and the Real Estate Research
Institute. Mrs. McBride received her Masters in Business Administration from New
York University and a Bachelor of Arts degree from Middlebury College. Mrs.
McBride is a member of the Investment Committee and the Audit Committee of the
Board of Directors.
J. Marshall Peck, 45, has been a director of the Company since June 1996.
Mr. Peck was appointed to the Board in connection with the USRealty Transaction.
Mr. Peck is a Managing Director of Security Capital Investment Research
Incorporated. Prior to joining Security Capital Investment Research Incorporated
in May 1996, Mr. Peck was a Managing Director of LaSalle Partners Limited since
January 1989, where he served in various capacities over his 14-year tenure,
with responsibility for operating groups within both the investment and services
businesses and was a member of its management committee. Prior thereto, Mr. Peck
held various marketing and management positions in the Data Processing Division
of IBM. Mr. Peck is past Chairman of the Pension Real Estate Association and
serves on the National Real Estate Advisory Board of the Nature Conservancy. Mr.
Peck is on the Boards of
<PAGE>
Directors of Regency Realty Corporation and Storage USA, Inc. Mr. Peck received
his B.A. degree from University of North Carolina at Chapel Hill. Mr. Peck is a
member of the Executive Committee and the Executive Compensation Committee of
the Board of Directors.
George R. Puskar, 53, has been a director of the Company since its
commencement of operations. Mr. Puskar's term expires at the 1999 Annual Meeting
of Stockholders. He has served as the Chairman and Chief Executive Officer of
Equitable Real Estate Investment Management, Inc. ("Equitable Real Estate")
since 1989 and a vice president of The Equitable Life Assurance Society of the
United States ("ELAS"). Mr. Puskar joined ELAS in 1966 in its local field office
in Pittsburgh. Mr. Puskar became the President of Equitable Real Estate, a
diversified real estate organization which is a subsidiary of ELAS, in 1984. Mr.
Puskar serves as a director of Equitable Real Estate Capital Markets, Inc. and
is a board member of the International Council of Shopping Centers, Clark
Atlanta University, The Atlanta Chamber of Commerce, the Vice Chairman and a
board member of the National Realty Committee, and a member of the Advisory
Board of the Wharton School's Real Estate Center in Philadelphia. Mr. Puskar is
a member of the Executive Committee and the Nominating Committee of the Board of
Directors.
William D. Sanders, 55, has been a director of the Company since May 1996.
Mr. Sanders is the Founder and Chairman of Security Capital Group, an affiliate
of USRealty. Mr. Sanders retired on January 1, 1990, as chief executive officer
of LaSalle Partners Limited, which he founded in 1968. Mr. Sanders is on the
Boards of Directors of R. R. Donnelley & Sons Company, USRealty, Storage USA,
Inc. and Regency Realty Corporation. Mr. Sanders is a former trustee and member
of the executive committee of the University of Chicago and a former trustee
fellow of Cornell University. Mr. Sanders received his Bachelor of Science from
Cornell University. Mr. Sanders is a member of the Nominating Committee of the
Board of Directors.
Wesley S. Williams, Jr., 54, has been a director of the Company since
February 1993. Mr. Williams' term as a director of the Company expires at the
1998 Annual Meeting of Stockholders. Mr. Williams has been a partner of the law
firm of Covington & Burling since 1975. He was adjunct professor of real estate
finance law at the Georgetown University Law Center from 1971 to 1973 and is a
contributing author to several texts on banking law and on real estate finance
and investment. Mr. Williams is also on the Editorial Advisory Board of the
District of Columbia Real Estate Reporter. Mr. Williams serves on the Boards of
Directors of Blackstar Communications, Inc. and its Florida, Michigan and Oregon
subsidiaries; Blackstar LLC and its Nebraska and South Dakota subsidiaries; and
the Federal Reserve Bank of Richmond. Mr. Williams is Chairman of the Boards of
Directors of Broadcast Capital, Inc. and Broadcast Capital Fund, Inc. and is
Vice Chairman of The Lockhart Companies, Incorporated. Mr. Williams also is a
member of the Executive Committee of the Board of Trustees of Penn Mutual Life
Insurance Company. Mr. Williams received a B.A. and J.D. from Harvard
University, an M.A. from the Fletcher School of Law and Diplomacy and an L.L.M.
from Columbia University. Mr. Williams is a member of the Executive Compensation
Committee of the Board of Directors.
Executive Officers and Certain Key Employees of the Company
In addition, as of March 15, 1997, the Company's executive officers and key
employees were as follows:
Brian K. Fields, 37, has been the Company's Chief Financial Officer since
May 1995. Prior to that time, Mr. Fields served as the Company's Vice President,
Treasurer and Controller since February 1993. Mr. Fields served as Treasurer and
Controller of OCCO from 1990 to February 1993. Prior to that time, Mr. Fields
was a Senior Manager with KPMG Peat Marwick LLP in Washington, D.C. Mr. Fields
was employed by KPMG Peat Marwick LLP for eight years. Since 1993, Mr. Fields
has also been a director and Treasurer of Carr Services, Inc. and since 1996 he
has served as a director and officer of several other subsidiaries of the
Company. He holds a Bachelor of Science degree in Accounting from Virginia Tech
and is a Certified Public Accountant. Mr. Fields is a member of management's
Operating Committee and Investment Committee.
Philip L. Hawkins, 41, has been the Company's Managing Director of Asset
Management since February 1996. Prior to that time, Mr. Hawkins was employed by
LaSalle Partners Limited since 1982. Mr. Hawkins served as the Executive Vice
President,
<PAGE>
Eastern Division, Asset Management Group since 1995; the Senior Vice President,
Northeast Region, Asset Management Group from 1990 to 1994 and in other asset
management positions prior to that time. Mr. Hawkins was also a director of
LaSalle Partners. He holds a Masters in Business Administration from the
University of Chicago Graduate School of Business and a Bachelor of Arts degree
from Hamilton College. Mr. Hawkins is a member of management's Operating
Committee and Investment Committee.
Robert E. Peterson, 45, has been the Company's Regional Managing Director,
Southeast Region, since November 1996. Mr. Peterson has over 23 years of real
estate experience. Mr. Peterson's most recent experience includes 18 years as
President of Peterson Properties, which he co-founded in 1978. Prior to forming
Peterson Properties, Mr. Peterson was Vice President of Arthur Rubloff &
Company, where he spent five years specializing in office and industrial leasing
and investment property brokerage. Mr. Peterson is a former member of the
Society of Industrial and Office Realtors and serves on the Developer Advisory
council for the Georgia Chapter of the National Association of Industrial and
Office Parks. He graduated from University of North Carolina at Chapel Hill,
with a B.S. in Business Administration. Mr. Peterson is a member of management's
Operating Committee and Investment Committee.
Robert G. Stuckey, 35, has been the Company's Managing Director of
Acquisitions and Development since February 1996. Prior to that time, Mr.
Stuckey was employed by Security Capital Industrial Trust, an affiliate of
Security Capital Group, since January 1993, as a Senior Vice President managing
the operations of the development group since November 1994, and as a Vice
President supervising acquisition due diligence from May 1993 to November 1994.
Prior to that time, Mr. Stuckey had seven years of experience with Trammell Crow
Company. His most recent position there was as Chief Financial Officer for
Trammel Crow Company NE, Inc. Mr. Stuckey holds a Masters in Business
Administration from Harvard Business School and a Bachelor of Science in Finance
from University of Nebraska. Mr. Stuckey is a member of management's Operating
Committee and Investment Committee.
Paul R. Adkins, 38, has been the Company's Vice President, Market Officer
for Washington, D.C. since August 1996. Mr. Adkins has been with the Company for
over 14 years, including serving as Vice President of Acquisitions from May 1994
to August 1996. Mr. Adkins was instrumental in the Company's initial efforts to
acquire suburban office properties in its suburban Atlanta and Austin, Texas
target markets. Prior to that, Mr. Adkins served in a variety of other
capacities with the Company, with over 12 years in commercial real estate
leasing. Mr. Adkins was named "Top Producer" for the Washington metropolitan
area in 1990 and 1991 by the Washington, D.C. Association of Realtors. Mr.
Adkins is a member of the District of Columbia's Building Industry Association
and Northern Virginia's National Association of Industrial and Office Parks. Mr.
Adkins holds a Bachelor of Arts degree from Bucknell University.
Andrea F. Bradley, 36, has been the Company's Vice President, General
Counsel and Corporate Secretary since August 1993. Mrs. Bradley was an attorney
with the law firm of Shaw, Pittman, Potts and Trowbridge from 1991 to August
1993 and an attorney with the law firm of Paul, Hastings, Janofsky & Walker from
1985 to 1991, where she practiced primarily corporate finance and securities
law. Mrs. Bradley holds a Juris Doctor from University of California at Los
Angeles and an A.B. degree in American Studies from Stanford University.
Steven N. Bralower, 46, has been Senior Vice President of Carr Realty, L.P.,
a subsidiary of the Company, since May 1996 and prior thereto was Senior Vice
President of Carr Services, Inc. from 1993 to May 1996. Mr. Bralower was Senior
Vice President of OCCO from 1985 to February 1993 and was responsible for
overseeing and directing one-half of OCCO's leasing activities in its portfolio
of commercial office and retail space. Mr. Bralower first joined OCCO in 1978 as
a commercial leasing agent. Mr. Bralower has been a member of the Georgetown
University Law Center faculty. Mr. Bralower holds a Bachelor of Arts degree from
Kenyon College.
Robert L. Brumm, 45, has been Vice President, Human Resources and
Administration of the Company, since May 1996. From 1993 to 1996, Mr. Brumm held
the same position with Carr Services, Inc. and from March 1990 to 1993 held the
same
<PAGE>
position with OCCO. He is responsible for managing the Human Resources,
Risk Management, Training, and Office Management functions. He has over 20 years
of experience including 8 years with Mark Controls Corporation and 5 years with
the real estate division of Philip Morris, Inc. Mr. Brumm received his Bachelors
degree from California State University at Long Beach.
Clete Casper, 37, has been the Company's Vice President, Market Officer for
suburban Seattle since July 1996. Mr. Casper has over 10 years' experience in
the real estate and marketing field. Mr. Casper's most recent experience
includes 1 year as a Senior Associate with CB Commercial Real Estate Group Inc.,
Seattle, Washington. Prior to that, Mr. Casper was with Sabey Corporation in
Seattle, Washington serving in the following capacities: 4 years as Development
Manager and 5 years as a Marketing Associate. Mr. Casper is a graduate of
Washington State University.
Joel DeSpain, 45, has been the Company's Vice President, Market Officer for
Austin, Texas since August 1996. Mr. DeSpain has over 18 years' experience in
the real estate and marketing field. Mr. DeSpain's most recent experience
includes 2 years as a Vice President of Littlefield Real Estate Company in
Austin, Texas. Prior to that, Mr. DeSpain spent 2 years with Faison-Stone in
Austin, Texas as Vice President, 5 years with Grubb & Ellis in Austin, Texas as
President, 2 years with Paragon Properties in Austin, Texas as Executive Vice
President, and 7 years with The Home Company Realtors in Houston, Texas as
Marketing Director. Mr. DeSpain holds a Doctor of Jurisprudence from South Texas
College of Law and a BBA in Marketing from University of Houston.
John J. Donovan, Jr., 53, has been Senior Vice President of Carr Services,
Inc. since February 1993. Prior to that, Mr. Donovan was Senior Vice President
of OCCO from 1988 to February 1993 and was responsible for overseeing and
directing one-half of OCCO's leasing activities in its portfolio of commercial
office and retail space. Mr. Donovan joined OCCO as a commercial leasing agent
in 1976. He is a member of the Advisory Board for Jubilee Enterprise of Greater
Washington (an affiliate of Jubilee Housing and The Enterprise Foundation). Mr.
Donovan holds a Bachelor of Arts degree from Georgetown University.
Karen B. Dorigan, 32, has been the Company's Vice President -- Land Due
Diligence since January 1996 and is responsible for supervising land and
development due diligence. Prior to that time and for more than 9 years, Mrs.
Dorigan served in a variety of capacities in OCCO's development business,
including from February 1993 to January 1996 serving as a Vice President. She is
a past member of Northern Virginia's Building Industry Association's Arlington
Chapter Council. Mrs. Dorigan holds a Bachelor of Science degree in Economics
from the University of Pennsylvania, Wharton School.
J. Thad Ellis, 36, has been the Company's Vice President, Market Officer for
suburban Atlanta since November 1996. Mr. Ellis has over 12 years' experience in
the real estate field. Mr. Ellis' most recent experience includes 10 years with
Peterson Properties where his primary responsibility was to oversee and
coordinate the leasing and property management for the management services
portfolio. Prior to that, Mr. Ellis spent two years with another Atlanta
development company. Mr. Ellis is a graduate of Washington & Lee University and
is involved with the National Association of Industrial and Office Parks and
Atlanta's Chamber of Commerce and is also on the Advisory Board of Black's
Guide.
Richard W. Greninger, 45, has been Senior Vice President of Carr Services,
Inc. since March 1995. Prior to that time he had been Vice President of Carr
Services, Inc. since February 1993. Mr. Greninger was with OCCO as Vice
President of Property Management Services from January 1992 to February 1993.
Prior to that time, Mr. Greninger was with CB Commercial Real Estate Group Inc.,
a commercial real estate firm, where he was Senior Vice President and Regional
Manager of the Mid-Atlantic Property Management Division responsible for the
management of 7.5 million square feet of commercial space. During 1994, Mr.
Greninger served as President of the Greater Washington Apartment and Office
Building Association. Mr. Greninger has served as a director of both the
Institute of Real Estate Management and the Building Owners and Managers
Association. Mr. Greninger holds a Masters in Business Administration from the
University of Cincinnati and a Bachelor of Science degree from Ohio State
University.
<PAGE>
John S. Herr, 41, has been the Company's Vice President, Market Officer for
Northern California since September 1996. Mr. Herr has over 12 years' experience
in the real estate and marketing field. Mr. Herr's most recent experience
includes 21U2 years as the President and Chief Executive Officer of Simeon
Commercial Properties in San Francisco, California. Prior to that, Mr. Herr
spent 8 years with Trammel Crow serving in the following capacities: 2 years as
Principal and Executive Vice President in San Francisco; 3 years as Partner in
Richmond, Virginia; and 4 years as Marketing Representative in Washington, D.C.
Mr. Herr holds a Masters in Business Administration from Stanford University and
a Bachelors degree from the U.S. Naval Academy.
Austin W. Lehr, 35, has been the Company's Vice President, Market Officer
for Southeast Denver since July 1996. Mr. Lehr has over 10 years' experience in
the real estate and marketing field. Mr. Lehr's most recent experience includes
4 years as a Vice President with Southwest Value Partners and Affiliates in
Phoenix, Arizona. Prior to that, Mr. Lehr spent 4 years with Draper and Kramer,
lncorporated in Washington, D.C. as the Director of Development and Marketing,
and 2 years as a Vice President at Guaranty Federal Savings and Loan in Dallas,
Texas. Mr. Lehr holds a Masters of Management degree from Northwestern
University and a Bachelor of Arts degree from Williams College.
Dwight L. Merriman, 36, has been the Company's Vice President, Market
Officer for Southern California since August 1996. Mr. Merriman has over 12
years' experience in the real estate and marketing field. Mr. Merriman's most
recent experience includes 1 year as Vice President with Security Capital
Industrial Trust in Irvine, California. Prior to that, Mr. Merriman spent 11
years with Overton, Moore in Los Angeles in the following capacities: 5 years as
the Director of Marketing - Asset Management (Partner), 4 years as Director of
Marketing - Development (Partner) and 2 years as a Marketing Associate. Mr.
Merriman holds a Masters in Business Administration from University of
California at Los Angeles and a Bachelors degree from University of Southern
California.
B. Thomas Miller, Jr., 35, has been the Company's Vice President -
Acquisitions and Marketing since September 1996. Mr. Miller has over 10 years of
experience in the real estate and marketing field. Mr. Miller's most recent
experience includes 3 years as Vice President of Security Capital Investment
Research Incorporated. Prior to that time, Mr. Miller spent 3 years as a Senior
Manager with Arthur Andersen S.C. Real Estate Services Group and 2 years as an
Associate in Management Advisory Services at Kenneth Leventhal & Company. Mr.
Miller holds a Bachelor of Arts degree in Finance from University of Texas at
Austin.
Gerald J. O'Malley, 53, has been the Company's Vice President, Market
Officer for suburban Chicago since July 1996. Mr. O'MalIey has over 29 years'
experience in the real estate and marketing field. Mr. O'Malley's most recent
experience includes 10 years as founder and President of G.J. O'MaIIey &
Company, a real estate office leasing company. Prior to that, Mr. O'Malley spent
6 years as a leasing agent for LaSalle Partners in Chicago, Illinois, 4 years as
a leasing and sales agent for the firm of Bennett and Kahnweiler, in Chicago,
Illinois, and 8 years with Whiston Group as a property and leasing manager. Mr.
O'Malley holds a Bachelors degree from Loyola University.
James D. Peterson, 49, has been the Company's Vice President, Market Officer
for South Florida since November 1996. Mr. Peterson has over 25 years'
experience in the real estate field. Mr. Peterson's most recent experience
includes 3 years (from 1993 to October 1996) as Vice President of Peterson
Properties with responsibility for property operations in South Florida. From
1978 to 1981, Mr. Peterson was President of Peterson Properties, which he
co-founded. Mr. Peterson also spent 4 years with the Investment Life Insurance
Company of America as Chairman and Chief Executive Officer, 7 years as Chairman
of Cavanaugh Development Company, a general contractor and developer of office
and industrial parks in San Diego, California, which he co-founded, and 7 years
with Wachovia Bank and Trust Company. Mr. Peterson is involved with the National
Association of Industrial and Office Parks and is a member of Boca Raton's
Chamber of Commerce. Mr. Peterson holds a Masters in Business Administration
from University of Texas - Austin and a Bachelor of Science degree in Economics
from University of North Carolina at Chapel Hill.
<PAGE>
Matthew L. Richardson, 37, has been a Senior Vice President of Carr
Development & Construction, Inc., a subsidiary of the Company, since April 1996,
with responsibility for all build-to- suit marketing and for assisting the
Market Officer Group in qualifying, structuring and negotiating development
opportunities. Prior to that time and for more than 8 years, Mr. Richardson
served in a variety of capacities in OCCO's development business, including from
September 1991 to April 1996 serving as its President. He is on the Board of
Directors of the District of Columbia's Building Industry Association. Mr.
Richardson holds a Masters of Business Administration and a Bachelor of Urban
Planning degree from University of Virginia.
Debra A. Volpicelli, 32, has been the Company's Treasurer and Controller
since May 1995. Prior to that time, Mrs. Volpicelli was the Company's Tax
Manager since February 1993. Mrs. Volpicelli was Tax Manager for OCCO from 1990
to February 1993. Prior to that time, Mrs. Volpicelli was in the tax department
of Arthur Andersen & Co., SC. Mrs. Volpicelli holds a Bachelor of Science degree
in Business Administration from Georgetown University and is a Certified Public
Accountant.
Joseph D. Wallace, 33, has been the Company's Vice President - Building Due
Diligence since January 1996 and is responsible for supervising building
acquisition due diligence. Prior to that time, Mr. Wallace was the Company's
Vice President of Asset Management since February 1993. Mr. Wallace was Vice
President of Carr Partners, Inc. from 1990 to February 1993. Prior to that, Mr.
Wallace was co-Director of Asset Management for OCCO responsible for the
investment oversight of OCCO's portfolio of commercial properties in the
Washington, D.C. metropolitan area. Mr. Wallace holds a Bachelor of Science
degree in Commerce from University of Virginia.
James S. Williams, 40, has been a Senior Vice President of Carr Development
& Construction, Inc. with responsibility for oversight of all project
management, design and construction operations since October 1996. Mr. Williams
rejoined the Company after 2 years as Vice President of Operations of Obadwick
International. Mr. Williams' initial tenure with the Company was from 1983 to
1994, during which time he served in a variety of capacities in OCCO's
development business. Prior to that, Mr. Williams was employed by Holland &
Lyons where he worked in project management of commercial and residential real
estate development. Mr. Williams is a guest lecturer at George Washington
University. Mr. Williams holds a Bachelor of Science degree in Business
Administration from West Virginia University.
Item 2. Properties
General. As of December 31, 1996, the Company owned interests in 165 operating
office properties consisting of whole or partial ownership interests, ranging
from two to sixteen stories each, located in eleven target markets across the
United States. As of December 31, 1996, the Company owned fee simple title or
leasehold interest in 156 operating office properties, controlling partial
interests in three operating office properties, and non-controlling partial
interests of 2% to 50% in six operating office properties. In addition, as of
December 31, 1996, the Company owned four office properties under development
and a 50% interest in one additional office property development project. Except
as disclosed in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources," the
Company has no immediate plans to renovate its operating office properties other
than for routine capital maintenance. The Company believes its properties are
adequately covered by insurance. The Company believes that, as a result of its
national operating system, market research capabilities, access to capital, and
experience as an owner, operator and developer of real estate, it will continue
to be able to identify and consummate acquisition opportunities and to operate
its portfolio more effectively than competitors without such capabilities. The
Company, however, competes in many of its target markets with other real estate
operators, some of whom may have been active in such markets for a longer period
than the Company.
<PAGE>
The following table sets forth certain related information about each
operating property owned by the Company as of December 31, 1996:
<TABLE>
<CAPTION>
Total
Net Annualized Average
Company's Rentable Base Base Rent
Effective Area Rent(3) Per Leased
Property (square Percent (in Square
Property Ownership feet)(1) Leased(2) thousands) Foot(4) Significant Tenants(5)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Properties
SOUTHEAST REGION
Downtown Washington, D.C.:
International Square (3 Properties) 100.0% 1,017,511 91.7% $ 30,802 $33.00 International Monetary Fund (42%)
1730 Pennsylvania Avenue 100.0 229,461 97.6 8,538 38.12 Federal Deposit Insurance
Corporation (52%) King & Spalding (26%)
2550 M Street 100.0 187,931 100.0 5,838 31.06 Patton, Boggs (86%)
1775 Pennsylvania Avenue(6) 100.0 143,981 99.1 3,120 21.87 Citibank F.S.B.(81%)
900 19th Street 100.0 100,804 75.6 2,194 28.79 America's Community Bankers (29%),
Lucent Technologies (11%)
1747 Pennsylvania Avenue 89.7(7) 152,314 76.6 3,522 30.17 Legg Mason Wood Walker (16%)
1255 23rd Street 75.0(8) 303,930 88.4 7,356 27.40 Chronicle of Higher Education
(16%), Seabury & Smith (16%)
2445 M Street 74.0(7) 266,902 90.1 6,858 28.51 Wilmer, Cutler & Pickering (77%)
Suburban Washington, D.C.:
One Rock Spring Plaza(6) 100.0 205,298 95.9 4,349 22.10 Sybase (27%), Caterair (22%)
Tycon Courthouse 100.0 416,099 99.0 8,094 19.66 Siemens Rolm (19%), GSA-FINCEN
(16%), Vie de France (11%)
Three Ballston Plaza 100.0 302,797 100.0 6,979 23.05 CACI (50%), Eastman Kodak (20%)
Reston Quadrangle (3 Properties) 100.0 260,643 99.9 5,447 20.93 Software AG (67%), Lucas (14%),
LaFarge Corporation (11%)
Parkway One 100.0 87,842 100.0 1,358 15.46 EIS International (87%)
Suburban Atlanta:
Veridian (22 Properties) 100.0 187,842 96.0 2,255 12.50 GE Capital Corporation (32%)
Glenridge 100.0 64,431 96.0 909 14.69 Industrial Computer Corp. (37%),
Crawford & Co. (27%)
Century Springs West 100.0 94,765 95.3 1,321 14.63 Retirement Care Associates (27%)
Holcomb Place 100.0 72,991 100.0 1,097 15.03 Prudential (24%), Intercept
Holdings, Inc. (13%), The Progeni
Corp. (13%)
DeKalb Tech (5 properties) 100.0 163,159 86.9 1,239 8.73 Lucent Technologies (21%),
Moreland & Altobelli (20%)
Midori 100.0 99,864 96.1 1,718 17.91 OHM Remediation Services Corp.
(30%), UPS (21%), NCR (14%)
Crestwood 100.0 88,186 100.0 1,444 16.38 EBC Gwinnet Enterprises (23%),
Everready Battery Co. (12%)
Parkwood 100.0 151,020 89.5 2,486 18.40 Columbian Chemicals Company (30%)
Lakewood 100.0 80,338 98.2 1,117 14.16 Paychex (25%), ISS (25%), Hickson
Corp. (23%), Morrison's (17%)
The Summit 100.0 178,382 100.0 2,206 12.37 Unisys Corp. (73%), GE Claims
Service (14%), Construction Market
Data, Inc. (13%)
Spalding Triangle II (3 Properties) 100.0 82,102 97.6 1,074 13.41 OHM Remediation Services Corp.
(28%), UNI Distribution Corp. (18%),
Wakefield/Beasley & Associates (16%)
South Florida:
Lake Wyman Plaza 100.0 159,921 97.1 2,036 13.11 Motorola (15%)
--------- ---- -------- -----
Southeast Region Subtotal 5,098,514 94.3 113,357 23.57
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Total
Net Annualized Average
Company's Rentable Base Base Rent
Effective Area Rent(3) Per Leased
Property (square Percent (in Square
Property Ownership feet)(1) Leased(2) thousands) Foot(4) Significant Tenants(5)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC REGION
Southern California:
Scenic Business Park (4 Properties) 100.0 137,436 89.7 1,329 10.78 FHP (51%), So. Cal Blood & Tissue (12%)
Harbor Corporate Park (4 Properties) 100.0 147,304 53.6 1,033 13.06 Texaco Refining & Marketing (12%)
Plaza PacifiCare 100.0 104,377 100.0 960 9.20 Pacificare Health Systems (100%)
Katella Corporate Center 100.0 79,917 92.7 1,169 15.78 Friendly Hills Healthcare (19%),
Harris & Assoc (11%)
Warner Center (12 Properties) 100.0 342,056 94.5 7,444 23.03 El Camino Resources (18%), General
Services Administration (16%)
Del Mar Corporate Plaza
(2 Properties) 100.0 123,142 100.0 1,756 14.26 Peregrine Systems, Inc. (77%),
Newgen Results Company (23%)
South Coast Executive Center
(2 Properties) 100.0 161,778 95.3 3,009 19.52 State Compensation Insurance Fund (32%)
Northern California:
AT&T Center (6 Properties) 100.0 949,281 100.0 18,153 19.12 AT&T (54%), PeopleSoft (20%)
Sunnyvale Research Plaza
(3 Properties) 100.0 126,000 100.0 1,629 12.93 AEA Credit Union (63%), Cadence
Design Systems (31%)
Rio Robles (7 Properties) 100.0 368,178 100.0 4,065 11.04 Fujitsu (41%), KLA Instruments (31%),
NEC Systems Laboratory (23%)
San Jose Orchard Business Park - B
(6 Properties) 100.0 166,928 100.0 1,653 9.90 Pericom (16%), Delta Assembly (11%)
Orchard Bayshore Center
(2 Properties) 100.0 195,249 100.0 2,643 13.53 Clarify, Inc. (51%), Alantec (49%)
Orchard Rincon Centre (3 Properties) 100.0 201,178 100.0 1,885 9.37 Ontrak Systems (44%), Toshiba
America Electronic (38%),
Future Electronics (19%)
Orchard Office Centre II
(4 Properties) 100.0 212,082 62.4 1,293 9.78 Boston Scientific (38%), Clarify, Inc. (18%)
Orchard Office Centre (2 Properties) 100.0 68,725 100.0 1,406 20.46 Bank of America (21%), Quadrep (20%)
Orchard Centre (2 Properties) 100.0 102,291 100.0 979 9.57 Seagate Technology (40%),
Gregory Associates (38%),
Winbond Electronics (22%)
San Jose Orchard Business Park - A
(2 Properties) 100.0 67,784 100.0 630 9.30 Leybold-Heraeus (35%), Tylan
General (17%), Arcom Electronics (15%)
Suburban Seattle:
Redmond East (10 Properties) 100.0 398,777 99.9 4,572 11.48 Digital Systems (21%), INCONTROL
(16%), IBM (15%), Genetic Systems (14%),
Trigon Packaging (10%)
-------- ---- -------- ------
Pacific Region Subtotal 3,952,483 95.1 55,608 14.80
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Total
Net Annualized Average
Company's Rentable Base Base Rent
Effective Area Rent(3) Per Leased
Property (square Percent (in Square
Property Ownership feet)(1) Leased(2) thousands) Foot(4) Significant Tenants(5)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CENTRAL REGION
Austin, Texas:
Norwood Tower 100.0 111,440 86.3 849 8.83 City of Austin (21%), George,
Donaldson & Ford (20%)
Littlefield Complex (2 Properties)(6) 100.0 126,622 52.4 765 11.55 Excel Fitness (12%)
First State Bank Tower 100.0 258,113 74.3 1,954 10.19 Southern Union Gas Company (12%),
First State Bank (10%)
Great Hills Plaza 100.0 135,335 100.0 1,930 14.26 First USA Management, Inc. (48%),
Blue Cross (24%), Skjerven Morrill,
Machpherson (13%), Executive Suites (11%)
Balcones Center 100.0 75,761 83.5 904 14.29 Medianet (37%), Austin Diagnostic
Clinic (15%), Daughters of Charity
Health (11%)
Park North (2 Properties) 100.0 132,935 98.7 2,112 16.10 Austin Regional Clinic (22%),
Samsung Austin Semiconductor (13%)
The Settings (3 Properties) 100.0 136,183 95.3 2,148 16.55 Holt, Rinehart & Winston (76%),
Barter Exchange (13%)
Suburban Chicago:
Parkway North (2 Properties) 100.0 508,488 96.0 8,112 16.62 Fujisawa USA (27%), Alliant
Foodservice, Inc. (21%),
Clintec Nutrition (16%),
Baxter Healthcare Corporation (13%)
Unisys (2 Properties) 100.0 365,193 91.4 5,583 16.72 Unisys (21%), PNC Mortgage (15%),
Sears Logistical (14%)
Dallas, Texas:
Greyhound 100.0 92,890 100.0 845 9.10 Greyhound Lines (100%)
Search Plaza 100.0 151,057 90.9 2,010 14.64 Basic Capital Management (29%)
--------- ----- -------- ------
Central Region Subtotal 2,094,017 89.1 27,212 14.58
--------- ----- -------- ------
MOUNTAIN REGION
Southeast Denver:
Harlequin Plaza (2 Properties) 100.0 324,340 95.8 4,020 12.94 Bellco First Federal Credit Union(12%)
Quebec Court I & II (2 Properties) 100.0 285,829 100.0 2,878 10.07 Intelligent Electronics (45%),
Alert Centre (37%), TCI Digital
Satellite (17%)
The Quorum (2 Properties) 100.0 123,876 78.2 1,335 13.78 Chatfield Dean (21%), Colorado
Mortgage Prof. (15%)
Greenwood Center 100.0 74,853 94.1 1,074 15.24 General Motors Corp. (33%),
Wakefield & Assoc. (13%)
Quebec Center (3 Properties) 100.0 104,367 92.5 1,232 12.76 Gordon Gumeeson & Associates
(12%), Walberg & Dagner (12%)
Phoenix, Arizona:
Camelback Lakes (2 Properties) 100.0 200,453 88.0 2,863 16.24 Vanguard Group (38%), Humana
Health Plan (11%)
Pointe Corridor IV 100.0 171,705 96.5 2,597 15.68 Jostens Learning Corp (27%), Aetna Life
--------- ---- -------- ------
Insurance Company (23%), Jennifer
Loomis Associates, Inc. (16%)
Mountain Region Subtotal 1,285,423 93.5 15,999 13.31
--------- ---- -------- ------
TOTAL CONSOLIDATED PROPERTIES: 12,430,437 $212,176
========== ========
WEIGHTED AVERAGE 93.6% $18.24
===== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Total
Net Annualized Average
Company's Rentable Base Base Rent
Effective Area Rent(3) Per Leased
Property (square Percent (in Square
Property Ownership feet)(1) Leased(2) thousands) Foot(4) Significant Tenants(5)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unconsolidated Properties
Downtown Washington, D.C.:
AARP Headquarters 24.0(9) 477,187 99.1 16,691 35.30 American Association of Retired
Persons (98%)
Bond Building 15.0(10) 162,097 100.0 4,714 29.08 General Services Administration -
Dept of Justice (93%)
1776 Eye Street 5.0(11) 212,774 92.3 6,972 35.52 Putnam, Hayes & Bartlett (17%),
Smith Barney (11%), Nuclear Management &
Resources Council (11%), United States
Council for Energy Awareness (11%)
Willard Office/Hotel 5.0(12) 242,787 91.9 8,368 37.52 Vinson & Elkins (27%), Hale & Dorr(15%)
1575 Eye Street 2.0(11) 205,441 52.8 2,796 25.78 American Society of Association
Executives (20%)
Suburban Washington, D.C.:
Booz-Allen & Hamilton Building 50.0(13) 222,989 100.0 3,211 14.40 Booz Allen & Hamilton (100%)
---------- ----- -------- ------
TOTAL UNCONSOLIDATED PROPERTIES: 1,523,275 $ 42,752
---------- --------
WEIGHTED AVERAGE 91.0% $30.85
----- ------
All Operating Properties
TOTAL: 13,953,712 $254,928
========== ========
WEIGHTED AVERAGE 93.3% $19.58
===== ======
</TABLE>
(1) Includes office and retail space but excludes storage space.
(2) Includes space for leases that have been executed and have commenced as of
December 31, 1996.
(3) Total annualized base rent is based on executed and commenced leases as of
December 31, 1996. Total annualized base rent equals total original base
rent, including historical contractual increases and excluding (i)
percentage rents, (ii) additional rent payable by tenants such as common
area maintenance, real estate taxes and other expense reimbursements, (iii)
future contractual or contingent rent escalations, and (iv) parking rents.
(4) Calculated as total annualized base rent divided by net rentable area leased
as of December 31, 1996.
(5) Includes tenants leasing 10% or more of rentable square footage (with the
percentage of rentable square footage in parentheses).
(6) The Company owns the improvements on the property and has a leasehold
interest in all or a portion of the underlying land.
(7) The Company holds a general and limited partner interest in a partnership
that owns the property.
(8) The Company holds a 50% joint venture interest in the joint venture that
owns this property and a 50% joint venture interest in another joint
venture, which holds the remaining 50% interest in the joint venture that
owns the property. As a result of preferential rights to annual
distributions from another venture, the Company will receive distributions
of less than 75% (but in no event less than 50%) of the total amount
distributed with respect to this property in each year until the
preferential distribution requirements are satisfied, but will receive 100%
of any subsequent distributions during the year until its aggregate
distributions equal 75% of the cumulative distributions with respect to the
property since inception of the partnership. Thereafter, the Company will
receive 75% of the distributions made during the year with respect to the
property. Upon sale of the property, the Company will receive 75% of the
distributions until the Company receives its preference amount, 50% until
the remaining venturer receives its preference amount, and 75% of the
distributions thereafter.
(9) The Company holds an effective 24% interest in the property by virtue of a
48% general partner interest in a partnership that owns a 50% general
partner interest in the property.
(10)The Company holds an effective 15% interest in the property by virtue of a
30.6% limited partner interest in a partnership that has a 49% limited
partner interest in the property.
(11)The Company holds a limited partner interest in the partnership that owns
the property.
(12)The Company holds an effective 5% interest in the property by virtue of a
7.85% limited partner interest in a partnership that owns a 63.7% limited
partner interest in the property. The partnership in which the Company holds
an interest owns the improvements on the property and has a leasehold
interest in the underlying land.
(13)The Company holds a 50% joint venture interest, and is the managing
partner.
<PAGE>
Occupancy, Average Rentals and Lease Expirations. As of December 31, 1996, 93.6%
of the aggregate net rentable square footage in the 159 operating office
properties whose results are consolidated in the financial statements of the
Company was leased. The following table sets forth the percent leased and
average annualized rent per leased square foot (excluding storage space) for
office and retail space combined for the past five years for the operating
office properties that were consolidated for financial statement purposes in
each of the years indicated:
Average
Percent Annualized Rent Number of
Leased at Per Leased Consolidated
Year Year End Square Foot(1) Properties
- --------------------------------------------------------------------------
1996 93.6% $19.37 159
1995 93.5 27.36 13
1994 95.9 32.48 11
1993 95.5 34.35 9
1992 97.5 33.68 9
(1)Calculated as total annualized building operating revenue, including tenant
reimbursements for operating expenses and excluding parking and storage
revenue, divided by the total square feet, excluding storage, in the building
under lease at year-end.
The following table sets forth a schedule of the lease expirations for
leases in place as of December 31, 1996 for each of the ten years beginning with
1997 and thereafter for the 159 operating office properties whose results are
consolidated in the financial statements of the Company, assuming that no
tenants exercise renewal options:
<TABLE>
<CAPTION>
Net Annual Percent of
Rentable Area Base Rent Total Annual
Number of Subject to Under Expiring Base Rent
Tenants With Expiring Leases Leases (1) Represented by
Year of Lease Expiration Expiring Leases (square feet) (in thousands) Expiring Leases
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
1997 225 1,507,806 $24,115 11.4%
1998 199 2,176,065 42,294 19.9
1999 191 1,315,594 21,750 10.2
2000 106 1,548,089 26,194 12.3
2001 113 1,300,355 20,419 9.6
2002 40 950,265 20,367 9.6
2003 26 794,845 12,891 6.1
2004 22 379,395 7,770 3.7
2005 19 449,511 8,621 4.1
2006 21 540,756 14,152 6.7
2007 and thereafter 14 671,926 13,603 6.4
(1) Excludes reimbursements from tenants for operating expenses.
</TABLE>
<PAGE>
Building and Lease Information. The following table sets forth certain
lease-related information for the 159 operating office properties that were
consolidated for financial statement purposes regarding leases that commenced
during the year ended December 31, 1996, excluding leases for office properties
that were executed prior to the date of acquisition of such properties:
<TABLE>
<CAPTION>
Downtown Washington, D.C. Calculated on a Weighted Average Basis
-------------------------------------------------------------------------------------------
(10 Properties) Tenant
Total Improvements and Leasing
Type of Square Feet Cash Allowances Base Rent Lease Life Abatements Commission
Lease Leased per Square Foot per Square Foot in Years in Months Per Square Foot
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Office 207,638 $13.37 $27.29 7.8 2.6 $6.16
Retail 5,478 1.83 29.57 5.1 2.1 5.66
---------
Total 213,116 13.07 27.35 7.7 2.6 6.15
========= ====== ====== ==== === ====
New leases or expansion space 150,609 $17.17 $26.66 8.6 3.5 $6.69
Renewals of existing tenants' space 62,507 3.19 29.01 5.6 0.5 4.86
---------
Total 213,116 13.07 27.35 7.7 2.6 6.15
========= ====== ====== ==== === =====
</TABLE>
<TABLE>
<CAPTION>
All Other Operating Properties Calculated on a Weighted Average Basis
------------------------------------------------------------------------------------------
(149 Properties) Tenant
Total Improvements and Leasing
Type of Square Feet Cash Allowances Base Rent Lease Life Abatements Commission
Lease Leased per Square Foot per Square Foot in Years in Months Per Square Foot
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Office 1,384,713 $ 5.74 $18.06 5.7 0.2 $1.83
Retail 5,513 0.00 8.50 10.0 0.0 3.07
---------
Total 1,390,226 5.72 18.02 5.7 0.2 1.84
========= ====== ====== ==== === =====
New leases or expansion space 327,405 $ 6.64 $15.61 5.4 0.8 $1.80
Renewals of existing tenants' space 1,062,821 5.43 18.76 5.8 0.0 1.85
---------
Total 1,390,226 5.72 18.02 5.7 0.2 1.84
========= ====== ====== ==== === =====
</TABLE>
<PAGE>
Mortgage Financing. As of December 31, 1996, the 159 operating office
properties that were consolidated for financial statement purposes were subject
to existing mortgage indebtedness in an aggregate principal amount of $440.4
million, and unsecured indebtedness of $215.0 million, which bears a floating
interest rate. The Company's fixed rate debt bears an effective weighted average
interest rate of 8.1% and a weighted average maturity of 5.8 years (assuming
loans callable before maturity are called as early as possible). The existing
mortgage indebtedness for the consolidated operating office properties is set
forth in the table below:
<TABLE>
<CAPTION>
Principal Estimated
Balance Annual Balance Due
nterest as of 12/31/96 Debt Service Maturity at Maturity
Property Rate (in thousands) (in thousands) Date (in thousands)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
International Square
1850 K Street
1825 Eye Street 8.80% $93,500 $8,228 2/1/03 $87,164(4)
1875 Eye Street
1730 Pennsylvania Avenue
1255 23rd Street 7.75 40,000 3,100 2/1/03 36,981(4)
International Square Land 7.55 40,000 3,020 2/1/03 36,781(4)
International Square Land 8.00 10,000 800 2/1/03 9,243(4)
900 19th Street 8.25 16,957 1,656 7/15/19(1) (1)
1747 Pennsylvania Avenue 9.50 15,613 1,730 7/10/17(2) (2)
2445 M Street 8.90 38,188 4,646 6/1/02 26,925(5)
1775 Pennsylvania Avenue 7.50 6,350 586 2/1/99 6,098(5)
Redmond East 8.38 28,036 2,648 1/1/06 24,022(6)
Warner Center 7.40 26,000 1,924 12/1/00 26,000(5)
First State Bank Tower 7.38 9,630 868 3/1/99 9,259(5)
Parkway North I 7.96 29,250 2,328 12/1/03 29,250(8)
San Jose Orchard Business Park - A
Orchard Office Center
Orchard Center II 8.25 40,850 4,655 12/10/01 37,873(5)
Orchard Rincon Center
Orchard Bayshore Center
Century Springs West
Glenridge
Crestwood 7.20 22,022 2,126 1/1/06 15,209(7)
Lakewood
Parkwood
Pointe Corridor IV 5.50 13,731 (3) 1/3/97 13,731(3)
South Coast Executive Center 9.01 10,322 1,015 5/31/99 10,103(5)
</TABLE>
(1) Note is callable by the lender after July 1, 2004. The estimated principal
balance at July 1, 2004 will be $14,262,000.
(2) Note is callable by the lender after June 30, 2002. The estimated principal
balance at June 30, 2002 will be $13,840,000.
(3) Principal balance was repaid in full in January 1997.
(4) Prepayable after November 1, 1997 at the rates stated in the loan documents.
(5) Currently prepayable at the rates stated in the loan documents.
(6) Prepayable after December 19, 2005 at the rates stated in the loan
documents.
(7) Prepayable after January 2001 at the rates stated in the loan documents.
(8) Prepayable after December 1, 1999 at the rates stated in the loan documents.
<PAGE>
Additional Property Information. Because the aggregate book value of the
three properties that constitute International Square is in excess of 10% of the
Company's total assets as of December 31, 1996, additional information regarding
this property is provided below.
International Square was developed in three phases that were completed in
1977, 1979 and 1982. The complex occupies three-quarters of a city block
bordered by K, 18th, 19th and Eye Streets, N.W., directly above Farragut West,
one of Washington, D.C.'s busiest Metro stations. The Metro level of
International Square offers a 600-seat food court, with more than a dozen
carry-out food establishments, serving a variety of international foods. The
street level of International Square contains more than 20 retail stores,
including a book store, a travel agency, clothing stores, and restaurants. A
two-level underground parking garage contains approximately 725 parking spaces.
The Company has no immediate plans to renovate International Square other than
for routine capital maintenance and believes the property is adequately covered
by insurance.
As of December 31, 1996, approximately 91.7% of the rentable square footage
in the three buildings constituting International Square was leased. The
following table sets forth the percent leased and average annualized rent per
leased square foot (excluding storage space) for the past five years for
International Square:
Average
Percent Annualized Rent
Leased at Per Leased
Year Year End Square Foot(1)
- --------------------------------------------------------------------------------
1996 91.7% $33.73
1995 89.9 34.18
1994 96.1 33.36
1993 95.5 33.32
1992 95.9 34.08
(1) Calculated as total building operating revenue, including tenant
reimbursements for operating expenses and excluding parking and storage
revenue, divided by the total square feet in the building, excluding
storage, under lease at year-end.
At December 31, 1996, the International Monetary Fund ("IMF"), an
intergovernmental financial agency, occupied 432,310 square feet in
International Square under direct leases with the Company that expire during
1998 and 2002. The IMF is currently constructing an office building in
Washington, D.C. which should be completed by 1998, and the IMF may move some of
its employees currently in International Square to their new building. The
Company has had discussions with the IMF and they have indicated that they may
reduce their office space requirements in International Square by approximately
133,000 square feet by the year 2000; however, there can be no assurances that
the IMF will not vacate more space than 133,000 square feet.
Three tenants in 1850 K Street, Phase I of the project, occupy over 10% of
the rentable square footage. As of December 31, 1996, the IMF occupied 94,258
square feet (25% of the rentable square footage) pursuant to a lease which
expires January 15, 1998. The IMF has an option to renew the lease on 39,270
square feet for two consecutive five-year periods and an option to renew the
lease on 12,456 square feet for consecutive terms of two and a half years and
five years. The law firm of McDermott, Will & Emery occupies 62,975 square feet
(17% of the rentable square footage) pursuant to a lease which expires on
December 31, 1997. McDermott, Will & Emery has notified the Company that it
plans to vacate its space on September 30, 1997. Merrill Lynch occupies 51,232
square feet (14% of the rentable square footage) pursuant to a lease that
expires on December 31, 2008, with an option to renew for two five-year terms.
The IMF is the only tenant occupying more than 10% of the rentable square
footage in 1825 Eye Street, Phase II of the project, occupying 63% of the
rentable square footage in that building as of December 31, 1996. Its leases,
which expire on various dates from January 15, 1998 to August 1, 2002, cover
234,153 square feet. The lease that expires as of January 15, 1998 contains an
option to renew the lease on 74,269 square feet for two consecutive five-year
terms. The lease that expires on August 1, 2002 contains an option to renew the
lease on 96,013 square feet for an additional five-year term.
<PAGE>
The IMF is the only tenant in 1875 Eye Street, Phase III of the project,
occupying more than 10% of the rentable square footage. The IMF occupies 103,899
square feet (39% of the rentable square footage) pursuant to three leases which
expire on July 31, 2002 and provide renewal options on the entire space for two
five-year terms.
The following table sets out a schedule of the lease expirations for
International Square for each of the ten years beginning with 1997 and
thereafter:
<TABLE>
<CAPTION>
Net Annual Percent of
Rentable Area Base Rent Total Annual
Number of Subject to Under Expiring Base Rent
Tenants With Expiring Leases Leases (1) Represented by
Year of Lease Expiration Expiring Leases (square feet) (in thousands) Expiring Leases
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 16 150,907 $ 4,899 15.9%
1998 8 365,896 12,685 41.2
1999 21 121,321 3,945 12.8
2000 1 26,162 827 2.7
2001 4 6,466 234 0.8
2002 12 191,680 6,079 19.7
2003 2 12,477 395 1.3
2004 4 8,509 273 0.9
2005 5 24,990 798 2.6
2006 3 11,736 379 1.2
2007 and thereafter 1 13,207 288 0.9
(1) Excludes operating expense recoveries.
</TABLE>
The aggregate tax basis of depreciable real property of the office
properties constituting International Square for Federal income tax purposes is
$149,350,000 as of December 31, 1996. Depreciation and amortization are computed
on the Modified Accelerated Cost Recovery System (MACRS), Accelerated Cost
Recovery System (ACRS), declining balance or straight-line methods over the
estimated useful lives of the real property which range from 15 to 50 years. The
aggregate tax basis for depreciable personal property associated with these
office properties for Federal income tax purposes is $1,010,000 as of December
31, 1996. Depreciation and amortization are computed on the double declining
balance method or straight-line method over the estimated useful life of the
personal property of 5 to 7 years.
The current realty tax rate for International Square is $2.15 per $100 of
assessed value. The total annual tax at this rate for 1997 is $3,561,000 at an
assessed value of $165,640,000.
For additional information regarding the Company's office properties and
their operation, see "Item 1, Business."
Item 3. Legal Proceedings
The Company is a party to a variety of legal proceedings arising in the ordinary
course of its business. All of these matters, taken together, are not expected
to have a material adverse impact on the Company.
Item 4. Submission of Matters to a
Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity & Related Stockholder Matters
The Company's common stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "CRE". The Company's common stock was listed on the NYSE
beginning on February 9, 1993. As of February 28, 1997, there were 423
stockholders of record. The following table sets forth the high and low sale
prices of the Company's common stock as reported in the NYSE Composite Tape, and
the dividends per share of common stock paid:
1996 1Q 2Q 3Q 4Q Full Year
- --------------------------------------------------------------------------------
High $ 25 25 1/4 25 7/8 29 1/2 29 1/2
Low $ 23 5/8 23 5/8 21 7/8 24 7/8 21 7/8
Dividend $.4375 .4375 .4375 .4375 1.75
1995
- --------------------------------------------------------------------------------
High $ 18 1/4 19 3/4 19 3/4 24 5/8 24 5/8
Low $ 17 1/8 16 3/4 17 1/4 18 1/2 16 3/4
Dividend $.4375 .4375 .4375 .4375 1.75
On April 30, 1996, the Company sold 11,627,907 shares of its common stock
directly to USRealty. These shares were not registered under the Securities Act
of 1933, as amended (the "Securities Act") in reliance on Section 4(2) of the
Securities Act based on the fact that USRealty is a single, sophisticated
investor.
On July 24, 1996, the Company sold 2,785,714 shares of its common stock
directly to USRealty, which shares were not registered under the Securities Act.
These shares were sold in connection with a public offering by the Company of
6,500,000 shares of common stock, of which USRealty bought 400,000 shares of
common stock. The 2,785,714 shares were sold at the public offering price of
$22.00 per share in reliance on Section 4(2) of the Securities Act based on the
fact that USRealty is a single, sophisticated investor with a previous
investment relationship with the Company. No underwriting discount was applied
to any shares purchased by USRealty directly from the Company or in the public
offering.
The Company, in order to qualify as a REIT, is required to make
distributions (other than capital gain distributions) to its stockholders in
amounts at least equal to (i) the sum of (A) 95% of its "REIT taxable income"
(computed without regard to the dividends paid deduction and its net capital
gain) and (B) 95% of the net income (after tax), if any, from foreclosure
property, minus (ii) the sum of certain items of non-cash income. The Company's
distribution strategy is to distribute what it believes is a conservative
percentage of its cash flow permitting the Company to retain funds for capital
improvements and other investments while funding its distributions.
For Federal income tax purposes, distributions may consist of ordinary
income, capital gains, nontaxable return of capital or a combination thereof.
Distributions that exceed the Company's current and accumulated earnings and
profits (calculated for tax purposes) constitute a return of capital rather than
a dividend and reduce the stockholder's basis in his or her shares of common
stock. To the extent that a distribution exceeds both current and accumulated
earnings and profits and the stockholder's basis in his or her shares, it will
generally be treated as gain from the sale or exchange of that stockholder's
shares. The Company annually notifies stockholders of the taxability of
distributions paid during the preceding year. The following table sets forth the
taxability of distributions paid in 1996, 1995, and 1994:
1996 1995 1994
- --------------------------------------------------------------------------------
Ordinary income 95% 85% 75%
Capital Gain -- -- --
Return of Capital 5% 15% 25%
Item 6. Selected Financial Data
The following table sets forth selected financial and operating information for
the Company as of December 31, 1996, 1995, 1994 and 1993 and for the years ended
December 31, 1996, 1995 and 1994 and the period from February 16, 1993
(commencement of operations) to December 31, 1993. The following table also sets
forth selected financial and operating information for the Carr Group, the
predecessor entity to the Company, as of and for the year ended December 31,
1992, and for the period from January 1, 1993 to February 15, 1993.
<PAGE>
The following selected financial and operating information should be read in
conjunction with "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations," and all of the financial statements and
notes thereto included elsewhere in this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
The Company Carr Group
- ----------------------------------------------------------------------------------------------- ------------------------------
Period from Period from
February 16, 1993 January 1, 1993 Year Ended
Year Ended December 31, to December 31, to February 15, December 31,
- ----------------------------------------------------------------------------------------------- ------------------------------
(In thousands, except per share data) 1996 1995 1994 1993 1993 1992
- ----------------------------------------------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Data:
Real Estate Operating Revenue:
Rental revenue $154,165 89,539 82,665 59,932 8,209 68,341
Real estate service income $ 12,512 11,315 8,890 8,978 1,096 9,995
Net income (loss) $ 24,318(1) 12,067(1) 12,097 (1,464)(2) 1,251 14,181
Dividends paid to common
shareholders $ 42,914 23,344 20,204 10,578 -- --
Per Share Data:
Net income (loss) $ 0.88 0.90 1.06 (0.15) -- --
Dividends paid to common
shareholders $ 1.75 1.75 1.75 1.06 -- --
Weighted average shares outstanding 31,999 13,338 11,387 10,000 -- --
used to calculate net income
(loss) per share
</TABLE>
<TABLE>
<CAPTION>
The Company Carr Group
As of December 31, As of December 31,
- ----------------------------------------------------------------------------------------------- ------------------------------
(In thousands) 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Real estate, before
accumulated depreciation $1,475,998 480,589 429,537 286,764 202,988
Total assets $1,536,564 458,860 407,948 284,633 180,370
Mortgages and notes payable $ 655,449 317,374 254,933 185,827 201,024
Minority interest $ 50,597 34,850 38,644 25,373 --
Total stockholders' equity $ 787,478 95,543 106,042 59,590 --
Total common shares outstanding 43,789 13,409 13,248 10,000 --
</TABLE>
<TABLE>
<CAPTION>
The Company Carr Group
- ----------------------------------------------------------------------------------------------- ------------------------------
Period from Period from
February 16, 1993 January 1, 1993 Year Ended
Year Ended December 31, to December 31, to February 15, December 31,
- ----------------------------------------------------------------------------------------------- ---------------------------------
(In thousands) 1996 1995 1994 1993 1993 1992
- ----------------------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Other Data:
Net cash provided (used)
by operating activities $ 82,300 35,277 29,908 (663) (1,286) 11,072
Net cash used by investing
activities $(876,947) (81,635) (67,046) (85,363) (1,015) (9,684)
Net cash provided (used)
by financing activities $ 813,067 37,113 32,652 108,974 (4,391) (906)
Funds from operations before
minority interest of the
Unitholders(3) $ 64,496(5) 33,190(5) 30,640 14,286(4) 2,421 22,890
</TABLE>
(1) Net income includes a non-recurring deduction of approximately $2.3 and $1.9
million in 1996 and 1995, respectively, related to the write-off of
unamortized purchase price of certain third party real estate service
contracts that were terminated in 1996 and the termination of an agreement
to acquire the development business of The Evans Company in 1995,
respectively.
(2) Net loss includes a deduction for reorganization costs of $9.6 million and
an extraordinary loss on early extinguishment of debt of $5.6 million,
respectively.
(3) 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
National Association of Real Estate Investment Trust's (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 (or 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 in 1994 and 1993 and the Carr
Group's funds from operations in 1993 and 1992 have been restated to conform
to the new NAREIT definition of funds from operations. Funds from operations
does not represent net income or cash flow 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.
(4) Net income used to calculate funds from operations includes a deduction of
approximately $9.6 million related to reorganization costs associated with
the formation of the Company.
(5) Net income used to calculate funds from operations includes a non-recurring
deduction of approximately $2.3 and $1.9 million in 1996 and 1995,
respectively, related to the write-off of unamortized purchase price of
certain third party real estate service contracts that were terminated in
1996 and the termination of an agreement to acquire the development business
of The Evans Company in 1995, respectively.
<PAGE>
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion is based primarily on the Consolidated Financial
Statements of CarrAmerica Realty Corporation and its subsidiaries as of December
31, 1996, 1995 and 1994.
This information should be read in conjunction with the accompanying
financial statements and notes thereto. These financial statements include all
adjustments which are, in the opinion of management, necessary to reflect a fair
statement of the periods presented, and all such adjustments are of a normal,
recurring nature.
RESULTS OF OPERATIONS--1996 TO 1995
Real Estate Operating Revenue. Total real estate operating revenue increased
$65.8 million, or 65.3%, to $166.7 million for 1996 as compared to $100.9
million for 1995. The increase in revenue was primarily attributable to a $64.6
million and a $1.2 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, which contributed approximately $68.2 million
of additional rental revenue in 1996. Rental revenue from properties that were
fully operating throughout both years decreased by approximately $3.6 million
due to increased vacancies experienced in those properties. Real estate service
revenue increased by $1.2 million, or 10.6% for 1996 to $12.5 million as
compared to $11.3 million for 1995. The increase was 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 $54.4 million for 1996, or 65.8%, to $137.1 million as compared to
$82.7 million for 1995. The net increase in operating expenses was attributable
to a $20.3 million increase in property operating expenses, a $9.8 million
increase in interest expense, a $4.5 million increase in general and
administrative expenses, and a $19.8 million increase in depreciation and
amortization. The increase in property operating expenses was primarily
attributable to $20.2 million in operating expenses associated with property
acquisitions. Exclusive of operating expenses attributable to new property
acquisitions, property operating expenses increased by $.1 million for 1996. The
increase in the Company's interest expense is primarily related to borrowings
for acquisitions. The increase in general and administrative expenses is
predominantly a result of the addition of new staff to implement the Company's
new business strategy, the addition of approximately $1.8 million of expenses
associated with Carr Development & Construction, Inc., and inflation. The
increase in depreciation and amortization was predominately a result of
additional depreciation and amortization on the Company's real estate
acquisitions.
Other Operating Income (Expense). Other operating income (expense) increased
$.8 million for 1996, to ($.1) million as compared to ($.9) million for 1995,
primarily as a result of an increase in interest income and the addition of
equity in earnings of CC-JM II Associates, a joint venture which owns the
Booz-Allen & Hamilton Building. The Company is a 50% venturer in this entity,
which constructed the Booz-Allen & Hamilton Building that was placed in service
in January 1996. The increases in other operating income were partially offset
by an additional loss recognized on the write-off of intangible assets.
Net Income. Net income of $24.3 million was earned for 1996 as compared to
$12.1 million during 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 $47.0
million, or 133.3%, to $82.3 million for 1996 as compared to $35.3 million for
1995, primarily as a result of the acquisitions made by the Company. Net cash
used by investing activities increased $795.3 million, to $876.9 million for
1996 as compared to $81.6 million for 1995, primarily as a result of capital
deployed by the Company for acquisitions of office properties, land held for
future development and construction in progress. Net cash provided by financing
activities increased $776.0 million to $813.1 million provided for 1996 as
compared to $37.1 million provided for 1995, primarily as a result of the sale
of common stock and preferred stock by the Company and net borrowings for the
Company's acquisitions.
RESULTS OF OPERATIONS--1995 TO 1994
Real Estate Operating Revenue. Total real estate operating revenue increased
$9.3 million, or 10.2%, to $100.9 million in 1995 as compared to $91.6 million
in 1994. The increase in revenue was primarily attributable to a $6.9 million
and a $2.4 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 which contributed approximately $8.1 million of
additional rental revenue in 1995. Rental revenue contributed by properties that
were fully operating throughout both periods declined by approximately $1.2
million, or 1.5%. These properties, all of which were located in downtown
Washington, D.C., experienced lower rental revenue in the aggregate during 1995
as a result of (a) lower occupancy rates, (b) the renegotiation of certain
tenants' leases resulting in lower rental rates, and (c) new leases entered into
by the Company at rates lower than the expiring leases' rental rates. The
Company experienced growth in its real estate service income of $1.7 million as
a result of its acquisition of real estate service contracts in 1995. In
addition, real estate service revenues from the Company's core service contracts
increased by $.7 million, or 8.2%, in 1995.
Real Estate Operating Expenses. Total real estate operating expenses
increased $7.7 million, or 10.2%, to $82.7 million as compared to $75.0 million
in 1994. The net increase in operating expenses was attributable to a $1.9
million increase in property operating expenses, a $.5 million increase in
interest expense, a $1.2 million increase in general and administrative
expenses, and a $4.1 million increase in depreciation and amortization. The
increase in property operating expenses was primarily attributable to $2.4
million in operating expenses associated with property acquisitions. Exclusive
of operating expenses attributable to new property acquisitions, property
operating expenses decreased $.5 million, or 1.9%, in 1995 predominately as a
result of lower real estate tax assessments. 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
general and administrative expenses associated with the real estate service
contracts acquired in 1995 and inflation. The increase in depreciation and
amortization is predominately a result of depreciation and amortization on the
Company's real estate and real estate service contract acquisitions.
Other Operating Income (Expense). In January 1996, the Company terminated an
agreement to acquire the development business of The Evans Company and, as a
result, recognized a $1.9 million non-recurring charge to its earnings in the
fourth quarter of 1995. The Company took this action in order to focus on
implementing its national growth strategy.
Net Income. Net income of $12.1 million was earned during 1995 as compared
to $12.1 million during 1994. 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 $5.4
million, or 18.0%, to $35.3 million in 1995 as compared to $29.9 million in
1994, primarily as a result of the acquisitions made by the Company. Net cash
used by investing activities increased $14.6 million, or 21.8%, to $81.6 million
in 1995 as compared to $67.0 million in 1994, primarily as a result of capital
deployed by the Company for acquisitions of office properties and real estate
service contracts. Net cash provided by financing activities increased $4.5
million, or 13.7%, to $37.1 million in 1995 as compared to $32.6 million in
1994, primarily as a result of net borrowings for the Company's acquisitions.
Liquidity and Capital Resources
The Company's total indebtedness at December 31, 1996 was $655.4 million, of
which $215.0 million, or 32.8%, had a LIBOR-based floating interest rate. The
Company's fixed rate indebtedness had an effective weighted average interest
rate of 8.1% and had a weighted average term to maturity of 5.8 years. In
addition to the indebtedness outstanding, the Company had total borrowing
capacity under its unsecured line of credit of $283.0 million allowing the
Company to borrow up to an additional $68.0 million at December 31, 1996. Based
upon the Company's total market capitalization at December 31, 1996 of $2.147
billion (the stock price was $29.25 per share and the total shares/Units
outstanding were 51,008,319), the Company's debt represented 30.52% of its total
market capitalization. On January 28, 1997, the Company obtained a $150 million,
short-term revolving credit facility from Morgan Guaranty Trust Company of New
York, secured by certain of the Company's properties. The Company currently has
$89.0 million of borrowing capacity under this facility, of which, as of March
15, 1997, the Company had drawn $86.0 million. The Company intends to use the
credit facility to finance the acquisitions and development of office properties
and to meet working capital needs.
<PAGE>
The Company will require capital to invest in its existing portfolio of
operating assets for major capital projects such as large-scale renovations,
routine capital expenditures and deferred maintenance on certain properties
recently acquired and tenant related capital expenditures, such as tenant
improvements and allowances and leasing commissions. With respect to major
capital projects, the Company is planning a renovation of a 327,000 square foot
property in southeast Denver during 1997 which will cost $2.0 million, or
approximately $5.00 per square foot. During 1997, the Company is also completing
renovations of several garages in its downtown Washington, D.C. portfolio. The
total remaining cost of the garage renovations will be approximately $1.7
million. With respect to routine capital expenditures and deferred maintenance
on certain properties recently acquired, the Company anticipates spending
approximately $5.8 million, or approximately $0.52 per square foot, during 1997
on its portfolio of operating assets owned as of December 31, 1996. The Company
expects this amount to decrease in subsequent years as deferred maintenance
activities are completed on recently acquired properties and as the emphasis of
the Company's growth shifts from acquiring existing office properties to
developing new properties. The Company's capital requirements for tenant related
capital expenditures are dependent upon a number of factors including square
feet of expiring leases, tenant retention ratios and whether the expiring leases
are in central business district properties or suburban properties. During 1997,
the Company has 256,347 square feet and 1,251,459 square feet of expiring leases
in central business district properties and suburban properties, respectively.
Tenant related capital expenditures (tenant improvements, cash allowances and
leasing commissions) for 1996 were $19.22 per square foot and $7.56 per square
foot for leases executed in 1996 for the Company's central business district
properties and suburban properties, respectively. The Company intends to use
cash flow from operations and its unsecured revolving credit facility to meet
its working capital needs for its existing portfolio of operating assets.
The Company will also require a substantial amount of capital for
development projects currently underway and planned for the future. The Company
currently has six development projects underway which are expected to require a
total investment by the Company of $119.4 million. The Company intends to use
cash flow from operations and its unsecured, revolving credit facility to meet
its working capital needs for its existing portfolio of operating assets.
Net cash flow provided by operating activities was $82.3 million for 1996,
compared to $35.3 million in 1995. The increase in net cash flow provided by
operating activities was primarily as a result of acquisitions made by the
Company.
The Company's investing activities used approximately $876.9 million and
$81.6 million in 1996 and 1995, respectively. The Company's investment
activities included the investment in the acquisition of operating properties,
land and real estate service contracts, as well as meeting the construction
costs of its properties currently under development, of approximately $857.1
million and $71.8 million in 1996 and 1995, respectively. Additionally, the
Company invested approximately $11.5 million and $8.9 million in 1996 and 1995,
respectively, in its existing real estate assets.
Net of distributions to the Company's shareholders, the Company's financing
activities provided net cash of $813.1 million and $37.1 million in 1996 and
1995, respectively. The Company had net borrowings of approximately $215.0
million in 1996 and borrowings of $72.0 million in 1995, to provide adequate
capital for the Company's investing activities. Additionally, in 1996, the
Company raised $708.5 million in net proceeds from the sales of common stock and
preferred stock to provide adequate capital for the Company's investing
activities and to repay certain indebtedness. In 1995, the Company did not raise
any capital from equity offerings.
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 non-recurring 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, building renovations and construction costs, from (i) available funds
from operations, (ii) existing capital reserves, and (iii) if necessary, credit
facilities established with third party lenders. If these sources of funds are
insufficient, the Company's ability to make expected distributions may be
adversely impacted. At December 31, 1996, the Company had cash of $35.9 million,
of which $8.2 million was restricted.
<PAGE>
The Company's dividends are paid quarterly. Amounts accumulated for
distribution are primarily invested by the Company in short-term investments
that are collateralized by securities of the United States Government or any of
its agencies.
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 or debt financings
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, continuing debt service
obligations, the payment of dividends in accordance with REIT requirements in
both the short-term and long-term, and future acquisitions of 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
(or 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 in 1994 have been restated to conform to the new NAREIT
definition of funds from operations. Funds from operations does not represent
net income or cash flow 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 sets forth the calculation of the Company's funds from
operations for 1996, 1995 and 1994:
(In thousands) 1996 1995 1994
- --------------------------------------------------------------------------------
Net income before minority interest $29,534 17,284 17,821
Adjustments to derive funds
from operations:
Add:
Depreciation and amortization 35,888 17,564 14,523
Deduct:
Minority interests (non-Unitholders)
share of depreciation and
amortization and net income (926) (1,658) (1,704)
------- ------ ------
Funds from operations before
allocation to the
minority Unitholders 64,496 33,190 30,640
Less: Funds from operations
allocable to the
minority Unitholders (8,610) (7,876) (8,640)
------- ------ ------
Funds from operations
allocable to CarrAmerica
Realty Corporation $55,886 25,314 22,000
======= ====== ======
Changes in funds from operations are largely attributable to changes in net
income between the periods as previously discussed.
Acquisition and Development Activity
The following is a discussion of the Company's acquisition and development
activity during 1996. A more detailed discussion can be found in "Item 1.
Business -- Recent Developments."
During 1996, the Company acquired the following properties: in its Pacific
region, the Company acquired an aggregate of 73 buildings containing a total of
approximately 4.0 million square feet, for an aggregate purchase price of
approximately $454.3 million; in its Mountain region, the Company acquired an
aggregate of 13 buildings containing a total of approximately 1.3 million square
feet, for an aggregate purchase price of approximately $112.7 million; in its
Central region, the Company acquired an aggregate of 17 buildings containing a
total of approximately 2.1 million square feet, for an aggregate purchase price
of approximately $243.5 million; and in its Southeast region, the Company
acquired an aggregate of 43 buildings containing a total of approximately 1.8
million square feet, for an aggregate purchase price of approximately $178.3
million.
<PAGE>
During 1996, the Company also acquired or purchased options to acquire 142
acres of developable land in four of its target markets: suburban Seattle;
southeast Denver; Austin, Texas; and suburban Chicago. In the aggregate, this
land (including land subject to purchase options) will support development of up
to 3.2 million square feet of office space. In addition, as of December 31,
1996, the Company had three properties under construction: 128,000 square feet
in suburban Atlanta; and an aggregate of 295,000 square feet in southeast Denver
(including a build-to-suit project with 189,000 rentable square feet). Land held
for development was purchased for an aggregate purchase price of $32.3 million.
Costs incurred during 1996 for properties under construction were $31.7 million.
An additional $36.3 million will be expended for completion of projects already
under construction as of December 31, 1996.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data included in this Annual Report
on Form 10-K are listed in Part IV, Item 14(a).
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is hereby incorporated by reference to the
material appearing in Part I of this Annual Report on Form 10-K and in the Proxy
Statement for the Annual Stockholders Meeting to be held in 1997 (the "Proxy
Statement").
Item 11. Executive Compensation
The information required by this item is hereby incorporated by reference to the
material appearing in the Proxy Statement under the caption "Executive
Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is hereby incorporated by reference to the
material appearing in the Proxy Statement under the caption "Voting Securities
and Principal Holders Thereof."
Item 13. Certain Relationships and
Related Transactions
The information required by this item is hereby incorporated by reference to the
material appearing in the Proxy Statement under the caption "Certain
Relationships and Transactions."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
14(a)(1) Financial Statements
Reference is made to the Index to Financial Statements and Schedule
on page F-1.
14(a)(2) Financial Statement Schedule
Reference is made to the Index to Financial Statements and Schedule
on page F-1.
14(a)(3) Exhibits
3.1 Amendment and Restatement of Articles of Incorporation of
CarrAmerica Realty Corporation, as amended on April 29, 1996
and April 30, 1996 (incorporated by reference to the same
numbered exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996 and filed May 15,
1996).
3.2 Second Amendment and Restatement of By-laws of CarrAmerica
Realty Corporation (incorporated by reference to Exhibit 3.1
to the Company's Current Report on Form 8-K dated and filed
February 12, 1997).
3.3 Articles Supplementary of Series A Cumulative Convertible
Redeemable Preferred Stock dated October 24, 1996
(incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1996 and filed on November 5, 1996).
10.1 First Amended and Restated Agreement of Limited Partnership of
CarrAmerica Realty, L.P., dated May 24, 1996, as amended
(incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996 and filed on August 14, 1996).
10.2 Third Amended and Restated Agreement of Limited Partnership of
Carr Realty, L.P., dated March 5, 1996, as amended
(incorporated by reference to Exhibit 3.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1996 and filed on May 15, 1996).
10.3 1993 Carr Realty Option Plan (incorporated by reference to
Exhibit 10.3 of the Company's Registration Statement on Form
S-11, No. 33-53626).
10.4 Non-Employee Director Stock Option Plan (incorporated by
reference to the Company's Registration Statement on Form S-8,
No. 33-92136).
10.5 1997 Stock Option and Incentive Plan.
10.6 Noncompetition and Restriction Agreement by and among The
Oliver Carr Company, Oliver T. Carr, Jr., Carr Realty
Corporation and Carr Realty, L.P. (incorporated by reference
to Exhibit 10.7 of the Company's Registration Statement on
Form S-11, No. 33-53626).
10.7 Promissory Note from Carr Real Estate Services, Inc. to Carr
Realty, L.P. (incorporated by reference to the same titled
exhibit to the Company's Registration Statement on Form S-11,
No. 33-72974).
10.8 Security Agreement granted by Carr Real Estate Services, Inc.
to Carr Realty, L.P. (incorporated by reference to the same
titled exhibit to the Company's Registration Statement on Form
S-11, No. 33-72974).
10.9 Promissory Note from Carr Realty, L.P. to the Northwestern
Mutual Life Insurance Company (incorporated by reference to
Exhibit 10.27 of the Company's Registration Statement on
Form S-11, No. 33-72974).
10.10 Deed of Trust and Security Agreement by and among Carr Realty,
L.P., Patrick H. McGuire, III, and the Northwestern Mutual
Life Insurance Company (incorporated by reference to Exhibit
10.28 of the Company's Registration Statement on Form S-11,
No. 33-72974).
10.11 Stock Purchase Agreement, dated November 5, 1995 by and among
Carr Realty Corporation, Security Capital Holdings, S.A. and
Security Capital U.S. Realty (incorporated by reference to
Exhibit 5.1 to the Company's Current Report on Form 8-K dated
November 6, 1995).
<PAGE>
10.12 Amendment No. 1 to Stock Purchase Agreement, dated April 29,
1996 by and among Carr Realty Corporation, Security Capital
Holdings, S.A. and Security Capital U.S. Realty (incorporated
by reference to Exhibit 2.1 of Security Capital U.S. Realty's
Schedule 13D dated April 30, 1996).
10.13 Stockholders Agreement, dated April 30, 1996 by and among Carr
Realty Corporation, Carr Realty, L.P., Security Capital
Holdings, S.A. and Security Capital U.S. Realty (incorporated
by reference to Exhibit 2.2 of Security Capital U.S. Realty's
Schedule 13D dated April 30, 1996).
10.14 Registration Rights Agreement, dated April 30, 1996 by and
among Carr Realty Corporation, Security Capital Holdings, S.A.
and Security Capital U.S. Realty (incorporated by reference to
Exhibit 2.3 of Security Capital U.S. Realty's Schedule 13D
dated April 30, 1996).
10.15 Amended and Restated Credit Agreement, dated August 23, 1996
by and among CarrAmerica Realty Corporation, Carr Realty, L.P.
and Morgan Guaranty Trust Company of New York.
10.16 First Amendment to Amended and Restated Revolving Credit
Agreement, dated October 18, 1996 by and among CarrAmerica
Realty Corporation, Carr Realty, L.P., Morgan Guaranty Trust
Company of New York, Commerzbank Aktiengesellschaft, New York
Branch, NationsBank, N.A., Wells Fargo Realty Advisors
Funding, Inc. (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K dated and filed
October 24, 1996).
10.17 Employment Agreement dated November 1, 1996 by and among
Robert E. Peterson and CarrAmerica Realty Corporation.
21.1 List of Subsidiaries.
23.1 Consent of KPMG Peat Marwick LLP, dated March 26, 1997.
27 Financial Data Schedule.
14(b) Reports on Form 8-K
Form 8-K dated and filed October 16, 1996, regarding Pro Forma
Balance Sheet for six months ended June 30, 1996 and Pro Forma
Statements of Operations for six months ended June 30, 1996 and the
year ended December 31, 1995 for Littlefield Portfolio.
Form 8-K dated and filed October 24, 1996, regarding (i) new
acquisitions of Sunnyvale Research Plaza, Quebec Centre, Greenwood
Center, Panorama Corporate Center, Warner Center Business Park,
Katella Corporate Center, Littlefield Portfolio and Riata Land, (ii)
probable acquisitions of Peterson Portfolio, NELO/Orchard Portfolio,
Greyhound Building, Cedar Maple Plaza, Camelback Lakes, and Pointe
Corridor Centre IV and (iii) Historical Financials for the six months
ended June 30, 1996 and the year ended December 31, 1995 for
Sunnyvale Research Plaza, NELO/Orchard Portfolio, Peterson Portfolio
and Camelback Lakes.
Form 8-K dated October 24, 1996 and filed October 25, 1996, regarding
Hogan & Hartson L.L.P. opinion for offering of 1,740,000 shares of
the Company's preferred stock.
Form 8-K dated and filed November 4, 1996, regarding Historical
Financial Statements for the nine months ended September 30, 1996 and
the year ended December 31, 1995 for Search Plaza/Quorum North, Rio
Robles Technology Center and South Coast Executive Center.
Form 8-K dated November 6, 1996 and filed November 15, 1996,
regarding NELO/Orchard Portfolio acquisition.
Form 8-K/A dated and filed November 22, 1996, amending Form 8-K filed
October 24, 1996, regarding reliance on Historical Financials for the
three months ended March 31, 1996 and the year ended December 31,
1995 for Warner Center Business Park acquisition.
<PAGE>
Form 8-K/A dated and filed November 22, 1996, amending Form 8-K filed
November 4, 1996, regarding reliance on Historical Financials for the
nine months ended September 30, 1996 and the year ended December 31,
1995 for Search Plaza/Quorum North.
Form 8-K dated and filed November 26, 1996, regarding Hogan & Hartson
L.L.P. opinion for offering of 5,750,000 shares of Company's common
stock.
Form 8-K dated and filed November 26, 1996, regarding Hogan & Hartson
L.L.P. opinion for offering of 2,142,857 shares of Company's common
stock to USRealty.
Form 8-K dated and filed December 18, 1996, regarding Unisys Center
Historical Financial Statements for the nine months ended September
30, 1996 and the year ended December 31, 1995, Pro Forma Balance
Sheet for the nine months ended September 30, 1996 and Pro Forma
Statements of Operations for the nine months ended September 30, 1996
and the year ended December 31, 1995.
Form 8-K dated and filed December 19, 1996, regarding Peterson
Portfolio Pro Forma Balance Sheet for the nine months ended September
30, 1996 and Pro Forma Statements of Operations for the nine months
ended September 30, 1996 and the year ended December 31, 1995.
Form 8-K/A dated and filed December 19, 1996, amending Form 8-K filed
November 15, 1996, regarding NELO/Orchard Portfolio Pro Forma Balance
Sheet for the nine months ended September 30, 1996 and Pro Forma
Statements of Operations for the nine months ended September 30, 1996
and the year ended December 31, 1995.
Form 8-K dated and filed December 20, 1996, regarding Hogan & Hartson
L.L.P. opinion for offering of 321,429 shares of Company's common
stock to Security Capital U.S. Realty.
14(c) Exhibits
The list of exhibits filed with this report is set forth in response
to Item 14(a)(3). The required exhibit index has been filed with the
exhibits.
14(d) Financial Statements
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registration has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
District of Columbia on
March 26, 1997.
CARRAMERICA REALTY CORPORATION
a Maryland corporation
By: /s/ THOMAS A. CARR
--------------------------------------
Thomas A. Carr
President and Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following person on behalf of the
registrant and in the capacities indicated on March 26, 1997.
Signature Title
- -------- -----
/s/ OLIVER T. CARR, JR.
- ---------------------------------- Chairman of the Board,
Oliver T. Carr, Jr. Chief Executive Officer and Director
/s/ THOMAS A. CARR
- ---------------------------------- President, Chief Operating Officer and
Thomas A. Carr Director
/s/ BRIAN K. FIELDS
- ---------------------------------- Chief Financial Officer
Brian K. Fields
/s/ ROBERT O. CARR
- ---------------------------------- Director
Robert O. Carr
/s/ DAVID BONDERMAN
- ---------------------------------- Director
David Bonderman
/s/ ANDREW F. BRIMMER
- ---------------------------------- Director
Andrew F. Brimmer
/s/ A. JAMES CLARK
- ---------------------------------- Director
A. James Clark
/s/ ANTHONY R. MANNO, JR.
- ---------------------------------- Director
Anthony R. Manno, Jr.
/s/ CAROLINE S. MCBRIDE
- ---------------------------------- Director
Caroline S. McBride
/s/ J. MARSHALL PECK
- ---------------------------------- Director
J. Marshall Peck
/s/ GEORGE R. PUSKAR
- ---------------------------------- Director
George R. Puskar
/s/ WILLIAM D. SANDERS
- ---------------------------------- Director
William D. Sanders
/s/ WESLEY S. WILLIAMS, JR.
- ---------------------------------- Director
Wesley S. Williams, Jr.
<PAGE>
CARRAMERICA REALTY CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
The following Consolidated Financial Statements and Schedule of CarrAmerica
Realty Corporation and Subsidiaries and the Independent Auditors' Reports
thereon are attached hereto:
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-2
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 F-3
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-5
Notes to Consolidated Financial Statements F-7
Independent Auditors' Report F-21
FINANCIAL STATEMENT SCHEDULE
Independent Auditors' Report F-21
Schedule III: Consolidated Real Estate and Accumulated
Depreciation as of December 31, 1996 for CarrAmerica Realty
Corporation and Subsidiaries F-22
All other schedules are omitted because they are not applicable, or because the
required information is included in the financial statements or notes thereto.
F-1
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of December 31, 1996 and 1995
(In thousands, except share amounts) 1996 1995
- -------------------------------------------------------------------------------
Assets
Rental property (notes 2 and 13):
Land $ 356,797 115,565
Buildings 1,017,313 301,537
Tenant improvements 99,760 60,060
Furniture, fixtures, and equipment 2,128 3,427
----------- --------
1,475,998 480,589
Less-- accumulated depreciation (119,657) (98,873)
----------- --------
Total rental property 1,356,341 381,716
Land held for development 32,277 --
Construction in progress 31,723 --
Cash and cash equivalents 27,637 9,217
Restricted cash and cash equivalents (note 2) 8,229 2,249
Accounts and notes receivable (note 10) 11,899 8,728
Investments (note 4) 13,524 10,745
Accrued straight-line rents 23,810 22,437
Tenant leasing costs, net of accumulated
amortization of $11,986 in 1996 and
$11,579 in 1995 13,499 10,746
Deferred financing costs, net of accumulated
amortization of $1,979 in 1996 and $1,200
in 1995 3,800 2,267
Prepaid expenses and other assets, net of
accumulated depreciation of $3,506 in 1996
and $1,894 in 1995 13,825 10,755
----------- --------
$1,536,564 458,860
=========== ========
Liabilities, Minority Interest, and
Stockholders' Equity
Liabilities:
Mortgages and notes payable (notes 2 and 13) $ 655,449 317,374
Accounts payable and accrued expenses 32,657 9,357
Rent received in advance and security deposits 10,383 1,736
----------- --------
Total liabilities 698,489 328,467
Minority interest (note 3) 50,597 34,850
Stockholders' equity (notes 7 and 8):
Preferred stock, $.01 par value, authorized
30,000,000 shares, issued and outstanding
1,740,000 shares of Series A Cumulative
Convertible Redeemable Preferred stock with
an aggregate liquidation preference of
$43.5 million 17 --
Common stock, $.01 par value, authorized
90,000,000 shares, issued and outstanding
43,789,073 shares at December 31, 1996 and
13,409,177 shares at December 31, 1995 438 134
Additional paid in capital 837,355 126,835
Cumulative dividends in excess of net income (50,332) (31,426)
----------- --------
Total stockholders' equity 787,478 95,543
----------- --------
Commitments (notes 5, 6 and 10)
$1,536,564 458,860
=========== ========
See accompanying notes to consolidated financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the Years Ended December 31, 1996, 1995 and 1994
(In thousands, except per common share amounts) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real estate operating revenue (notes 5 and 10):
Rental revenue:
Minimum base rent $133,807 79,688 73,070
Recoveries from tenants 14,105 5,266 5,977
Parking and other tenant charges 6,253 4,585 3,618
--------- -------- ------
Total rental revenue 154,165 89,539 82,665
Real estate service income 12,512 11,315 8,890
--------- -------- ------
Total revenue 166,677 100,854 91,555
--------- -------- ------
Real estate operating expenses:
Property operating expenses:
Operating expenses 37,047 21,894 19,428
Real estate taxes 14,880 9,685 10,279
Interest expense 31,630 21,873 21,366
General and administrative 15,228 10,711 9,535
Depreciation and amortization 38,264 18,495 14,419
--------- -------- ------
Total operating expenses 137,049 82,658 75,027
--------- -------- ------
Real estate operating income 29,628 18,196 16,528
--------- -------- ------
Other operating income (expense):
Interest Income 1,701 1,121 1,310
Equity in earnings (losses) of unconsolidated partnerships (note 4) 484 (131) (17)
Loss on write-off of investment and intangible assets (note 11) (2,279) (1,902) --
--------- -------- ------
Total other operating income (expense) (94) (912) 1,293
--------- -------- ------
Net operating income before minority interest
and extraordinary item 29,534 17,284 17,821
Minority interest (note 3) (4,732) (5,217) (5,724)
--------- -------- ------
Income before extraordinary item 24,802 12,067 12,097
Extraordinary item-- loss on early extinguishment of debt 484 -- --
--------- -------- ------
Net income $ 24,318 12,067 12,097
========= ======== ======
Net income per common share:
Income before extraordinary item $ 0.90 0.90 1.06
Extraordinary item-- loss on early extinguishment of debt (0.02) -- --
--------- -------- ------
Net income per common share $ 0.88 0.90 1.06
========= ======== ======
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the Years Ended December 31, 1996, 1995 and 1994
Dividends in
Additional Excess of
Common Preferred Common Preferred Paid In Cumulative
(In thousands, except share amounts) Shares Shares stock stock Capital Earnings Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 10,000,067 -- $100 -- 71,532 (12,042) 59,590
Sale of common stock 2,875,000 -- 29 54,436 54,465
Shares issued in exchange for
Unit redemptions (note 3) 372,944 -- 3 -- 1,967 -- 1,970
Dilution from assets and liabilities
contributed by Unitholders -- -- -- -- (1,876) -- (1,876)
Net Income -- -- -- -- -- 12,097 12,097
Dividends Paid -- -- -- -- -- (20,204) (20,204)
---------- --------- ----- --- -------- ------- --------
Balance at December 31, 1994 13,248,011 -- 132 -- 126,059 (20,149) 106,042
Shares issued in exchange for
Unit redemptions (note 3) 161,166 -- 2 -- 776 -- 778
Net income -- -- -- -- -- 12,067 12,067
Dividends paid -- -- -- -- -- (23,344) (23,344)
---------- --------- ----- --- -------- ------- --------
Balance at December 31, 1995 13,409,177 -- 134 -- 126,835 (31,426) 95,543
Sales of common stock 30,102,907 -- 301 -- 665,178 -- 665,479
Sale of Series A Cumulative Convertible
Redeemable Preferred Stock -- 1,740,000 -- 17 42,976 -- 42,993
Shares issued in exchange for
Unit redemptions (note 3) 212,293 -- 2 -- 831 -- 833
Exercise of stock options 2,000 -- -- -- 36 -- 36
Shares issued to acquire rental property 62,696 -- 1 -- 1,499 -- 1,500
Net income -- -- -- -- -- 24,318 24,318
Dividends paid -- -- -- -- -- (43,224) (43,224)
---------- --------- ----- --- -------- ------- --------
Balance at December 31, 1996 43,789,073 1,740,000 $438 17 837,355 (50,332) 787,478
========== ========= ===== === ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the Years Ended December 31, 1996, 1995 and 1994
(In thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 24,318 12,067 12,097
--------- ------- -------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 38,264 18,495 14,419
Minority interest in income 4,732 5,217 5,724
Equity in (earnings) losses of unconsolidated partnerships (464) 161 47
Extraordinary item--loss on early extinguishment of debt 484 -- --
Loss on write-off of assets 2,279 -- --
Decrease (increase) in accounts receivable (3,171) (3,124) 370
Decrease (increase) in accrued straight-line rents (1,373) 1,931 (713)
Additions to tenant leasing costs (5,530) (1,350) (811)
Increase in prepaid expenses and other assets (5,915) (884) (1,346)
Increase (decrease) in accounts payable and accrued expenses 20,029 2,969 (923)
Increase (decrease) in rent received in advance and security deposits 8,647 (205) 1,044
--------- ------- -------
Total adjustments 57,982 23,210 17,811
--------- ------- -------
Net cash provided by operating activities 82,300 35,277 29,908
--------- ------- -------
Cash flows from investing activities:
Additions to rental property (11,525) (8,927) (11,715)
Acquisitions of rental property (800,628) (64,363) (57,006)
Land purchased for future development (23,022) -- --
Additions to construction in progress (31,723) -- --
Acquisition of real estate service contracts and other intangibles (1,750) (7,419) --
Distributions from unconsolidated partnerships 1,739 4,399 --
Investments in unconsolidated partnerships (4,055) (3,437) (2,641)
Acquisition of minority interest (3) (1,546) --
Decrease (increase) in restricted cash and cash equivalents (5,980) (342) 3,375
Cash from contributed net assets -- -- 941
--------- ------- -------
Net cash used by investing activities (876,947) (81,635) (67,046)
--------- ------- -------
Cash flows from financing activities:
Net proceeds from sales of common and preferred stock 708,508 -- 54,465
Net borrowings on unsecured line of credit 215,000 -- --
Borrowings on mortgages payable -- 72,000 60,418
Repayment of mortgages payable (57,048) (2,559) (38,120)
Contributions from minority interests -- 17 --
Dividends paid (43,224) (23,344) (20,204)
Repayment of mortgages payable to related party -- -- (15,186)
Additions to deferred financing costs (3,020) (879) (674)
Distributions to minority interests (7,149) (8,122) (8,047)
--------- ------- -------
Net cash provided by financing activities 813,067 37,113 32,652
--------- ------- -------
Increase (decrease) in unrestricted cash and cash equivalents 18,420 (9,245) (4,486)
Unrestricted cash and cash equivalents, beginning of the period 9,217 18,462 22,948
--------- ------- -------
Unrestricted cash and cash equivalents, end of the period $ 27,637 9,217 18,462
========= ======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of $2,664 in 1996
and $226 in 1995) $ 29,693 21,825 21,366
========= ======= =======
</TABLE>
F-5
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
for the Years Ended December 31, 1996, 1995 and 1994
Supplemental disclosure of noncash investing and financing activities:
(a) During 1996, the Company funded a portion of the aggregate purchase price
of its property acquisitions by assuming $184.4 million of debt and
liabilities and by issuing $1.5 million of common stock and $18.0 million
of Units. The Company also repaid $1.0 million of liabilities by issuing
$1.0 million of Units.
(b) On July 6, 1995, the Company formed a limited liability company (the
"LLC") with a commingled pension trust fund. The Company contributed its
ownership in 1717 Pennsylvania Avenue to the LLC for a 50 percent
ownership interest. The Company was credited with a contribution of $20.0
million, reduced by $7.0 million of indebtedness secured by the property.
Subsequent to the Company's contribution to the LLC, the Company received
a distribution from the LLC of $2.9 million.
(c) During 1994, the Company funded a portion of the purchase prices of its
property acquisitions by assuming $20.4 million of debt and liabilities
and by issuing $14.1 million of Units.
(d) On February 17, 1994, the Company acquired an additional 21.4% interest in
Square 24 Associates, the partnership that owns the property located at
2445 M Street, in exchange for $4.3 million of Units.
See accompanying notes to consolidated financial statements
F-6
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Description of Business and Summary of Significant Accounting Policies
(a) Business
CarrAmerica Realty Corporation (the "Company"), formerly Carr Realty
Corporation, 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. The Company's office
properties are located in eleven suburban markets across the United States.
(b) Basis of Presentation
The accounts of the Company and its majority-owned subsidiaries are consolidated
in the accompanying financial statements. The Company uses the equity method of
accounting for its investments in and earnings and losses of unconsolidated
partnerships not controlled by the Company. Management of the Company has made a
number of estimates and assumptions relating to the reporting of assets and
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates. Certain amounts for prior years have been reclassified to conform
with the presentation for 1996.
(c) Rental Property
Rental property is recorded at cost less accumulated depreciation (which is less
than the net realizable value of the rental property). Depreciation is computed
on the straight-line basis over the estimated useful lives of the assets, as
follows:
- --------------------------------------------------------------------------------
Base Building 30 to 50 years
Building components 7 to 20 years
Tenant improvements Terms of the leases or useful lives,
whichever is shorter
Furniture, fixtures and equipment 5 to 15 years
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations are capitalized.
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This Statement requires that long-lived assets, such as the
Company's rental property, and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Adoption of this Statement had no effect on the Company's financial
position, results of operations, or liquidity.
(d) Development Property
Land held for development and construction in progress are carried at cost.
Specifically identifiable direct and indirect acquisition, development and
construction costs are capitalized including, where applicable, salaries and
related costs, real estate taxes, interest and certain pre-construction costs
essential to the development of the property.
(e) Tenant Leasing Costs
Fees and costs incurred in the successful negotiation of leases have been
deferred and are being amortized on a straight-line basis over the terms of the
respective leases.
(f) Deferred Financing Costs
Deferred financing costs include fees and costs incurred to obtain financing and
are being amortized over the terms of the respective loans on a basis which
approximates the interest method.
F-7
<PAGE>
(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, accrued expenses and other liabilities.
(h) 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 real estate service revenue for certain properties it
manages, leases and develops for third parties. Such revenue is recognized as
revenue as earned.
(i) 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 consolidated financial
statements. At December 31, 1996 and 1995, the Company's income tax basis in its
assets was approximately $1.5 billion and $474.5 million, respectively.
Certain subsidiaries, organized as partnerships, of the Company are subject
to District of Columbia franchise taxes. Franchise taxes are recorded as general
and administrative expenses in the accompanying consolidated financial
statements.
Carr Development & Construction, Inc. ("CDC"), the Company's development
subsidiary, and Carr Real Estate Services, Inc. ("CRESI"), the Company's real
estate service subsidiary, file separate tax returns and are subject to federal,
state and local income taxes. The Company has adopted the asset and liability
method of accounting for CDC's and CRESI's income taxes. Under the asset and
liability method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and to operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period of the enactment date. The effect of the asset and liability method on
the Company's financial statements is insignificant. The Company's subsidiaries
did not incur any income tax expense in 1996, 1995 or 1994.
(j) Real Estate Service Contracts and Other Intangible Assets
Real estate service contracts and other intangible assets 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. 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.
F-8
<PAGE>
(k) Per Share Data and Dividends
Net income per share of common stock is based upon the weighted average number
of common shares and share equivalents outstanding during the year. When
dilutive, stock options and Units are included as share equivalents. The
weighted average number of shares used in the computations was 31,999,580 for
1996, 13,338,080 for 1995 and 11,387,030 for 1994.
Net income for 1996 used in the computations was reduced by cumulative
preferred stock dividends of $572 thousand.
Following is the income tax status of dividends paid during the years ended
December 31:
1996 1995 1994
- --------------------------------------------------------------------------------
Ordinary income 95% 85% 75%
Capital Gain -- -- --
Return of Capital 5% 15% 25%
(l) 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.
(m) Stock/Unit Option Plans
Prior to January 1, 1996, the Company accounted for its option plans in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expenses would be recorded only if the current market
price of the underlying unit or stock on the date of grant exceeded the exercise
price. As of January 1, 1996, the Company adopted SFAS No. 123, Accounting for
Stock-Based Compensation, which permits entities to recognize as expense, over
the vesting period, the fair value of all unit-based and stock-based awards on
the date of grant. Alternatively, SFAS No. 123 allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma net income and
pro forma earnings per share disclosures for employee option grants made in 1995
and future years as if the fair-value-based method defined in SFAS No. 123 had
been applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
F-9
<PAGE>
(2) Mortgages And Notes Payable
Mortgages payable are collateralized by certain rental properties and generally
require monthly principal and/or interest payments. Following is a summary of
the Company's mortgages and notes payable as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <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 through February 1, 1998; thereafter, principal and interest
payments are due monthly based on a 25-year amortization schedule through
maturity in February, 2003. $183,500 183,500
Mortgage payable to NML; bearing interest at 8.9 percent requires monthly
principal and interest payments of $346 thousand through maturity in June
2002; additional annual principal curtailments of $500 thousand are due
through 2000; $2.0 million in 2001, and $1.0 million in 2002. 38,188 39,377
Mortgages payable to the Aid Association for Lutherans ("AAL") under 2 notes;
$16.5 million note bearing interest at 9.5 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. 32,570 33,050
Note payable to Morgan Guaranty Trust Company of New York, as agent for a group
of banks ("Morgan"); $325.0 million unsecured revolving 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 the London
Interbank Offered Rate (LIBOR). The year-end weighted average interest rate at
December 31, 1996 was 7.3%. The note matures in July 1998, with an option to
extend for one year. 215,000 --
Mortgages 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. This mortgage payable is held by Carr
Redmond Corporation, a wholly-owned subsidiary of the Company which owns the
Redmond East office campus. 28,036 --
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 Connecticut General Life Insurance Company; 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. 9,630 --
Mortgages payable to New York Life Insurance Company; bearing interest at an
effective rate of 8.25 percent; principal and interest payments of $388
thousand are due monthly through maturity in December 2001. 40,850 --
Mortgage payable to State Farm Insurance Company; bearing interest at 7.2
percent; principal and interest payments of $177 thousand are due monthly
through maturity in January 2006. 22,022 --
Mortgage payable to Windy City Holdings, Inc.; bearing interest at 9.01 percent;
principal and interest payments of $85 thousand are due monthly through
maturity in May 1999. 10,322 --
Mortgage payable to The Riggs National Bank of Washington, D.C.; bearing
interest at 7.5 percent; principal and interest payments of $49 thousand are
due monthly through maturity in February 1999. 6,350 6,447
Mortgage payable to 16th & Northern Associates L.L.C.; bearing interest at
5.5 percent; the note was repaid in full in January 1997. 13,731 --
Mortgage payable to NationsBank, N.A.; $35 million interest only note bearing
interest at 1.75 percent above LIBOR. The note was repaid in full in April
1996. -- 35,000
Mortgage payable to NationsBank, N.A.; $20 million interest only note bearing
interest at 2.0 percent above LIBOR. The note was repaid in full in
April 1996. -- 20,000
-------- -------
$655,449 317,374
======== =======
</TABLE>
F-10
<PAGE>
As of December 31, 1996, the scheduled maturity of all mortgages and notes
payable are as follows:
(In thousands)
- --------------------------------------------------------------------------------
1997 $ 17,281
1998 220,588
1999 31,790
2000 32,809
2001 46,783
Thereafter 306,198
--------
$655,449
========
Restricted cash and cash equivalents primarily consist of escrow deposits
required by lenders to be used for future building renovations, tenant
improvements or as collateral for letters of credit.
Based on the borrowing rates available to the Company for mortgages and
notes payable with similar terms and average maturities, the estimated fair
value of the Company's mortgages and notes at December 31, 1996 and 1995 was
approximately $644.5 million and $309.1 million, respectively.
(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
years ended December 31, 1996 and 1995, 212,293 and 161,166 dividend paying
Units, respectively, of Carr Realty, L.P. or CarrAmerica Realty, L.P., were
redeemed for common stock of the Company.
The following table sets forth the common stock and preferred stock of the
Company and Units of Carr Realty, L.P. and CarrAmerica Realty, L.P.:
CarrAmerica
CarrAmerica Realty
Realty Corporation's
Corporation's Preferred Dividend Non-Dividend
Common Stock Stock Paying Units Paying Units
(In thousands) Outstanding Outstanding Outstanding Outstanding
- --------------------------------------------------------------------------------
As of December 31:
1996 43,789 1,740 4,940 540
1995 13,409 -- 4,080 668
1994 13,248 -- 4,241 668
====== ====== ====== ======
Weighted average for:
1996 26,932 328 4,131 872
1995 13,338 -- 4,151 668
1994 11,387 -- 4,473 18
====== ====== ====== ======
Minority interest in the accompanying consolidated financial statements
relates primarily to holders of Units.
F-11
<PAGE>
(4) Investments in Unconsolidated Partnerships
Through seven unconsolidated partnerships, the Company owns interests ranging
from 2% to 50% in office properties. The combined condensed financial
information for the unconsolidated partnerships is as follows:
Balance Sheets
December 31,
(In thousands) 1996 1995
- --------------------------------------------------------------------------------
Assets
- ------
Rental property, net $310,100 305,870
Cash and cash equivalents 15,577 15,998
Other assets 38,073 35,274
-------- -------
$363,750 357,142
======== =======
Liabilities and Accumulated Deficit
- -----------------------------------
Liabilities:
Notes payable $362,849 357,911
Other liabilities 17,233 21,091
-------- -------
Total liabilities 380,082 379,002
Accumulated deficit (16,332) (21,860)
-------- -------
$363,750 357,142
======== =======
F-12
<PAGE>
Statements of Operations
1996 1995 1994
- --------------------------------------------------------------------------------
Revenue $ 85,702 81,182 80,815
Depreciation and
amortization expense 6,266 3,608 11,355
Interest expense 24,470 22,998 32,316
Other expenses 41,787 41,304 37,112
-------- ------- ------
Net income $ 13,179 13,272 32
======== ======= ======
(5) Lease Agreements
The following table summarizes future minimum base rent to be received under
noncancelable tenant leases and the percentage of total rentable space expiring
each year, as of December 31, 1996:
Future Percentage of
Minimum Total Space
(In thousands) Rent Expiring
- --------------------------------------------------------------------------------
1997 $ 199,669 13.0%
1998 164,848 18.7
1999 140,622 11.3
2000 122,360 13.3
2001 98,644 11.2
Thereafter 324,732 32.5
----------
$1,050,875
==========
The leases also provide for additional rent based on increases in the
Consumer Price Index (CPI) and increases in operating expenses. These increases
are generally payable in equal installments throughout the year, based on
estimated increases, with any differences being adjusted in the succeeding year.
The Company's largest tenant is AT&T with a master lease of approximately .9
million square feet of office space at AT&T Center which represents 7.6% of net
rentable space in the Company's consolidated office properties at December 31,
1996. No other single tenant occupies more than 5% of the net rentable space.
(6) Land Leases
The Company leases land beneath three office properties located in metropolitan
Washington, D.C. and Austin, Texas. The Company also leases land adjacent to an
office property in suburban Chicago. The terms of these leases range from 5
years to 99 years, with the last lease maturing in the year 2086. The minimum
base annual rental payment associated with these leases is $1.2 million.
(7) Series A Cumulative Convertible Redeemable Preferred Stock
The Company is authorized to issue 30,000,000 shares of Preferred Stock. On
October 25, 1996, the Company issued 1,740,000 shares of Series A Cumulative
Convertible Redeemable Preferred Stock ("Series A Preferred Stock") at $25 per
share. Dividends for the Series A Preferred Stock are cumulative from the date
of issuance and are payable quarterly in arrears in an amount per share equal to
the greater of (1) $1.75 per share per annum, or (2) the cash dividend paid on
the number of shares, or portion thereof, of the Company's common stock into
which a share of Series A Preferred Stock is convertible. The Series A Preferred
Stock has a liquidation preference of $25 per share. After April 25, 1997, each
share of Series A Preferred Stock is convertible, at the option of the holder,
into one share of the Company's common stock, subject to certain conversion
adjustments. After October 25, 1999, each share of Series A Preferred Stock is
redeemable at the Company's option, at $25 per share, plus accrued and unpaid
dividends.
(8) Stock/Unit Option Plans
As of December 31, 1996, the Company had two option plans: one plan for the
purpose of attracting and retaining executive officers and other key employees
(Employee Unit Option Plan); and the other plan for the purpose of attracting
and retaining directors who are not employees of the Company (Non-Employee
Director Stock Option Plan).
The Employee Unit Option Plan allows for the grant of options to purchase
Units of Carr Realty, L.P. (Unit options) that are exerciseable at the fair
market value of the Units at the date of grant, which is deemed to be equivalent
to the fair market value of the Company's common stock at such date. Units
(following exercise of Unit options) are redeemable for cash or common stock of
the Company, at the option of the Company. The Unit options have a 10-year term
from the date of grant and vest over a five-year period, 20% per year. At
December 31, 1996, the Company had 1,266,900 Units reserved for issuance under
the Employee Unit Option Plan, of which 941,348 were outstanding.
F-13
<PAGE>
The Non-Employee Director Stock Option Plan provides for the grant of
options to purchase the Company's common stock at an exercise price which is
equal to the fair market value of the common stock at the date of grant. The
Non-Employee Director Stock Option Plan was approved by the Company's
stockholders at its Annual Meeting of Stockholders on April 28, 1995, following
which each then-serving non-employee director was granted options to purchase
3,000 shares of the Company's common stock. Immediately following each annual
election of directors, each then-serving non-employee director will receive
options to purchase 5,000 shares of the Company's common stock. The stock
options have a 10-year term from the date of grant and vest over a three-year
period, 33 1/3% per year. At December 31, 1996, the Company had 150,000 shares
of common stock reserved for issuance under the Non-Employee Director Stock
Option Plan, of which 61,000 were outstanding.
As approved by the Board of Directors (subject to shareholder approval), the
Company granted options to purchase an aggregate of 25,000 shares of the
Company's common stock to two key employees in 1996. The stock options have a
10-year term from the date of grant and vest over a five-year period, 20% per
year. All 25,000 options were outstanding at December 31, 1996.
The per share weighted-average fair value of Unit options and stock options
granted during 1996 and 1995 was $2.15 and $1.92, respectively, on the date of
grant using the Black Scholes option-pricing model with the following
weighed-average assumptions: 1996 - expected dividend yield of 7.893%, risk
free interest rate of 6.08%, stock volatility of 19.45%, and expected option
life of 4.02 years; 1995 - expected dividend yield of 7.893%, risk free interest
rate of 7.06%, stock volatility of 19.45%, and expected option life of 5.38
years.
F-14
<PAGE>
The Company applies APB Opinion No. 25 in accounting for its Unit options
and stock options and, accordingly, no compensation cost has been recognized for
its Unit options and stock options in the financial statements. The pro forma
effect of compensation costs, based on the fair value at the date of grant, of
the Unit options and stock options is immaterial to the Company's consolidated
financial statements and therefore is not presented. Unit option and stock
option activity during 1996 and 1995 is as follows:
Number Weighted-
of Units/ Average
Shares Exercise Price
- --------------------------------------------------------------------------------
Balance at December 31, 1994 911,348 $22.97
Granted 29,000 18.78
Exercised -- --
Forfeited 3,000 17.75
Expired -- --
---------
Balance at December 31, 1995 937,348 22.86
Granted 112,000 24.70
Exercised 4,000 20.75
Forfeited 18,000 22.66
Expired -- --
---------
Balance at December 31, 1996 1,027,348 $23.07
========= ======
At December 31, 1996, the range of exercise prices was between $17.75 and
$25.13 per Unit/share and the weighted-average remaining contractual life of
outstanding options was 7.29 years.
At December 31, 1996 and 1995, the number of options exercisable was 526,420
and 345,921, respectively, and the weighted average exercise price of those
options was $22.72 and $22.67 per Unit/share, respectively.
(9) Employee Benefits
The Company has a 401(k) plan for employees that will match 50% of employee
contributions up to the first 4% of an employee's pay and will make a base
contribution of 3% of pay for participants who remain employed on December 31,
the end of the plan year. The Company contributions are subject to a five-year
graduated vesting schedule. Company contributions to the plan amounted to $.3
million in 1996, $.3 million in 1995, and $.3 million in 1994.
F-15
<PAGE>
(10) Transactions With Affiliates
CarrPark, Inc., a subsidiary of The Oliver Carr Company, a stockholder of the
Company, manages certain of the parking garages in the Company's properties, for
fees ranging from 24 to 62 percent of gross receipts from garage operations.
CarrPark, Inc. is responsible for payment of all garage operating expenses.
Parking revenue recognized is net of fees paid to CarrPark, Inc. of $1.9 million
in 1996, $1.8 million in 1995, and $1.8 million in 1994. Accounts receivable
includes $.3 million at December 31, 1996 and 1995 due from CarrPark, Inc.
Accounts receivable includes management and leasing fees, development and
architectural fees and payroll reimbursements receivable from affiliates of $4.0
million at December 31, 1996 and $3.9 million at December 31, 1995. This amount
includes a leasing commission receivable of $2.7 million at December 31, 1996
and $2.9 million at December 31, 1995, respectively, that is collectible in
quarterly installments of approximately $47 thousand through September 2011. The
fair market value of this receivable is $1.6 million at December 31, 1996 and
1995. The leasing commission is due from an unconsolidated investee partnership.
The Company earned management, leasing, development and architectural fees
in 1996 from affiliated partnerships of $6.9 million in 1996, $6.7 million in
1995, and $6.4 million in 1994.
A wholly-owned subsidiary of Clark Enterprises, Inc., a Unitholder, has
provided construction management services to the Company. In connection with
these services, the Company paid $1.3 million in 1996, $.7 million in 1995, and
$1.0 million in 1994. Additionally, a wholly-owned subsidiary of Clark
Enterprises, Inc. received a total of $19.6 million during the years of 1996,
1995 and 1994 under a construction contract for the Booz-Allen & Hamilton
Building (in which the Company is a 50% joint venturer).
The Equitable Life Assurance Society of the United States, an affiliate of
an entity of which one of the Company's directors serves as an officer and
director, leases approximately 10,000 square feet of office space from the
Company. Rents of $.3 million in each of 1996, 1995, and 1994 are included in
rental revenue.
The Company leases office space from a partnership affiliated with The
Oliver Carr Company. Rent expense amounted to $1.1 million in 1996, $.9 million
in 1995, and $.9 million in 1994 under the lease. Future minimum payments under
the lease are $.9 million in 1997 and $.4 million in 1998.
Carr Development and Construction was a division of The Oliver Carr Company
("OCCO") until April 30, 1996 when the Company acquired it for $1.75 million.
Carr Development and Construction was the development manager of 1717
Pennsylvania Avenue during 1995 and a portion of 1996. OCCO earned fees of $.2
million and $.5 million in 1996 and 1995, respectively.
The Company paid Security Capital Markets Group, Inc., an affiliate of
USRealty, a placement fee of $.4 million in 1996 for services rendered in
connection with the sale of 1,740,000 shares of Series A Preferred Stock issued
in October 1996.
During 1996, payments of $1.1 million were made to Security Capital
Investment Research Incorporated, an affiliate of USRealty, for services
rendered in connection with the acquisition of operating and development
properties.
(11) Loss on Write-off of Investment and Intangible Assets
On January 31, 1996, the Company terminated an agreement to acquire the
development business of The Evans Company ("Evans") and, as a result, in 1995
the Company recognized a $1.9 million loss on its investment. Furthermore, in
1996, the Company wrote off approximately $2.3 million of the unamortized
purchase price of certain third-party real estate service contracts that were
terminated during the year. These contracts were acquired from Evans in 1995 and
were terminated early as a result of the sale of the properties by third-party
owners.
(12) Segment Operations
The Company is engaged in the ownership and rental of commercial office
buildings and provides real estate services on a contractual basis to both
related and unrelated parties. Revenue from real estate services provided to
properties wholly-owned by the Company and to properties that are owned by
partnerships that are consolidated in the Company's consolidated financial
statements is eliminated in consolidation. During 1996, the Company's real
estate service operations did not account for more than 10% of the Company's
revenue and are not anticipated to exceed 10% in future years. As a result,
information regarding segment operations is not provided for 1996.
F-16
<PAGE>
The following tables present operating and other information for the
Company's lines of business for 1995 and 1994:
<TABLE>
<CAPTION>
Property
Rental Management Consolidated
(In thousands) Operations Operations Eliminations Total
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Revenue $ 89,539 11,315 -- 100,854
Intersegment revenue -- 5,824 (5,824) --
-------- -------- -------- --------
Total revenue $ 89,539 17,139 (5,824) 100,854
======== ======== ======== ========
Depreciation and
amortization $ 16,850 1,645 -- 18,495
======== ======== ======== ========
Operating profit $ 19,354 (919) (629) 17,806
======== ======== ======== ========
Identifiable assets
at December 31 $442,495 19,121 (2,756) 458,860
======== ======== ======== ========
Capital expenditures $ 73,290 7,419 -- 80,709
======== ======== ======== ========
1994
Revenue $ 82,665 8,890 -- 91,555
Intersegment revenue -- 4,628 (4,628) --
-------- -------- -------- --------
Total revenue $ 82,665 13,518 (4,628) 91,555
======== ======== ======== ========
Depreciation and
amortization $ 13,801 618 -- 14,419
======== ======== ======== ========
Operating profit $ 18,489 (1,501) (477) 16,511
======== ======== ======== ========
Identifiable assets
at December 31 $398,362 12,528 (2,942) 407,948
======== ======== ======== ========
Capital expenditures $ 67,816 905 -- 68,721
======== ======== ======== ========
</TABLE>
(13) Acquisition and Development Activities
During 1996, the Company made the following acquisitions: in its Pacific region,
the Company acquired an aggregate of 73 buildings containing a total of
approximately 4.0 million square feet, for an aggregate purchase price of
approximately $454.3 million; in its Mountain region, the Company acquired an
aggregate of 13 buildings containing a total of approximately 1.3 million square
feet, for an aggregate purchase price of approximately $112.7 million; in its
Central region, the Company acquired an aggregate of 17 buildings containing a
total of approximately 2.1 million square feet, for an aggregate purchase price
of approximately $243.5 million; and in its Southeast region, the Company
acquired an aggregate of 43 buildings containing a total of approximately 1.8
million square feet, for an aggregate purchase price of approximately $178.3
million.
During 1996, the Company acquired or purchased options to acquire 142 acres
of developable land in four of its target markets: suburban Seattle; southeast
Denver; Austin, Texas; and suburban Chicago. In the aggregate, this land
(including land subject to purchase options) will support development of up to
3.2 million square feet (unaudited) of office space. In addition, as of December
31, 1996, the Company had three properties under construction: 128,000 square
feet (unaudited) in suburban Atlanta; and an aggregate of 295,000 square feet
(unaudited) in southeast Denver (including a build-to-suit project with 189,000
rentable square feet). Land held for development was purchased for an aggregate
purchase price of $32.3 million. Costs incurred during 1996 for properties under
construction were $31.7 million. An additional $36.3 million (unaudited) will be
expended for completion of projects already under construction as of December
31, 1996.
In 1995, the Company acquired two properties in suburban Washington, D.C.
containing .6 million square feet for an aggregate purchase price of $64.0
million.
All acquisitions have been accounted for as purchases. Operations of the
properties acquired have been included in the accompanying consolidated
financial statements from their respective dates of acquisition.
The following unaudited pro forma summary presents information as if the
Company's acquisitions and sales of common and preferred stock through December
31, 1996 had occurred at the beginning of each year. The pro forma information
is provided for informational purposes only. It is based on historical
information and does not necessarily reflect the actual results that would have
occurred nor is it necessarily indicative of future results of operations of the
Company.
F-17
<PAGE>
Pro forma Information (unaudited)
(In thousands, except per share amounts) 1996 1995
- -------------------------------------------------------------------------------
Total revenue $247,203 238,515
Net income before extraordinary item $ 42,985 45,330
Net income $ 42,501 45,330
Net income per common share $ 0.90 0.96
F-18
<PAGE>
(14) Subsequent Events
In January 1997, the Company entered into a revolving credit agreement to borrow
up to $150.0 million secured by certain properties in the Company's portfolio.
The facility bears interest at 162.5 basis points over LIBOR. The agreement is
for an initial six-month period with two six-month options to extend.
In January 1997, the Company consummated a public offering and a concurrent
offering to a wholly-owned subsidiary of USRealty of 4,928,570 shares of common
stock that raised net proceeds of approximately $136 million. The net proceeds
were used to acquire the suburban office properties and land discussed below,
and to pay down indebtedness under the Company's unsecured line of credit.
Since January 1, 1997, the Company has acquired or placed into service 11
operating office properties, totaling approximately 1.0 million square feet. In
addition, since January 1, 1997, the Company has acquired 26 acres of land which
will support the future development of 636,000 square feet of office space. The
purchase of these properties was financed by the assumption of $18.1 million in
debt and the payment of $102.4 million in cash. These acquisitions added to the
Company's holdings as follows (unaudited):
<TABLE>
<CAPTION>
Square Acres of Buildable
# of Feet Land Square Feet
Operating of Operating Held for of Land Held for
Region Buildings Properties Development Development
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pacific Region 3 191,000 18 300,000
Mountain Region 1 106,000 7 240,000
Central Region 7 705,000 1 38,000
Southeast Region -- -- -- 58,000
-- --------- -- -------
Total 11 1,002,000 26 636,000
== ========= == =======
</TABLE>
In February 1997, the Company sold its 2% limited partnership interest in
the partnership that owns 1575 Eye Street in Washington, D.C. for $40 thousand.
As part of this transaction, CRESI also received $400 thousand in consideration
for the early termination of its management and leasing agreement (which was
otherwise non-cancelable) and a $120 thousand financing fee from the partnership
for facilitating the transaction.
In March 1997, the Company sold its 5% limited partnership interest in the
partnership that owns 1776 Eye Street in Washington, D.C. for approximately $310
thousand. As part of this transaction, CRESI also received $326 thousand in
consideration for the early termination of its management and leasing agreement
(which was cancelable on 30 days notice).
In March 1997, the Company established its 1997 Stock Option and Incentive
Plan, subject to the approval of its shareholders at the 1997 Annual Meeting of
Stockholders, for the purpose of attracting and retaining executive officers and
other key employees. The Company has 3,000,000 shares of common stock reserved
for issuance under the stock option plan. As of March 15, 1997, an aggregate of
861,500 options had been granted under the stock option plan to 43 employees,
subject to shareholder approval.
F-19
<PAGE>
(15) Quarterly Financial Information (unaudited)
The following is a summary of quarterly results of operations for 1996 and 1995:
<TABLE>
<CAPTION>
First Second Third Fourth
(In thousands, except per share data) Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Rental revenue $25,350 32,784 42,506 53,525
======= ====== ====== ======
Real estate service revenue $ 2,726 2,904 3,634 3,248
======= ====== ====== ======
Real estate operating income $ 4,321 5,280 8,670 11,357
======= ====== ====== ======
Income before extraordinary item $ 3,335 4,741 7,910 8,816
======= ====== ====== ======
Net income $ 3,335 4,257 7,910 8,816
======= ====== ====== ======
Per share:
- ---------
Income before extraordinary item $ 0.25 0.22 0.24 0.20
====== ==== ==== ====
Net income $ 0.25 0.20 0.24 0.20
====== ==== ==== ====
1995
Rental revenue $21,796 22,141 22,742 22,860
======= ====== ======= ======
Real estate service revenue $ 2,480 2,626 2,640 3,569
======= ====== ======= ======
Real estate operating income $ 4,506 5,029 4,619 4,042
======= ====== ======= ======
Net income $ 3,257 3,684 3,435 1,691
======= ====== ======= ======
Per share: Net income $ 0.25 0.28 0.26 0.12
- --------- ======= ====== ======= ======
</TABLE>
F-20
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORTS
The Board of Directors and Stockholders
CarrAmerica Realty Corporation:
We have audited the accompanying consolidated balance sheets of CarrAmerica
Realty Corporation and subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CarrAmerica
Realty Corporation and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Washington, D.C.
February 6, 1997,
except for Note 14 which is as of March 26, 1997.
The Board of Directors and Stockholders
CarrAmerica Realty Corporation:
Under date of February 6, 1997, we reported on the consolidated balance sheets
of CarrAmerica Realty Corporation and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1996, which are included in this Form 10-K. In connection with our
audits of the aforementioned consolidated financial statements, we also audited
the related consolidated financial statement schedule in this Form 10-K. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, this financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Washington, D.C.
February 6, 1997
F-21
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<TABLE>
<CAPTION>
Initial Cost
------------------------- Costs Capitalized
(In thousands) Buildings and Subsequent to
Properties Encumbrances Land Improvements Acquisition(4)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Downtown Washington, D.C.:
International Square (1) $ 183,500(2) 69,651 100,921 230
1730 Pennsylvania Avenue, N.W (2) 2,196 11,013 12,022
2550 M Street, N.W -- 2,340 11,348 3,729
1775 Pennsylvania Avenue, N.W 6,350 -- 19,000 869
Presidential Plaza 16,957 1,985 13,358 1,537
1747 Pennsylvania Avenue, N.W 15,613 1,636 8,157 3,415
1255 23rd Street (2) 10,793 40,214 3,250
2445 M Street 38,188 4,530 37,439 (760)
Virginia:
Ballston Plaza -- 8,250 46,926 820
Tycon Courthouse -- 14,183 31,772 1,074
Reston Quadrangle -- 8,997 34,322 382
Parkway One -- 2,010 4,663 84
Maryland:
One Rock Spring Plaza -- -- 18,409 837
Southern California:
Plaza PacifiCare -- 3,493 6,392 56
Katella Corporate Center -- 2,671 4,314 85
Warner Center 26,000 16,490 33,698 1,716
Scenic Business Park -- 2,469 4,503 171
Del Mar Corporate Center -- 2,860 13,252 25
South Coast Executive Center 10,322 3,324 17,212 31
Harbor Corporate Park -- 2,191 5,784 324
Northern California:
AT&T Center -- 32,946 75,720 1,439
Sunnyvale Research Plaza -- 5,082 11,191 153
San Jose Orchard Business Park - A 40,850(3) 3,859 3,155 21
San Jose Orchard Business Park - B -- 8,753 7,155 60
Orchard Center -- 6,051 4,945 32
Orchard Office Center (3) 6,134 5,014 31
Orchard Center II (3) 13,658 11,164 69
Orchard Rincon Center (3) 12,464 10,188 63
Orchard Bayshore Center (3) 17,545 14,342 88
Rio Robles -- 16,655 29,598 80
Southeast Denver:
The Quorum -- 1,299 7,887 90
Quebec Center -- 1,423 5,659 101
Greenwood Center -- 289 6,619 48
Quebec Court I & II -- 2,368 19,819 272
<CAPTION>
Gross Amount at Which
Carried at Close of Period
------------------------------
(In thousands) Buildings and Accumulated Date of Year of
Properties Land Improvements Total Depreciation Construction Acquisition
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Downtown Washington, D.C.:
International Square (1) 69,651 $101,151 170,802 46,384 1977,1979,1982 1993
1730 Pennsylvania Avenue, N.W. 2,196 23,035 25,231 7,818 1972 1993
2550 M Street, N.W. 2,340 15,077 17,417 6,904 1978 1993
1775 Pennsylvania Avenue, N.W. -- 19,869 19,869 1,464 1975 1994
Presidential Plaza 1,985 14,895 16,880 4,964 1986 1993
1747 Pennsylvania Avenue, N.W. 1,636 11,572 13,208 4,800 1970 1993
1255 23rd Street 10,793 43,464 54,257 13,650 1983 1993
2445 M Street 4,530 36,679 41,209 9,834 1986 1993
Virginia:
Ballston Plaza 8,250 47,746 55,996 5,566 1991 1994
Tycon Courthouse 14,183 32,846 47,029 1,132 1983 1995
Reston Quadrangle 8,997 34,704 43,701 982 1987-1989 1996
Parkway One 2,010 4,747 6,757 135 1985 1996
Maryland:
One Rock Spring Plaza -- 19,246 19,246 1,801 1989 1995
Southern California:
Plaza PacifiCare 3,493 6,448 9,941 138 1986 1996
Katella Corporate Center 2,671 4,399 7,070 82 1982 1996
Warner Center 16,490 35,414 51,904 723 1981-1985 1996
Scenic Business Park 2,469 4,674 7,143 199 1985 1996
Del Mar Corporate Center 2,860 13,277 16,137 35 1986 1996
South Coast Executive Center 3,324 17,243 20,567 -- 1987 1996
Harbor Corporate Park 2,191 6,108 8,299 189 1987 1996
F-22
<PAGE>
Northern California:
AT&T Center 32,946 77,159 110,105 6,103 1988 1996
Sunnyvale Research Plaza 5,082 11,344 16,426 175 1985 1996
San Jose Orchard Business Park - A 3,859 3,176 7,035 14 1981 1996
San Jose Orchard Business Park - B 8,753 7,215 15,968 31 1979 1996
Orchard Center 6,051 4,977 11,028 23 1980 1996
Orchard Office Center 6,134 5,045 11,179 21 1981 1996
Orchard Center II 13,658 11,233 24,891 44 1980 1996
Orchard Rincon Center 12,464 10,251 22,715 61 1984 1996
Orchard Bayshore Center 17,545 14,430 31,975 81 1984 1996
Rio Robles 16,655 29,678 46,333 123 1985 1996
Southeast Denver:
The Quorum 1,299 7,977 9,276 173 1975 1996
Quebec Center 1,423 5,760 7,183 111 1985 1996
Greenwood Center 289 6,667 6,956 116 1982 1996
Quebec Court I & II 2,368 20,091 22,459 562 1979/1980 1996
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which
Initial Cost Carried at Close of Period
---------------------- Costs Capitalized --------------------------------
(In thousands) Buildings and Subsequent to Buildings and
Properties Encumbrances Land Improvements Acquisition(4) Land Improvements Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Harlequin Plaza -- 4,746 21,344 401 4,746 21,745 26,491
Quorum Land -- 484 -- 18 502 -- 502
Panorama Phase II-VII (7) -- 6,503 -- 264 6,767 -- 6,767
JD-Edwards (8) -- 3,006 5,479 1,995 3,006 5,479 8,485
Panorama I (8) -- 1,325 6,486 -- 1,325 8,481 9,806
Panorama II-Land -- 1,844 -- 1,574 1,844 1,574 3,418
Suburban Seattle:
Redmond East 28,036 6,957 32,390 293 6,957 32,683 39,640
Redmond Hilltop-Land -- 2,511 -- 82 2,593 -- 2,593
Suburban Chicago:
Parkway North I 29,250 3,727 29,146 508 3,727 29,654 33,381
Parkway North III & IV -- 4,304 34,390 658 4,304 35,048 39,352
Unisys -- 6,387 45,111 15 6,387 45,126 51,513
Parkway North III-Land -- 8,810 -- 823 9,633 -- 9,633
Austin, Texas:
Balcones -- 949 7,649 38 949 7,687 8,636
Great Hills -- 1,680 13,545 403 1,680 13,948 15,628
Park North -- 1,671 13,471 85 1,671 13,556 15,227
Setting I, II & III -- 1,718 13,854 735 1,718 14,589 16,307
First State Bank 9,630 1,985 19,977 490 1,985 20,467 22,452
Littlefield Complex -- 967 9,736 171 967 9,907 10,874
Norwood Tower -- 851 8,570 268 851 8,838 9,689
Riata-Land -- 10,121 -- 492 10,613 -- 10,613
Setting IV & V-Land -- 1,890 -- 248 2,138 -- 2,138
Aubrey Smith (7) -- 30 -- -- 30 -- 30
Dallas, Texas:
Greyhound -- 1,312 7,999 72 1,312 8,071 9,383
Search Plaza -- 1,822 13,362 23 1,822 13,385 15,207
Phoenix, Arizona:
Camelback Lakes -- 5,476 21,365 28 5,476 21,393 26,869
Pointe Corridor IV 13,731 2,396 12,580 22 2,396 12,602 14,998
Suburban Atlanta:
Veridian -- 2,730 13,308 25 2,730 13,333 16,063
Century Springs West 22,022(5) 1,642 7,646 134 1,642 7,780 9,422
Glenridge (5) 1,423 4,870 11 1,423 4,881 6,304
Crestwood (5) 1,423 7,306 14 1,423 7,320 8,743
Midori -- 1,802 6,715 13 1,802 6,728 8,530
Spalding Triangle -- 1,365 5,449 19 1,365 5,468 6,833
Summit -- 2,237 15,027 28 2,237 15,055 17,292
Holcomb Place -- 1,419 4,574 10 1,419 4,584 6,003
DeKalb Tech -- 1,090 7,662 25 1,090 7,687 8,777
Parkwood (5) 2,080 12,678 26 2,080 12,704 14,784
Lakewood (5) 1,040 6,789 26 1,040 6,815 7,855
Spalding Ridge (8) -- 1,550 4,950 3,515 1,550 8,465 10,015
South Florida:
Lake Wyman Plaza -- 3,003 10,475 75 3,003 10,550 13,553
--------- --------- --------- --------- --------- --------- ---------
Total $ 440,449 394,871 1,099,056 46,071 396,798 1,143,200 1,539,998
========= ========= ========= ========= ========= ========= =========
</TABLE>
F-23
<PAGE>
<TABLE>
<CAPTION>
(In thousands) Accumulated Date of Year of
Properties Depreciation Construction Acquisition
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Harlequin Plaza 571 1981 1996
Quorum Land -- N/A 1996
Panorama Phase II-VII (7) -- N/A 1996
JD-Edwards (8) -- N/A 1996
Panorama I (8) -- N/A 1996
Panorama II-Land -- N/A 1996
Suburban Seattle:
Redmond East 890 1988-1992 1996
Redmond Hilltop-Land -- N/A 1996
Suburban Chicago:
Parkway North I 603 1986-1989 1996
Parkway North III & IV 1,021 1986-1989 1996
Unisys 62 1984-1985 1996
Parkway North III-Land -- N/A 1996
Austin, Texas:
Balcones 130 1985 1996
Great Hills 265 1985 1996
Park North 217 1981 1996
Setting I, II & III 282 1985 1996
First State Bank 290 1980/1995 1996
Littlefield Complex 186 1910/1980 1996
Norwood Tower 150 1929/1982 1996
Riata-Land -- N/A 1996
Setting IV & V-Land -- N/A 1996
Aubrey Smith (7) -- N/A 1996
Dallas, Texas:
Greyhound 34 1962 1996
Search Plaza 19 1985 1996
Phoenix, Arizona:
Camelback Lakes 31 1982 1996
Pointe Corridor IV 26 1990 1996
Suburban Atlanta:
Veridian 41 1976 1996
Century Springs West 39 1982 1996
Glenridge 26 1986 1996
Crestwood 36 1986 1996
Midori 28 1989 1996
Spalding Triangle 19 1988 1996
Summit 66 1986 1996
Holcomb Place 21 1982 1996
DeKalb Tech 26 1985 1996
Parkwood 62 1985 1996
Lakewood 33 1985 1996
Spalding Ridge (8) -- N/A 1996
South Florida:
Lake Wyman Plaza 45 1988 1996
--------
Total 119,657
========
</TABLE>
F-24
<PAGE>
CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (continued)
December 31, 1996
Depreciation and amortization of the investment in building and improvements
reflected in the statements of operations are calculated over the estimated
lives of the assets as follows:
- --------------------------------------------------------------------------------
Base Building 30 to 50 years
Building components 7 to 20 years
Tenant improvements Terms of leases or useful lives,
whichever is shorter
Furniture, fixtures and equipment 5 to 15 years
The aggregate cost for federal income tax purposes was approximately
$1,375,987 at December 31, 1996.
The changes in total real estate assets and accumulated depreciation and
amortization for the three years ended December 31, 1996, 1995, and 1994 are as
follows:
1996 1995 1994
- --------------------------------------------------------------------------------
Total Real Estate Assets
Balance, beginning of period $ 480,589 429,537 286,764
Acquisitions 1,050,227 65,783 132,414(6)
Improvements 20,536 3,029 11,715
Retirements and write-offs (11,354) (17,760) (1,356)
---------- ------- -------
$1,539,998 480,589 429,537
========== ======= =======
Accumulated Depreciation
Balance, beginning of period $ 98,873 88,408 71,194
Depreciation for the period 32,078 10,465 18,502(6)
Retirements and write-offs (11,294) -- (1,288)
---------- ------- -------
$ 119,657 98,873 88,408
========== ======= =======
- -------------------------------------------------------------------------------
Notes:
(1) Represents 3 properties: 1850 K Street, N.W., 1875 Eye Street, N.W.,
and 1825 Eye Street, N.W.
(2) Consists of four loans secured by International Square,
1730 Pennsylvania Avenue & 1255 23rd Street.
(3) Secured by San Jose Orchard Business Park-A, Orchard Office Center,
Orchard Center II, Orchard Rincon Center & Orchard Bayshore Center.
(4) Costs capitalized are offset by retirements and write-offs.
(5) Secured by Century Springs West, Glenridge, Crestwood, Lakewood and
Parkwood.
(6) Includes the effect of consolidating 2445 M Street, NW, effective
January 1, 1994.
(7) Represents cost of options to acquire land for future development.
(8) Under construction as of December 31, 1996.
F-25
CARRAMERICA REALTY CORPORATION
1997 STOCK OPTION AND INCENTIVE PLAN
CarrAmerica Realty Corporation, a Maryland corporation (the "Company"),
sets forth herein the terms of its 1997 Stock Option and Incentive Plan (the
"Plan") as follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and
retain highly qualified officers, key employees, and other persons to advance
the interests of the Company by providing such persons with stronger incentives
to continue to serve the Company and its affiliates (as defined herein) and to
expend maximum effort to improve the business results and earnings of the
Company. The Plan is intended to accomplish this objective by providing to
eligible persons an opportunity to acquire or increase a direct proprietary
interest in the operations and future success of the Company. To this end, the
Plan provides for the grant of stock options, restricted stock and restricted
stock units in accordance with the terms hereof. Stock options granted under the
Plan may be non-qualified stock options or incentive stock options, as provided
herein.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:
2.1 "affiliate" of, or person "affiliated" with, a person means any
company or other trade or business that controls, is controlled by or is under
common control with such person within the meaning of Rule 405 of Regulation C
under the Securities Act (as defined herein).
2.2 "Award Agreement" means the stock option agreement, restricted stock
agreement, restricted stock unit agreement or other written agreement between
the Company and a Grantee that evidences and sets out the terms and conditions
of a Grant.
2.3 "Benefit Arrangement" shall have the meaning set forth in Section 14
hereof.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Code" means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended.
2.6 "Committee" means a Committee of, and designated from time to time
by resolution of, the Board, which shall consist of no fewer than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any affiliate, and each of whom shall qualify in all respects as a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act
or any successor rule or regulation. Commencing on the Effective Date, and until
such time as the Board shall determine otherwise, the Committee shall be the
Executive Compensation Committee of the Board.
2.7 "Company" means CarrAmerica Realty Corporation.
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2.8 "Effective Date" means ______________, 1997, the date on which the
Plan was adopted by the Board.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.10 "Fair Market Value" means the value of a share of Stock, determined
as follows: if on the Grant Date or other determination date the Stock is listed
on an established national or regional stock exchange, is admitted to quotation
on the Nasdaq National Market, or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the
closing price of the Stock on such exchange or in such market (the highest such
closing price if there is more than one such exchange or market) on the Grant
Date or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on such trading day)
or, if no sale of Stock is reported for such trading day, on the next preceding
day on which any sale shall have been reported. If the Stock is not listed on
such an exchange, quoted on such system or traded on such a market, Fair Market
Value shall be the value of the Stock as determined by the Committee in good
faith.
2.11 "Grant" means an award of an Option, Restricted Stock or Restricted
Stock Units under the Plan.
2.12 "Grant Date" means the date as of which the Committee approves a
Grant.
2.13 "Grantee" means a person who receives or holds an Option,
Restricted Stock or Restricted Stock Units under the Plan.
2.14 "Incentive Stock Option" means an "incentive stock option" within
the meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.15 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.16 "Option Period" means the period during which Options may be
exercised as set forth in Section 11 hereof.
2.17 "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.18 "Other Agreement" shall have the meaning set forth in Section 13
hereof.
2.19 "Plan" means the CarrAmerica Realty Corporation 1997 Stock Option
and Incentive Plan.
2.20 "Reporting Person" means a person who is required to file reports
under Section 16(a) of the Exchange Act.
2.21 "Restricted Period" means the period during which Restricted Stock
or Restricted Stock Units are subject to restrictions or conditions pursuant to
Section 12.2 hereof.
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2.22 "Restricted Stock" means shares of Stock, awarded to a Grantee
pursuant to Section 12 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.23 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant
to Section 12 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
2.24 "Securities Act" means the Securities Act of 1933, as now in effect
or as hereafter amended.
2.25 "Service Provider" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
provider or affiliate of the Company, and employees of any of the foregoing, as
such persons may be designated from time to time by the Committee pursuant to
Section 6 hereof.
2.26 "Stock" means the common stock, par value $0.10 per share, of the
Company.
2.27 "Subsidiary" means Carr Realty, L.P., CarrAmerica Realty, L.P.,
CarrAmerica Realty Services, Inc., CarrAmerica Realty LP Holdings, Inc.,
CarrAmerica Realty GP Holdings, Inc. and any "subsidiary corporation" of the
Company within the meaning of Section 425(f) of the Code.
2.28 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in Section 11.2 hereof.
3. ADMINISTRATION OF THE PLAN
3.1 General. The Plan shall be administered by the Committee. The Board
may remove members, add members, and fill vacancies on the Committee from time
to time, all in accordance with the Company's articles of incorporation and
by-laws and applicable law; provided, however, that each member of the Committee
shall at all times qualify in all respects as a "non-employee director" within
the meaning of Rule 16b-3 under the Exchange Act or any successor rule or
regulation. Notwithstanding the foregoing, to the extent that shares of Stock
are then available for grant and issuance under the Plan, the President of the
Company, acting on behalf of the Board of Directors, shall have the authority to
grant to employees of or consultants to the Company options to purchase such
number of shares of Stock as determined by the Committee from time to time, at
such times and on such terms as are set forth in or determined pursuant to the
Plan.
3.2 Plenary Authority of the Committee. The Committee shall have such
powers and authorities related to the administration of the Plan as are
consistent with the Company's articles of incorporation and by-laws and
applicable law. The Committee shall have full power and authority to take all
actions and to make all determinations required or provided for under the Plan,
any Grant or any Award Agreement, and shall have full power and authority to
take all such other actions and determinations not inconsistent with the
specific terms and provisions of the Plan that the Committee deems to be
necessary or appropriate to the administration of the Plan, any Grant or any
Award Agreement. All such actions and determinations shall be by the affirmative
vote of a majority of the members of the Committee present at a meeting or by
unanimous consent of the Committee executed in writing in accordance with the
Company's articles of incorporation and by-laws and applicable law. The
interpretation and construction by the Committee of any provision of the Plan,
any Grant or any Award Agreement shall be final and conclusive.
3.3 Grants. Subject to the other terms and conditions of the Plan, the
Committee shall have full and final authority (i) to designate Grantees, (ii) to
determine the type or types of Grant to be made to a Grantee, (iii) to determine
the number of shares of Stock to be subject to a Grant, (iv) to establish the
terms and conditions of each Grant (including, but not limited to, the exercise
price of any Option,
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the nature and duration of any restriction or condition (or provision for lapse
thereof) relating to the vesting, exercise, transfer, or forfeiture of a Grant
or the shares of Stock subject thereto, and any terms or conditions that may be
necessary to qualify Options as Incentive Stock Options), (v) to prescribe the
form of each Award Agreement evidencing a Grant, and (vi) to amend, modify, or
supplement the terms of any outstanding Grant. Such authority specifically
includes the authority, in order to effectuate the purposes of the Plan but
without amending the Plan, to modify Grants to eligible individuals who are
foreign nationals or are individuals who are employed outside the United States
to recognize differences in local law, tax policy, or custom. As a condition to
any subsequent Grant, the Committee shall have the right, at its discretion, to
require Grantees to return to the Company Grants previously awarded under the
Plan. Subject to the terms and conditions of the Plan, any such new Grant shall
be upon such terms and conditions as are specified by the Committee at the time
the new Grant is made.
3.4 No Liability. No member of the Board or of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Grant or Award Agreement.
3.5 Applicability of Rule 16b-3. Those provisions of the Plan that make
express reference to Rule 16b-3 under the Exchange Act shall apply only to
Reporting Persons.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 16 hereof, the number of
shares of Stock available for issuance under the Plan shall be 3,000,000. Stock
issued or to be issued under the Plan shall be authorized but unissued shares.
If any shares covered by a Grant are not purchased or are forfeited, or if a
Grant otherwise terminates without delivery of any Stock subject thereto, then
the number of shares of Stock counted against the aggregate number of shares
available under the Plan with respect to such Grant shall, to the extent of any
such forfeiture or termination, again be available for making Grants under the
Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1 Effective Date. The Plan shall be effective as of the Effective
Date, subject to approval of the Plan within one year of the Effective Date, by
a majority of the votes cast on the proposal at a meeting of shareholders,
provided that the total votes cast represent a majority of all shares entitled
to vote. Upon approval of the Plan by the shareholders of the Company as set
forth above, all Grants made under the Plan on or after the Effective Date shall
be fully effective as if the shareholders of the Company had approved the Plan
on the Effective Date. If the shareholders fail to approve the Plan within one
year after the Effective Date, any Grants made hereunder shall be null and void
and of no effect.
5.2 Term. The Plan has no termination date; however, no Incentive Stock
Option may be granted on or after the tenth anniversary of the Effective Date.
6. OPTION GRANTS
6.1 Company or Subsidiary Employees. Grants (including Grants of
Incentive Stock Options) may be made under the Plan to any employee of the
Company or of any Subsidiary, including any such employee who is an officer or
director of the Company or of any Subsidiary, as the Committee shall determine
and designate from time to time.
6.2 Successive Grants. An eligible person may receive more than one
Grant, subject to such restrictions as are provided herein.
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7. LIMITATIONS ON GRANTS
7.1 Limitation on Shares of Stock Subject to Grants. The maximum number
of shares of Stock subject to Options that can be awarded under the Plan to any
person eligible for a Grant under Section 6 hereof is 500,000 per year. The
maximum number of shares of Restricted Stock that can be awarded under the Plan
(including for this purpose any shares of Stock represented by Restricted Stock
Units) to any person eligible for a Grant under Section 6 hereof is 500,000 per
year.
7.2 Limitations on Incentive Stock Options. An Option shall constitute
an Incentive Stock Option only (i) if the Grantee of such Option is an employee
of the Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the shares of Stock with respect to which all Incentive Stock Options held by
such Grantee become exercisable for the first time during any calendar year
(under the Plan and all other plans of the Grantee's employer and its
affiliates) does not exceed $100,000. This limitation shall be applied by taking
Options into account in the order in which they were granted.
8. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award
Agreement, to be executed by the Company and by the Grantee, in such form or
forms as the Committee shall from time to time determine. Award Agreements
granted from time to time or at the same time need not contain similar
provisions but shall be consistent with the terms of the Plan. Each Award
Agreement evidencing a Grant of Options shall specify whether such Options are
intended to be non-qualified stock options or Incentive Stock Options.
9. OPTION PRICE
The Option Price of each Option shall be fixed by the Committee and
stated in the Award Agreement evidencing such Option. The Option Price shall be
the aggregate Fair Market Value on the Grant Date of the shares of Stock subject
to the Option or such other price as the Committee, in its discretion, shall
determine; provided, however, that in the event that a Grantee would otherwise
be ineligible to receive an Incentive Stock Option by reason of the provisions
of Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than
ten percent of the Company's outstanding Stock), the Option Price of an Option
granted to such Grantee that is intended to be an Incentive Stock Option shall
be not less than the greater of the par value of a share of Stock or 110 percent
of the Fair Market Value of a share of Stock on the Grant Date. In no case shall
the Option Price of any Option be less than the par value of a share of Stock.
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1 Vesting and Option Period. Subject to Section 10.2 hereof, each
Option granted under the Plan shall become exercisable at such times and under
such conditions as shall be determined by the Committee and stated in the Award
Agreement. For purposes of this Section 10.1, fractional numbers of shares of
Stock subject to an Option shall be rounded down to the next nearest whole
number. The period during which any Option shall be exercisable shall constitute
the "Option Period" with respect to such Option.
10.2 Term. Each Option granted under the Plan shall terminate, and all
rights to purchase shares of Stock thereunder shall cease, upon the expiration
of ten years from the date such Option is granted, or under such circumstances
and on such date prior thereto as is set forth in the Plan or as may be fixed by
the Committee and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the outstanding Stock), an Option
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granted to such Grantee that is intended to be an Incentive Stock Option shall
not be exercisable after the expiration of five years from its Grant Date.
10.3 Acceleration. Any limitation on the exercise of an Option contained
in any Award Agreement may be rescinded, modified or waived by the Committee, in
its sole discretion, at any time and from time to time after the Grant Date of
such Option, so as to accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option shall be exercisable
in whole or in part prior to the date the Plan is approved by the shareholders
of the Company as provided in Section 5.1 hereof.
10.4 Termination of Employment or Other Relationship. Upon the
termination of a Grantee's employment with the Company other than by reason of
death or "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code), any Option or portion thereof held by such Grantee that
has not vested in accordance with the provisions of Section 10.1 hereof shall
terminate immediately, and any Option or portion thereof that has vested in
accordance with the provisions of Section 10.1 hereof but has not been exercised
shall terminate at the close of business on the 365th day following the
Grantee's termination of employment, unless the Committee, in its discretion,
extends the period during which the Option may be exercised (which period may
not be extended beyond the original term of the Option). Upon termination of an
Option or portion thereof, the Grantee shall have no further right to purchase
shares of Stock pursuant to such Option or portion thereof. Whether a leave of
absence or leave on military or government service shall constitute a
termination of employment for purposes of the Plan shall be determined by the
Committee, which determination shall be final and conclusive. For purposes of
the Plan, a termination of employment, service or other relationship shall not
be deemed to occur if the Grantee is immediately thereafter a director of the
Company.
10.5 Rights in the Event of Death. If a Grantee dies while employed by
the Company, all Options granted to such Grantee shall fully vest on the date of
death, and the executors or administrators or legatees or distributees of such
Grantee's estate shall have the right, at any time within one year after the
date of such Grantee's death (or such longer period as the Committee, in its
discretion, may determine prior to the expiration of such one-year period) and
prior to termination of the Option pursuant to Section 10.2 above, to exercise
any Option held by such Grantee at the date of such Grantee's death.
10.6 Rights in the Event of Disability. If a Grantee terminates
employment with the Company by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Grantee, such
Grantee's Options shall continue to vest, and shall be exercisable to the extent
that they are vested, for a period of one year after such termination of
employment or service (or such longer period as the Committee, in its
discretion, may determine prior to the expiration of such one-year period),
subject to earlier termination of the Option as provided in Section 10.2 above.
Whether a termination of employment or service is to be considered by reason of
"permanent and total disability" for purposes of the Plan shall be determined by
the Committee, which determination shall be final and conclusive.
10.7 Limitations on Exercise of Option. Notwithstanding any other
provision of the Plan, in no event may any Option be exercised, in whole or in
part, prior to the date the Plan is approved by the shareholders of the Company
as provided herein, or after ten years following the date upon which the Option
is granted, or after the occurrence of an event referred to in Section 16 hereof
which results in termination of the Option.
10.8 Method of Exercise. An Option that is exercisable may be exercised
by the Grantee's delivery to the Company of written notice of exercise on any
business day, at the Company's principal office, addressed to the attention of
the Committee. Such notice shall specify the number of shares of Stock with
respect to which the Option is being exercised and shall be accompanied by
payment in full
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of the Option Price of the shares for which the Option is being exercised. The
minimum number of shares of Stock with respect to which an Option may be
exercised, in whole or in part, at any time shall be the lesser of (i) 100
shares or such lesser number set forth in the applicable Award Agreement and
(ii) the maximum number of shares available for purchase under the Option at the
time of exercise. Payment of the Option Price for the shares purchased pursuant
to the exercise of an Option shall be made (i) in cash or in cash equivalents;
(ii) through the tender to the Company of shares of Stock, which shares shall be
valued, for purposes of determining the extent to which the Option Price has
been paid thereby, at their Fair Market Value on the date of exercise; or (iii)
by a combination of the methods described in (i) and (ii). The Committee may
provide, by inclusion of appropriate language in an Award Agreement, that
payment in full of the Option Price need not accompany the written notice of
exercise provided that the notice of exercise directs that the certificate or
certificates for the shares of Stock for which the Option is exercised be
delivered to a licensed broker acceptable to the Company as the agent for the
individual exercising the Option and, at the time such certificate or
certificates are delivered, the broker tenders to the Company cash (or cash
equivalents acceptable to the Company) equal to the Option Price for the shares
of Stock purchased pursuant to the exercise of the Option plus the amount (if
any) of federal and/or other taxes which the Company may in its judgment, be
required to withhold with respect to the exercise of the Option. An attempt to
exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Unless otherwise stated in the applicable
Award Agreement, an individual holding or exercising an Option shall have none
of the rights of a shareholder (for example, the right to receive cash or
dividend payments or distributions attributable to the subject shares of Stock
or to direct the voting of the subject shares of Stock) until the shares of
Stock covered thereby are fully paid and issued to him. Except as provided in
Section 16 hereof, no adjustment shall be made for dividends, distributions or
other rights for which the record date is prior to the date of such issuance.
10.9 Delivery of Stock Certificates. Promptly after the exercise of an
Option by a Grantee and the payment in full of the Option Price, such Grantee
shall be entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject to the Option.
11. TRANSFERABILITY OF OPTIONS
Each Option granted pursuant to this Plan shall, during a Grantee's
lifetime, be exercisable only by the Grantee or his or her permitted
transferees, and neither the Option nor any right thereunder shall be
transferable by the Grantee, by operation of law or otherwise, other than as may
be provided in the Award Agreement evidencing such Option or as may be provided
by will or the laws of descent and distribution. Except as may be provided in
the Award Agreement evidencing an Option, no Option shall be pledged or
hypothecated (by operation of law or otherwise) or subject to execution,
attachment or similar processes.
12. RESTRICTED STOCK
12.1 Grant of Restricted Stock or Restricted Stock Units. The Committee
may from time to time grant Restricted Stock or Restricted Stock Units to
persons eligible to receive Grants under Section 6 hereof, subject to such
restrictions, conditions and other terms as the Committee may determine.
12.2 Restrictions. At the time a Grant of Restricted Stock or Restricted
Stock Units is made, the Committee shall establish a period of time (the
"Restricted Period") applicable to such Restricted Stock or Restricted Stock
Units. Each Grant of Restricted Stock or Restricted Stock Units may be subject
to a different Restricted Period. The Committee may, in its sole discretion, at
the time a Grant of Restricted Stock or Restricted Stock Units is made,
prescribe restrictions in addition to or other than the expiration of the
Restricted Period, including the satisfaction of corporate or individual
performance objectives, which may be applicable to all or any portion of the
Restricted Stock or Restricted Stock Units. Such performance objectives shall be
established in writing by the Committee prior to the
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ninetieth day of the year in which the Grant is made and while the outcome is
substantially uncertain. Performance objectives shall be based on Stock price,
market share, sales, earnings per share, return on equity or costs. Performance
objectives may include positive results, maintaining the status quo or limiting
economic losses. Subject to the second sentence of this Section 12.2, the
Committee also may, in its sole discretion, shorten or terminate the Restricted
Period or waive any other restrictions applicable to all or a portion of the
Restricted Stock or Restricted Stock Units. Neither Restricted Stock nor
Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Restricted Period or prior to the
satisfaction of any other restrictions prescribed by the Committee with respect
to such Restricted Stock or Restricted Stock Units.
12.3 Restricted Stock Certificates. The Company shall issue, in the name
of each Grantee to whom Restricted Stock has been granted, stock certificates
representing the total number of shares of Restricted Stock granted to the
Grantee, as soon as reasonably practicable after the Grant Date. The Secretary
of the Company shall hold such certificates for the Grantee's benefit until such
time as the Restricted Stock is forfeited to the Company, or the restrictions
lapse.
12.4 Rights of Holders of Restricted Stock. Unless the Committee
otherwise provides in an Award Agreement, holders of Restricted Stock shall have
the right to vote such Stock and the right to receive any dividends declared or
paid with respect to such Stock. The Committee may provide that any dividends
paid on Restricted Stock must be reinvested in shares of Stock, which may or may
not be subject to the same vesting conditions and restrictions applicable to
such Restricted Stock. All distributions, if any, received by a Grantee with
respect to Restricted Stock as a result of any stock split, stock dividend,
combination of shares, or other similar transaction shall be subject to the
restrictions applicable to the original Grant.
12.5 Rights of Holders of Restricted Stock Units. Unless the Committee
otherwise provides in an Award Agreement, holders of Restricted Stock Units
shall have no rights as stockholders of the Company. The Committee may provide
in an Award Agreement evidencing a Grant of Restricted Stock Units that the
holder of such Restricted Stock Units shall be entitled to receive, upon the
Company's payment of a cash dividend on its outstanding Stock, a cash payment
for each Restricted Stock Unit held equal to the per-share dividend paid on the
Stock. Such Award Agreement may also provide that such cash payment will be
deemed reinvested in additional Restricted Stock Units at a price per unit equal
to the Fair Market Value of a share of Stock on the date that such dividend is
paid.
12.6 Termination of Employment. Upon the termination of a Grantee's
employment with the Company other than by reason of death or "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code), any
Restricted Stock or Restricted Stock Units held by such Grantee that has not
vested, or with respect to which all applicable restrictions and conditions have
not lapsed, shall immediately be deemed forfeited, unless the Committee, in its
discretion, determines otherwise. Upon forfeiture of Restricted Stock or
Restricted Stock Units, the Grantee shall have no further rights with respect to
such Grant, including but not limited to any right to vote Restricted Stock or
any right to receive dividends with respect to shares of Restricted Stock or
Restricted Stock Units. Whether a leave of absence or leave on military or
government service shall constitute a termination of employment for purposes of
the Plan shall be determined by the Committee, which determination shall be
final and conclusive. For purposes of the Plan, a termination of employment,
service or other relationship shall not be deemed to occur if the Grantee is
immediately thereafter a director of the Company.
12.7 Rights in the Event of Death. If a Grantee dies while employed by
the Company, all Restricted Stock or Restricted Stock Units granted to such
Grantee shall fully vest on the date of death, and the shares of Stock
represented thereby shall be deliverable in accordance with the terms of the
Plan to the executors, administrators, legatees or distributees of the Grantee's
estate.
12.8 Rights in the Event of Disability. If a Grantee terminates
employment with the Company by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of
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the Code) of such Grantee, such Grantee's Restricted Stock or Restricted Stock
Units shall continue to vest in accordance with the applicable Award Agreement
for a period of one year after such termination of employment or service (or
such longer period as the Committee, in its discretion, may determine prior to
the expiration of such one-year period), subject to the earlier forfeiture of
such Restricted Stock or Restricted Stock Units in accordance with the terms of
the applicable Award Agreement. Whether a termination of employment or service
is to be considered by reason of "permanent and total disability" for purposes
of the Plan shall be determined by the Committee, which determination shall be
final and conclusive.
12.9 Delivery of Stock and Payment Therefor. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to shares of
Restricted Stock or Restricted Stock Units shall lapse, and, upon payment by the
Grantee to the Company, in cash or by check, of the aggregate par value of the
shares of Stock represented by such Restricted Stock or Restricted Stock Units,
a stock certificate for such shares shall be delivered, free of all such
restrictions, to the Grantee or the Grantee's beneficiary or estate, as the case
may be.
13. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by a
Grantee with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
participants or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee from the Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in clause
(ii) of the preceding sentence, then the Grantee shall have the right, in the
Grantee's sole discretion, to designate those rights, payments, or benefits
under this Plan, any Other Agreements, and any Benefit Arrangements that should
be reduced or eliminated so as to avoid having the payment or benefit to the
Grantee under this Plan be deemed to be a Parachute Payment.
14. REQUIREMENTS OF LAW
14.1 General. The Company shall not be required to sell or issue any
shares of Stock under any Grant if the sale or issuance of such shares would
constitute a violation by the Grantee, any other individual exercising an
Option, or the Company of any provision of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Company shall determine, in
its discretion, that the listing, registration or
9
<PAGE>
qualification of any shares subject to a Grant upon any securities exchange or
under any governmental regulatory body is necessary or desirable as a condition
of, or in connection with, the issuance or purchase of shares hereunder, no
shares of Stock may be issued or sold to the Grantee or any other individual
exercising an Option pursuant to such Grant unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company, and any delay caused thereby shall
in no way affect the date of termination of the Grant. Specifically, in
connection with the Securities Act, upon the exercise of any Option or the
delivery of any shares of Restricted Stock or Stock underlying Restricted Stock
Units, unless a registration statement under such Act is in effect with respect
to the shares of Stock covered by such Grant, the Company shall not be required
to sell or issue such shares unless the Committee has received evidence
satisfactory to it that the Grantee or any other individual exercising an Option
may acquire such shares pursuant to an exemption from registration under the
Securities Act. Any determination in this connection by the Committee shall be
final, binding, and conclusive. The Company may, but shall in no event be
obligated to, register any securities covered hereby pursuant to the Securities
Act. The Company shall not be obligated to take any affirmative action in order
to cause the exercise of an Option or the issuance of shares of Stock pursuant
to the Plan to comply with any law or regulation of any governmental authority.
As to any jurisdiction that expressly imposes the requirement that an Option
shall not be exercisable until the shares of Stock covered by such Option are
registered or are exempt from registration, the exercise of such Option (under
circumstances in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the availability of
such an exemption.
14.2 Rule 16b-3. It is the intent of the Company that Grants pursuant to
the Plan and the exercise of Options granted hereunder will qualify for the
exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any
provision of the Plan or action by the Committee does not comply with the
requirements of Rule 16b-3, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Committee, and shall not affect the
validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the
Board may exercise its discretion to modify this Plan in any respect necessary
to satisfy the requirements of, or to take advantage of any features of, the
revised exemption or its replacement.
15. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Grants have not been
made; provided, however, that the Board shall not, without approval of the
Company's shareholders, amend the Plan such that it does not comply with the
Code. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of the Grantee taking
actions in "competition with the Company," as defined in the applicable Award
Agreement. Furthermore, the Company may annul a Grant if the Grantee is an
employee of the Company or an affiliate and is terminated "for cause" as defined
in the applicable Award Agreement. Except as permitted under this Section 15 or
Section 16 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the Grantee, alter or impair rights or obligations under
any Grant theretofore awarded under the Plan.
10
<PAGE>
16. EFFECT OF CHANGES IN CAPITALIZATION
16.1 Changes in Stock. If the number of outstanding shares of Stock is
increased or decreased or the shares of Stock are changed into or exchanged for
a different number or kind of shares or other securities of the Company on
account of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the Effective
Date, the number and kinds of shares for which Grants of Options, Restricted
Stock and Restricted Stock Units may be made under the Plan shall be adjusted
proportionately and accordingly by the Company. In addition, the number and kind
of shares for which Grants are outstanding shall be adjusted proportionately and
accordingly so that the proportionate interest of the Grantee immediately
following such event shall, to the extent practicable, be the same as
immediately before such event. Any such adjustment in outstanding Options shall
not change the aggregate Option Price payable with respect to shares that are
subject to the unexercised portion of an Option outstanding but shall include a
corresponding proportionate adjustment in the Option Price per share.
16.2 Reorganization in Which the Company Is the Surviving Entity and in
Which No Change of Control Occurs. Subject to Section 16.3 hereof, if the
Company shall be the surviving entity in any reorganization, merger, or
consolidation of the Company with one or more other entities, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation.
Subject to any contrary language in an Award Agreement evidencing a Grant of
Restricted Stock, any restrictions applicable to such Restricted Stock shall
apply as well to any replacement shares received by the Grantee as a result of
the reorganization, merger or consolidation.
16.3 Reorganization, Sale of Assets or Sale of Stock Which Involves a
Change of Control. Upon the dissolution or liquidation of the Company or upon a
merger, consolidation, or reorganization of the Company with one or more other
entities in which the Company is not the surviving entity, or upon a sale of
substantially all of the assets of the Company to another entity, or upon any
transaction (including, without limitation, a merger or reorganization in which
the Company is the surviving entity) approved by the Board that results in any
person or entity (or person or entities acting as a group or otherwise in
concert, owning [fifty percent] or more of the combined voting power of all
classes of securities of the Company, (i) all outstanding shares of Restricted
Stock and Restricted Stock Units shall be deemed to have vested, and all
restrictions and conditions applicable to such shares of Restricted Stock and
Restricted Stock Units shall be deemed to have lapsed, immediately prior to the
occurrence of such event, and (ii) all Options outstanding hereunder shall
become immediately exercisable for a period of fifteen days immediately prior to
the scheduled consummation of the event. Any exercise of an Option during such
fifteen-day period shall be conditioned upon the consummation of the event and
shall be effective only immediately before the consummation of the event. Upon
consummation of any such event, the Plan and all outstanding but unexercised
Options shall terminate, except to the extent provision is made in writing in
connection with such transaction for the continuation of the Plan or the
assumption of such Options theretofore granted, or for the substitution for such
Options of new options covering the stock of a successor Company, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares or units and exercise prices, in which event the Plan and Options
theretofore granted shall continue in the manner and under the terms so
provided. The Committee shall send written notice of an event that will result
in such a termination to all individuals who hold Options not later than the
time at which the Company gives notice thereof to its shareholders.
11
<PAGE>
16.4 Adjustments. Adjustments under this Section 16 related to shares of
Stock or securities of the Company shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. No
fractional shares or other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share.
16.5 No Limitations on Company. The making of Grants pursuant to the
Plan shall not affect or limit in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations, or changes of its capital
or business structure or to merge, consolidate, dissolve, or liquidate, or to
sell or transfer all or any part of its business or assets.
17. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company. In addition, notwithstanding anything contained in the Plan to the
contrary, unless otherwise stated in the applicable Award Agreement, no Grant
awarded under the Plan shall be affected by any change of duties or position of
the Optionee, so long as such Grantee continues to be a director, officer,
consultant or employee of the Company. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual obligation
to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to require
the Company to transfer any amounts to a third party trustee or otherwise hold
any amounts in trust or escrow for payment to any participant or beneficiary
under the terms of the Plan. No Grantee shall have any of the rights of a
shareholder with respect to the shares of Stock subject to an Option except to
the extent the certificates for such shares of Stock shall have been issued upon
the exercise of the Option.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
19. WITHHOLDING TAXES
The Company or a Subsidiary, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state,
or local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to Restricted Stock or
Restricted Stock Units or upon the issuance of any shares of Stock upon the
exercise of an Option. At the time of such vesting, lapse, or exercise, the
Grantee shall pay to the Company or the Subsidiary, as the case may be, any
amount that the Company or the Subsidiary may reasonably determine to be
necessary to satisfy such withholding obligation. Subject to the prior approval
of the Company or the Subsidiary, which may be withheld by the Company or the
Subsidiary, as the case may be, in its sole discretion, the Grantee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company or the
Subsidiary to withhold shares of Stock otherwise issuable to the Grantee or (ii)
by delivering to the Company or the Subsidiary shares of Stock already owned by
the Grantee. The shares of Stock so delivered or withheld shall have an
aggregate Fair Market Value equal to such withholding obligations. The Fair
Market Value of the shares of Stock used to satisfy such withholding obligation
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<PAGE>
shall be determined by the Company or the Subsidiary as of the date that the
amount of tax to be withheld is to be determined. A Grantee who has made an
election pursuant to this Section 19 may satisfy his or her withholding
obligation only with shares of Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting, or other similar requirements.
20. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
21. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Committee,
in its sole discretion.
22. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
23. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined
to be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
24. GOVERNING LAW
The validity and construction of this Plan and the instruments
evidencing the Grants awarded hereunder shall be governed by the laws of the
State of Maryland.
* * *
The Plan was duly adopted and approved by the Board of Directors of the
Company as of the ____ day of ____________, 1997.
/S/ ___________________________
[Name]
[Title]
The Plan was duly approved by the shareholders of the Company on the
____ day of ____________, 1997.
/S/ ___________________________
[Name]
[Title]
13
================================================================================
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
dated as of August 23, 1996
among
CARRAMERICA REALTY CORPORATION,
CARR REALTY, L.P.,
CARRAMERICA REALTY, L.P.,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Bank and as Lead Agent for the Banks,
COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH,
as Bank and as Co-Agent for the Banks,
NATIONSBANK, N.A.
as Bank and as Co-Agent for the Banks,
WELLS FARGO REALTY ADVISORS FUNDING, INCORPORATED,
as Bank and as Co-Agent for the Banks,
and
THE BANKS LISTED HEREIN
================================================================================
<PAGE>
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of
August 23, 1996, among CARRAMERICA REALTY CORPORATION ("Carr"), CARR REALTY,
L.P. ("Carr LP"; Carr and Carr LP each, a "Borrower" and collectively, the
"Borrowers"), CARRAMERICA REALTY, L.P. ("CarrAmerica LP"), MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Bank and as Lead Agent for the Banks, COMMERZBANK
AKTIENGESELLSCHAFT, NEW YORK BRANCH, as Bank and as Co-Agent for the Banks,
NATIONSBANK, N.A., as Bank and as Co-Agent for the Banks, WELLS FARGO REALTY
ADVISORS FUNDING, INCORPORATED, as Bank and as Co-Agent for the Banks, and the
BANKS listed on the signature pages hereof (the "Banks").
W I T N E S S E T H:
WHEREAS, the Borrowers and Lead Agent entered into the Revolving
Credit Agreement, dated as of May 23, 1996 (the "Existing Credit Agreement");
and
WHEREAS, the parties hereto have agreed to amend and restate the
terms and conditions contained in the Existing Credit Agreement in their
entirety as hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
I. The Existing Credit Agreement is hereby modified so that all
of the terms and conditions of the aforesaid Existing Credit Agreement shall be
restated in their entirety as set forth herein, and the Borrowers and
CarrAmerica LP agree to comply with and be subject to all of the terms,
covenants and conditions of this Agreement.
II. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and assigns, and
shall be deemed to be effective as of the date hereof.
<PAGE>
III. Any reference in the Notes, any other Loan Document or any
other document executed in connection with this Agreement to the Existing Credit
Agreement shall be deemed to refer to this Agreement.
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein,
have the following meanings:
"Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.6(b).
"Administrative Questionnaire" means, with respect to each Bank,
an administrative questionnaire in the form prepared by the Lead Agent and
submitted to the Lead Agent (with a copy to the Borrowers) duly completed by
such Bank.
"Agreement" means this Revolving Credit Agreement as the same
may from time to time hereafter be modified, supplemented or amended.
"Allocated Carr Borrowing Base Property Loan Amount" means as to
any Carr Borrowing Base Property, an amount equal to the product from time to
time of (x) the outstanding principal balance of the Tranche A Loans at the time
in question, and (y) a fraction, the numerator of which is the amount (the "Carr
Numerator Amount") indicated next to such Carr Borrowing Base Property listed on
Exhibit B-1 attached hereto and made a part hereof and such other amounts
hereafter determined as hereinafter set forth upon the addition of any New
Acquisition or Real Property
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<PAGE>
Asset to the Carr Borrowing Base Properties, and the denominator of which is the
aggregate of the Carr Numerator Amounts with respect to all the Carr Borrowing
Base Properties at the time in question. Effective upon the release of any Carr
Borrowing Base Property in accordance with the terms of this Agreement,
"Allocated Carr Borrowing Base Property Loan Amount" shall no longer be deemed
to include the amount corresponding to such released Carr Borrowing Base
Property. Upon the addition of any New Acquisition or Real Property Asset to the
Carr Borrowing Base Properties, the amount with respect thereto for purposes of
determining the numerator and the denominator in clause (y), shall be equal to
the purchase price thereof if the same shall have been purchased within one year
of such addition.
"Allocated Carr LP Borrowing Base Property Loan Amount" means as
to any Carr LP Borrowing Base Property, an amount equal to the product from time
to time of (x) the outstanding principal balance of the Tranche B Loans at the
time in question, and (y) a fraction, the numera- tor of which is the amount
(the "Carr LP Numerator Amount") indicated next to such Carr LP Borrowing Base
Property listed on Exhibit B-2 attached hereto and made a part hereof and such
other amounts hereafter determined as hereinafter set forth upon the addition of
any New Acquisition or Real Property Asset to the Carr LP Borrowing Base
Properties, and the denominator of which is the aggregate of the Carr LP
Numerator Amounts with respect to all the Carr LP Borrowing Base Properties at
the time in question. Effective upon the release of any Carr LP Borrowing Base
Property in accordance with the terms of this Agreement, "Allocated Carr LP
Borrowing Base Property Loan Amount" shall no longer be deemed to include the
amount corresponding to such released Carr LP Borrowing Base Property. Upon the
addition of any New Acquisition or Real Property Asset to the Carr LP Borrowing
Base Properties, the amount with respect thereto for purposes of determining the
numerator and the denominator in clause (y), shall be equal to the purchase
price thereof if the same shall have been purchased within one year of such
addition.
"Annual EBITDA" means, measured as of the last day of each
calendar quarter, an amount derived from (i) total revenues relating to all Real
Property Assets of the Borrowers and their Consolidated Subsidiaries or to the
Borrowers' interest in Minority Holdings for the previous four consecutive
calendar quarters including the quarter then ended, on a cash basis, plus (ii)
interest and other income of the Borrowers and their Consolidated Subsidiaries,
including, without limitation, real estate service revenues, for such period,
less (iii) total operating expenses and other expenses relating to such Real
Property Assets and to the Borrowers' interest in Minority Holdings for such
period (other than interest, taxes,
3
<PAGE>
depreciation, amortization, and other non-cash items), less (iv) total corporate
operating expenses (including general overhead expenses) and other expenses of
the Borrowers, their Consolidated Subsidiaries and the Borrowers' interest in
Minority Holdings (other than interest, taxes, depreciation, amortization and
other non-cash items), for such period.
"Applicable Interest Rate" means the lesser of (x) the rate at
which the interest rate applicable to any floating rate Indebtedness could be
fixed, at the time of calculation, by the applicable Borrower entering into an
unsecured interest rate swap agreement (or, if such rate is incapable of being
fixed by entering into an unsecured interest rate swap agreement at the time of
calculation, a reasonably determined fixed rate equivalent), and (y) the rate at
which the interest rate applicable to such floating rate Indebtedness is
actually capped, at the time of calculation, if such Borrower has entered into
an interest rate cap agreement with respect thereto.
"Applicable Lending Office" means, with respect to any Bank, (i)
in the case of its Base Rate Loans, its Domestic Lending Office and (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
4
<PAGE>
"Applicable Margin" means, with respect to each Loan, the
respective percentages per annum determined, at any time from and after the
receipt by Carr of two (2) Investment Grade Ratings, based on the range into
which the rating or "shadow" rating on Carr's senior long-term unsecured debt
then falls, in accordance with the following table. Any change in Carr's
Investment Grade Rating causing it to move to a different range on the table
shall effect an immediate change in the Applicable Margin. In the event that
Carr receives two (2) Investment Grade Ratings that are not equivalent, the
Applicable Margin shall be determined by the lower of such two (2) Investment
Grade Ratings, at least one of which shall be an Investment Grade Rating from
S&P or Moody's. In the event Carr receives more than two (2) ratings (from S&P,
Moody's, Duff & Phelps or Fitch) and such ratings are not equivalent, the
Applicable Margin shall be determined by the lower of the two highest ratings;
provided that each of said two (2) highest ratings shall be Investment Grade
Ratings and at least one of which shall be an Investment Grade Rating from S&P
or Moody's.
Range of Applicable
Carr's Margin for Applicable
Credit Rating Base Rate Margin for Euro
(S&P/Moody's Loans Dollar Loans
Ratings) (% per annum) (% per annum)
-------- ------------- -------------
BBB-/Baa3 .125 1.625
BBB/Baa2 0 1.50
The Applicable Margin for so long as Carr shall not have
obtained two Investment Grade Ratings (at least one of which shall be from S&P
or Moody's) or after Borrower loses its Investment Grade Rating, shall be as
follows:
Applicable
Margin for Applicable
Base Rate Margin for Euro
Loans Dollar Loans
(% per annum) (% per annum)
------------- -------------
.25 1.75
5
<PAGE>
Lead Agent shall notify the Banks in writing promptly after it
obtains knowledge of any change in Carr's Investment Grade Rating which shall
effect a change in the Applicable Margin.
"Assignee" has the meaning set forth in Section 9.6(c).
"Bank" means each bank listed on the signature pages hereof,
each Assignee which becomes a Bank pursuant to Section 9.6(c), and their
respective successors.
"Bankruptcy Code" means Title 11 of the United States Code,
entitled "Bankruptcy", as amended from time to time, and any successor statute
or statutes.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means a Loan to be made by a Bank as a Base
Rate Loan in accordance with the applicable Notice of Borrowing or pursuant to
Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means either (i) Carr and its successors or (ii) Carr
LP and its successors, and, collectively, "Borrowers" shall mean both Borrowers.
"Borrowers LTV Ratio" means the ratio, expressed as a percentage
and calculated on a quarterly basis by Carr, of the aggregate amount of the
Loans outstanding as of the date of determination, to the Borrowing Base
Properties Value as of the date of determination.
"Borrowing" means a borrowing hereunder consisting of Loans made
to the Borrowers or CarrAmerica LP at the same time by the Banks pursuant to
Article II. A Borrowing is a "Domestic Borrowing" if such Loans are Base Rate
Loans or a
6
<PAGE>
"Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans.
"Borrowing Base Net Operating Cash Flow" means as of any date of
determination with respect to the Borrowing Base Properties, Property Income for
the previous four consecutive quarters including the quarter then ended, but
less (x) Property Expenses with respect to the Borrowing Base Properties for the
previous four consecutive quarters including the quarter then ended and (y) the
greater of (i) Capital Expenditures which are not related to new construction
for the previous four consecutive quarters including the quarter then ended and
(ii) appropriate reserves for replacements of not less than $2.29 per square
foot per annum for each Borrowing Base Property. For purposes of Section 5.1(m)
hereof, the calculation of Borrowing Base Net Operating Cash Flow shall be made
separately as to each Borrowing Base Property.
"Borrowing Base Properties" means, as of any date, collectively
the Carr Borrowing Base Properties and the Carr LP Borrowing Base Properties.
"Borrowing Base Properties Minimum Debt Service Coverage" means
as of the last day of each calendar quarter, Borrowing Base Net Operating Cash
Flow equal to or greater than 200% of Pro-Forma Debt Service.
"Borrowing Base Properties Value" means the aggregate of (i) the
Carr Borrowing Base Properties Value and (ii) the Carr LP Borrowing Base
Properties Value.
"Capital Expenditures" means, for any period, the sum of all
expenditures (whether paid in cash or accrued as a liability) by Carr or Carr
LP, as applicable, which are capitalized on the consolidated balance sheet of
such Borrower in conformity with GAAP, but less all expenditures made with
respect to the acquisition by Carr or Carr LP and their Consolidated
Subsidiaries of any interest in real property within nine months after the date
such interest in real property is acquired.
"Carr Borrowing Base Properties" means, as of any date, the Real
Property Assets listed in Exhibit B-1 attached hereto and made a part hereof,
each of which is 100% owned in fee (or leasehold in the case of assets listed as
such on Exhibit B-1) by Carr or any Consolidated Subsidiary
7
<PAGE>
of Carr (other than Carr LP) and each of which is not subject to any Lien (other
than Permitted Liens), subject to adjustment as set forth herein, together with
all New Acquisitions or Real Property Assets which have become part of the Carr
Borrowing Base Properties as of such date in accordance with Section 3.3 and
excluding any Carr Borrowing Base Properties which have been released from this
Agreement and the other Loan Documents as of such date in accordance with
Sections 5.13 and 5.14 and all other terms of this Agreement.
"Carr Borrowing Base Properties Value" means the aggregate of
(i) with respect to the Carr Borrowing Base Properties acquired (A) on or before
January 1, 1996 or (B) after January 1, 1996 and such Carr Borrowing Base
Property has been owned by Carr or any of its Consolidated Subsidiaries for a
period of at least one year, the quotient of (x) Net Operating Income with
respect to the Carr Borrowing Base Properties less appropriate reserves for
replacements of not less than $.50 per square foot per annum for each Carr
Borrowing Base Property and (y) 11% and (ii) with respect to the Carr Borrowing
Base Properties acquired after January 1, 1996 and such Carr Borrowing Base
Property has been owned by Carr or any of its Consolidated Subsidiaries for a
period of less than one year, the lesser of (A) the quotient of (x) Net
Operating Income with respect to the Carr Borrowing Base Properties less
appropriate reserves for replacements of not less than $.50 per square foot per
annum for each Carr Borrowing Base Property and (y) 11% and (B) the purchase
price of such Carr Borrowing Base Property.
"Carr LP Borrowing Base Properties" means, as of any date, the
Real Property Assets listed in Exhibit B-2 attached hereto and made a part
hereof, each of which is 100% owned in fee (or leasehold in the case of assets
listed as such on Exhibit B-2) by Carr LP or any Consolidated Subsidiary of Carr
LP and each of which is not subject to any Lien (other than Permitted Liens),
subject to adjustment as set forth herein, together with all New Acquisitions or
Real Property Assets which have become part of the Carr LP Borrowing Base
Properties as of such date in accordance with Section 3.3 and excluding any Carr
LP Borrowing Base Properties which have been released from this Agreement and
the other Loan Documents as of such date in accordance with Sections 5.13 and
5.14 and all other terms of this Agreement.
"Carr LP Borrowing Base Properties Value" means the aggregate of
(i) with respect to the Carr LP Borrowing Base Properties acquired (A) on or
before January 1, 1996 or (B) after January 1, 1996 and such Carr LP Borrowing
Base Property has been owned by Carr LP or any of its Consolidated
8
<PAGE>
Subsidiaries for a period of at least one year, the quotient of (x) Net
Operating Income with respect to the Carr LP Borrowing Base Properties less
appropriate reserves for replacements of not less than $.50 per square foot per
annum for each Carr LP Borrowing Base Property and (y) 11% and (ii) with respect
to the Carr LP Borrowing Base Properties acquired after January 1, 1996 and such
Carr Borrowing Base Property has been owned by Carr or any of its Consolidated
Subsidiaries for a period of less than one year, the lesser of (A) the quotient
of (x) Net Operating Income with respect to the Carr LP Borrowing Base
Properties less appropriate reserves for replacements of not less than $.50 per
square foot per annum for each Carr LP Borrowing Base Property and (y) 11% and
(B) the purchase price of such Carr LP Borrowing Base Property.
"Carr LP LTV Ratio" means the ratio, expressed as a percentage
and calculated on a quarterly basis by Carr LP, of the aggregate amount of the
Tranche B Loans outstanding as of the date of determination, to the Carr LP
Borrowing Base Properties Value as of the date of determination.
"Carr LP Maximum Total Debt Ratio" means the ratio as of the
date of determination of (i) the sum of (x) the aggregate Debt of Carr LP and
its Consolidated Subsidiaries and (y) Carr LP's pro rata share of the Debt of
any Subsidiaries of Carr LP which are not Consolidated Subsidiaries, at the time
of determination to (ii) Carr LP Tangible FMV.
"Carr LP Tangible FMV" means the sum of (x) (i) with respect to
Real Property Assets owned by Carr LP or its Consolidated Subsidiaries for a
period of at least one year, the quotient of Net Operating Income with respect
to such Real Property Assets determined as of the last day of the previous
calendar quarter, as divided by the FMV Cap Rate, (ii) with respect to Real
Property Assets owned by Carr LP or its Consolidated Subsidiaries for a period
of less than six months, the purchase price of such Real Property Assets
and (iii) with respect to Real Property Assets owned by Carr LP or its
Consolidated Subsidiaries for a period of at least six months but less than one
year, the lesser of (A) the purchase price of such Real Property Assets or (B)
the quotient of Property Income attributable to such Real Property Assets
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for the period during which Carr LP or its Consolidated Subsidiaries owned such
Real Property Assets, but less Property Expenses attributable to such Real
Property Assets for the period during which Carr LP or its Consolidated
Subsidiaries owned such Real Property Assets on an annualized basis, as divided
by the FMV Cap Rate and (y) Cash or Cash Equivalents of Carr LP and its
Consolidated Subsidiaries as of the date of determination.
"Carr LTV Ratio" means the ratio, expressed as a percentage and
calculated on a quarterly basis by Carr, of the aggregate amount of the Tranche
A Loans outstanding as of the date of determination, to the Carr Borrowing Base
Properties Value as of the date of determination.
"Carr Maximum Total Debt Ratio" means the ratio as of the date
of determination of (i) the sum of (x) the aggregate Debt of Carr and its
Consolidated Subsidiaries (other than Carr LP) and (y) Carr's pro rata share of
the Debt of any Subsidiaries of Carr which are not Consolidated Subsidiaries, at
the time of determination to (ii) Carr Tangible FMV.
"Carr Tangible FMV" means the sum of (x) (i) with respect to
Real Property Assets owned by Carr or its Consolidated Subsidiaries (other than
Carr LP) for a period of at least one year, the quotient of Net Operating Income
with respect to such Real Property Assets determined as of the last day of the
previous calendar quarter, as divided by the FMV Cap Rate, (ii) with respect to
Real Property Assets owned by Carr or its Consolidated Subsidiaries (other than
Carr LP) for a period of less than six months, the purchase price of such Real
Property Assets and (iii) with respect to Real Property Assets owned by Carr or
its Consolidated Subsidiaries (other than Carr LP) for a period of at least six
months but less than one year, the lesser of (A) the purchase price of such Real
Property Assets or (B) the quotient of Property Income attributable to such Real
Property Assets for the period during which Carr or its Consolidated
Subsidiaries (other than Carr LP) owned such Real Property Assets, but less
Property Expenses attributable to such Real Property Assets for the period
during which Carr or its Consolidated Subsidiaries (other than Carr LP) owned
such Real Property Assets, on an annualized basis, as divided by the FMV Cap
Rate and (y) Cash or Cash Equivalents of Carr and its Consolidated Subsidiaries
(other than Carr LP) as of the date of determination.
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"Cash or Cash Equivalents" means (i) cash, (ii) direct
obligations of the United States Government, including, without limitation,
treasury bills, notes and bonds, (iii) interest bearing or discounted
obligations of Federal agencies and Government sponsored entities or pools of
such instruments offered by banks rated AA or better by S&P or Aa2 by Moody's
and dealers, including, without limitation, Federal Home Loan Mortgage
Corporation participation sale certificates, Government National Mortgage
Association modified pass-through certificates, Federal National Mortgage
Association bonds and notes, Federal Farm Credit System securities, (iv) time
deposits, domestic and Eurodollar certificates of deposit, bankers acceptances,
commercial paper rated at least A-1 by S&P and P-1 by Moody's, and/or guaranteed
by an Aa rating by Moody's, an AA rating by S&P, or better rated credit,
floating rate notes, other money market instruments and letters of credit each
issued by banks which have a long-term debt rating of at least AA by S&P or Aa2
by Moody's, (v) obligations of domestic corporations, including, without
limitation, commercial paper, bonds, debentures, and loan participations, each
of which is rated at least AA by S&P, and/or Aa2 by Moody's, and/or
unconditionally guaranteed by an AA rating by S&P, an Aa2 rating by Moody's, or
better rated credit, (vi) obligations issued by states and local governments or
their agencies, rated at least MIG-1 by Moody's and/or SP-1 by S&P and/or
guaranteed by an irrevocable letter of credit of a bank with a long-term debt
rating of at least AA by S&P or Aa2 by Moody's, (vii) repurchase agreements with
major banks and primary government securities dealers fully secured by U.S.
Government or agency collateral equal to or exceeding the principal amount on a
daily basis and held in safekeeping, and (viii) real estate loan pool
participations, guaranteed by an entity with an AA rating given by S&P or an Aa2
rating given by Moody's, or better rated credit.
"Closing Date" means the date on which the Lead Agent shall have
received the documents specified in or pursuant to Section 3.1.
"Commitment" means, collectively, the Tranche A Commitment and
the Tranche B Commitment with respect to each Bank.
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"Consolidated Subsidiary" means at any date any Subsidiary or
other entity which is consolidated with either Borrower in accordance with GAAP.
"Consolidated Tangible Net Worth" means at any date the
consolidated stockholders' equity of Carr (determined on a book basis), less its
consolidated Intangible Assets, all determined as of such date. For purposes of
this definition "Intangible Assets" means with respect to any such intangible
assets, the amount (to the extent reflected in determining such consolidated
stockholders' equity) of all write-ups subsequent to December 31, 1995 in the
book value of any asset owned by either Borrower or a Consolidated Subsidiary
and (ii) goodwill, patents, trademarks, service marks, trade names, anticipated
future benefit of tax loss carry forwards, copyrights, organization or
developmental expenses and other intangible assets.
"Contingent Obligation" as to any Person means, without
duplication, (i) any contingent obligation of such Person required to be shown
on such Person's balance sheet in accordance with GAAP, and (ii) any obligation
required to be disclosed in the footnotes to such Person's financial statements,
guaranteeing partially or in whole any non-recourse Debt, lease, dividend or
other obligation, exclusive of contractual indemnities (including, without
limitation, any indemnity or price-adjustment provision relating to the purchase
or sale of securities or other assets) and guarantees of non-monetary
obligations (other than guarantees of completion) which have not yet been called
on or quantified, of such Person or of any other Person. The amount of any
Contingent Obligation described in clause (ii) shall be deemed to be (a) with
respect to a guaranty of interest or interest and principal, or operating income
guaranty, the sum of all payments required to be made thereunder (which in the
case of an operating income guaranty shall be deemed to be equal to the debt
service for the note secured thereby), calculated at the Applicable Interest
Rate, through (i) in the case of an interest or interest and principal guaranty,
the stated date of maturity of the obligation (and commencing on the date
interest could first be payable thereunder), or (ii) in the case of an operating
income guaranty, the date through which such guaranty will remain in effect, and
(b) with respect to all guarantees not covered by the preceding clause (a), an
amount equal to the stated or determinable amount of the primary obligation in
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<PAGE>
respect of which such guaranty is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as recorded on the balance sheet and
on the footnotes to the most recent financial statements of the applicable
Borrower required to be delivered pursuant to Section 4.6 hereof.
Notwithstanding anything contained herein to the contrary, guarantees of
completion shall not be deemed to be Contingent Obligations unless and until a
claim for payment or performance has been made thereunder, at which time any
such guaranty of completion shall be deemed to be a Contingent Obligation in an
amount equal to any such claim. Subject to the preceding sentence, (i) in the
case of a joint and several guaranty given by such Person and another Person
(but only to the extent such guaranty is recourse, directly or indirectly to the
applicable Borrower), the amount of the guaranty shall be deemed to be 100%
thereof unless and only to the extent that such other Person has delivered Cash
or Cash Equivalents to secure all or any part of such Person's guaranteed
obligations, (ii) in the case of joint and several guarantees given by a Person
in whom the applicable Borrower owns an interest (which guarantees are
non-recourse to the applicable Borrower), to the extent the guarantees, in the
aggregate, exceed 15% of total real estate investments, the amount in excess of
15% shall be deemed to be a Contingent Obligation of the applicable Borrower,
and (iii) in the case of a guaranty (whether or not joint and several) of an
obligation otherwise constituting Debt of such Person, the amount of such
guaranty shall be deemed to be only that amount in excess of the amount of the
obligation constituting Debt of such Person. Notwithstanding anything contained
herein to the contrary, "Contingent Obligations" shall not be deemed to include
guarantees of Unused Commitments or of construction loans to the extent the same
have not been drawn.
"Debt" of any Person means, without duplication, (A) as shown on
such Person's consolidated balance sheet (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property and, (ii) all
indebtedness of such Person evidenced by a note, bond, debenture or similar
instrument (whether or not disbursed in full in the case of a construction
loan), (B) the face amount of all letters of credit issued for the account of
such Person and, without duplication, all unreimbursed amounts drawn
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<PAGE>
thereunder, (C) all Contingent Obligations of such Person, (D) all payment
obligations of such Person under any interest rate protection agreement
(including, without limitation, any interest rate swaps, caps, floors, collars
and similar agreements) and currency swaps and similar agreements which were not
entered into specifically in connection with Debt set forth in clauses (A), (B)
or (C) hereof. For purposes of this Agreement, Debt (other than Contingent
Obligations) of the applicable Borrower shall be deemed to include only the
applicable Borrower's pro rata share (such share being based upon the applicable
Borrower's percentage ownership interest as shown on the applicable Borrower's
annual audited financial statements) of the Debt of any Person in which the
applicable Borrower, directly or indirectly, owns an interest, provided that
such Debt is nonrecourse, both directly and indirectly, to the applicable
Borrower.
"Debt Service" shall mean, measured as of the last day of each
calendar quarter, an amount equal to the sum of (i) interest (whether accrued,
paid or capitalized) actually payable by either Borrower or the Borrowers on its
Debt for the previous four consecutive quarters including the quarter then
ended, plus (ii) scheduled payments of principal on such Debt, whether or not
paid by either Borrower or the Borrowers (excluding balloon payments) for the
previous four consecutive quarters including the quarter then ended.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Domestic Business Day" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank, its office
located within the United States at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its Domestic
Lending Office) or such other office within the United States as such Bank may
hereafter designate as its Domestic Lending Office by notice to the Borrowers
and the Lead Agent.
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"Due Diligence Package" has the meaning provided in Section 3.3.
"Duff & Phelps" means Duff & Phelps Credit Rating Co. or any
successor thereto.
"Environmental Affiliate" means any partnership, or joint
venture, trust or corporation in which an equity interest is owned by either
Borrower or CarrAmerica LP, either directly or indirectly.
"Environmental Approvals" means any permit, license, approval,
ruling, variance, exemption or other authorization required under applicable
Environmental Laws.
"Environmental Claim" means, with respect to any Person, any
notice, claim, demand or similar communication (written or oral) by any other
Person alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damage, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
(i) the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned by such Person or
(ii) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law, in each case as to which there is a reasonable likelihood
of an adverse determination with respect thereto and which, if adversely
determined, would have a Material Adverse Effect.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
hazardous wastes into the environment including, without limitation, ambient
air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
hazardous wastes or the clean-up or other remediation thereof.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrowers, any Subsidiary and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Borrowers or any Subsidiary, are treated as a single employer under Section 414
of the Internal Revenue Code.
"Euro-Dollar Borrowing" has the meaning set forth in Section
1.3.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrowers and the Lead Agent.
"Euro-Dollar Loan" means a Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Borrowing.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.6(b).
"Event of Default" has the meaning set forth in Section 6.1.
"Extension Date" has the meaning set forth in Section 2.8.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New
16
<PAGE>
York on the Domestic Business Day next succeeding such day, provided that (i) if
such day is not a Domestic Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Domestic Business
Day as so published on the next succeeding Domestic Business Day, and (ii) if no
such rate is so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to Morgan
Guaranty Trust Company of New York on such day on such transactions as
determined by the Lead Agent.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System as constituted from time to time.
"FFO" means "funds from operations," defined to mean net income
(loss) (computed in accordance with GAAP), excluding gains (or losses) from debt
restructurings and sales of properties, plus depreciation and amortization,
after adjustments for Minority Holdings. Adjustments for Minority Holdings will
be calculated to reflect FFO on the same basis.
"Fitch" means Fitch Investors Services, L.P. or any successor
thereto.
"FMV Cap Rate" means, prior to the Extension Date, 11% and from
and after the Extension Date, at the rate at which Lead Agent shall determine,
in its sole discretion, to be the market capitalization rate.
"Fronting Bank" shall mean Morgan or such other Bank which
Borrower is notified by the Lead Agent may be a Fronting Bank and which is
designated by Borrower in its Notice of Borrowing as the Bank which shall issue
a Letter of Credit with respect to such Notice of Borrowing.
"GAAP" means generally accepted accounting principles recognized
as such in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and Board or in such
other statements by such other entity as may be approved by a significant
segment of the accounting profession, which are applicable to the circumstances
as of the date of determination.
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"Group of Loans" means, at any time, a group of Loans consisting
of (i) all Loans which are Base Rate Loans at such time, or (ii) all Loans which
are Euro-Dollar Loans having the same Interest Period at such time; provided
that, if a Loan of any particular Bank is converted to or made as a Base Rate
Loan pursuant to Section 8.2 or 8.4, such Loan shall be included in the same
Group or Groups of Loans from time to time as it would have been in if it had
not been so converted or made.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydro- carbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 9.3(b).
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as each Borrower or CarrAmerica LP, as the
case may be, may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) if any Interest Period includes a date on which a payment
of principal of the Loans is required to be made under Section 2.9 but
does not end on such date, then (i) the principal amount (if any) of
each Euro-Dollar Loan required to be repaid on such date
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<PAGE>
shall have an Interest Period ending on such date and (ii) the
remainder (if any) of each such Euro-Dollar Loan shall have an Interest
Period determined as set forth above.
(2) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (c)(i) above) which would otherwise end
on a day which is not a Euro-Dollar Business Day shall be extended to
the next succeeding Euro-Dollar Business Day; and
(b) if any Interest Period includes a date on which a payment
of principal of the Loans is required to be made under Section 2.9 but
does not end on such date, then (i) the principal amount (if any) of
each Base Rate Loan required to be repaid on such date shall have an
Interest Period ending on such date and (ii) the remainder (if any) of
each such Base Rate Loan shall have an Interest Period determined as
set forth above.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, or any successor statute.
"Investment Grade Rating" means a rating for a Person's senior
long-term unsecured debt, or if no such rating has been issued, a "shadow"
rating, of BBB- or better from S&P, and a rating or "shadow" rating of Baa3 or
better from Moody's or a rating or "shadow" rating equivalent to the foregoing
from either Duff & Phelps or Fitch. Any such "shadow" rating shall be evidenced
by a letter from the applicable Rating Agency or by such other evidence as may
be reasonably acceptable to the Lead Agent (as to any such other evidence, the
Lead Agent shall present the same to, and discuss the same with, the Banks).
"Lead Agent" means Morgan Guaranty Trust Company of New York in
its capacity as Lead Agent for the Banks hereunder, and its successors in such
capacity.
"Letter(s) of Credit" has the meaning provided in Section
2.2(b).
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"Letter of Credit Collateral" has the meaning provided in
Section 6.4.
"Letter of Credit Collateral Account" has the meaning provided
in Section 6.4.
"Letter of Credit Documents" has the meaning provided in Section
2.16.
"Letter of Credit Usage" means at any time the sum of (i) the
aggregate maximum amount available to be drawn under the Letters of Credit then
outstanding, assuming compliance with all requirements for drawing referred to
therein, and (ii) the aggregate amount of the Borrowers' unpaid obligations
under this Agreement in respect of the Letters of Credit.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any other type
of preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, each of
the Borrowers or any Subsidiary shall be deemed to own subject to a Lien any
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Loan" means a Base Rate Loan or a Euro-Dollar Loan and "Loans"
means Base Rate Loans or Euro-Dollar Loans or any combination of the foregoing.
"Loan Documents" means this Agreement, the Notes, Letters of
Credit and Letter of Credit Documents.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.6(b).
"Margin Stock" shall have the meaning provided such term in
Regulation U and Regulation G of the Federal Reserve Board.
"Material Adverse Effect" means a material adverse effect upon
(i) the business, operations, properties or assets of either Borrower or (ii)
the ability of either Borrower
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<PAGE>
to perform its obligations hereunder in all material respects, including to pay
interest and principal.
"Material Plan" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $5,000,000.
"Materials of Environmental Concern" means and includes
pollutants, contaminants, hazardous wastes, toxic and hazardous substances,
petroleum and petroleum by-products.
"Maturity Date" has the meaning set forth in Section 2.8.
"Maximum Total Debt Ratio" means the ratio as of the date of
determination of (i) the sum of (x) the aggregate Debt of the Borrowers and
their Consolidated Subsidiaries and (y) the Borrowers' pro rata share of the
Debt of any Subsidiaries of the Borrowers which are not Consolidated
Subsidiaries, at the time of determination to (ii) the Tangible FMV of the
Borrowers and their Consolidated Subsidiaries.
"Minority Holdings" means partnerships, limited liability
companies and corporations held or owned by either Borrower which are not
consolidated with such Borrower on such Borrower's financial statements, other
than Bond Texas Limited Partnership, The Greystone Square 127 Associates, Carr
Square 225 Associates and 1575 Eye Street Associates.
"Moody's" means Moody's Investors Service, Inc. or any successor
thereto.
"Morgan" means Morgan Guaranty Trust Company of New York, in its
individual capacity.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the ERISA
Group during such five year period.
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"Net Operating Cash Flow" means, as of any date of
determination, with respect to all Real Property Assets and Minority Holdings of
Carr and its Consolidated Subsidiaries, Property Income for the previous four
consecutive quarters including the quarter then ended, but less (x) Property
Expenses with respect to all such Real Property Assets and Minority Holdings for
the previous four consecutive quarters including the quarter then ended and (y)
the greater of (i) Capital Expenditures which are not related to new
construction for the previous four consecutive quarters including the quarter
then ended, and (ii) appropriate reserves for replacements of not less than
$2.29 per square foot per annum for each Real Property Asset.
"Net Operating Income" means as of any date of determination
with respect to any Real Property Asset, Property Income for the previous four
consecutive quarters including the quarter then ended, but less Property
Expenses for the previous four consecutive quarters including the quarter then
ended.
"New Acquisition" has the meaning set forth in Section 5.15.
"Non-Recourse Debt" means Debt of either Borrower on a
consolidated basis for which the right of recovery of the obligee thereof is
limited to recourse against the Real Property Assets securing such Debt (subject
to such limited exceptions to the non-recourse nature of such Debt such as
fraud, misappropriation, misapplication and environmental indemnities, as are
usual and customary in like transactions at the time of the incurrence of such
Debt).
"Notes" means collectively, the Tranche A Notes and the Tranche
B Notes.
"Notice of Borrowing" means a Notice of Borrowing (as defined in
Section 2.2).
"Obligations" means all obligations, liabilities and
indebtedness of every nature of the Borrowers or CarrAmerica LP, from time to
time owing to any Bank under or in connection with this Agreement or any other
Loan Document.
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"Outstanding Balance" means the sum of (i) the aggregate
outstanding and unpaid principal balance of all Loans and (ii) the Letter of
Credit Usage.
"Outstanding Working Capital Amount" means the aggregate
outstanding and unpaid principal balance of all Loans used for working capital
purposes from time to time.
"Parent" means, with respect to any Bank, any Person controlling
such Bank.
"Participant" has the meaning set forth in Section 9.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" means (a) Liens in favor of either or both of
the Borrowers or CarrAmerica LP on all or any part of the assets of Subsidiaries
of either Borrower or CarrAmerica LP, provided that (i) such Subsidiary shall be
a co-maker of the Tranche A Notes or Tranche B Notes, as applicable, (ii) the
Debt to which such Lien relates is held by a Borrower or CarrAmerica LP, (iii)
such Debt is not otherwise pledged or encumbered and (iv) no more than 25% of
the Borrowing Base Properties Value may be subject to any such Liens; (b) Liens
to secure the performance of statutory obligations, surety or appeal bonds,
performance bonds, completion bonds, government contracts or other obligations
of a like nature, including Liens in connection with workers' compensation,
unemployment insurance and other types of statutory obligations or to secure the
performance of tenders, bids, leases, contracts (other than for the repayment of
Debt) and other similar obligations incurred in the ordinary course of business;
(c) Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded; provided, that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (d) Liens on property of either Borrower or
any Subsidiary thereof in favor of the Federal or any state government to secure
certain payments pursuant to any contract, statute or regulation; (e) easements
(including, without limitation, reciprocal easement agreements
23
<PAGE>
and utility agreements), rights of way, covenants, consents, reservations,
encroachments, variations and zoning and other restrictions, charges or
encumbrances (whether or not recorded), which do not interfere materially with
the ordinary conduct of the business of the applicable Borrower or any
Subsidiary thereof and which do not materially detract from the value of the
property to which they attach or materially impair the use thereof by the
applicable Borrower or Subsidiary; (f) statutory Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other Liens
imposed by law and arising in the ordinary course of business, for sums not then
due and payable (or which, if due and payable are being contested in good faith
and with respect to which adequate reserves are being maintained to the extent
required by GAAP); (g) Liens not otherwise permitted by this definition and
incurred in the ordinary course of business of either or both of the Borrowers
or any Subsidiary with respect to obligations which do not exceed $2,000,000 in
principal amount in the aggregate at any one time outstanding; (h) Liens
existing on the date of the Agreement which have been disclosed on Schedule
4.28; (i) the interests of lessees and lessors under leases of real or personal
property made in the ordinary course of business which would not have a material
adverse effect on the Borrowers and their Subsidiaries taken as a whole; and (j)
judgment and attachment Liens not giving rise to an Event of Default.
"Permitted LTV Ratio" means any Borrowers LTV Ratio which is 50%
or lower.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for
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employees of any Person which was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
"Pro-Forma Debt Service" means the amount determined by applying
a 25 year mortgage style amortization schedule to the Loans outstanding as of
the last day of each calendar quarter, using an interest rate equal to the
greater of (i) the Treasury Rate plus 1.75%, and (ii) the actual rate of
interest in effect with respect to the Loans as of the last day of such quarter,
all determined on an annualized basis.
"Property Expenses" means, when used with respect to any Real
Property Asset, the costs of maintaining such Real Property Asset which are the
responsibility of the owner thereof and that are not paid directly by the tenant
thereof, including, without limitation, taxes, insurance, repairs and
maintenance, but provided that if such tenant is more than 60 days in arrears in
the payment of base or fixed rent, then such costs will also constitute
"Property Expenses", but excluding depreciation, amortization and interest
costs.
"Property Income" means, when used with respect to any Real
Property Asset, cash rents and other cash revenues received in the ordinary
course therefrom, including, without limitation, revenues from any parking
leases and lease termination fees amortized over the remaining term of the lease
for which such termination fee was received (other than the paid rents and
revenues and security deposits except to the extent applied in satisfaction of
tenants' obligations for rent).
"Rating Agencies" means, collectively, S&P, Moody's, Duff &
Phelps and Fitch.
"Real Property Assets" means as of any time, the real property
assets (including interests in participating mortgages in which either
Borrower's interest therein is characterized as equity according to GAAP) owned
directly or indirectly by either Borrower at such time.
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"Recourse Debt" shall mean Debt of the Borrower or any
Consolidated Subsidiary that is not Non-Recourse Debt.
"Reference Bank" means the principal London offices of Morgan
Guaranty Trust Company of New York.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Request to Extend" shall have the meaning set
forth in Section 2.8.
"Required Banks" means at any time Banks having at least 51% of
the aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 51% of the aggregate unpaid
principal amount of the Loans.
"Solvent" means, with respect to any Person, that the fair
saleable value of such Person's assets exceeds the Debts of such Person.
"S&P" means Standard & Poor's Ratings Group, or
any successor thereto.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests representing either (i) ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions or (ii) a majority of the economic interest therein, are at
the time directly or indirectly owned by Carr or Carr LP, including, without
limitation, Carr Real Estate Services, Inc., Carr Real Estate Services of
Northern Virginia, Inc., Carr Development and Construction, Inc. and
CarrAmerica LP.
"Survey" means a survey (prepared in accordance with the ALTA
appropriate specifications) for each Borrowing Base Property, prepared or
re-certified on a date not earlier than June 30, 1995, by a land surveyor duly
licensed in the state in which such Borrowing Base Property or New Acquisition
is located.
"Tangible FMV" means the aggregate of (i) Carr Tangible FMV and
(ii) Carr LP Tangible FMV.
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"Term" has the meaning set forth in Section 2.8.
"Title Company" means, with respect to each Borrowing Base
Property, a title insurance company of recognized national standing.
"Title Commitment" means, for each Borrowing Base Property, an
ALTA fee or leasehold title commitment or title policy issued by the Title
Company.
"Tranche A Commitment" means, with respect to each Bank, the
amount committed by such Bank pursuant to this Agreement with respect to any
Tranche A Loans, as such amount may be reduced from time to time pursuant to
Sections 2.8 and 2.9.
"Tranche A Loan" means the loan or loans to be made to Carr and
CarrAmerica LP for the purposes set forth in Section 5.15 hereof which loan or
loans shall either be a Base Rate Loan or Loans or a Euro-Dollar Loan or Loans.
"Tranche A Loan Amount" has the meaning set forth in Section
2.1(a).
"Tranche A Notes" means the promissory notes of Carr and
CarrAmerica LP, each substantially in the form of Exhibit A-1 hereto, evidencing
the joint and several obligation of Carr and CarrAmerica LP to repay the Tranche
A Loans, and "Tranche A Note" means any one of such promissory notes issued
hereunder.
"Tranche B Commitment" means, with respect to each Bank, the
amount committed by such Bank pursuant to this Agreement with respect to any
Tranche B Loans, as such amount may be reduced from time to time pursuant to
Sections 2.8 and 2.9.
"Tranche B Loan" means the loan or loans to be made to Carr LP
and Carr for the purposes set forth in Section 5.15 hereof which loan or loans
shall either be a Base Rate Loan or Loans or a Euro-Dollar Loan or Loans.
"Tranche B Loan Amount" has the meaning set forth in Section
2.1(b).
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"Tranche B Notes" means the promissory notes of Carr LP and
Carr, each substantially in the form of Exhibit A-2 hereto, evidencing the joint
and several obligation of Carr LP and Carr to repay the Tranche B Loans, and
"Tranche B Note" means any one of such promissory notes issued hereunder.
"Treasury Rate" means, as of any date, a rate equal to the
annual yield to maturity on the U.S. Treasury Constant Maturity Series with a
ten year maturity, as such yield is reported in Federal Reserve Statistical
Release H.15 -- Selected Interest Rates, published most recently prior to the
date the applicable Treasury Rate is being determined. Such yield shall be
determined by straight line linear interpolation between the yields reported in
Release H.15, if necessary. In the event Release H.15 is no longer published,
the Lead Agent shall select, in its reasonable discretion, an alternate basis
for the determination of Treasury yield for U.S. Treasury Constant Maturity
Series with ten year maturities.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA Group
to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including
the States and the District of Columbia, but excluding its territories and
possessions.
"Unused Commitments" means an amount equal to all unadvanced
funds (other than unadvanced funds in connection with any construction loan)
which any third party is obligated to advance to either of the Borrowers or
otherwise, pursuant to any loan document, written instrument or otherwise.
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SECTION 1.2. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes concurred in by the
Borrowers' independent public accountants) with the most recent audited
consolidated financial statements of Carr delivered to the Lead Agent and the
Banks; provided that, if Carr notifies the Lead Agent and the Banks that Carr
wishes to amend any covenant in Article V to eliminate the effect of any change
in generally accepted accounting principles on the operation of such covenant
(or if the Lead Agent notifies Carr that the Required Banks wish to amend
Article V for such purpose), then Carr's compliance with such covenant shall be
determined on the basis of generally accepted accounting principles in effect
immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to Carr and the Required Banks.
SECTION 1.3. Types of Borrowings. The term "Borrowing" denotes
the aggregation of Loans of one or more Banks to be made to the Borrowers
pursuant to Article II on a single date and for a single Interest Period.
Borrowings are classified for purposes of this Agreement by reference to the
pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a
Borrowing comprised of Euro-Dollar Loans).
ARTICLE II
THE CREDITS
SECTION 2.1. Commitments to Lend.
(a) Each Bank severally agrees, on the terms and conditions set
forth in this Agreement, to make the Tranche A Loans to Carr and CarrAmerica LP
and participate in Letters of Credit issued by the Fronting Bank on behalf of
Carr or CarrAmerica LP pursuant to this Section from time to time, but, together
with the Tranche B Loans, not more
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frequently than twice monthly, during the Term in amounts such that the
aggregate principal amount of Tranche A Loans by such Bank at any one time
outstanding together with such Bank's pro rata share of Letter of Credit Usage
with respect to Carr and CarrAmerica LP shall not exceed the amount of its
Tranche A Commitment. The aggregate amount of Tranche A Loans to be made
hereunder, together with the Letter of Credit Usage with respect to Carr and
CarrAmerica LP, shall not exceed One Hundred Forty-One Million Dollars
($141,000,000) (the "Tranche A Loan Amount"). Each Bank severally agrees, on the
terms and conditions set forth in this Agreement, to make the Tranche B Loans to
Carr LP and Carr and participate in Letters of Credit issued by the Fronting
Bank on behalf of Carr LP pursuant to this Section from time to time, but,
together with the Tranche A Loans, not more frequently than twice monthly,
during the Term in amounts such that the aggregate principal amount of Tranche B
Loans by such Bank at any one time outstanding, together with such Bank's pro
rata share of Letter of Credit Usage with respect to Carr LP, shall not exceed
the amount of its Tranche B Commitment. The aggregate amount of Tranche B Loans
to be made hereunder, together with the Letter of Credit Usage with respect to
Carr LP, shall not exceed Seventy-Four Million Dollars ($74,000,000) (the
"Tranche B Loan Amount"). Each Borrowing under this subsection (a) shall be in
an aggregate principal amount of at least $2,500,000, or an integral multiple of
$1,000,000 in excess thereof (except that any such Borrowing may be in the
aggregate amount available in accordance with Section 3.2(c)) and shall be made
from the several Banks ratably in proportion to their respective Commitments.
Subject to the limitations set forth herein, any amounts repaid may be
reborrowed. Notwithstanding anything to the contrary, the number of new
Borrowings shall be limited to two Borrowings per month.
SECTION 2.2. Notice of Borrowing. (a) The applicable Borrower or
CarrAmerica LP, as the case may be, shall give the Lead Agent notice (a "Notice
of Borrowing") not later than 10:00 a.m. (New York City time) (x) one Domestic
Business Day before each Base Rate Borrowing or (y) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Domestic Borrowing
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or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to
be Base Rate Loans or Euro-Dollar Loans,
(iv) in the case of a Euro-Dollar Borrowing, the
duration of the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period,
(v) the intended use for the proceeds of such Borrowing,
and
(vi) the Outstanding Working Capital Amount.
(b) Either Borrower or CarrAmerica LP shall give the Lead Agent,
and the designated Fronting Bank, written notice in the event that it desires to
have Letters of Credit (each, a "Letter of Credit") issued hereunder no later
than 10:00 a.m., New York City time, at least four (4) Domestic Business Days
prior to the date of such issuance. Each such notice shall specify (i) the
designated Fronting Bank, (ii) the aggregate amount of the requested Letters of
Credit, (iii) the individual amount of each requested Letter of Credit and the
number of Letters of Credit to be issued, (iv) the date of such issuance (which
shall be a Domestic Business Day), (v) the name and address of the beneficiary,
(vi) the expiration date of the Letter of Credit (which in no event shall be
later than twelve (12) months after the issuance of such Letter of Credit or the
Maturity Date, whichever is earlier), (vii) the purpose and circumstances for
which such Letter of Credit is being issued and (viii) the terms upon which each
such Letter of Credit may be drawn down (which terms shall not leave any
discretion to Fronting Bank). Each such notice may be revoked telephonically by
the applicable Borrower or CarrAmerica LP, as the case may be, to the applicable
Fronting Bank and the Lead Agent any time prior to the date of issuance of the
Letter of Credit by the applicable Fronting Bank, provided such revocation is
confirmed in writing by such Borrower or CarrAmerica LP to the Fronting Bank and
the Lead Agent within one (1) Domestic Business Day by facsimile. No later than
10:00 a.m., New York City time, on the date that is four (4) Domestic Business
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Days prior to the date of issuance, the applicable Borrower or CarrAmerica LP
shall specify a precise description of the documents and the verbatim text of
any certificate to be presented by the beneficiary of such Letter of Credit,
which if presented by such beneficiary prior to the expiration date of the
Letter of Credit would require the Fronting Bank to make a payment under the
Letter of Credit; provided that Fronting Bank may, in its reasonable judgment,
require changes in any such documents and certificates only in conformity with
changes in customary and commercially reasonable practice or law and provided
further, that no Letter of Credit shall require payment against a conforming
draft to be made thereunder on the following Domestic Business Day that such
draft is presented if such presentation is made later than 10:00 A.M. New York
City time (except that if the beneficiary of any Letter of Credit requests at
the time of the issuance of its Letter of Credit that payment be made on the
same Domestic Business Day against a conforming draft, such beneficiary shall be
entitled to such a same day draw, provided such draft is presented to the
applicable Fronting Bank no later than 10:00 A.M. New York City time and
provided further that, prior to the issuance of such Letter of Credit, such
Borrower or CarrAmerica LP shall have requested to Fronting Bank and the Lead
Agent that such beneficiary shall be entitled to a same day draw). In
determining whether to pay on such Letter of Credit, the Fronting Bank shall be
responsible only to determine that the documents and certificates required to be
delivered under the Letter of Credit have been delivered and that they comply on
their face with the requirements of that Letter of Credit.
SECTION 2.3. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Lead Agent shall
notify each Bank on the same day as it receives the Notice of Borrowing of the
contents thereof and of such Bank's share of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the applicable Borrower or
CarrAmerica LP.
(b) Not later than 2:00 P.M. (New York City time) on the date of
each Borrowing, each Bank shall (except as provided in subsection (c) of this
Section) make available its share of such Borrowing, in Federal or other funds
immediately available in New York City, to the Lead Agent at
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its address referred to in Section 9.1. The Lead Agent will make the funds so
received from the Banks available to the applicable Borrower or CarrAmerica LP,
as applicable, at the Lead Agent's aforesaid address. If a Borrower or
CarrAmerica LP has requested the issuance of a Letter of Credit, no later than
12:00 Noon (New York City time) on the date of such issuance as indicated in the
notice delivered pursuant to Section 2.2(b), the Fronting Bank shall issue such
Letter of Credit in the amount so requested and deliver the same to the
applicable Borrower or CarrAmerica LP with a copy thereof to the Lead Agent.
Immediately upon the issuance of each Letter of Credit by the Fronting Bank,
such Fronting Bank shall be deemed to have sold and transferred to each other
Bank, and each such other Bank shall be deemed to, and hereby agrees to, have
irrevocably and unconditionally purchased and received from Fronting Bank,
without recourse or warranty, an undivided interest and a participation in such
Letter of Credit, any drawing thereunder, and the obligations of the applicable
Borrower or CarrAmerica LP hereunder with respect thereto, and any security
therefor or guaranty pertaining thereto, in an amount equal to such Bank's
ratable share thereof (based upon the ratio its Commitment bears the aggregate
of all Commitments). Upon any change in any of the Commitments in accordance
herewith, there shall be an automatic adjustment to such participations to
reflect such changed shares. The Fronting Bank shall have the primary obligation
to fund any and all draws made with respect to such Letter of Credit
notwithstanding any failure of a participating Bank to fund its ratable share of
any such draw. The Lead Agent will instruct the Fronting Bank to make such
Letter of Credit available to such Borrower and the Fronting Bank shall make
such Letter of Credit available to the applicable Borrower or CarrAmerica LP at
the applicable Borrower's or CarrAmerica's LP aforesaid address on the date of
the Borrowing.
(c) Unless the Lead Agent shall have received notice from a Bank
prior to the date of any Borrowing that such Bank will not make available to the
Lead Agent such Bank's share of such Borrowing, the Lead Agent may assume that
such Bank has made such share available to the Lead Agent on the date of such
Borrowing in accordance with subsection (b) of this Section 2.3 and the Lead
Agent may, in reliance upon such assumption, make available to the applicable
Borrower or CarrAmerica LP, as applicable, on
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such date a corresponding amount. If and to the extent that such Bank shall not
have so made such share available to the Lead Agent, such Bank and the
applicable Borrower or CarrAmerica LP severally agree to repay to the Lead Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the applicable
Borrower or CarrAmerica LP until the date such amount is repaid to the Lead
Agent, at (i) in the case of either Borrower or CarrAmerica LP, a rate per annum
equal to the higher of the Federal Funds Rate and the interest rate applicable
thereto pursuant to Section 2.6 and (ii) in the case of such Bank, the Federal
Funds Rate. If such Bank shall repay to the Lead Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement.
SECTION 2.4. Notes.
(a) The Tranche A Loans shall be evidenced by the Tranche A
Notes, each of which shall be payable to the order of each Bank for the account
of its Applicable Lending Office in an amount equal to each such Bank's Tranche
A Commitment.
(b) The Tranche B Loans shall be evidenced by the Tranche B
Notes, each of which shall be payable to the order of each Bank for the account
of its Applicable Lending Office in an amount equal to each such Bank's Tranche
B Commitment.
(c) Each Bank may, by notice to the Borrowers and CarrAmerica LP
and the Lead Agent, request that its Loans of a particular type be evidenced by
a separate Note in an amount equal to the aggregate unpaid principal amount of
such Loans. Each such Note shall be in substantially the form of Exhibit A-1 or
Exhibit A-2 hereto, as applicable, with appropriate modifications to reflect the
fact that it evidences solely Loans of the relevant type. Each reference in this
Agreement to the "Note" of such Bank shall be deemed to refer to and include any
or all of such Notes, as the context may require.
(d) Upon receipt of each Bank's Note pursuant to Section 3.1(a)
or (b), the Lead Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount,
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type and maturity of each Loan made by it and the date and amount of each
payment of principal made by either Borrower or CarrAmerica LP with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding; provided that the failure of any Bank to make any
such recordation or endorsement shall not affect the obligations of the
Borrowers hereunder or under the Notes. Each Bank is hereby irrevocably
authorized by the Borrowers and CarrAmerica LP so to endorse its Note and to
attach to and make a part of its Note a continuation of any such schedule as and
when required.
(e) There shall be no more than five (5) Euro-Dollar Borrowings
outstanding at any one time pursuant to this Agreement.
SECTION 2.5. Maturity of Loans. The Loans shall mature, and the
principal amount thereof shall be due and payable, on the Maturity Date.
SECTION 2.6. Interest Rates.
(a) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until it
becomes due, at a rate per annum equal to the sum of the Applicable Margin for
Base Rate Loans for such day plus the Base Rate for such day. Such interest
shall be payable for each Interest Period on the last day thereof.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin for
Euro-Dollar Loans for such day plus the Adjusted London Interbank Offered Rate
applicable to such Interest Period. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest Period is longer
than three months, at intervals of three months after the first day thereof.
"Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to
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the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of
1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in New York City with deposits exceeding five billion
dollars in respect of "Eurocurrency liabilities" (or in respect of any other
category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank Offered Rate
shall be adjusted automatically on and as of the effective date of any change in
the Euro-Dollar Reserve Percentage.
"London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which deposits in dollars are
offered to the Reference Bank in the London interbank market at approximately
11:00 a.m. (London time) two Euro-Dollar Business Days before the first day of
such Interest Period in an amount approximately equal to the principal amount of
the Euro-Dollar Loan of such Reference Bank to which such Interest Period is to
apply and for a period of time comparable to such Interest Period.
(c) In the event that, and for so long as, any Event of Default
shall have occurred and be continuing, the outstanding principal amount of the
Loans, and, to the extent permitted by law, overdue interest in respect of all
Loans, shall bear interest at the annual rate of the sum of the Prime Rate and
four percent (4%).
(d) The Lead Agent shall determine each interest rate applicable
to the Loans hereunder. The Lead Agent shall give prompt notice to the
applicable Borrower or CarrAmerica LP and the Banks of each rate of interest so
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determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(e) The Reference Bank agrees to use its best efforts to furnish
quotations to the Lead Agent as contemplated by this Section. If the Reference
Bank does not furnish a timely quotation, the provisions of Section 8.1 shall
apply.
SECTION 2.7. Fees.
(a) Commitment Fee. During the Term, the Borrowers and/or
CarrAmerica LP shall pay Lead Agent for the account of the Banks ratably in
proportion to their respective Commitments, a commitment fee at an annual rate
of .25% on the daily average undrawn Commitments in any given quarter, payable
quarterly, in arrears.
(b) Letter of Credit Fee. During the Term, Borrowers and/or
CarrAmerica LP shall pay to the Lead Agent, for the account of the Banks in
proportion to their interests in respective undrawn issued Letters of Credit, a
fee (a "Letter of Credit Fee") in an amount, provided that no Event of Default
shall have occurred and be continuing, equal to a rate per annum equal to the
Applicable Margin for Euro-Dollar Loans on the daily average of such issued and
undrawn Letters of Credit, which fee shall be payable, in arrears, on each
January 1, April 1, July 1 and October 1 during the term. From the occurrence,
and during the continuance, of an Event of Default, such fee shall be increased
to be equal to four percent (4%) per annum on the daily average of such issued
and undrawn Letters of Credit.
(c) Fronting Bank Fee. The Borrowers and/or CarrAmerica LP shall
pay any Fronting Bank, for its own account, a fee (a "Fronting Bank Fee") at a
rate per annum equal to .15% of the issued and undrawn amount of such Letter of
Credit, which fee shall be in addition to and not in lieu of, the Letter of
Credit Fee. The Fronting Bank Fee shall be payable in arrears on each January 1,
April 1, July 1 and October 1 during the Term.
(d) Extension Fee. Within three (3) Domestic Business Days after
the Borrowers shall have received notice from the Lead Agent that the Request to
Extend has been approved, the Borrowers and/or CarrAmerica LP shall pay to the
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Lead Agent for the account of the Banks ratably in proportion to their
Commitments an extension fee of .25% of the aggregate Commitments.
(e) Fees Non-Refundable. All fees set forth in this Section 2.7
shall be deemed to have been earned on the date payment is due in accordance
with the provisions hereof and shall be non-refundable. The obligation of the
Borrowers and CarrAmerica LP to pay such fees in accordance with the provisions
hereof shall be binding upon the Borrowers and CarrAmerica LP and shall inure to
the benefit of the Lead Agent and the Banks regardless of whether any Loans are
actually made.
SECTION 2.8. Mandatory Termination; Extension Option.
(a) The term (the "Term") of the Commitments shall terminate and
expire on July 30, 1998 (the "Maturity Date"), except as provided in
subparagraph (b) below.
(b) Notwithstanding the foregoing, the Borrowers may request a
one-year extension of the Maturity Date by delivering a written request therefor
to the Lead Agent (the "Request to Extend") on or before a date that is not more
than seven (7) months or less than four (4) months prior to the Maturity Date.
The Lead Agent shall promptly notify the Banks of the receipt of the Request to
Extend and each Bank shall give notice in writing to the Lead Agent not more
than thirty (30) days following its receipt of the Request to Extend of such
Bank's acceptance or rejection of such request. If all the Banks shall have
notified the Lead Agent on or before the date which is thirty (30) days
following the receipt by the Banks of the Request to Extend that they accept
such request, the Maturity Date shall be extended for one year. If any Bank
shall not have notified the Lead Agent on or prior to the date which is thirty
(30) days following the receipt by such Bank of the Request to Extend that it
accepts such request, the Maturity Date shall not be extended. The Lead Agent
shall notify the Borrowers in writing whether the Request to Extend has been
accepted or rejected. The Borrowers' right to request an extension of the
Maturity Date shall be subject to the following terms and conditions: (i) no
Event of Default shall have occurred and be continuing both on the date the
Borrowers deliver the Request to Extend to the Lead Agent and on the original
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Maturity Date (the "Extension Date"), (ii) the Borrowers shall pay to the Lead
Agent, for the account of the Banks, the fee required pursuant to Section 2.7(d)
on or before the day which is three (3) Domestic Business Days after the
Borrowers shall have received notice from Lead Agent that the Request to Extend
has been approved and (iii) the Borrowers shall continue to be in compliance
both on the date of the delivery of the Request to Extend and on the Extension
Date with the provisions of Sections 5.8 through 5.20; provided, however, if
Borrowers and CarrAmerica LP are in compliance on the date of the delivery of
the Request to Extend but not on the Extension Date with the provisions of
Sections 5.8 through 5.20, the Borrowers or CarrAmerica LP, as applicable, shall
be entitled to the return of the fee required pursuant to Section 2.7(d). The
Borrowers' delivery of the Request to Extend shall be irrevocable. Upon the date
of the termination of the Term, any Loans then outstanding (together with
accrued interest thereon) shall be due and payable on such date, the Commitments
shall terminate and the Borrowers and CarrAmerica LP shall return or cause to be
returned all Letters of Credit to the Fronting Bank.
SECTION 2.9. Mandatory Prepayment.
(a) If as of the last day of any calendar quarter the Borrowers
LTV Ratio exceeds the Permitted LTV Ratio, but the Borrowers LTV Ratio is not
greater than 52.5%, and provided that no Event of Default has occurred and is
continuing, either (i) Carr or Carr LP shall add additional Real Property Assets
to the Borrowing Base Properties within 90 days of the date the Borrowers LTV
Ratio exceeded the Permitted LTV Ratio, in accordance with the provisions of
Section 3.3, or (ii) the Borrowers and/or CarrAmerica LP shall pay to the Lead
Agent, for the account of the Banks, within 90 days of the date the Borrowers
LTV Ratio exceeded the Permitted LTV Ratio, an amount such that the Loans
outstanding subsequent to such payment do not cause the Borrowers LTV Ratio to
exceed the Permitted LTV Ratio. In the event that the Borrowers LTV Ratio
exceeds the Permitted LTV Ratio and is greater than or equal to 52.5%, then the
Borrowers and/or CarrAmerica LP shall, within twenty-five (25) days from the
last day of any calendar quarter or the date of any New Acquisition when the
Permitted LTV Ratio is exceeded, pay to the Lead Agent, for the account of the
Banks, an amount such that the Loans outstanding subsequent to such
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payment do not cause the Borrowers LTV Ratio to exceed the Permitted LTV Ratio.
(b) In the event that a Borrowing Base Property is sold or
released from the restrictions of Section 5.14 hereof, in accordance with this
Agreement, the applicable Borrower shall simultaneously with such sale or
release, prepay to the Lead Agent, for the account of the Banks, an amount equal
to the greater of (x) the amount required such that the Tranche A Loans or
Tranche B Loans, as applicable, remain in compliance with the Permitted LTV
Ratio after such sale or release and (y) either (i) 100% of the Carr Allocated
Borrowing Base Property Loan Amount for any Carr Borrowing Base Property or (ii)
100% of the Carr LP Allocated Borrowing Base Property Loan Amount for any Carr
LP Borrowing Base Property. Notwithstanding the foregoing, a simultaneous
like-kind exchange under Section 1031 of the Internal Revenue Code will not be
subject to the provisions of this Section 2.9(b) provided that the exchanged
property has qualified as a New Acquisition and any "boot" associated therewith
shall be applied to prepayment of the Tranche A Loans or Tranche B Loans, as
applicable. Sale of a property in violation of this Section 2.9 shall constitute
an Event of Default.
(c) In the event that the Borrowing Base Properties Minimum Debt
Service Coverage is not maintained as of the last day of a calendar quarter,
either (i) the Borrowers will add a New Acquisition or a Real Property Asset to
the Borrowing Base Properties in accordance with this Agreement which, on a pro
forma basis (i.e. the Borrowing Base Properties Minimum Debt Service Coverage
shall be recalculated to include such New Acquisition or Real Property Asset as
though the same had been a Borrowing Base Property for the entire applicable
period) would result in compliance with the Borrowing Base Properties Minimum
Debt Service Coverage or (ii) the Borrowers and/or CarrAmerica LP shall prepay
to the Lead Agent, for the account of the Banks, an amount necessary to cause
the Borrowing Base Properties Minimum Debt Service Coverage to be in compliance.
Failure by the Borrowers and/or CarrAmerica LP to comply with the Borrowing Base
Properties Minimum Debt Service Coverage within 90 days of the date of such
non-compliance shall be an Event of Default.
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(d) If as of the last day of any calendar quarter the Carr LTV
Ratio exceeds 50%, but the Carr LTV Ratio is not greater than 52.5%, and
provided that no Event of Default has occurred and is continuing, either (i)
Carr shall add additional Real Property Assets to the Carr Borrowing Base
Properties within 90 days of the date the Carr LTV Ratio exceeded 50%, in
accordance with the provisions of Section 3.3, or (ii) Carr shall pay to the
Lead Agent, for the account of the Banks, within 90 days of the date the Carr
LTV Ratio exceeded 50%, an amount such that the Tranche A Loans outstanding
subsequent to such payment shall not cause the Carr LTV Ratio to be greater than
50%. In the event that the Carr LTV Ratio exceeds 50% and is greater than or
equal to 52.5%, then Carr shall, within twenty-five (25) days from the last day
of any calendar quarter or the date of any New Acquisition when the Carr LTV
Ratio is greater than 50%, pay to the Lead Agent, for the account of the Banks,
an amount such that the Tranche A Loans outstanding subsequent to such payment
shall not cause the Carr LTV Ratio to be greater than 50%.
(e) If as of the last day of any calendar quarter the Carr LP
LTV Ratio exceeds 50%, but the Carr LP LTV Ratio is not greater than 52.5%, and
provided that no Event of Default has occurred and is continuing, either (i)
Carr LP shall add additional Real Property Assets to the Carr LP Borrowing Base
Properties within 90 days of the date the Carr LP LTV Ratio exceeded 50%, in
accordance with the provisions of Section 3.3, or (ii) Carr LP shall pay to the
Lead Agent, for the account of the Banks, within 90 days of the date the Carr LP
LTV Ratio exceeded 50%, an amount such that the Tranche B Loans outstanding
subsequent to such payment do not cause the Carr LP LTV Ratio to be greater than
50%. In the event that the Carr LP LTV Ratio exceeds 50% and is greater than or
equal to 52.5%, then Carr LP shall, within twenty-five (25) days from the last
day of any calendar quarter or the date of any New Acquisition when the Carr LP
LTV Ratio is greater than 50%, pay to the Lead Agent, for the account of the
Banks, an amount such that the Tranche B Loans outstanding subsequent to such
payment shall not cause the Carr LP LTV Ratio to be greater than 50%.
SECTION 2.10. Optional Prepayments.
(a) The Borrowers or CarrAmerica LP may, upon at least one
Domestic Business Day's notice to the Lead Agent,
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prepay to the Lead Agent, for the account of the Banks, any Base Rate Borrowing
in whole at any time, or from time to time in part in amounts aggregating One
Million Dollars ($1,000,000), or an integral multiple of One Million Dollars
($1,000,000) in excess thereof or, if less, the outstanding principal balance,
by paying the principal amount to be pre-paid together with accrued interest
thereon to the date of prepayment. Each such optional prepayment shall be
applied to prepay ratably the Loans of the several Banks included in such
Borrowing. Any notice of prepayment delivered pursuant to this Section 2.10(a)
shall set forth the amount of such prepayment which is applicable to any Loan
made for working capital purposes and the Outstanding Working Capital Amount
after such prepayment is made.
(b) Except as provided in Section 8.2, a Borrower or CarrAmerica
LP may not prepay all or any portion of the principal amount of any Euro-Dollar
Loan prior to the maturity thereof unless the applicable Borrower or CarrAmerica
LP shall also pay any applicable expenses pursuant to Section 2.12. Any such
prepayment shall be upon at least three (3) Euro-Dollar Business Days' notice to
the Lead Agent. Any notice of prepayment delivered pursuant to this Section
2.10(b) shall set forth the amount of such prepayment which is applicable to any
Loan made for working capital purposes and the Outstanding Working Capital
Amount after such pre-payment is made. Each such optional prepayment shall be in
the amounts set forth in Section 2.10(a) above and shall be applied to prepay
ratably the Loans of the Banks included.
(c) A Borrower or CarrAmerica LP may, upon at least one (1)
Domestic Business Day's notice to the Lead Agent (by 11:00 a.m New York time on
such Domestic Business Day), reimburse the Lead Agent for the benefit of the
Fronting Bank for the amount of any drawing under a Letter of Credit in whole or
in part in any amount.
(d) A Borrower or CarrAmerica LP may at any time return any
undrawn Letters of Credit to the Fronting Bank in whole, but not in part, and
the Fronting Bank shall endeavor to give the Lead Agent and each of the Banks
notice of such return.
(e) Either Borrower may at any time and from time to time cancel
all or any part of the Tranche A Commitments or Tranche B Commitments, as
applicable, in amounts aggregating
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One Million Dollars ($1,000,000), or an integral multiple of One Million Dollars
($1,000,000) in excess thereof, by the delivery to the Lead Agent and the Banks
of a notice of cancellation upon at least three (3) Domestic Business Days'
notice to Lead Agent and the Banks, whereupon, in either event, all or such
portion of the Tranche A Commitments or Tranche B Commitments, as applicable,
shall terminate as to the Banks, pro rata on the date set forth in such notice
of cancellation, and, if there are any Loans then outstanding in an aggregate
amount which exceeds the aggregate Tranche A Commitments or Tranche B
Commitments, as applicable (after giving effect to any such reduction), the
applicable Borrower shall prepay to the Lead Agent, for the account of the
Banks, as applicable, all or such portion of Loans outstanding on such date in
accordance with the requirements of Sections 2.10(a) and (b). In no event shall
either Borrower be permitted to cancel Commitments for which a Letter of Credit
has been issued and is outstanding unless such Borrower returns (or causes to be
returned) such Letter of Credit to the Fronting Bank. A Borrower shall be
permitted to designate in its notice of cancellation which Loans, if any, are to
be prepaid.
(f) Upon receipt of a notice of prepayment or cancellation or a
return of a Letter of Credit pursuant to this Section, the Lead Agent shall
promptly, and in any event within one (1) Domestic Business Day, notify each
Bank of the contents thereof and of such Bank's ratable share (if any) of such
prepayment or cancellation and such notice shall not thereafter be revocable by
the Borrowers or CarrAmerica LP.
(g) Any amounts so prepaid pursuant to this Section 2.10 may be
reborrowed subject to the other terms of this Agreement. In the event either
Borrower elects to cancel all or any portion of the Commitments pursuant to
Section 2.10(e) hereof, such amounts may not be reborrowed.
SECTION 2.11. General Provisions as to Payments.
(a) The Borrowers and CarrAmerica LP shall make each payment of
principal of, and interest on, the Loans and of fees hereunder, not later than
12:00 Noon (New York City time) on the date when due, in Federal or other funds
immediately available in New York City, to the Lead Agent at its address
referred to in Section 9.1. The Lead Agent will
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distribute to each Bank its ratable share of each such payment received by the
Lead Agent for the account of the Banks on the same day as received by the Lead
Agent if received by the Lead Agent by 3:00 p.m. (New York City time), or, if
received by the Lead Agent after 3:00 p.m. (New York City time), on the
immediately following Domestic Business Day. Whenever any payment of principal
of, or interest on, the Base Rate Loans or of fees shall be due on a day which
is not a Domestic Business Day, the date for payment thereof shall be extended
to the next succeeding Domestic Business Day. Whenever any payment of principal
of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Lead Agent shall have received notice from a
Borrower or CarrAmerica LP prior to the date on which any payment is due to the
Banks hereunder that such Borrower or CarrAmerica LP will not make such payment
in full, the Lead Agent may assume that such Borrower or CarrAmerica LP, as
applicable has made such payment in full to the Lead Agent on such date and the
Lead Agent may, in reliance upon such assumption, cause to be distributed to
each Bank on such due date an amount equal to the amount then due such Bank. If
and to the extent that such Borrower or CarrAmerica LP shall not have so made
such payment, each Bank shall repay to the Lead Agent forthwith on demand such
amount distributed to such Bank together with interest thereon, for each day
from the date such amount is distributed to such Bank until the date such Bank
repays such amount to the Lead Agent, at the Federal Funds Rate.
SECTION 2.12. Funding Losses. If a Borrower or CarrAmerica LP
makes any payment of principal with respect to any Euro-Dollar Loan (pursuant to
Article II, VI or VIII or otherwise) on any day other than the last day of the
Interest Period applicable thereto, or the last day of an applicable period
fixed pursuant to Section 2.6(b), or if a Borrower fails to borrow any
Euro-Dollar Loans, after notice has been given to any Bank in accordance with
Section
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2.3(a), such Borrower or CarrAmerica LP shall reimburse each Bank within 15 days
after demand for any resulting loss or expense incurred by it (or by an existing
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment or failure to
borrow, provided that such Bank shall have delivered to such Borrower or
CarrAmerica LP a certificate as to the amount of such loss or expense and the
calculation thereof, which certificate shall be conclusive in the absence of
manifest error.
SECTION 2.13. Computation of Interest and Fees. Interest based
on the Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.14. Method of Electing Interest Rates.
(a) The Loans included in each Borrowing shall bear interest initially
at the type of rate specified by such Borrower or CarrAmerica LP in the
applicable Notice of Borrowing. Thereafter, such Borrower or CarrAmerica LP, as
applicable, may from time to time elect to change or continue the type of
interest rate borne by each Group of Loans (subject in each case to the
provisions of Article VIII), as follows:
(i) if such Loans are Base Rate Loans, a Borrower or CarrAmerica
LP, as applicable, may elect to convert such Loans to Euro-Dollar Loans as of
any Euro-Dollar Business Day;
(ii) if such Loans are Euro-Dollar Loans, a Borrower or
CarrAmerica LP, as applicable, may elect to convert such Loans to Base Rate
Loans or elect to continue such Loans as Euro-Dollar Loans for an additional
Interest Period, in each case effective on the last day of the then current
Interest Period applicable to such Loans.
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Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Lead Agent at least three (3) Euro-Dollar Business Days
before the conversion or continuation selected in such notice is to be effective
(unless the relevant Loans are to be continued as Base Rate Loans, in which case
such notice shall be delivered to the Lead Agent no later than 12:00 Noon (New
York City time) at least one (1) Domestic Business Day before such continuation
is to be effective). A Notice of Interest Rate Election may, if it so specifies,
apply to only a portion of the aggregate principal amount of the relevant Group
of Loans; provided that (i) such portion is allocated ratably among the Loans
comprising such Group, (ii) the portion to which such notice applies, and the
remaining portion to which it does not apply, are each $1,000,000 or any larger
multiple of $1,000,000, (iii) there shall be no more than five (5) Borrowings
comprised of Euro-Dollar Loans outstanding at any time under this Agreement,
(iv) no Loan may be continued as, or converted into, a Euro-Dollar Loan when any
Event of Default has occurred and is continuing, and (v) no Interest Period
shall extend beyond the Maturity Date.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected
in such notice is to be effective, which shall comply with the applicable clause
of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted,
the new type of Loans and, if such new Loans are Euro-Dollar Loans, the duration
of the initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for
an additional Interest Period, the duration of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
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(c) Upon receipt of a Notice of Interest Rate Election from a Borrower
or CarrAmerica LP pursuant to subsection (a) above, the Lead Agent shall notify
each Bank on the same day as it receives such Notice of Interest Rate Election
of the contents thereof and such notice shall not thereafter be revocable by
such Borrower or CarrAmerica LP. If such Borrower or CarrAmerica LP fails to
deliver a timely Notice of Interest Rate Election to the Lead Agent for any
Group of Euro-Dollar Loans, such Loans shall be converted into Base Rate Loans
on the last day of the then current Interest Period applicable thereto.
SECTION 2.15. Letters of Credit. (a) Subject to the terms
contained in this Agreement and the other Loan Documents, upon the receipt of a
notice in accordance with Section 2.2(b) requesting the issuance of a Letter of
Credit, the Fronting Bank shall issue a Letter of Credit or Letters of
Credit in such form as is reasonably acceptable to the applicable Borrower or
CarrAmerica LP, as applicable, in an amount or amounts equal to the amount or
amounts requested by the applicable Borrower or CarrAmerica LP.
(b) Each Letter of Credit shall be issued in the minimum amount
of One Million Dollars ($1,000,000).
(c) The Letter of Credit Usage shall be no more than $10,000,000
at any one time.
(d) There shall be no more than five (5) Letters of Credit
outstanding at any one time.
(e) In the event of any request for a drawing under any Letter
of Credit by the beneficiary thereunder, the Fronting Bank shall endeavor to
notify the applicable Borrower and the Lead Agent (and the Lead Agent shall
endeavor to notify each Bank thereof) on or before the date on which the
Fronting Bank intends to honor such drawing, and, except as provided in this
subsection (e), the applicable Borrower shall reimburse the Fronting Bank, in
immediately available funds, on the same day on which such drawing is honored in
an amount equal to the amount of such drawing. Notwithstanding anything
contained herein to the contrary, however, unless such Borrower or CarrAmerica
LP shall have notified the Lead Agent, and the Fronting Bank prior to 11:00 a.m.
(New York time) on the Domestic Business Day immediately prior to the date of
such drawing that such Borrower
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intends to reimburse the Fronting Bank for the amount of such drawing with funds
other than the proceeds of the Loans, the applicable Borrower or CarrAmerica LP
shall be deemed to have timely given a Notice of Borrowing pursuant to Section
2.2 to the Lead Agent, requesting a Borrowing of Base Rate Loans on the date on
which such drawing is honored and in an amount equal to the amount of such
drawing. Each Bank (other than the Fronting Bank) shall, in accordance with
Section 2.3(b), make available its share of such Borrowing to the Lead Agent,
the proceeds of which shall be applied directly by the Lead Agent to reimburse
the Fronting Bank for the amount of such draw. In the event that any such Bank
fails to make available to the Fronting Bank the amount of such Bank's
participation on the date of a drawing, the Fronting Bank shall be entitled to
recover such amount on demand from such Bank together with interest at the
Federal Funds Rate commencing on the date such drawing is honored.
(f) If, after the date hereof, any change in any law or
regulation or in the interpretation thereof by any court or administrative or
governmental authority charged with the administration thereof shall either (a)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against letters of credit issued by, or assets held by, or deposits
in or for the account of, or participations in any letter of credit, upon any
Bank (including the Fronting Bank) or (b) impose on any Bank any other condition
regarding this Agreement or such Bank (including the Fronting Bank) as it
pertains to the Letters of Credit or any participation therein and the result of
any event referred to in the preceding clause (a) or (b) shall be to increase
the cost to the Fronting Bank or any Bank of issuing or maintaining any Letter
of Credit or participating therein then the applicable Borrower or CarrAmerica
LP shall pay to the Fronting Bank or such Bank, within 15 days after written
demand by such Bank (with a copy to the Lead Agent), which demand shall be
accompanied by a certificate showing, in reasonable detail, the calculation of
such amount or amounts, such additional amounts as shall be required to
compensate the Fronting Bank or such Bank for such increased costs or reduction
in amounts received or receivable hereunder together with interest thereon at
the Base Rate. The amount specified in the written demand shall, absent manifest
error, be final and conclusive and binding upon the Borrowers and CarrAmerica
LP.
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(g) The Borrowers and CarrAmerica LP hereby agree to protect,
indemnify, pay and save the Fronting Bank harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees and disbursements) which the Fronting Bank
may incur or be subject to as a result of (i) the issuance of the Letters of
Credit, other than as a result of the gross negligence or wilful misconduct of
the Fronting Bank or (ii) the failure of the Fronting Bank to honor a drawing
under any Letter of Credit as a result of any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto government or
Governmental Authority (collectively, "Governmental Acts"), other than as a
result of the gross negligence or wilful misconduct of the Fronting Bank. As
between the Borrowers, CarrAmerica LP and the Fronting Bank, the Borrowers and
CarrAmerica LP assume all risks of the acts and omissions of, or misuses of, the
Letters of Credit issued by the Fronting Bank, by the beneficiaries of such
Letters of Credit. In furtherance and not in limitation of the foregoing, the
Fronting Bank shall not be responsible (i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of such Letters of Credit, even
if it should in fact prove to be in any and all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) for the validity or insufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (iii) for failure of the beneficiary of any such Letter of Credit to
comply fully with conditions required in order to draw upon such Letter of
Credit; (iv) for errors, omissions, interruptions or delays in transmission or
delivery of any message, by mail, cable, telegraph, telex, facsimile
transmission, or otherwise; (v) for errors in interpretation of any technical
terms; (vi) for any loss or delay in the transmission or otherwise of any
documents required in order to make a drawing under any such Letter of Credit or
of the proceeds thereof; (vii) for the misapplication by the beneficiary of any
such Letter of Credit of the proceeds of such Letter of Credit; and (viii) for
any consequence arising from causes beyond the control of the Fronting Bank,
including any Government Acts, in each case other than as a result
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of the gross negligence or willful misconduct of the Fronting Bank. None of the
above shall affect, impair or prevent the vesting of the Fronting Bank's rights
and powers hereunder. In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the
Fronting Bank under or in connection with the Letters of Credit issued by it or
the related certificates, if taken or omitted in good faith, shall not put the
Fronting Bank under any resulting liability to the Borrowers or CarrAmerica LP.
(h) If the Fronting Bank or the Lead Agent is required at any
time, pursuant to any bankruptcy, insolvency, liquidation or reorganization law
or otherwise, to return to the Borrowers or CarrAmerica LP any reimbursement by
the Borrowers or CarrAmerica LP of any drawing under any Letter of Credit, each
Bank shall pay to the Fronting Bank or the Lead Agent, as the case may be, its
share of such payment, but without interest thereon unless the Fronting Bank or
the Lead Agent is required to pay interest on such amounts to the person
recovering such payment, in which case with interest thereon, computed at the
same rate, and on the same basis, as the interest that the Fronting Bank or the
Lead Agent is required to pay.
SECTION 2.16. Letter of Credit Usage Absolute. The obligations
of the Borrowers and CarrAmerica LP under this Agreement in respect of any
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement (as the same may be
amended from time to time) and any Letter of Credit Documents (as hereinafter
defined) under all circumstances, including, without limitation, to the extent
permitted by law, the following circumstances:
(a) any lack of validity or enforceability of any Letter of Credit or
any other agreement or instrument relating thereto (collectively, the "Letter of
Credit Documents") or any Loan Document;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of either Borrower or CarrAmerica
LP in respect of the Letters of Credit or any other amendment or waiver of or
any consent by either Borrower or CarrAmerica LP to departure from all or any of
the Letter of Credit Documents or any
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Loan Document, provided that the Fronting Bank shall not consent to any such
change or amendment unless previously consented to in writing by either Borrower
or CarrAmerica LP, as applicable;
(c) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any guaranty, for
all or any of the obligations of either Borrower or CarrAmerica LP in respect of
the Letters of Credit;
(d) the existence of any claim, set-off, defense or other right that
either Borrower or CarrAmerica LP may have at any time against any beneficiary
or any transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Lead Agent, the Fronting
Bank or any Bank (other than a defense based on the gross negligence or wilful
misconduct of the Lead Agent, the Fronting Bank or such Bank) or any other
Person, whether in connection with the Loan Documents, the transactions
contemplated hereby or by the Letters of Credit Documents or any unrelated
transaction;
(e) any draft or any other document presented under or in connection
with any Letter of Credit or other Loan Document proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; provided that payment by the Fronting
Bank under such Letter of Credit against presentation of such draft or document
shall not have constituted gross negligence or wilful misconduct of the Fronting
Bank;
(f) payment by the Fronting Bank against presentation of a draft or
certificate that does not comply with the terms of the Letter of Credit;
provided that such payment shall not have constituted gross negligence or wilful
misconduct of the Fronting Bank; and
(g) any other circumstance or happening whatsoever other than the
payment in full of all obligations hereunder in respect of any Letter of Credit
or any agreement or instrument relating to any Letter of Credit, whether or not
similar to any of the foregoing, that might otherwise constitute a defense
available to, or a discharge of, the Borrowers or CarrAmerica LP; provided that
such other circumstance
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or happening shall not have been the result of gross negligence or wilful
misconduct of the Fronting Bank.
ARTICLE III
CONDITIONS
SECTION 3.1. Closing. The closing hereunder shall occur on the date (the
"Closing Date") when each of the following conditions is satisfied (or waived by
the Lead Agent), each document to be dated the Closing Date unless otherwise
indicated:
(a) Carr and CarrAmerica LP shall have executed and delivered to the
Lead Agent a Tranche A Note for the account of each Bank dated on or before the
Closing Date complying with the provisions of Section 2.4;
(b) Carr and Carr LP shall have executed and delivered to the Lead
Agent a Tranche B Note for the account of each Bank dated on or before the
Closing Date complying with the provisions of Section 2.4;
(c) the Borrowers and CarrAmerica LP shall have executed and delivered
to the Lead Agent a duly executed original of this Agreement;
(d) Lead Agent shall have received an opinion of Hogan & Hartson
L.L.P., with respect to certain matters of New York and Maryland law, acceptable
to the Lead Agent, the Banks and their counsel;
(e) the Lead Agent shall have received all documents the Lead Agent may
reasonably request relating to the existence of the Borrowers and CarrAmerica
LP, the authority for and the validity of this Agreement and the other Loan
Documents, and any other matters relevant hereto, all in form and substance
reasonably satisfactory to the Lead Agent. Such documentation shall include,
without limitation, the articles of incorporation and by-laws of Carr and the
partnership agreement and limited partnership certificate of Carr LP and
CarrAmerica LP, as amended, modified or supplemented to the Closing Date, each
certified to be true, correct and complete by a senior officer of Carr, Carr LP
or
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CarrAmerica LP, as applicable, as of a date not more than forty-five (45) days
prior to the Closing Date, together with a good standing certificate from the
Secretary of State (or the equivalent thereof) of Maryland with respect to Carr
and a good standing certificate from the Secretary of State (or the equivalent
thereof) of Delaware with respect to Carr LP and CarrAmerica LP and from the
Secretary of State (or the equivalent thereof) of each other State in which
Carr, Carr LP and CarrAmerica LP is required to be qualified to transact
business, each to be dated not more than forty-five (45) days prior to the
Closing Date;
(f) the Lead Agent shall have received all certificates, agreements and
other documents and papers referred to in this Section 3.1 and Section 3.2,
unless otherwise specified, in sufficient counterparts, satisfactory in form and
substance to the Lead Agent in its sole discretion;
(g) the Borrowers and CarrAmerica LP shall have taken all actions
required to authorize the execution and delivery of this Agreement and the other
Loan Documents and the performance thereof by the Borrowers and CarrAmerica LP;
(h) the Lead Agent shall have received an unaudited consolidated
balance sheet and income statement of Carr for the fiscal quarter ended March
31, 1996;
(i) the Lead Agent shall have received wire transfer instructions in
connection with the Loans to be made on the Closing Date;
(j) the Lead Agent shall have received, for its and any other Bank's
account, all fees due and payable pursuant to Section 2.7 hereof on or before
the Closing Date, and the reasonable fees and expenses accrued through the
Closing Date of Skadden, Arps, Slate, Meagher & Flom;
(k) the Lead Agent shall have received copies of all consents, licenses
and approvals, if any, required in connection with the execution, delivery and
performance by the Borrower and CarrAmerica LP, and the validity and enforce-
ability, of the Loan Documents, or in connection with any of the transactions
contemplated thereby, and such consents, licenses and approvals shall be in full
force and effect;
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(l) the Lead Agent shall have received satisfactory reports of Uniform
Commercial Code filing searches conducted by a search firm acceptable to the
Lead Agent with respect to the Borrowers, such searches to be conducted in each
of the locations specified by the Lead Agent;
(m) no material defaults or Events of Default (as defined therein)
shall exist under any existing agreement entered into by either Borrower or
CarrAmerica LP in connection with any Debt of such Borrower or CarrAmerica LP;
(n) the representations and warranties of the Borrowers and CarrAmerica
LP contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date both before and after giving effect to
the making of any Loans; and
(o) the Lead Agent shall have received certificates of insurance with
respect to each Borrowing Base Property demonstrating the coverages required
under this Agreement;
(p) the Lead Agent shall have received with respect to each Borrowing
Base Property, a satisfactory Title Commitment;
(q) the Lead Agent shall have received with respect to each Borrowing
Base Property, a satisfactory environmental report indicating that (A) the
Borrowing Base Property complies with all Environmental Laws in all material
respects, (B) is free of all Materials of Environmental Concern in all material
respects and (C) is not subject to any Environmental Claim, or if any of the
foregoing is not satisfied, Lead Agent shall have received from the applicable
Borrower either (i) a satisfactory indemnification indemnifying the Lead Agent
and the Banks and guaranteeing the remediation of the applicable Material of
Environmental Concern, from a tenant with an Investment Grade Rating or other
party acceptable to the Lead Agent, (ii) evidence satisfactory to the Lead Agent
in its sole discretion that the applicable Borrower has adequate rights as an
indemnitee pursuant to an environmental indemnity pursuant to which a tenant
with an Investment Grade Rating or other party acceptable to the Lead Agent
indemnifies the applicable Borrower or which guarantees the remediation of
Materials of Environmental Concern or (iii) Cash or Cash Equivalents, letters of
credit or evidence that the applicable Borrower
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has access to such items, equal to an amount satisfactory to the Lead Agent to
be used for remediation of the applicable Material of Environmental Concern;
(r) the Lead Agent shall have received with respect to each Borrowing
Base Property, a satisfactory engineer's inspection report;
(s) the Lead Agent shall have received with respect to each Borrowing
Base Property, evidence of compliance with zoning and other local laws, together
with copies of the certificates of occupancy for each thereof (or evidence
satisfactory to the Lead Agent as to why no certificate of occupancy is
required);
(t) the Lead Agent shall have received with respect to each Borrowing
Base Property, (i) a description of the Borrowing Base Property, (ii) two years
of historical cash flow operating statements, if available, (iii) five years of
cash flow projections (including capital expenditures), (iv) the credit history
of each existing tenant which occupies more than 15% of such Borrowing Base
Property, (v) a map and site plan, including an existing Survey of the property
dated not more than twelve (12) months prior to such submission, (vi) copies of
all lease agreements with each existing tenant which occupies more than 15% of
such Borrowing Base Property and lease abstracts thereof, (vii) an estoppel
certificate from each tenant which occupies 50% or more of such Borrowing Base
Property and (viii) any investment memorandum prepared by Carr in connection
with the four most recent acquisitions of Borrowing Base Properties by Carr; and
(u) receipt by the Lead Agent and the Banks of a certificate of the
chief financial officer or the chief accounting officer of Carr certifying that
the Borrowers and CarrAmerica LP are in compliance with all covenants of the
Borrowers and CarrAmerica LP contained in this Agreement, including, without
limitation, the requirements of Section 5.8, as of the Closing Date.
The Lead Agent shall promptly notify the Borrowers and CarrAmerica LP and the
Banks of the Closing Date, and such notice shall be conclusive and binding on
all parties hereto.
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SECTION 3.2. Borrowings. The obligation of any Bank to make a Loan on
the occasion of any Borrowing or to participate in any Letter of Credit issued
by the Fronting Bank and the obligation of the Fronting Bank to issue a Letter
of Credit on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) the Closing Date shall have occurred on or prior to August 16, 1996;
(b) receipt by the Lead Agent of a Notice of Borrowing as required by
Section 2.2;
(c) with respect to any portion of the $20,000,000 of the proceeds of
the Loans solely available for the payment of Capital Expenditures in accordance
with Section 5.15, receipt by the Lead Agent and the Banks of a certificate of
the chief financial officer or the chief accounting officer of Carr certifying
that the applicable Borrower will use the proceeds of such Loan for Capital
Expenditures and briefly describing such Capital Expenditures;
(d) with respect to the next Notice of Borrowing delivered to Lead Agent
after any delivery of a Notice of Borrowing and the certificate set forth in
subsection (c) of this Section 3.2, receipt by the Lead Agent and the Banks of a
certificate of the chief financial officer or the chief accounting officer of
Carr certifying that the applicable Borrower has used the proceeds of such Loan
for Capital Expenditures;
(e) immediately after such Borrowing, the Outstanding Balance will not
exceed the aggregate amount of the Commitments and with respect to each Bank,
such Bank's pro rata portion of the Loans and Letter of Credit Usage will not
exceed such Bank's Commitment;
(f) immediately before and after such Borrowing, no Default or Event of
Default shall have occurred and be continuing both before and after giving
effect to the making of such Loans;
(g) the representations and warranties of the Borrowers and CarrAmerica
LP contained in this Agreement shall be true and correct in all material
respects on and as of the
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date of such Borrowing both before and after giving effect to the making of such
Loans;
(h) no law or regulation shall have been adopted, no order, judgment or
decree of any governmental authority shall have been issued, and no litigation
shall be pending or threatened, which does or, with respect to any threatened
litigation, seeks to enjoin, prohibit or restrain, the making or repayment of
the Loans, the issuance of any Letters of Credit or any participations therein
or the consummation of the transactions contemplated hereby; and
(i) no event, act or condition shall have occurred after the Closing
Date which, in the reasonable judgment of the Lead Agent or the Required Banks,
as the case may be, has had or is likely to have a Material Adverse Effect.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the applicable Borrower and CarrAmerica LP, if applicable, on the date of such
Borrowing as to the facts specified in clauses (c) through (i) of this Section
(except that with respect to clause (h), such representation and warranty shall
be deemed to be limited to laws, regulations, orders, judgments, decrees and
litigation affecting the Borrowers or CarrAmerica LP and not solely the Banks).
SECTION 3.3 Conditions Precedent to New Acquisitions and Additional Real
Property Assets.
(a) All New Acquisitions or Real Property Assets to be added to
the Borrowing Base Properties shall be approved by all the Banks.
(b) The Borrowers shall submit to the Lead Agent and the Banks
as provided in subsection (c) below the materials set forth below (the "Due
Diligence Package") relating to each potential New Acquisition or Real Property
Assets to be added to the Borrowing Base Properties. The Due Diligence Package
shall include (i) a description of the Real Property Asset or New Acquisition,
(ii) two years of historical cash flow operating statements, if available, (iii)
five years of cash flow projections (including capital expenditures), (iv) the
credit history of each existing tenant which occupies more than 15% of such Real
Property Asset or New Acquisition, (v) a map and site plan, including an
existing Survey of the property dated not more than twelve
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(12) months prior to such submission, (vi) copies of all lease agreements with
each existing tenant which occupies more than 15% of such Real Property Asset or
New Acquisition and lease abstracts thereof, (vii) an environmental report in
compliance with Section 3.1(q), (viii) a satisfactory engineer's inspection
report, (ix) an estoppel certificate from each tenant which occupies 50% or more
of the Real Property Asset or New Acquisition, (x) evidence of compliance with
zoning and other local laws, (xi) a satisfactory Title Commitment and (xii) a
final investment memorandum prepared by Carr in connection with the New
Acquisition or Real Property Asset. The applicable Borrower shall permit the
Lead Agent at all reasonable times and upon reasonable prior notice to make an
inspection of such New Acquisition or Real Property Asset.
(c) The Borrowers shall distribute a copy of each item
constituting the Due Diligence Package by overnight mail to each of the Banks
for their review and approval. Failure to respond to the Lead Agent in writing
by any Bank within ten (10) Domestic Business Days after receipt of the Due
Diligence Package, shall be deemed to be an approval by such Bank of such
potential New Acquisition or Real Property Asset.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lead Agent and each of the other Banks which may
become a party to this Agreement to make the Loans, the applicable Borrower or
CarrAmerica LP makes the following representations and warranties as of the date
hereof. Such representations and warranties shall survive the effectiveness of
this Agreement, the execution and delivery of the other Loan Documents and the
making of the Loans.
SECTION 4.1. Existence and Power of Carr. Carr is duly organized,
validly existing and in good standing as a corporation under the laws of the
State of Maryland and has all powers and all material governmental licenses,
authorizations, consents and approvals required to own its property and assets
and carry on its business as now conducted
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or as it presently proposes to conduct and has been duly qualified and is in
good standing in every jurisdiction in which the failure to be so qualified
and/or in good standing is likely to have a Material Adverse Effect.
SECTION 4.2. Existence and Power of Carr LP and CarrAmerica LP. Carr LP
and CarrAmerica LP are each duly organized, validly existing and in good
standing as limited partnership under the laws of the State of Delaware and has
all powers and all material governmental licenses, authorizations, consents and
approvals required to own its property and assets and carry on its business as
now conducted or as it presently proposes to conduct and has been duly qualified
and is in good standing in every jurisdiction in which the failure to be so
qualified and/or in good standing is likely to have a Material Adverse Effect.
SECTION 4.3. Power and Authority of Carr. Carr has the corporate power
and authority to execute, deliver and carry out the terms and provisions of each
of the Loan Documents to which it is a party and has taken all necessary action
to authorize the execution and delivery on behalf of Carr and the performance by
Carr of such Loan Documents. Carr has duly executed and delivered each Loan
Document to which it is a party, and each such Loan Document constitutes the
legal, valid and binding obligation of Carr, enforceable in accordance with its
terms, except as enforceability may be limited by applicable insolvency,
bankruptcy or other laws affecting creditors rights generally, or general
principles of equity, whether such enforceability is considered in a proceeding
in equity or at law.
SECTION 4.4. Power and Authority of Carr LP and CarrAmerica LP. Carr LP
and CarrAmerica LP each have the partnership power and authority to execute,
deliver and carry out the terms and provisions of each of the Loan Documents to
which it is a party and has taken all necessary action to authorize the
execution and delivery on behalf of Carr LP or CarrAmerica LP, as applicable,
and the performance by Carr LP or CarrAmerica LP, as applicable, of such Loan
Documents. Carr LP and CarrAmerica LP have each duly executed and delivered each
Loan Document to which it is a party, and each such Loan Document constitutes
the legal, valid and binding obligation of Carr LP or CarrAmerica LP, as
applicable, enforceable in accordance with its terms, except as enforceability
may be limited by applicable insolvency,
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bankruptcy or other laws affecting creditors rights generally, or general
principles of equity, whether such enforceability is considered in a proceeding
in equity or at law.
SECTION 4.5. No Violation. Neither the execution, delivery or
performance by or on behalf of the Borrowers or CarrAmerica LP of the Loan
Documents, nor compliance by the Borrowers or CarrAmerica LP with the terms and
provisions thereof nor the consummation of the transactions contemplated by the
Loan Documents, (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality or (ii) will conflict with or result in any breach
of, any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of the Borrowers
or CarrAmerica LP pursuant to the terms of any indenture, mortgage, deed of
trust, or other agreement or other instrument to which the Borrowers or
CarrAmerica LP (or of any partnership of which either Borrower is a partner) is
a party or by which it or any of its property or assets is bound or to which it
is subject or (iii) will cause a default by either Borrower or CarrAmerica LP
under any organizational document of any Subsidiary, or cause a default under
Carr's articles of incorporation or by-laws or Carr LP's or CarrAmerica LP's
agreement of limited partnership.
SECTION 4.6. Financial Information.
(a) The unaudited consolidated balance sheet of Carr as of March 31,
1996, a copy of which has been delivered to the Lead Agent, fairly presents, in
conformity with generally accepted accounting principles, the consolidated
financial position of Carr as of such date and its consolidated results of
operations for such fiscal year.
(b) Since March 31, 1996, (i) there has been no material adverse change
in the business, financial position or results of operations of the Borrowers
and (ii) except as previously disclosed to the Lead Agent, neither the Borrowers
nor CarrAmerica LP have incurred any material indebtedness or guaranty.
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SECTION 4.7. Litigation.
(a) There is no action, suit or proceeding pending against, or
to the knowledge of the Borrowers or CarrAmerica LP, threatened against or
affecting, (i) the Borrowers or CarrAmerica LP or any of their Subsidiaries,
(ii) the Loan Documents or any of the transactions contemplated by the Loan
Documents or (iii) any of their assets, in any case before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable likelihood of an adverse decision which could, individually or in the
aggregate, have a Material Adverse Effect or which in any manner draws into
question the validity of this Agreement or the other Loan Documents.
(b) There are no final nonappealable judgments or decrees in an
aggregate amount of Five Million Dollars ($5,000,000) or more entered by a court
or courts of competent jurisdiction against the Borrowers or either Borrower or
CarrAmerica LP (other than any judgment as to which, and only to the extent, a
reputable insurance company has acknowledged coverage of such claim in writing).
SECTION 4.8. Compliance with ERISA.
(a) Except as previously disclosed to the Lead Agent in writing, each
member of the ERISA Group has fulfilled its obligations under the minimum
funding standards of ERISA and the Internal Revenue Code with respect to each
Plan and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Internal Revenue Code with respect to each Plan. No
member of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code in respect of any Plan,
(ii) failed to make any contribution or payment to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan
or Benefit Arrangement, which has resulted or could result in the imposition of
a Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA.
(b) The transactions contemplated by the Loan Documents will not
constitute a nonexempt prohibited transaction
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(as such term is defined in Section 4975 of the Code or Section 406 of ERISA)
that could subject the Lead Agent or the Banks to any tax or penalty or
prohibited transactions imposed under Section 4975 of the Code or Section 502(i)
of ERISA.
SECTION 4.9. Environmental Matters. In the ordinary course of its
business, the Borrowers and CarrAmerica LP each review the effect of
Environmental Laws on the business, operations and properties of the Borrowers
and their subsidiaries or CarrAmerica LP, as applicable, in the course of which
they identify and evaluate associated liabilities and costs (including, without
limitation, any capital or operating expenditures required for clean-up or
closure of properties presently or previously owned, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by law or as a condition of any license, permit or
contract, any related constraints on operating activities, including any
periodic or permanent shutdown of any facility or reduction in the level of or
change in the nature of operations conducted thereat, any costs or liabilities
in connection with off-site disposal of wastes or Hazardous Substances, and any
actual or potential liabilities to third parties, including employees, and any
related costs and expenses). On the basis of this review, the Borrowers and
CarrAmerica LP have reasonably concluded that such associated liabilities and
costs, including the costs of compliance with Environmental Laws, are unlikely
to have a Material Adverse Effect.
SECTION 4.10. Taxes. The initial tax year of each Borrower for federal
income tax purposes was 1993. The initial tax year of CarrAmerica LP for federal
income tax purposes is 1996. The federal income tax returns of the Borrowers are
currently under examination by the Internal Revenue Service. Although such
examination is not yet formally closed, the examining agent has delivered his
report to the Borrowers and such report does not propose any adjustments in
respect of such returns that would have a Material Adverse Effect and the
Borrowers currently do not anticipate that the Internal Revenue Service will
propose any such adjustments. The Borrowers and their subsidiaries and
CarrAmerica LP have filed all United States Federal income tax returns and all
other material tax returns which are required to be filed by them and have paid
all taxes due
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pursuant to such returns or pursuant to any assessment received by the Borrowers
or any subsidiary. The charges, accruals and reserves on the books of the
Borrowers and their subsidiaries and CarrAmerica LP in respect of taxes or other
governmental charges are, in the opinion of the Borrowers and CarrAmerica LP,
adequate.
SECTION 4.11. Full Disclosure. All information heretofore furnished by
the Borrowers or CarrAmerica LP to the Lead Agent or any Bank for purposes of or
in connection with this Agreement or any transaction contemplated hereby is true
and accurate in all material respects on the date as of which such information
is stated or certified. The Borrowers and CarrAmerica LP have disclosed to the
Banks in writing any and all facts known to the Borrowers or CarrAmerica LP
which materially and adversely affect or are likely to materially and adversely
affect (to the extent the Borrowers or CarrAmerica LP can now reasonably
foresee), the business, operations or financial condition of the Borrowers and
CarrAmerica LP considered as one enterprise or the ability of the Borrowers or
CarrAmerica LP, as applicable, to perform their obligations under this Agreement
or the other Loan Documents.
SECTION 4.12. Solvency. On the Closing Date and after giving effect to
the transactions contemplated by the Loan Documents occurring on the Closing
Date, each Borrower and CarrAmerica LP is Solvent.
SECTION 4.13. Use of Proceeds; Margin Regulations. All proceeds of the
Loans will be used by the Borrowers only in accordance with the provisions
hereof. No part of the proceeds of any Loan will be used by the Borrowers to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock. Neither the making of any Loan nor
the use of the proceeds thereof will violate or be inconsistent with the
provisions of Regulations G, T, U or X of the Federal Reserve Board.
SECTION 4.14. Governmental Approvals. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection with
the execution, delivery and performance of any
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Loan Document or the consummation of any of the transactions contemplated
thereby other than those that have already been duly made or obtained and remain
in full force and effect.
SECTION 4.15. Investment Company Act; Public Utility Holding Company
Act. Neither Borrower nor CarrAmerica LP is (x) an "investment company" or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended, (y) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of either a
"holding company" or a "subsidiary company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (z) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money.
SECTION 4.16. Closing Date Transactions. On the Closing Date and
immediately prior to the making of the Loans, the transactions (other than the
making of the Loans) intended to be consummated on the Closing Date will have
been consummated in accordance with all applicable laws. All consents and
approvals of, and filings and registrations with, and all other actions by, any
Person required in order to make or consummate such transactions have been
obtained, given, filed or taken and are in full force and effect.
SECTION 4.17. Representations and Warranties in Loan Documents. All
representations and warranties made by the Borrowers and CarrAmerica LP in the
Loan Documents are true and correct in all material respects.
SECTION 4.18. Patents, Trademarks, etc. Each Borrower and CarrAmerica LP
has obtained and holds in full force and effect all patents, trademarks, service
marks, trade names, copyrights and other such rights, free from burdensome
restrictions, which are necessary for the operation of its business as presently
conducted, the impairment of which is likely to have a Material Adverse Effect.
To the Borrowers' and CarrAmerica LP's knowledge, no material product, process,
method, substance, part or other material presently sold by or employed by the
Borrowers or CarrAmerica LP in connection with such business infringes any
patent, trademark, service mark, trade name, copyright, license or other such
right owned by any other Person. There is not pending or, to the Borrowers' and
CarrAmerica LP's knowledge, threatened any claim or litigation against or
affecting
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either Borrower or CarrAmerica LP contesting its right to sell or use any such
product, process, method, substance, part or other material.
SECTION 4.19. No Default. No Default or Event of Default exists under or
with respect to any Loan Document. Neither Borrower nor CarrAmerica LP is in
default in any material respect beyond any applicable grace period under or with
respect to any other material agreement, instrument or undertaking to which it
is a party or by which it or any of its property is bound in any respect, the
existence of which default is likely (to the extent that the Borrowers or
CarrAmerica LP, as applicable, can now reasonably foresee) to result in a
Material Adverse Effect.
SECTION 4.20. Licenses, etc. Each Borrower and CarrAmerica LP has
obtained and holds in full force and effect, all franchises, licenses, permits,
certificates, authorizations, qualifications, accreditations, easements, rights
of way and other consents and approvals which are necessary for the operation of
its businesses as presently conducted, the absence of which is likely (to the
extent that the Borrowers or CarrAmerica LP, as applicable, can now reasonably
foresee) to have a Material Adverse Effect.
SECTION 4.21. Compliance With Law. Each Borrower and CarrAmerica LP is
in compliance with all laws, rules, regulations, orders, judgments, writs and
decrees, including, without limitation, all building and zoning ordinances and
codes, the failure to comply with which is likely (to the extent that the
Borrowers or CarrAmerica LP, as applicable, can now reasonably foresee) to have
a Material Adverse Effect.
SECTION 4.22. No Burdensome Restrictions. Neither Borrower nor
CarrAmerica LP is a party to any agreement or instrument or subject to any other
obligation or any charter or corporate or partnership restriction, as the case
may be, which, individually or in the aggregate, is likely (to the extent that
the Borrowers or CarrAmerica LP, as applicable, can now reasonably foresee) to
have a Material Adverse Effect.
SECTION 4.23. Brokers' Fees. Neither Borrower nor CarrAmerica LP has
dealt with any broker or finder with respect to the transactions contemplated by
the Loan Documents
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(except with respect to the acquisition or disposition of Real Property Assets)
or otherwise in connection with this Agreement, and neither Borrower nor
CarrAmerica LP has done any acts, had any negotiations or conversation, or made
any agreements or promises which will in any way create or give rise to any
obligation or liability for the payment by the Borrower or CarrAmerica LP of any
brokerage fee, charge, commission or other compensation to any party with
respect to the transactions contemplated by the Loan Documents (except with
respect to the acquisition or disposition of Real Property Assets), other than
the fees payable hereunder.
SECTION 4.24. Labor Matters. There are no collective bargaining
agreements or Multiemployer Plans covering the employees of the Borrowers or
CarrAmerica LP and the Borrowers or CarrAmerica LP have not suffered any
strikes, walkouts, work stoppages or other material labor difficulty within the
last five (5) years.
SECTION 4.25. Organizational Documents. The documents delivered pursuant
to Section 3.1(e) constitute, as of the Closing Date, all of the organizational
documents (together with all amendments and modifications thereof) of the
Borrowers. The Borrowers represent that they have delivered to the Lead Agent
true, correct and complete copies of each of the documents set forth in this
Section 4.25. CarrAmerica LP represents that it has delivered to the Lead Agent
and the Banks true, correct and complete copies of all of the organizational
documents (together with all amendments and modifications thereof) of
CarrAmerica LP as of the Closing Date.
SECTION 4.26. Principal Offices. The principal office, chief executive
office and principal place of business of each of the Borrowers and CarrAmerica
LP is 1700 Pennsylvania Avenue, N.W., Washington, D.C.
SECTION 4.27. REIT Status. For the fiscal year ended December 31, 1995,
Carr qualified and Carr intends to continue to qualify as a real estate
investment trust under the Code.
SECTION 4.28. Ownership of Property. Schedule 4.28 attached hereto and
made a part hereof sets forth all the real property owned or leased by the
Borrowers and Persons
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in which the Borrowers, directly or indirectly, own an interest as of the
Closing Date. As of the Closing Date, each Borrower and such Persons have good
and insurable fee simple title (or leasehold title if so designated on Schedule
4.28) to all of such real property, subject to customary encumbrances and liens
as of the date of this Agreement. As of the date of this Agreement, there are no
mortgages, deeds of trust, indentures, debt instruments or other agreements
creating a Lien against any of the Real Property Assets except as disclosed on
Schedule 4.28.
SECTION 4.29. Insurance. Each Borrower and CarrAmerica LP
currently maintains, or causes its tenants to maintain, insurance at 100%
replacement cost insurance coverage (subject to customary deductibles) in
respect of each of the Real Property Assets, as well as commercial general
liability insurance (including "builders' risk") against claims for personal,
and bodily injury and/or death, to one or more persons, or property damage, as
well as workers' compensation insurance, in each case with respect to the Real
Property Assets with insurers having an A.M. Best policyholders' rating of not
less than A-IX in amounts that prudent owner of assets such as the Real Property
Assets would maintain.
SECTION 4.30. Surveys. As to any Survey dated prior to June 30,
1995, neither the Borrowers nor CarrAmerica LP know of any material changes to
the matters shown thereon which have occurred since the date of each such Survey
and which have not been disclosed by the Borrowers or CarrAmerica LP in writing
to the Lead Agent.
ARTICLE V
AFFIRMATIVE AND NEGATIVE COVENANTS
Each Borrower and CarrAmerica LP covenant and agree that, so long as any
Bank has any Commitment hereunder or any Obligations remain unpaid:
SECTION 5.1. Information. The applicable Borrower will deliver to the
Lead Agent and to each of the Banks:
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(a) as soon as available and in any event within 105 days after the end
of each fiscal year of Carr, an audited consolidated balance sheet of Carr as of
the end of such fiscal year and the related consolidated statements of cash flow
and operations for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, audited by KPMG Peat Marwick LLP
or other independent public accountants of similar standing;
(b) as soon as available and in any event within ninety (90) days after
the end of each quarter of each fiscal year of Carr, a statement of Carr,
prepared on a GAAP basis, setting forth the operating income and operating
expenses of Carr, in sufficient detail so as to calculate net operating cash
flow of Carr for the immediately preceding quarter;
(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate of the chief financial
officer or the chief accounting officer of Carr (i) setting forth in reasonable
detail the calculations required to establish whether the Borrowers were in
compliance with the requirements of Section 5.8 on the date of such financial
statements; (ii) stating whether any Default exists on the date of such
certificate and, if any Default then exists, setting forth the details thereof
and the action which the applicable Borrower or CarrAmerica LP is taking or
proposes to take with respect thereto; and (iii) certifying (x) that such
financial statements fairly present the financial condition and the results of
operations of Carr as of the dates and for the periods indicated, on the basis
of generally accepted accounting principles, subject, in the case of interim
financial statements, to normal year-end adjustments, and (y) that such officer
has reviewed the terms of the Loan Documents and has made, or caused to be made
under his or her supervision, a review in reasonable detail of the business and
condition of the applicable Borrower or CarrAmerica LP during the period
beginning on the date through which the last such review was made pursuant to
this Section 5.1(c) (or, in the case of the first certification pursuant to this
Section 5.1(c), the Closing Date) and ending on a date not more than ten (10)
Domestic Business Days prior to the date of such delivery and that on the basis
of such review of the Loan Documents and the business and condition of the
applicable Borrower or CarrAmerica LP, to the best knowledge of
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such officer, no Default or Event of Default under any other provision of
Section 6.1 occurred or, if any such Default or Event of Default has occurred,
specifying the nature and extent thereof and, if continuing, the action the
applicable Borrower or CarrAmerica LP proposes to take in respect thereof;
(d) simultaneously with the delivery of each set of financial statements
referred to in clause (a) above, a statement of the firm of independent public
accountants which reported on such statements confirming the calculations set
forth in the officer's certificate delivered simultaneously therewith pursuant
to clause (c) above;
(e) (i) within five (5) days after the president, chief financial
officer, treasurer, controller or other executive officer of either Borrower or
CarrAmerica LP obtains knowledge of any Default, if such Default is then
continuing, a certificate of the chief financial officer or the president of
such Borrower or CarrAmerica LP setting forth the details thereof and the action
which such Borrower or CarrAmerica LP is taking or proposes to take with respect
thereto; (ii) promptly and in any event within ten (10) days after either
Borrower or CarrAmerica LP obtains knowledge thereof, notice of (x) any
litigation or governmental proceeding pending or threatened against the Borrower
or CarrAmerica LP, as applicable, as to which, if adversely determined, is
likely to individually or in the aggregate, result in a Material Adverse Effect,
and (y) any other event, act or condition which is likely to result in a
Material Adverse Effect;
(f) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section 4043
of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or
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appoint a trustee to administer any Plan, a copy of such notice; (iv) applies
for a waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement or makes any amendment to any Plan or Benefit
Arrangement which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security, a certificate of the chief financial
officer or the chief accounting officer of such Borrower or CarrAmerica LP
setting forth details as to such occurrence and action, if any, which such
Borrower, CarrAmerica LP or applicable member of the ERISA Group is required or
proposes to take;
(g) promptly and in any event within five (5) Domestic Business Days
after either Borrower or CarrAmerica LP obtains actual knowledge of any of the
following events, a certificate of the applicable Borrower or CarrAmerica LP,
executed by an officer of the applicable Borrower or CarrAmerica LP, specifying
the nature of such condition and such Borrower's or CarrAmerica LP's, if the
applicable Borrower or CarrAmerica LP, as the case may be, has actual knowledge
thereof, the Environmental Affiliate's proposed initial response thereto: (i)
the receipt by the applicable Borrower or CarrAmerica LP, or, if such Borrower
or CarrAmerica LP has actual knowledge thereof, any of the Environmental
Affiliates, of any communication (written or oral), whether from a governmental
authority, citizens group, employee or otherwise, that alleges that the
applicable Borrower or CarrAmerica LP, or, if the applicable Borrower or
CarrAmerica LP has actual knowledge thereof, any of the Environmental
Affiliates, is not in compliance with applicable Environmental Laws, and such
noncompliance is likely to have a Material Adverse Effect, (ii) the applicable
Borrower or CarrAmerica LP shall obtain actual knowledge that there exists any
Environmental Claim pending or threatened against the applicable Borrower,
CarrAmerica LP or any Environmental Affiliate or (iii) the applicable Borrower
obtains actual knowledge of any release, emission, discharge or disposal of any
Materials of Environmental Concern that are likely to form the basis of any
Environmental Claim
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against the applicable Borrower, CarrAmerica LP or any Environmental Affiliate;
(h) promptly and in any event within five (5) Domestic Business Days
after receipt of any material notices or correspondence from any company or
agent for any company providing insurance coverage to either Borrower or
CarrAmerica LP relating to any material loss or loss in excess of $1,500,000 of
the applicable Borrower or CarrAmerica LP, copies of such notices and
correspondence; and
(i) promptly upon the mailing thereof to the shareholders or partners of
either Borrower or CarrAmerica LP, copies of all financial statements, reports
and proxy statement so mailed;
(j) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which either Borrower or CarrAmerica LP shall have filed with the
Securities and Exchange Commission;
(k) simultaneously with delivery of the certificate required pursuant to
Section 5.1(c), an updated Schedule 4.28, certified by the chief financial
officer or any senior vice president or executive vice president of Carr as
true, correct and complete as of the date such updated schedules are delivered;
(l) within 5 days after filing of the annual income tax return with the
Internal Revenue Service, a certificate of the chief financial officer or chief
accounting officer of Carr certifying that Carr is properly classified and
continues to qualify as a real estate investment trust under the Internal
Revenue Code and has taken all actions consistent with maintaining such status;
(m) simultaneously with delivery of the information required by Sections
5.1(a) and (b), a statement of Borrowing Base Net Operating Cash Flow with
respect to each Borrowing Base Property and a list of all Borrowing Base
Properties; and
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(n) from time to time such additional information regarding the
financial position or business of the Borrowers as the Lead Agent, at the
request of any Bank, may reasonably request.
SECTION 5.2. Payment of Obligations. Each Borrower and CarrAmerica LP
will pay and discharge, at or before maturity, all its material obligations and
liabilities including, without limitation, any obligation pursuant to any
agreement by which it or any of its properties is bound and any tax liabilities,
except where such tax liabilities may be contested in good faith by appropriate
proceedings, and will maintain in accordance with generally accepted accounting
principles, appropriate reserves for the accrual of any of the same, in any
case, where failure to do so will likely result in a Material Adverse Effect.
SECTION 5.3. Maintenance of Property; Insurance.
(a) Each Borrower and CarrAmerica LP will keep, and will cause each of
its Subsidiaries to keep, all property useful and necessary in its business,
including, without limitation, the Real Property Assets, in good repair, working
order and condition, ordinary wear and tear and the provisions of any mortgage
with respect to casualty or condemnation events excepted.
(b) Each Borrower and CarrAmerica LP shall or shall cause the
Subsidiaries to maintain "all risk" insurance covering 100% replacement cost of
its real property assets with insurers having an A.M. Best policyholder's rating
of not less than A-VIII, which insurance shall in any event not provide for
materially less coverage than the insurance in effect on the Closing Date, and
furnish to each Bank from time to time, upon written request, copies of
certificates of insurance under which such insurance is issued and such other
information relating to such insurance as such Bank may reasonably request.
SECTION 5.4. Conduct of Business. Except as contemplated by the Proxy
Statement of Carr, dated January 22, 1996, each Borrower and CarrAmerica LP will
continue to engage in business of the same general type as now conducted by each
Borrower and CarrAmerica LP, as the case may be.
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SECTION 5.5. Compliance with Laws. Each Borrower and CarrAmerica LP will
comply in all material respects with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities (including, without
limitation, Environmental Laws, all zoning and building codes and ERISA and the
rules and regulations thereunder) except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
SECTION 5.6. Inspection of Property, Books and Records. The Borrowers
and CarrAmerica LP will keep proper books of record and account in which full,
true and correct entries shall be made of all dealings and transactions in
relation to its business and activities; and will permit representatives of any
Bank at such Bank's expense to visit and inspect any of its properties to
examine and make abstracts from any of its books and records and to discuss its
affairs, finances and accounts with its officers, employees and independent
public accountants, all at such reasonable times, upon reasonable notice, and as
often as may reasonably be desired.
SECTION 5.7. Existence.
(a) Each Borrower and CarrAmerica LP shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence or its partnership existence, as applicable.
(b) Each Borrower and CarrAmerica LP shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
patents, trademarks, servicemarks, tradenames, copyrights, franchises, licenses,
permits, certificates, authorizations, qualifications, accreditations,
easements, rights of way and other rights, consents and approvals the
nonexistence of which is likely to have a Material Adverse Effect.
SECTION 5.8. Financial Covenants.
(a) Debt Service Coverage. Measured as of the last day of each
calendar quarter, the ratio of (i) Annual EBITDA to (ii) the sum of (x) Debt
Service plus (y) appropriate reserves for replacements of not less than $2.29
per square foot per annum for each Real Property Asset, will not be less than
1.5:1.
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(b) Maximum Total Debt to Tangible FMV. As of the last day of
each calendar quarter, the Maximum Total Debt Ratio will not be greater than 55%
during the calendar year 1996, 50% during the calendar year 1997 and 45% during
the calendar year 1998.
(c) Carr Maximum Total Debt to Carr Tangible FMV. As of the last
day of each calendar quarter, the Carr Maxi- mum Total Debt Ratio will not be
greater than 60%.
(d) Carr LP Maximum Total Debt to Carr LP Tangible FMV. As of
the last day of each calendar quarter, the Carr LP Maximum Total Debt Ratio will
not be greater than 60%.
(e) EBITDA Interest Coverage. As of the last day of each
calendar quarter, the ratio of (x) Annual EBITDA to (y) interest (whether
accrued, paid or capitalized) actually payable by either Borrower or the
Borrowers on its Debt for the previous four consecutive quarters including the
quarter then ended, will not be less than 2.25:1.
(f) EBITDA Coverage. As of the last day of each calendar
quarter, the ratio of (x) Annual EBITDA to (y) the sum of (i) Debt Service plus
(ii) Capital Expenditures of the Borrowers for the previous four consecutive
quarters including the quarter then ended less a reserve of $20,000,000 for the
period commencing on the date hereof and ending on the first anniversary of the
date hereof, will not be less than 1.25:1.
(g) Dividends. Carr will not, as determined on an aggregate
annual basis, pay any dividends in excess of 90% of Carr's consolidated FFO for
such year. During the continuance of an Event of Default under Section 6.1(a),
Carr shall only pay those dividends necessary to maintain its status as a real
estate investment trust.
(h) Borrowers LTV Ratio. As of the last day of each calendar
quarter and as of the date of any New Acquisition, the Borrowers LTV Ratio shall
not exceed 50%, subject, however, to the Borrowers' rights to cure pursuant to
Section 2.9(a). Failure to restore compliance with this Section 5.8(h) in
accordance with Section 2.9(a) shall be an immediate Event of Default.
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(i) Carr LTV Ratio. As of the last day of each calendar quarter
and as of the date of any New Acquisition, the Carr LTV Ratio shall not exceed
50%, subject, however, to Carr's rights to cure pursuant to Section 2.9(d).
Failure to restore compliance with this Section 5.8(i) in accordance with
Section 2.9(d) shall be an immediate Event of Default.
(j) Carr LP LTV Ratio. As of the last day of each calendar
quarter and as of the date of any New Acquisition, the Carr LP LTV Ratio shall
not exceed 50%, subject, however, to Carr LP's rights to cure pursuant to
Section 2.9(e). Failure to restore compliance with this Section 5.8(j) in
accordance with Section 2.9(e) shall be an immediate Event of Default.
(k) Borrowing Base Properties Minimum Debt Service Coverage. As
of the last day of each calendar quarter, the Borrowers shall be in compliance
with the Borrowing Base Properties Minimum Debt Service Coverage, subject,
however, to the Borrowers' rights to cure pursuant to Section 2.9(c).
Failure to restore compliance with this Section 5.8(k) in accordance with
Section 2.9(c) shall be an immediate Event of Default.
(l) Minimum Consolidated Tangible Net Worth. The Consolidated
Tangible Net Worth will at no time be less than 90% of the Consolidated Tangible
Net Worth on the Closing Date.
SECTION 5.9. Restriction on Fundamental Changes; Operation and Control.
(a) Carr shall carry on its business operations through Carr and its
Subsidiaries. Neither Borrower nor CarrAmerica LP shall enter into any merger or
consolidation, unless such Borrower or CarrAmerica LP, as applicable, is the
surviving entity, or liquidate, wind-up or dissolve (or suffer any liquidation
or dissolution), discontinue its business or convey, lease, sell, transfer or
otherwise dispose of, in one transaction or series of transactions, all or any
substantial part of its business or property, whether now or hereafter acquired,
hold an interest in any subsidiary which is not controlled by such Borrower or
CarrAmerica LP, as applicable, or enter into other business lines, without the
prior written consent of the Lead Agent, except for (i) joint ventures in which
Carr's
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ownership interest shall be less than 15% of the fair market value of the Real
Property Assets owned by Carr as of the date hereof and (ii) Carr Real Estate
Services, Inc., Carr Real Estate Services of Northern Virginia, Inc., Carr
Development and Construction, Inc. and any other similar service company. For
purposes hereof, "fair market value" shall mean the quotient of (x) Net
Operating Income with respect to the Real Property Assets owned by Carr as of
the date hereof and (y) 11%.
(b) Neither Borrower nor CarrAmerica LP shall amend its articles of
incorporation, by-laws or agreement of limited partnership, as applicable, in
any material respect, without the Lead Agent's consent, which shall not be
unreasonably withheld, except as contemplated by the Proxy Statement of Carr,
dated January 22, 1996.
SECTION 5.10. Changes in Business. The Borrowers and CarrAmerica LP
shall not enter into any business which is substantially different from that
conducted by the Borrowers and CarrAmerica LP on the Closing Date after giving
effect to the transactions contemplated by the Loan Documents or described in
the Proxy Statement of Carr, dated January 22, 1996.
SECTION 5.11. Fiscal Year; Fiscal Quarter. The Borrowers and
CarrAmerica LP shall not change their fiscal year or any of their fiscal
quarters.
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SECTION 5.12. Margin Stock. None of the proceeds of the Loan will be
used, directly or indirectly, for the purpose, whether immediate, incidental
or ultimate, of buying or carrying any Margin Stock.
SECTION 5.13. Sale of Borrowing Base Properties. Prior to the sale or
transfer of any Borrowing Base Property, the applicable Borrower shall (i)
deliver prior written notice to the Lead Agent and the Banks, (ii) deliver to
the Lead Agent and the Banks a certificate from its Chief Financial Officer
certifying that at the time of such sale or other disposal (based on pro-forma
calculations for the previous period assuming that such Borrowing Base Property
was not a Borrowing Base Property for the relevant period) all of the covenants
contained in Sections 5.8 through 5.14 and 5.16 through 5.21 are and after
giving effect to the transaction shall continue to be true and accurate in all
respects, and (iii) pay to the Lead Agent an amount equal to that required
pursuant to Section 2.9(b).
SECTION 5.14. Liens; Release of Liens. Neither Borrower nor any of their
Subsidiaries shall at any time during the Term directly or indirectly create,
incur, assume or permit to exist any Lien for borrowed monies or any other Lien
other than Permitted Liens unless the same is being contested in good faith and
the same is discharged, bonded off or paid within thirty (30) days of filing of
such Lien, on or with respect to any Borrowing Base Property. Notwithstanding
the foregoing, the Borrowers may obtain a release from the terms of this
Agreement of any Borrowing Base Property provided that such Borrower has
complied with Section 2.9(b) and prior to or simultaneously with such release
(i) such Borrower shall pay to the Lead Agent any amounts due pursuant to
Section 2.9(b), and (ii) such Borrower delivers to the Lead Agent and the Banks
a certificate from its Chief Financial Officer certifying that at the time of
the release all of the covenants contained in Sections 5.8 through 5.14 and 5.16
through 5.21 are and after giving effect to the transaction shall continue to be
true and accurate in all respects.
SECTION 5.15 Use of Proceeds. The Borrowers and CarrAmerica LP shall use
the proceeds of the Loans solely (i) to facilitate the acquisition by Carr
(either directly or indirectly through Subsidiaries) of real properties (or
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interests therein) (the "New Acquisitions") which are office buildings (it being
understood that Carr LP may distribute, lend or otherwise transfer the proceeds
of a Tranche B Loan to Carr for such purpose, and that Carr may distribute, lend
or otherwise transfer the proceeds of a Tranche A Loan (or the proceeds of a
Tranche B Loan received from Carr LP) to a Subsidiary for such purpose), (ii)
for other purposes related to the acquisition of office buildings (including,
without limitation, the acquisition of property service companies in connection
therewith and the payment of fees and other costs related to such acquisition),
(iii) for working capital purposes, provided, however, the Outstanding Working
Capital Amount shall not exceed $15,000,000 at any one time or (iv) for
development and construction activities in accordance with Section 5.16 hereof.
Notwithstanding the foregoing, the Borrowers may use $20,000,000 of the proceeds
of the Loans only for the payment of Capital Expenditures.
SECTION 5.16 Development Activities. Neither the Borrowers nor
CarrAmerica LP shall have invested more than $25,000,000 in the aggregate as to
all such Persons in any current development and construction activities (which
limit shall be increased to $50,000,000 in the aggregate as to all such Persons
on the date which Carr shall have raised additional gross proceeds of at least
$150,000,000 in private or public equity capital after May 23, 1996), other than
(i) development of "build-to-suit" improvements pre-leased to the tenant (in
connection with which the Borrowers and CarrAmerica LP shall have no
construction completion risk) or (ii) development in connection with the
expansion and/or repositioning or restoration following a casualty or
condemnation of existing improvements on Real Property Assets.
SECTION 5.17 Restrictions on Recourse Debt. Until such time as Carr
shall receive two (2) Investment Grade Ratings, one of which shall be an
Investment Grade Rating from S&P or Moody's, neither Borrower nor CarrAmerica LP
shall incur any additional Recourse Debt, other than (i) Recourse Debt to any
Subsidiary, (ii) Recourse Debt in an amount outstanding at any one time not to
exceed $5,000,000 and (iii) the assumption of $28,300,000 of Recourse Debt in
connection with Carr's planned acquisition of office properties located in
Redmond, Washington. Notwithstanding the foregoing, the Borrowers shall be
permitted to incur Non-Recourse Debt with respect to any Real Property Asset
which (i) has been released as a Borrowing Base Property in accordance with the
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terms of this Agreement or (ii) is not otherwise included in the Borrowing Base
Properties.
SECTION 5.18. Carr's Status. Carr shall at all times (i) remain a
publicly traded company listed on the New York Stock Exchange, and (ii) maintain
its status as a self-directed and self-administered real estate investment
trust under the Internal Revenue Code.
SECTION 5.19 Certain Requirements for the Borrowing Base Properties. At
all times, (i) the Borrowing Base Properties Value of the Borrowing Base
Properties which are less than 85% leased to tenants (including as leased any
space for which a lease termination payment has been made to either Borrower or
CarrAmerica LP but only for the period for which such payment shall cover the
rental income for such space) shall not comprise more than 20% of the Borrowing
Base Properties Value. In the event that the requirements of this Section 5.19
are not satisfied, the Borrowers and CarrAmerica LP shall be prohibited from
further Borrowings unless such Borrower or CarrAmerica LP adds a New Acquisition
or Real Property Asset to the Borrowing Base Properties in accordance with this
Agreement in order to restore compliance with the requirements of this
provision. Failure to restore compliance with the requirements of this Section
5.19 within 90 days of such non-compliance shall be an Event of Default.
SECTION 5.20 Hedging Requirements. The Borrowers and CarrAmerica LP
shall maintain "Interest Rate Hedges" (as defined below) on a notional amount of
the Debt of the Borrowers and CarrAmerica LP and their Subsidiaries which, when
added to the aggregate principal amount of the Debt of the Borrowers,
CarrAmerica LP and their Subsidiaries which bears interest at a fixed rate,
equals or exceeds 75% of the aggregate principal amount of all Debt of the
Borrowers and CarrAmerica LP and their Subsidiaries. "Interest Rate Hedges"
shall mean interest rate exchange, collar, cap, swap, adjustable strike cap,
adjustable strike corridor or similar agreements having terms, conditions and
tenors reasonably acceptable to the Lead Agent entered into by the Borrowers
and/or CarrAmerica LP and/or their Subsidiaries in order to provide protection
to, or minimize the impact upon, the Borrowers and/or CarrAmerica LP and/or such
Subsidiaries of increasing floating rates of interest applicable to Debt.
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SECTION 5.21. Transfer of Real Property Assets. Neither Carr nor
CarrAmerica LP shall transfer its interest or any portion of any interest in any
Real Property Asset to Carr LP.
SECTION 5.22. CarrAmerica Realty GP Holdings, Inc. Carr hereby covenants
that at all times CarrAmerica Realty GP Holdings, Inc. shall remain a
wholly-owned Subsidiary of Carr.
ARTICLE VI
DEFAULTS
SECTION 6.1. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) either Borrower or CarrAmerica LP shall fail to pay when due any
principal of any Loan, or either Borrower or CarrAmerica LP shall fail to pay
when due any interest on any Loan, provided, however, that a Borrower shall be
entitled to a three (3) Domestic Business Day grace period with respect thereto
but only as to two (2) payments of interest during the Term, or either Borrower
or CarrAmerica LP shall fail to pay within three (3) Domestic Business Days
after the same is due any fees or other amounts payable hereunder;
(b) either Borrower or CarrAmerica LP shall fail to observe or perform
any covenant contained in Sections 5.7(a), 5.8 to 5.19, inclusive, or 5.21,
subject to any applicable grace periods set forth therein;
(c) either Borrower or CarrAmerica LP shall fail to observe or perform
any covenant or agreement contained in this Agreement (other than those covered
by clause (a) or (b) above) for 30 days after written notice thereof has been
given to such Borrower or CarrAmerica LP by the Lead Agent;
(d) any representation, warranty, certification or statement made by
either Borrower or CarrAmerica LP in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this Agreement shall
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prove to have been incorrect in any material respect when made (or deemed made);
(e) Either Borrower or CarrAmerica LP shall default in the payment when
due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) of any amount owing in respect of any Recourse Debt or Debt
guaranteed by such party (other than the Obligations and provided that such Debt
is in an aggregate amount of Five Million Dollars ($5,000,000) or more) and such
default shall continue beyond the giving of any required notice and the
expiration of any applicable grace period (as the same may be extended by the
applicable lender) and such default shall not be waived by the applicable lender
(which waiver shall serve to reinstate the applicable loan), or either Borrower
or CarrAmerica LP shall default in the performance or observance of any
obligation or condition with respect to any such Debt or any other event shall
occur or condition exist beyond the giving of any required notice and the
expiration of any applicable grace period (as the same may be extended by the
applicable lender), if in any such case the effect of such default, event or
condition is to accelerate the maturity of any such Debt or to permit (without
any further requirement of notice or lapse of time) the holder or holders
thereof, or any trustee or agent for such holders, to accelerate the maturity of
any such Debt and such default shall not be waived by the applicable lender
(which waiver shall serve to reinstate the applicable loan), or any such Debt
shall become or be declared to be due and payable prior to its stated maturity
other than as a result of a regularly scheduled payment;
(f) either Borrower or CarrAmerica LP shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
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(g) an involuntary case or other proceeding shall be commenced against
either Borrower or CarrAmerica LP seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against either Borrower under the federal bankruptcy
laws as now or hereafter in effect;
(h) either Borrower or CarrAmerica LP shall default in its obligations
under any Loan Document other than this Agreement beyond any applicable notice
and grace periods;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $1,000,000 which it shall have become liable
to pay under Title IV of ERISA, or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing, or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan, or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated, or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current payment
obligation in excess of $1,000,000;
(j) one or more final nonappealable judgments or decrees in an aggregate
amount of six percent (6%) or more of the Consolidated Tangible Net Worth as of
such date shall be entered by a court or courts of competent jurisdiction
against either Borrower or CarrAmerica LP (other than any judgment as to which,
and only to the extent, a reputable insurance company has acknowledged coverage
of such claim in writing) and (i) any such judgments or decrees shall not be
stayed, discharged, paid, bonded or vacated within thirty
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(30) days or (ii) enforcement proceedings shall be commenced by any creditor on
any such judgments or decrees;
(k) (i) any Environmental Claim shall have been asserted against either
Borrower, CarrAmerica LP or any Environmental Affiliate, (ii) any release,
emission, discharge or disposal of any Materials of Environmental Concern shall
have occurred, and such event is reasonably likely to form the basis of an
Environmental Claim against either Borrower, CarrAmerica LP or any Environmental
Affiliate, or (iii) either Borrower, CarrAmerica LP or the Environmental
Affiliates shall have failed to obtain any Environmental Approval necessary for
the ownership, or operation of its business, property or assets or any such
Environmental Approval shall be revoked, terminated, or otherwise cease to be in
full force and effect, in the case of clauses (i), (ii) or (iii) above, if the
existence of such condition has had or is reasonably likely to have a Material
Adverse Effect;
(l) during any consecutive two year period commencing on or after the
date hereof, individuals who at the beginning of such period constituted the
Board of Directors of Carr (together with any new directors whose election by
the Board of Directors or whose nomination for election by Carr stockholders was
approved by a vote of at least a majority of the members of the Board of
Directors then in the office who either were members of the Board of Directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
members of the Board of Directors then in office; or
(k) Carr shall cease at any time to qualify as a real estate investment
trust under the Internal Revenue Code.
SECTION 6.2. Rights and Remedies. (a) Upon the occurrence of any Event
of Default described in Sections 6.1(f) or (g), the unpaid principal amount of,
and any and all accrued interest on, the Loans and any and all accrued fees and
other Obligations hereunder shall automatically become immediately due and
payable, with all additional interest from time to time accrued thereon and
without presentation, demand, or protest or other requirements of any kind
(including, without limitation, valuation and ap- praisement, diligence,
presentment, notice of intent to
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demand or accelerate and notice of acceleration), all of which are hereby
expressly waived by the Borrowers and CarrAmerica LP; and upon the occurrence
and during the continuance of any other Event of Default, the Lead Agent may
exercise any of its rights and remedies hereunder and by written notice to the
Borrowers, declare the unpaid principal amount of and any and all accrued and
unpaid interest on the Loans and any and all accrued fees and other Obligations
hereunder to be, and the same shall thereupon be, immediately due and payable
with all additional interest from time to time accrued thereon and without
presentation, demand, or protest or other requirements of any kind other than as
provided in the Loan Documents (including, without limitation, valuation and
appraisement, diligence, presentment, and notice of intent to demand or
accelerate), all of which are hereby expressly waived by the Borrowers and
CarrAmerica LP. Notwithstanding anything contained in this Agreement to the
contrary, (i) Carr and CarrAmerica LP shall be jointly and severally liable for
all Obligations arising hereunder in connection with the Tranche A Loans, (ii)
Carr and Carr LP shall be jointly and severally liable for all Obligations
arising hereunder in connection with the Tranche B Loans and (iii) Carr LP shall
not be liable for any Borrowings made by Carr or CarrAmerica LP pursuant to the
terms hereof.
(b) Notwithstanding the foregoing, upon the occurrence and
during the continuance of any Event of Default other than any Event of Default
described in Sections 6.1(f) or (g), the Lead Agent shall not exercise any of
its rights and remedies hereunder nor declare the unpaid principal amount of and
any and all accrued and unpaid interest on the Loans and any and all accrued
fees and other Obligations hereunder to be immediately due and payable, until
such time as the Lead Agent shall have delivered a notice to the Banks
specifying the Event of Default which has occurred and whether Lead Agent
recommends the acceleration of the Obligations due hereunder or the exercise of
other remedies hereunder. The Banks shall notify the Lead Agent if they approve
or disapprove of the acceleration of the Obligations due hereunder or the
exercise of such other remedy recommended by Lead Agent within five (5) Domestic
Business Days after receipt of such notice. If any Bank shall not respond within
such five (5) Domestic Business Day period, then such Bank shall be deemed to
have accepted Lead Agent's recommendation for acceleration of the Obligations
due hereunder
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or the exercise of such other remedy. If the Required Banks shall approve the
acceleration of the Obligations due hereunder or the exercise of such other
remedy, then Lead Agent shall declare the unpaid principal amount of and any and
all accrued and unpaid interest on the Loans and any and all accrued fees and
other Obligations hereunder to be immediately due and payable or exercise such
other remedy approved by the Required Banks. If the Required Banks shall neither
approve nor disapprove the acceleration of the Obligations due hereunder or such
other remedy recommended by Lead Agent, then Lead Agent may accelerate the
Obligations due hereunder or exercise any of its rights and remedies hereunder
in its sole discretion. If the Required Banks shall disapprove the acceleration
of the Obligations due hereunder or the exercise of such other remedy
recommended by Lead Agent, but approve of another remedy, then to the extent
permitted hereunder, Lead Agent shall exercise such remedy.
SECTION 6.3. Notice of Default. If the Lead Agent shall not already have
given any notice to the Borrowers under Section 6.1, the Lead Agent shall give
notice to the Borrowers under Section 6.1 promptly upon being requested to do so
by the Required Banks and shall thereupon notify all the Banks thereof.
SECTION 6.4. Actions in Respect of Letters of Credit. (a) If, at any
time and from time to time, any Letter of Credit shall have been issued
hereunder and an Event of Default shall have occurred and be continuing, then,
upon the occurrence and during the continuation thereof, the Lead Agent may,
whether in addition to the taking by the Lead Agent of any of the actions
described in this Article or otherwise, make a demand upon the Borrowers to, and
forthwith upon such demand (but in any event within ten (10) days after such
demand), the Borrowers and/or CarrAmerica LP shall, pay to the Lead Agent, on
behalf of the Banks, in same day funds at the Lead Agent's office designated in
such demand, for deposit in a special cash collateral account (the "Letter of
Credit Collateral Account") to be maintained in the name of the Lead Agent (on
behalf of the Banks) and under its sole dominion and control at such place as
shall be designated by the Lead Agent, an amount equal to the amount of the
Letter of Credit Usage under the Letters of Credit. Interest shall accrue on the
Letter of Credit Collateral Account at a rate equal to the rate on overnight
funds.
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(b) The Borrowers and CarrAmerica LP hereby pledge, assign and grant to
the Lead Agent, as administrative agent for its benefit and the ratable benefit
of the Banks a lien on and a security interest in, the following collateral (the
"Letter of Credit Collateral"):
(i) the Letter of Credit Collateral Account, all cash
deposited therein and all certificates and instruments, if any, from time to
time representing or evidencing the Letter of Credit Collateral Account;
(ii) all notes, certificates of deposit and other
instruments from time to time hereafter delivered to or otherwise possessed by
the Lead Agent for or on behalf of either Borrower or CarrAmerica LP in
substitution for or in respect of any or all of the then existing Letter of
Credit Collateral;
(iii) all interest, dividends, cash, instru- ments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the then existing Letter of
Credit Collateral; and
(iv) to the extent not covered by the above clauses, all
proceeds of any or all of the foregoing Letter of Credit Collateral.
The lien and security interest granted hereby secures the payment of all
obligations of the Borrowers and CarrAmerica LP now or hereafter existing
hereunder and under any other Loan Document.
(c) The Borrowers and CarrAmerica LP hereby authorize the Lead Agent for
the ratable benefit of the Banks to apply, from time to time after funds are
deposited in the Letter of Credit Collateral Account, funds then held in the
Letter of Credit Collateral Account to the payment of any amounts, in such order
as the Lead Agent may elect, as shall have become due and payable by the
Borrowers and CarrAmerica LP to the Banks in respect of the Letters of Credit.
(d) Neither Borrower, CarrAmerica LP nor any Person claiming or acting
on behalf of or through either Borrower or CarrAmerica LP shall have any right
to withdraw any of
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the funds held in the Letter of Credit Collateral Account, except as provided in
Section 6.4(h) hereof.
(e) Each Borrower and CarrAmerica LP agrees that it will not (i) sell or
otherwise dispose of any interest in the Letter of Credit Collateral or (ii)
create or permit to exist any lien, security interest or other charge or
encumbrance upon or with respect to any of the Letter of Credit Collateral,
except for the security interest created by this Section 6.4.
(f) If any Event of Default shall have occurred and be continuing:
(i) The Lead Agent may, in its sole discretion, without notice
to the Borrowers or CarrAmerica LP except as required by law and at any time
from time to time, charge, set off or otherwise apply all or any part of first,
(x) amounts previously drawn on any Letter of Credit that have not been
reimbursed by the Borrowers or CarrAmerica LP and (y) any Letter of Credit Usage
described in clause (ii) of the definition thereof that are then due and payable
and second, any other unpaid Obligations then due and payable against the Letter
of Credit Collateral Account or any part thereof, in such order as the Lead
Agent shall elect. The rights of the Lead Agent under this Section 6.4 are in
addition to any rights and remedies which any Bank may have.
(ii) The Lead Agent may also exercise, in its sole discretion,
in respect of the Letter of Credit Collateral Account, in addition to the other
rights and remedies provided herein or otherwise available to it, all the rights
and remedies of a secured party upon default under the Uniform Commercial Code
in effect in the State of New York at that time.
(g) The Lead Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Letter of Credit Collateral if the Letter of
Credit Collateral is accorded treatment substantially equal to that which the
Lead Agent accords its own property, it being understood that, assuming such
treatment, the Lead Agent shall not have any responsibility or liability with
respect thereto.
(h) At such time as all Events of Default have been cured or waived in
writing, all amounts remaining in the
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Letter of Credit Collateral Account shall be promptly returned to the Borrowers.
Absent such cure or written waiver, any surplus of the funds held in the Letter
of Credit Collateral Account and remaining after payment in full of all of the
Obligations of the Borrowers and CarrAmerica LP hereunder and under any other
Loan Document after the Maturity Date shall be paid to the Borrowers or to
whomsoever may be lawfully entitled to receive such surplus.
ARTICLE VII
THE LEAD AGENT
SECTION 7.1. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Lead Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Lead Agent by the terms hereof or thereof,
together with all such powers as are reasonably incidental thereto.
SECTION 7.2. Lead Agent and Affiliates. Morgan shall have the same
rights and powers under this Agreement as any other Bank and may exercise or
refrain from exercising the same as though it were not the Lead Agent, and
Morgan and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrowers and/or CarrAmerica LP or any
subsidiary or affiliate of the Borrowers or CarrAmerica LP as if it were not the
Lead Agent hereunder, and the term "Bank" and "Banks" shall include Morgan in
its individual capacity.
SECTION 7.3. Action by Lead Agent. The obligations of the Lead Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Lead Agent shall not be required to take any
action with respect to any Default, except as expressly provided in Article VI.
SECTION 7.4. Consultation with Experts. The Lead Agent may consult with
legal counsel (who may be counsel for the Borrowers or CarrAmerica LP),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith
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in accordance with the advice of such counsel, accountants or experts.
SECTION 7.5. Liability of Lead Agent. Neither the Lead Agent nor any of
its affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required Banks or, where
required by the terms of this Agreement, all of the Banks, or (ii) in the
absence of its own gross negligence or willful misconduct. Neither the Lead
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement or
any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Borrowers or CarrAmerica LP; (iii) the
satisfaction of any condition specified in Article III, except receipt of items
required to be delivered to the Lead Agent; or (iv) the validity, effectiveness
or genuineness of this Agreement, the other Loan Documents or any other
instrument or writing furnished in connection herewith. The Lead Agent shall not
incur any liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex or similar writing)
believed by it in good faith to be genuine or to be signed by the proper party
or parties.
SECTION 7.6. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Lead Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrowers or CarrAmerica LP) against any cost, expense
(including counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees' gross negligence or
willful misconduct) that such indemnitees may suffer or incur in connection with
this Agreement, the other Loan Documents or any action taken or omitted by such
indemnitees hereunder.
SECTION 7.7. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Lead Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement.
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Each Bank also acknowledges that it will, independently and without reliance
upon the Lead Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking any action under this Agreement.
SECTION 7.8. Successor Lead Agent. The Lead Agent may resign at any time
by giving notice thereof to the Banks and the Borrowers. Upon any such
resignation or the removal of the Lead Agent in accordance with Section 7.11,
the Required Banks shall have the right to appoint a successor Lead Agent. If no
successor Lead Agent shall have been so appointed by the Required Banks, and
shall have accepted such appointment, within 30 days after the retiring Lead
Agent gives notice of resignation, then the retiring Lead Agent may, on behalf
of the Banks, appoint a successor Lead Agent, which shall be a commercial bank
organized or licensed under the laws of the United States of America or of any
State thereof and having a combined capital and surplus of at least $50,000,000.
Upon the acceptance of its appointment as the Lead Agent hereunder by a
successor Lead Agent, such successor Lead Agent shall thereupon succeed to and
become vested with all the rights and duties of the retiring Lead Agent, and the
retiring Lead Agent shall be discharged from its duties and obligations
hereunder first accruing or arising after the effective date of such retirement.
After any retiring Lead Agent's resignation hereunder as Lead Agent, the
provisions of this Article shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was the Lead Agent.
SECTION 7.9. Lead Agent's Fee. The Borrowers shall pay to the Lead Agent
for its own account fees in the amounts and at the times previously agreed upon
between the Borrowers and the Lead Agent.
SECTION 7.10. Copies of Notices. Lead Agent shall deliver to each Bank a
copy of any notice sent to either Borrower or CarrAmerica LP by Lead Agent in
connection with the performance of its duties as Lead Agent hereunder.
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SECTION 7.11. Removal of Lead Agent. If the Lead Agent shall breach any
of its material obligations under this Agreement, then, upon the unanimous
consent of all the Banks (other than the Lead Agent), the Lead Agent may be
removed as Lead Agent hereunder. Upon any such removal of the Lead Agent in
accordance with this Section 7.11, the Required Banks shall have the right to
appoint a successor Lead Agent in accordance with Section 7.8.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period for any Euro-Dollar
Borrowing:
(a) the Lead Agent is advised by the Reference Bank that deposits in
dollars (in the applicable amounts) are not being offered to the Reference Bank
in the relevant market for such Interest Period, or
(b) Banks having 50% or more of the aggregate amount of the Commitments
advise the Lead Agent that the Adjusted London Interbank Offered Rate as
determined by the Lead Agent will not adequately and fairly reflect the cost to
such Banks of funding their Euro-Dollar Loans for such Interest Period, the Lead
Agent shall forthwith give notice thereof to the Borrowers and the Banks,
whereupon until the Lead Agent notifies the Borrowers that the circumstances
giving rise to such suspension no longer exist, the obligations of the Banks to
make Euro-Dollar Loans shall be suspended. Unless the applicable Borrower
notifies the Lead Agent at least two Domestic Business Days before the date of
any Euro-Dollar Borrowing for which a Notice of Borrowing has previously been
given that it elects not to borrow on such date, such Borrowing shall instead be
made as a Base Rate Borrowing.
SECTION 8.2. Illegality. If, after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
existing applicable law, rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority, central
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bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or
fund its Euro-Dollar Loans or to participate in any Letter of Credit issued by
the Fronting Bank or, with respect to the Fronting Bank, to issue any Letters of
Credit, and such Bank shall so notify the Lead Agent, the Lead Agent shall
forthwith give notice thereof to the other Banks and the Borrowers, whereupon
until such Bank notifies the Borrowers and the Lead Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans or to participate in any Letter of Credit issued by the
Fronting Bank or, with respect to the Fronting Bank, to issue any Letters of
Credit, shall be suspended. Before giving any notice to the Lead Agent pursuant
to this Section, such Bank shall designate a different Euro-Dollar Lending
Office if such designation will avoid the need for giving such notice and will
not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If
such Bank shall determine that it may not lawfully continue to maintain and fund
any of its outstanding Euro-Dollar Loans to maturity and shall so specify in
such notice, the Borrowers and/or CarrAmerica LP shall immediately prepay in
full the then outstanding principal amount of each such Euro-Dollar Loan,
together with accrued interest thereon. Concurrently with prepaying each such
Euro-Dollar Loan, the Borrowers shall borrow a Base Rate Loan in an equal
principal amount from such Bank (on which interest and principal shall be
payable contemporaneously with the related Euro-Dollar Loans of the other
Banks), and such Bank shall make such a Base Rate Loan.
SECTION 8.3. Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable law, rule
or regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of
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law) of any such authority, central bank or comparable agency shall impose,
modify or deem applicable any reserve (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System (but
excluding with respect to any Euro-Dollar Loan any such requirement reflected in
an applicable Euro-Dollar Reserve Percentage)), special deposit, insurance
assessment or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Bank (or its Applicable Lending Office)
or shall impose on any Bank (or its Applicable Lending Office) or on the London
interbank market any other condition affecting its Euro-Dollar Loans, its Note,
or its obligation to make Euro-Dollar Loans, and the result of any of the
foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Euro-Dollar Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Lead Agent), which demand shall be accompanied by
a certificate showing, in reasonable detail, the calculation of such amount or
amounts, the Borrowers and/or CarrAmerica LP shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its Parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Lead Agent), which demand shall be accompanied
by a certificate showing, in
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reasonable detail, the calculation of such amount or amounts, the Borrowers
and/or CarrAmerica LP shall pay to such Bank such additional amount or amounts
as will compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrowers and CarrAmerica LP and
the Lead Agent of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Bank to compensation pursuant to this Section
and will designate a different Applicable Lending Office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount, such
Bank may use any reasonable averaging and attribution methods.
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SECTION 8.4. Taxes.
(a) Any and all payments by the Borrowers or CarrAmerica LP to or for
the account of any Bank or the Lead Agent hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Lead Agent, taxes imposed on its income, and franchise
taxes imposed on it, by the jurisdiction under the laws of which such Bank or
the Lead Agent (as the case may be) is organized or any political subdivision
thereof and, in the case of each Bank, taxes imposed on its income, and
franchise or similar taxes imposed on it, by the jurisdiction of such Bank's
Applicable Lending Office or any political subdivision thereof (and, if
different from the jurisdiction of such Bank's Applicable Lending Office, the
jurisdiction of the domicile of its Loans either established by the Bank
pursuant to Section 9.12 or determined by the applicable taxing authorities)(all
such non-excluded taxes, duties, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrowers and/or CarrAmerica LP shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder or under any Note or Letter of
Credit or participation therein to any Bank or the Lead Agent, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 8.4) such Bank, the Fronting Bank or the Lead Agent (as the case
may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrowers or CarrAmerica LP shall make such
deductions, (iii) the Borrowers or CarrAmerica LP shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law and (iv) the Borrowers or CarrAmerica LP shall furnish to
the Lead Agent, at its address referred to in Section 9.1, the original or a
certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrowers and CarrAmerica LP agree to pay any
present or future stamp or documentary taxes and any other excise or property
taxes, or charges or similar levies which arise from any payment made hereunder
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or under any Note or Letter of Credit or participation therein or from the
execution or delivery of, or otherwise with respect to, this Agreement or any
Note or Letter of Credit or participation therein (hereinafter referred to as
"Other Taxes").
(c) The Borrowers and CarrAmerica LP agree to indemnify each Bank, the
Fronting Bank and the Lead Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed or asserted by
any jurisdiction on amounts payable under this Section 8.4) paid by such Bank,
the Fronting Bank or the Lead Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be made within 15 days from the date such
Bank, the Fronting Bank or the Lead Agent (as the case may be) makes demand
therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrowers or
CarrAmerica LP (but only so long as such Bank remains lawfully able to do so),
shall provide the Borrowers or CarrAmerica LP with Internal Revenue Service form
1001 or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Bank is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the rate
of withholding tax on payments of interest or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States. If the form provided by a Bank at
the time such Bank first became a party to this Agreement or at any time
thereafter (other than solely by reason of a change in United States law or a
change in the terms of any treaty to which the United States is a party after
the date hereof) indicates a United States interest withholding tax rate in
excess of zero (or would have indicated such a withholding tax rate if such form
had been submitted and completed accurately and completely and either was not
submitted or was not completed accurately and completely), or if a Bank
otherwise is subject to United States interest withholding tax at a rate in
excess of zero
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at any time for any reason (other than solely by reason of a change in United
States law or regulation or a change in any treaty to which the United States is
a party after the date hereof), withholding tax at such rate shall be considered
excluded from "Taxes" as defined in Section 8.4(a). In addition, any amount that
otherwise would be considered "Taxes" or "Other Taxes" for purposes of this
Section 8.4 shall be excluded therefrom if the Bank either has transferred the
domicile of its Loans pursuant to Section 9.12 or changed the Applicable Lending
Office with respect to such Loans and such amount would not have been incurred
had such transfer or change not been made.
(e) For any period with respect to which a Bank has failed to provide
the Borrowers or CarrAmerica LP with the appropriate form pursuant to Section
8.4(d) (unless such failure is due to a change in treaty, law or regulation
occurring subsequent to the date on which a form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.4(a) with respect to Taxes imposed by the United States; provided, however,
that should a Bank, which is otherwise exempt from or subject to a reduced rate
of withholding tax, become subject to Taxes because of its failure to deliver a
form required hereunder, the Borrowers and CarrAmerica LP shall take such steps
as such Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrowers or CarrAmerica LP are required to pay additional
amounts to or for the account of any Bank pursuant to this Section 8.4, then
such Bank will change the jurisdiction of its Applicable Lending Office so as to
eliminate or reduce any such additional payment which may thereafter accrue if
such change, in the judgment of such Bank, is not otherwise disadvantageous to
such Bank.
SECTION 8.5. Base Rate Loans Substituted for Affected Euro-Dollar Loans.
If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended
pursuant to Sections 8.1 or 8.2 or (ii) any Bank has demanded compensation under
Section 8.3 or 8.4 with respect to its Euro-Dollar Loans and the Borrowers
shall, by at least five Euro-Dollar Business Days' prior notice to such Bank
through the Lead Agent, have elected that the provisions of this Section shall
apply to such Bank, then, unless and until such Bank
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notifies the Borrowers that the circumstances giving rise to such suspension or
demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as Euro-Dollar
Loans shall be made instead as Base Rate Loans (on which interest and principal
shall be payable contemporaneously with the related Euro-Dollar Loans of the
other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all payments of
principal which would otherwise be applied to repay such Euro-Dollar Loans shall
be applied to repay its Base Rate Loans instead.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given to such party: (x) in the
case of the Borrowers, CarrAmerica LP or the Lead Agent, at its address or
telecopy number set forth on the signature pages hereof, together with copies
thereof, in the case of the Borrowers or CarrAmerica LP, to Hogan & Hartson
L.L.P., 555 13th Street, N.W., Washington, D.C. 20004, Attention: J. Warren
Gorrell, Jr., Esq., Telephone: (202) 637-5600, Telecopy: (202) 637-5910, and in
the case of the Lead Agent, to Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, New York, New York 10022, Attention: Martha Feltenstein, Esq.,
Telephone: (212) 735-2272, Telecopy: (212) 735-2000, (y) in the case of any
Bank, at its address or telecopy number set forth on the signature pages hereof
or in its Administrative Questionnaire or (z) in the case of any party, such
other address or telecopy number as such party may hereafter specify for the
purpose by notice to the Lead Agent, the Banks, the Borrowers and CarrAmerica
LP. Each such notice, request or other communication shall be effective (i) if
given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Lead Agent
under Article II or Article VIII shall not be effective until received.
SECTION 9.2. No Waivers. No failure or delay by the Lead Agent or any
Bank in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.3. Expenses; Indemnification.
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(a) The Borrowers and CarrAmerica LP shall pay (i) all reasonable
out-of-pocket expenses of the Lead Agent (including, without limitation,
reasonable fees and disbursements of special counsel Skadden, Arps, Slate,
Meagher & Flom, local counsel for the Lead Agent, and travel, environmental and
engineering expenses), in connection with the preparation and administration of
this Agreement, the Loan Documents and the documents and instruments referred to
therein, the syndication of the Loans, any waiver or consent hereunder or any
amendment or modification hereof or any Default or alleged Default hereunder and
(ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the
Lead Agent and each Bank, including, without limitation, reasonable fees and
disbursements of counsel for the Lead Agent, in connection with the enforcement
of the Loan Documents and the instruments referred to therein and such Event of
Default and collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom.
(b) The Borrowers and CarrAmerica LP agree to indemnify the Lead Agent
and each Bank, their respective affiliates and the respective directors,
officers, agents and employees of the foregoing (each an "Indemnitee") and hold
each Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel, which may be incurred by such
Indemnitee in connection with any investigative, administrative or judicial
proceeding (whether or not such Indemnitee shall be designated a party thereto)
that may at any time (including, without limitation, at any time following the
payment of the Obligations) be imposed on, asserted against or incurred by any
Indemnitee as a result of, or arising out of, or in any way related to or by
reason of, (i) any of the transactions contemplated by the Loan Documents or the
execution, delivery or performance of any Loan Document, (ii) any violation by
the Borrowers, CarrAmerica LP or the Environmental Affiliates of any applicable
Environmental Law, (iii) any Environmental Claim arising out of the management,
use, control, ownership or operation of property or assets by the Borrowers,
CarrAmerica LP or any of the Environmental Affiliates, including, without
limitation, all on-site and off-site activities involving Materials of
Environmental Concern, (iv) the breach of any environmental representation or
warranty set forth herein, (v) the grant to the Lead Agent and the Banks of any
Lien in any property or assets of the
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Borrowers or CarrAmerica LP or any stock or other equity interest in the
Borrowers or CarrAmerica LP, and (vi) the exercise by the Lead Agent and the
Banks of their rights and remedies (including, without limitation, foreclosure)
under any agreements creating any such Lien (but excluding, as to any
Indemnitee, any such losses, liabilities, claims, damages, expenses,
obligations, penalties, actions, judgments, suits, costs or disbursements
incurred solely by reason of (i) the gross negligence or willful misconduct of
such Indemnitee as finally determined by a court of competent jurisdiction and
(ii) any investigative, administrative or judicial proceeding imposed or
asserted against any Indemnitee by any bank regulatory agency or by any equity
holder of such Indemnitee). Carr and CarrAmerica LP shall be jointly and
severally liable for all Obligations arising hereunder in connection with the
Tranche A Loans and Carr and Carr LP shall be jointly and severally liable for
all Obligations arising hereunder in connection with the Tranche B Loans.
Notwithstanding the foregoing, Carr LP shall not be liable for any Borrowings
made by Carr pursuant to the terms hereof. The Borrowers' and CarrAmerica LP's
obligations under this Section shall survive the termination of this Agreement
and the payment of the Obligations.
(c) The Borrowers and CarrAmerica LP shall pay, and hold the Lead Agent
and each of the Banks harmless from and against, any and all present and future
U.S. stamp, recording, transfer and other similar foreclosure related taxes with
respect to the foregoing matters and hold the Lead Agent and each Bank harmless
from and against any and all liabilities with respect to or resulting from any
delay or omission (other than to the extent attributable to such Bank) to pay
such taxes.
SECTION 9.4. Sharing of Set-Offs. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
any Event of Default, each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to the
Borrowers, CarrAmerica LP or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and apply any and all deposits
(general or special, time or demand, provisional or final), other than deposits
held for the benefit of third parties, and any other indebtedness at any time
held or
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owing by such Bank (including, without limitation, by branches and agencies of
such Bank wherever located) to or for the credit or the account of the Borrowers
or CarrAmerica LP against and on account of the Obligations of the Borrowers or
CarrAmerica LP then due and payable to such Bank under this Agreement or under
any of the other Loan Documents, including, without limitation, all interests in
Obligations purchased by such Bank. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest due with respect
to any Note held by it or Letter of Credit participated in by it, or, in the
case of the Fronting Bank, Letter of Credit issued by it, which is greater than
the proportion received by any other Bank or Letter of Credit issued or
participated in by such other Bank, in respect of the aggregate amount of
principal and interest due with respect to any Note held by such other Bank, the
Bank receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks or Letter of Credit issued
or participated in by such other Bank, and such other adjustments shall be made,
as may be required so that all such payments of principal and interest with
respect to the Notes held by the Banks or Letter of Credit issued or
participated in by such other Banks shall be shared by the Banks pro rata;
provided that nothing in this Section shall impair the right of any Bank to
exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of the Borrowers
or CarrAmerica LP other than their indebtedness under the Notes or the Letters
of Credit. The Borrowers and CarrAmerica LP agree, to the fullest extent they
may effectively do so under applicable law, that any holder of a participation
in a Note or Letter of Credit, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of the Borrowers or CarrAmerica LP in the amount of such
participation. Notwithstanding the foregoing, any Bank shall not exercise any
right of set-off or counterclaim or any similar right it may have against any
other indebtedness at any time held or owing by such Bank (including, without
limitation, by branches and agencies of such Bank wherever located) to or for
the credit or the account of Carr LP against and on account of any Obligations
of Carr (whether
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or not then due and payable) or to apply the amount subject to such exercise to
the payment of indebtedness or other Obligations of Carr.
SECTION 9.5. Amendments and Waivers. Any provision of this Agreement,
the Notes, the Letters of Credit or other Loan Documents may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Borrowers and the Required Banks (and, if the rights or duties of the Lead
Agent are affected thereby, by the Lead Agent); provided that no such amendment
or waiver shall, unless signed by all the Banks, (i) increase or decrease the
Commitment of any Bank (except for a ratable decrease in the Commitments of all
Banks) or subject any Bank to any additional obligation, (ii) reduce the
principal of or rate of interest on any Loan or any fees specified herein,
including, without limitation, the waiver of any Default or Event of Default in
the payment of interest, principal or fees hereunder if such waiver would result
in a permanent reduction in the amount or change in the timing of the payment of
interest, principal or fees payable hereunder by Borrowers or CarrAmerica LP,
unless the Borrowers or CarrAmerica LP have cured such Default or Event of
Default and paid all amounts, including any default interest, due hereunder at
the time a request for consent is made by Lead Agent to the Banks to the waiver
of any Default or Event of Default in the payment of interest, principal or fees
hereunder, in which event only the consent of the Required Banks to the waiver
of such Default or Event of Default shall be required, (iii) postpone the date
fixed for any payment of principal of or interest on any Loan or any fees
hereunder or for any reduction or termination of any Commitment or (iv) change
the percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes, or the number of Banks, which shall be required for the Banks or any
of them to take any action under this Section or any other provision of this
Agreement.
SECTION 9.6. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that the Borrowers may not assign or otherwise transfer any of their
rights under this Agreement or the other Loan Documents without the prior
written consent of all Banks.
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(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrowers, CarrAmerica LP and the Lead Agent, such Bank shall remain responsible
for the performance of its obligations hereunder, and the Borrowers, CarrAmerica
LP and the Lead Agent shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrowers and CarrAmerica LP hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement; provided that such participation agreement
may provide that such Bank will not agree to any modification, amendment or
waiver of this Agreement described in clause (i), (ii), (iii) or (iv) of Section
9.5 without the consent of the Participant. The Borrowers and CarrAmerica LP
agree that each Participant shall, to the extent provided in its participation
agreement, be entitled to the benefits of Article VIII with respect to its
participating interest. An assignment or other transfer which is not permitted
by subsection (c) or (d) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in accordance
with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement, the Notes and the other Loan
Documents, and such Assignee shall assume such rights and obligations, pursuant
to an Assignment and Assumption Agreement in substantially the form of Exhibit C
attached hereto executed by such Assignee and such transferor Bank, with (and
subject to) the subscribed consent of the Lead Agent and, provided no Event of
Default shall have occurred and be continuing, the Borrowers, which consent
shall not be unreasonably withheld or delayed. Upon execution and delivery of
such instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee
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shall be a Bank party to this Agreement and shall have all the rights and
obligations of a Bank with a Commitment as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment pursuant to
this subsection (c), the transferor Bank, the Lead Agent, the Borrowers and
CarrAmerica LP, if applicable, shall make appropriate arrangements so that, if
required, a new Note or Notes are issued to the Assignee. In connection with any
such assignment, the transferor Bank shall pay to the Lead Agent an
administrative fee for processing such assignment in the amount of $2,500. If
the Assignee is not incorporated under the laws of the United States of America
or a state thereof, it shall deliver to the Borrowers and the Lead Agent
certification as to exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 8.4.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note and the Letters of Credit participated in by
such Bank (as a Fronting Bank) or, in the case of the Fronting Bank, issued by
it, to a Federal Reserve Bank. No such assignment shall release the transferor
Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.3 or 8.4 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrowers' prior written
consent or by reason of the provisions of Section 8.2, 8.3 or 8.4 requiring such
Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 9.7. Governing Law; Submission to Jurisdiction.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
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GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
(b) Any legal action or proceeding with respect to this
Agreement or any other Loan Document and any action for enforcement of any
judgment in respect thereof may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, each Borrower and CarrAmerica
LP hereby accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. Each Borrower and CarrAmerica LP irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the hand delivery, or mailing of copies thereof
by registered or certified mail, postage prepaid, to the applicable Borrower or
CarrAmerica LP at its address set forth below. Each Borrower and CarrAmerica LP
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement or any other Loan Document brought in
the courts referred to above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum. Nothing
herein shall affect the right of the Lead Agent, any Bank or any holder of a
Note to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Borrowers or CarrAmerica LP in any
other jurisdiction.
Section 9.8. Marshalling; Recapture. Neither the Lead Agent nor
any Bank shall be under any obligation to marshall any assets in favor of the
Borrowers, CarrAmerica LP or any other party or against or in payment of any or
all of the Obligations. To the extent any Bank receives any payment by or on
behalf of the Borrowers or CarrAmerica LP, which payment or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to either Borrower or CarrAmerica LP or its estate,
trustee, receiver, custodian or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then to the extent of such
payment or repayment, the Obligation or part thereof which has been
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paid, reduced or satisfied by the amount so repaid shall be reinstated by the
amount so repaid and shall be included within the liabilities of the Borrowers
and CarrAmerica LP to such Bank as of the date such initial payment, reduction
or satisfaction occurred.
SECTION 9.9. Counterparts; Integration; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Lead Agent of counterparts
hereof signed by each of the parties hereto (or, in the case of any party as to
which an executed counterpart shall not have been received, receipt by the Lead
Agent in form satisfactory to it of telegraphic, telex or other written
confirmation from such party of execution of a counterpart hereof by such
party).
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, CARRAMERICA
LP, THE LEAD AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. Survival. All indemnities set forth herein shall survive
the execution and delivery of this Agreement and the other Loan Documents and
the making and repayment of the Loans hereunder.
SECTION 9.12. Domicile of Loans. Subject to the provisions of Article
VIII, each Bank may transfer and carry its Loans at, to or for the account of
any domestic or foreign branch office, subsidiary or affiliate of such Bank.
SECTION 9.13. Limitation of Liability. (a) No claim may be made by the
Borrowers, CarrAmerica LP or any other Person against the Lead Agent or any Bank
or the affiliates, directors, officers, employees, attorneys or agent of any of
them for any consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement or by the other Loan Documents,
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or any act, omission or event occurring in connection therewith; and each
Borrower and CarrAmerica LP hereby waives, releases and agrees not to sue upon
any claim for any such damages, whether or not accrued and whether or not known
or suspected to exist in its favor.
(b) The Lead Agent or any Bank may look to all the assets of the
Borrowers and CarrAmerica LP in seeking to enforce the Borrowers' and
CarrAmerica LP's liability and obligations hereunder, and the lien of any
judgment against the Borrowers and CarrAmerica LP and any proceeding instituted
on, under or in connection with any Note or any of the other Loan Documents
shall extend to all property now or hereafter owned by the Borrowers and
CarrAmerica LP, except as set forth in Sections 6.2 and 9.3.
SECTION 9.14. Confidentiality.
Prior to the occurrence and continuance of an Event of Default
and except in connection with the sale or assignment or potential sale or
assignment of any Bank's Commitment or portion of its Commitment pursuant to
Section 9.6, each Bank agrees that it will use reasonable efforts, consistent
with its customary policies for maintaining information as confidential, not to
disclose without the prior consent of the Borrowers (other than to its
subsidiaries, directors, agents, employees, auditors, counsel or other
professional consultants, provided that each such recipient shall either agree
to be bound by the terms of this Section 9.14 or is otherwise bound to keep such
information confidential on a similar basis pursuant to professional ethical
obligations) any information with respect to the Borrowers, CarrAmerica LP, any
Subsidiary thereof or any of their assets or properties which is furnished
pursuant to this Agreement or any Loan Documents and which is designated as
confidential, provided that any Bank may disclose any such information (a) that
has become generally available to the public (other than as a consequence of any
Bank's breach of this Section 9.14), (b) as may be required or appropriate in
any report, statement or testimony submitted to any local, state or federal
regulatory body having or claiming to have jurisdiction over such Bank, any
nationally recognized rating agency or similar organization, (c) as may be
required or appropriate in response to any summons or subpoena or in connection
with any litigation, or (d) in order to comply with any applicable law, order,
regulation or
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ruling; provided, further that in the case of the foregoing clauses (b), (c) and
(d), such Bank shall use reasonable efforts to give Carr prior notice of any
such disclosure.
SECTION 9.15. Co-Agents. Commerzbank Aktiengesellschaft, New
York Branch, Nationsbank, N.A., and Wells Fargo Realty Advisors Funding,
Incorporated, each as Bank and as Co-Agent for the Banks hereunder
(collectively, the "Co-Agents") shall have no other rights, obligations and
liabilities under this Agreement except as any other Bank hereunder. Each Bank
shall, ratably in accordance with its Commitment, indemnify the Co-Agents, their
affiliates and their respective directors, officers, agents and employees (to
the extent not reimbursed by the Borrowers or CarrAmerica LP) against any cost,
expense (including counsel fees and disbursements), claim, demand, action, loss
or liability (except such as result from such indemnitees' gross negligence or
willful misconduct) that such indemnitees may suffer or incur but solely in
connection with any such claim that may result pursuant to the Co-Agents acting
as Co-Agents under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
CARRAMERICA REALTY CORPORATION
By: /s/ Brian K. Fields
------------------------------
Name: Brian K. Fields
Title: Chief Financial Officer
1700 Pennsylvania Avenue,
N.W.
Washington, D.C. 20006
Telecopy number: (202) 638-0102
CARR REALTY, L.P.
By: CarrAmerica Realty
Corporation, General Partner
By: /s/ Brian K. Fields
--------------------------
Name: Brian K. Fields
Title: Chief Financial Officer
1700 Pennsylvania Avenue,
N.W.
Washington, D.C. 20006
Telecopy number:
(202)638-0102
CARRAMERICA REALTY, L.P.
By: CarrAmerica Realty GP
Holdings, Inc., General
Partner
By: /s/ Brian K. Fields
-------------------------------
Name: Brian K. Fields
Title: Chief Financial Officer
1700 Pennsylvania Avenue,
N.W.
Washington, D.C. 20006
Telecopy number:
(202)638-0102
<PAGE>
Commitments
$38,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Michael M. Errichetti
-----------------------------------
Name: Michael M. Errichetti
Title: Vice President
$35,000,000 WELLS FARGO REALTY ADVISORS FUNDING,
INCORPORATED
By: /s/ E.F. Shay, III
-----------------------------------
Name: E.F. Shay, III
Title: Vice President
By: /s/ Sherry S. Jones
-----------------------------------
Name: Sherry S. Jones
Title: Assistant Secretary
$35,000,000 NATIONSBANK, N.A.
By: /s/ Gary P.F. Carr
-----------------------------------
Name: Gary P.F. Carr
Title: Vice President
<PAGE>
$35,000,000 COMMERZBANK AKTIENGESELLSCHAFT,
NEW YORK BRANCH
By: /s/ Douglas P. Traynor
-------------------------------
Name: Douglas P. Traynor
Title: Vice President
By: /s/ David M. Schwartz
-------------------------------
Name: David M. Schwartz
Title: Vice President
$24,000,000 PNC BANK NATIONAL ASSOCIATION
By: /s/ Richard B. Trzybinski
-------------------------------
Name: Richard B. Trzybinski
Title: Assistant Vice President
$24,000,000 BANK OF AMERICA ILLINOIS
By: /s/ Robert P. McKenny
------------------------------
Name: Robert P. McKenny
Title: Vice President
$24,000,000 BAYERISCHE HYPOTHEKEN-UND WECHSEL
-BANK AKTIENGESELLSCHAFT
By: /s/ Stephen G. Melidones
------------------------------
Name: Stephen G. Melidones
Title: Assistant Vice President
By: /s/ George S. Gnad
-------------------------------
Name: George S. Gnad
Title: Vice President
Total Commitments
- ------------------
$215,000,000
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Lead Agent
By: /s/ Michael M. Errichetti
------------------------------
Name: Michael M. Errichetti
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Attention: Michael Errichetti
Telephone number: (212) 648-8127
Telecopy number: (212) 648-5336
Domestic and Euro-Currency
Lending Office:
Nassau, Bahamas Office
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, Delaware 19173-2107
Attention: Nancy K. Dunbar
Telecopy number: (302) 634-4222
<PAGE>
SCHEDULES AND EXHIBITS INTENTIONALLY OMITTED
AVAILABLE UPON REQUEST FROM
CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.........................................2
SECTION 1.2. Accounting Terms and Determinations................26
SECTION 1.3. Types of Borrowings................................27
ARTICLE II
THE CREDITS
SECTION 2.1. Commitments to Lend...............................27
SECTION 2.2. Notice of Borrowing...............................28
SECTION 2.3. Notice to Banks; Funding of Loans.................30
SECTION 2.4. Notes.............................................32
SECTION 2.5. Maturity of Loans.................................33
SECTION 2.6. Interest Rates....................................33
SECTION 2.7. Fees..............................................34
SECTION 2.8. Mandatory Termination; Extension
Option............................................35
SECTION 2.9. Mandatory Prepayment..............................37
SECTION 2.10. Optional Prepayments..............................39
SECTION 2.11. General Provisions as to Payments.................41
SECTION 2.12. Funding Losses....................................42
SECTION 2.13. Computation of Interest and Fees..................42
SECTION 2.14. Method of Electing Interest Rates.................42
SECTION 2.15 Letters of Credit.................................44
SECTION 2.16 Letter of Credit Usage Absolute...................47
ARTICLE III
CONDITIONS
SECTION 3.1. Closing............................................49
SECTION 3.2. Borrowings.........................................53
SECTION 3.3. Conditions Precedent to New
Acquisitions and Additional Real Property Assets...54
ARTICLE IV
BORROWERS' REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Existence and Power of Carr......................56
SECTION 4.2. Existence and Power of Carr LP
and CarrAmerica LP...................56
SECTION 4.3. Power and Authority of Carr......................56
SECTION 4.4. Power and Authority of Carr LP
and CarrAmerica LP...................56
SECTION 4.5. No Violation.....................................57
SECTION 4.6. Financial Information............................57
SECTION 4.7. Litigation ......................................58
SECTION 4.8. Compliance with ERISA............................58
SECTION 4.9. Environmental Matters............................59
SECTION 4.10. Taxes............................................59
SECTION 4.11. Full Disclosure..................................60
SECTION 4.12. Solvency.........................................60
SECTION 4.13. Use of Proceeds; Margin Regulations..............60
SECTION 4.14. Governmental Approvals...........................60
SECTION 4.15. Investment Company Act; Public
Utility Holding Company Act......................61
SECTION 4.16. Closing Date Transactions........................61
SECTION 4.17. Representations and Warranties in Loan
Documents.....................................61
SECTION 4.18. Patents, Trademarks, etc.........................61
SECTION 4.19. No Default.......................................62
SECTION 4.20. Licenses, etc....................................62
SECTION 4.21. Compliance With Law..............................62
SECTION 4.22. No Burdensome Restrictions.......................62
SECTION 4.23. Brokers' Fees....................................62
SECTION 4.24. Labor Matters....................................63
SECTION 4.25. Organizational Documents.........................63
SECTION 4.26. Principal Offices................................63
SECTION 4.27. REIT Status......................................63
SECTION 4.28. Ownership of Property............................63
SECTION 4.29. Insurance........................................64
SECTION 4.30. Surveys..........................................64
ARTICLE V
AFFIRMATIVE AND NEGATIVE COVENANTS
SECTION 5.1. Information.....................................64
SECTION 5.2. Payment of Obligations..........................68
SECTION 5.3. Maintenance of Property; Insurance..............69
SECTION 5.4. Conduct of Business.............................69
SECTION 5.5. Compliance with Laws............................69
SECTION 5.6. Inspection of Property, Books and
Records................................69
SECTION 5.7. Existence.......................................70
SECTION 5.8. Financial Covenants.............................70
SECTION 5.9. Restriction on Fundamental
Changes; Operation and Control..................72
SECTION 5.10. Changes in Business.............................73
SECTION 5.11. Fiscal Year; Fiscal Quarter.....................73
SECTION 5.12. Margin Stock....................................73
SECTION 5.13. Sale of Borrowing Base Properties...............73
SECTION 5.14. Liens; Release of Liens.........................73
SECTION 5.15. Use of Proceeds.................................74
SECTION 5.16. Development Activities..........................74
SECTION 5.17. Restrictions on Recourse Debt...................75
SECTION 5.18. Carr's Status...................................75
SECTION 5.19. Certain Requirements for the
Borrowing Base Properties.........75
SECTION 5.20. Hedging Requirements............................75
SECTION 5.21. Transfer of Real Property Assets................76
SECTION 5.22. CarrAmerica Realty GP Holdings, Inc.............76
ARTICLE VI
DEFAULTS
SECTION 6.1. Events of Default..............................76
SECTION 6.2. Rights and Remedies............................79
SECTION 6.3. Notice of Default..............................81
SECTION 6.4. Actions in Respect of Letters of Credit........81
ARTICLE VII
THE LEAD AGENT
SECTION 7.1. Appointment and Authorization..................84
SECTION 7.2. Lead Agent and Affiliates......................84
SECTION 7.3. Action by Lead Agent...........................84
SECTION 7.4. Consultation with Experts......................84
SECTION 7.5. Liability of Lead Agent........................85
SECTION 7.6. Indemnification................................85
SECTION 7.7. Credit Decision................................85
SECTION 7.8. Successor Lead Agent...........................86
SECTION 7.9. Lead Agent's Fee...............................86
SECTION 7.10. Copies of Notices..............................86
SECTION 7.11. Removal of Lead Agent..........................86
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest
Rate Inadequate or Unfair.....................87
SECTION 8.2. Illegality....................................87
SECTION 8.3. Increased Cost and Reduced Return.............88
SECTION 8.4. Taxes.........................................90
SECTION 8.5. Base Rate Loans Substituted
for Affected Euro-Dollar Loans.........93
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Notices......................................94
SECTION 9.2. No Waivers...................................94
SECTION 9.3. Expenses; Indemnification....................94
SECTION 9.4. Sharing of Set-Offs..........................96
SECTION 9.5. Amendments and Waivers.......................98
SECTION 9.6. Successors and Assigns.......................98
SECTION 9.7. Governing Law; Submission to
Jurisdiction...................100
SECTION 9.8. Marshalling; Recapture......................101
SECTION 9.9. Counterparts; Integration; Effectiveness....101
SECTION 9.10. Waiver of Jury Trial........................102
SECTION 9.11. Survival....................................102
SECTION 9.12. Domicile of Loans...........................102
SECTION 9.13. Limitation of Liability.....................102
SECTION 9.14 Confidentiality.............................103
SECTION 9.15 Co-Agents...................................103
SCHEDULES AND EXHIBITS
INTENTIONALLY OMITTED.
AVAILABLE UPON REQUEST FROM CORPORATION.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into this 1st day of November 1996, by and between CarrAmerica Realty
Corporation, a Maryland corporation ("Employer"), and Robert E. Peterson
("Employee").
W I T N E S S E T H
WHEREAS, Employer is engaged, directly or indirectly, in the
ownership, acquisition, development and operation of office properties
throughout the United States;
WHEREAS, Employer believes that it would benefit from
Employee's skill, experience and background, and wishes to employ Employee as
its Southeast Regional Managing Director; and
WHEREAS, the parties desire by this Agreement to set forth the
terms and conditions of the employment relationship between Employer and
Employee.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants herein set forth, and for other good and valuable
consideration, Employer and Employee hereby agree as follows:
1. Employment and Duties. Employer agrees to hire Employee,
and Employee agrees to be employed by Employer, as its Southeast Regional
Managing Director, on the terms and conditions provided in this Agreement.
Employee agrees to devote his best efforts and full business time, attention,
energy and skill to performing the duties of Southeast Regional Managing
Director. Employer agrees that, so long as Employee is serving as Southeast
Regional Managing Director under this Agreement, Employee also will be offered
the opportunity to serve as a member of each of Employer's National Operating
Committee and National Investment Committee (or the successor of each such
committee). Provided that such activities shall not violate any term or
condition of this Agreement, including the Noncompetition Agreement (as defined
below), or materially interfere with his performance of his duties hereunder,
nothing herein shall prohibit Employee (a) from participating in other business
activities approved in advance by the Board of Directors of Employer (the
"Board") in accordance with any terms and conditions of such approval, such
approval not to be unreasonably withheld or delayed, (b) from engaging in
charitable, civic, fraternal or trade group activities, or (c) from investing
his personal assets in other entities or business ventures, subject to policies
of Employer applicable to all executive personnel of Employer.
2. Term. Subject to the terms and conditions of this
Agreement, the term of employment shall be for a period of two (2) years (the
"Employment Term"), commencing on November 1, 1996 (the "Effective Date") and
terminating on October 31, 1998 (the "Termination Date").
3. Compensation. As compensation for performing the services
required by this Agreement, and during the term of this Agreement, Employee
shall be compensated as follows:
(a) Base Compensation. Employer shall pay to Employee
an annual salary ("Base Compensation") of One Hundred Ninety Thousand Dollars
($190,000), payable in accordance with the general policies and procedures for
payment of salaries to comparable executive personnel of Employer as implemented
by the Board in substantially equal installments, subject to withholding for
applicable federal, state and local taxes. Increases in Base Compensation, if
any, shall be determined by the Board based on periodic reviews of Employee's
performance conducted on at least an annual basis. Employee's Base Compensation
shall not be reduced during the term of this Agreement.
(b) Incentive Compensation. In addition to Base
Compensation, Employee shall be eligible to receive additional compensation
("Incentive Compensation") of a target of $90,000 per annum. The receipt of such
Incentive Compensation will be subject to the attainment of certain quantitative
and qualitative performance standards established for all comparable executive
personnel of Employer by the Board (or the Compensation Committee thereof) in
its sole and absolute discretion.
<PAGE>
(c) Initial Stock Options. On the Effective Date,
Employer shall issue to Employee options (the "Stock Options") to purchase up to
Twenty Thousand (20,000) shares of common stock, par value $0.01 per share, of
Employer (the "Common Stock"). The exercise of any of the Stock Options will be
conditioned upon Employer receiving, as required by the New York Stock Exchange
(the "NYSE"), either (i) a waiver by the NYSE permitting Employer to issue stock
upon exercise of the Stock Options without stockholder approval (which waiver
Employer shall use reasonable efforts to obtain), or (ii) if such waiver is not
obtained, the approval of the stockholders of Employer with regard to the
issuance of stock upon exercise of the Stock Options. Except as provided herein,
the Stock Options shall vest in the same manner that options will vest for other
executive personnel of Employer, which will be determined by the Board or the
Compensation Committee thereof; provided, however, that each Stock Option shall
fully vest immediately upon the termination of this Agreement pursuant to
Section 4(a)(i) or Section 4(b) hereof. Each Stock Option shall be exercisable
at a price per share of Common Stock equal to the closing trading price of the
Common Stock on the NYSE for the trading day immediately preceding the day on
which such Stock Option is granted by Employer. Subject to the vesting
requirements set forth above and continued employment by Employee with Employer,
each Stock Option shall be exercisable for a period of ten (10) years from the
date such Stock Option is granted (the "Grant Date"). To the extent each such
Stock Option shall have vested pursuant to this Section 3(c), such exercise
period shall survive the expiration or termination of Employee's employment by
Employer, pursuant to this Agreement or otherwise, for any reason whatsoever,
for a period of ninety (90) days following the termination of Employee's
employment. Subject to any required action by Employer (which shall be promptly
taken), the stockholders of Employer and provisions of the Maryland General
Corporation Law, if the outstanding shares of Common Stock are increased or
decreased or changed into or exchanged for a different number or kind of
security by reason of any recapitalization, reclassification, stock split-up,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such Common Stock
effected without receipt of consideration by Employer occurring after the date
the Stock Options are granted, Employer promptly shall take such actions, on its
own behalf, and, to the extent that any action should be required of any other
person including, without limitation, the stockholders of Employer, shall use
its best efforts to cause such action(s) promptly to be taken by such person(s),
as are necessary to effect a proportionate and appropriate adjustment in the
number of shares of Common Stock subject to the Stock Options, so that the
proportionate interest of Employee immediately following such event shall, to
the extent practicable, be the same as immediately prior to such event. Any such
adjustment in the number of shares of Common Stock subject to the Stock Options
shall not change the total price with respect to shares of Common Stock subject
to the unexercised portion of the Stock Options but shall include a
corresponding proportionate adjustment in the Stock Option price per share of
Common Stock. Except as provided herein, a Stock Option that has not vested upon
the expiration or termination of Employee's employment by Employer, pursuant to
this Agreement or otherwise, shall terminate and never vest.
(d) Future Stock Options. During the term of this
Agreement, Employee shall be eligible to receive grants of stock options under
any stock option plan which Employer establishes to issue stock options to key
employees. The number and terms of any such stock option grants shall be
comparable to those provided to comparable executive personnel of Employer, as
determined by the Board (or the Compensation Committee thereof) in its sole and
absolute discretion.
(e) Employee Benefits; Fringe Benefits. During the
term of this Agreement, Employee and his eligible dependents (where applicable)
shall have the right to participate in each retirement, pension, insurance,
health or other benefit plan or program that has been or is hereafter adopted by
Employer (or in which Employer participates) according to the terms of such plan
or program with all the benefits, rights and privileges as are generally enjoyed
by other comparable executive personnel of Employer. During the term of this
Agreement, Employee shall be entitled to all fringe benefits, if any, which are
generally enjoyed by other comparable executive personnel of Employer.
(f) Vacation; Holidays and Sick Leave; Leaves of
Absence. Employee shall be entitled to the normal and customary amount of paid
vacation provided to other comparable executive personnel of Employer on dates
mutually agreed upon by Employer and Employee, which approval by Employer shall
not be unreasonably withheld. Employee also shall be entitled to the same amount
of sick leave and the same holidays provided to other comparable executive
personnel of Employer. In addition, Employee may be granted leaves of
2
<PAGE>
absence with or without pay for such valid and legitimate reasons as the Board
in its sole and absolute discretion may determine.
(g) Expenses. Employee shall be entitled to receive
reimbursement for all reasonable and necessary expenses incurred by him in
connection with the performance of business-related duties under this Agreement.
4. Termination and Termination Benefits.
(a) Termination by Employer.
(i) Without Cause. The Board may terminate
this Agreement and Employee's employment at any time upon
ninety (90) days' written notice to Employee (during which
period the Board may elect to require Employee to continue to
perform the duties of Southeast Regional Managing Director
under this Agreement). In such event, Employee shall be paid
(A) at such times that Employer otherwise would have paid
Employee his Base Compensation had Employee remained employed
by Employer for the remainder of the Employment Term, his Base
Compensation for the balance of the Employment Term, and (B)
at the time that incentive compensation payments are made to
other comparable executive personnel of Employer with respect
to periods encompassed within the Employment Term, the amount
of Incentive Compensation to which Employee otherwise would
have been entitled to receive (taking into account length of
service during the applicable year, assuming for this purpose
continuous service during the Employment Term) had Employee
remained employed by Employer for the remainder of the
Employment Term (assuming for this purpose only that
performance criteria unique to Employee that would entitle
Employee to $90,000 of Incentive Compensation have been
satisfied). For purposes of this Section 4(a)(i), termination
of this Agreement in connection with the dissolution or final
liquidation of Employer shall be considered a termination by
Employer without cause.
(ii) With Cause. Employer may terminate this
Agreement with cause by written notice to Employee, whereupon
Employee's employment hereunder shall terminate. In such
event, Employee shall be paid his Base Compensation up to the
effective date of such termination, but Employee shall not be
entitled to any other compensation or payments (other than
pursuant to Section 3(f) up to the effective date of
termination). For purposes of this Section 4(a)(ii), "cause"
shall mean (w) dishonesty of a material nature which relates
to the performance of Employee's duties hereunder, (x)
criminal conduct (other than minor infractions and traffic
violations) that relates to the performance of Employee's
duties hereunder, (y) the failure of Employee to perform any
of his duties under this Agreement (other than a failure due
to disability) after written notice specifying the failure and
a 15-day opportunity to cure (it being understood that if
Employee's failure to perform is not of a type requiring a
single action to fully cure, then Employee may commence the
cure promptly after such written notice and thereafter
diligently prosecute such cure to completion), and (z) any
breach by Employee of the Noncompetition Agreement.
(iii) Disability. If due to illness,
physical or mental disability, or other incapacity, Employee
shall fail, for a total of any six (6) months or more within
any period of twelve (12) consecutive months, to perform the
duties required by this Agreement, the Board may terminate
this Agreement upon thirty (30) days' written notice to
Employee. In such event, Employee shall be (A) paid his Base
Compensation up to the effective date of such termination, (B)
paid, as soon as practicable thereafter in a lump sum, his Pro
Rata Share (as defined below) of the Incentive Compensation
that would have been payable to Employee for the year in which
such termination occurs (assuming that all performance
criteria that would entitle Employee to $90,000 of Incentive
Compensation are met), and (C) provided with employee benefits
(or, as soon as practicable thereafter, the after-tax cash
equivalent thereof in a lump sum) pursuant to Section 3(d)
hereof until the Termination Date. For purposes of this
Agreement, Employee's "Pro Rata Share" of his $90,000
Incentive Compensation for any fiscal year of Employer shall
be a fraction whose numerator shall be equal to the number of
months (or parts of months) during which
3
<PAGE>
Employee was actually employed by Employer during any such
fiscal year and whose denominator shall be the total number of
months in such fiscal year.
(b) Termination by Employee. Employee may terminate
this Agreement for cause upon fifteen (15) days' written notice to Employer
(during which period Employee shall continue to perform the duties of Southeast
Regional Managing Director under this Agreement or as specified by the Board),
provided that (i) such written notice shall specify the nature of Employer's
action or actions as the result of which Employee has the right to terminate
this Agreement pursuant to this Section 4(b), and (ii) during which period
Employer shall have the opportunity to cure. In such event, Employee shall be
paid (A) at such times that Employer otherwise would have paid Employee his Base
Compensation had Employee remained employed by Employer, his Base Compensation
for the balance of the Employment Term, and (B) at the time that incentive
compensation payments are made to other comparable executive personnel of
Employer with respect to periods encompassed within the Employment Term, the
amount of Incentive Compensation to which Employee otherwise would have been
entitled to receive (taking into account length of service during the applicable
year, assuming for this purpose continuous service during the Employment Term)
had Employee remained employed by Employer for the remainder of the Employment
Term (assuming for this purpose only that performance criteria unique to
Employee that would entitle Employee to $90,000 of Incentive Compensation have
been satisfied). For purposes of this Section 4(b), "cause" shall mean (w)
Employer's failure to make any of the payments or provide any of the benefits to
Employee due under this Agreement, (x) a material alteration in the scope of
Employee's responsibilities and duties as Southeast Regional Managing Director,
or (y) Employer's determination to relocate Employee's primary workplace outside
of the Atlanta, Georgia metropolitan area.
(c) Termination Benefits. In the event of a
termination of this Agreement pursuant to Section 4(a)(i) or 4(b), Employer
shall provide to Employee, in addition to the Base Compensation and Incentive
Compensation payable as hereinabove provided, benefits ("Termination Benefits")
in the form of any applicable employee benefits to be provided to Employee (or,
as soon as practicable thereafter, the after-tax cash equivalent thereof in a
lump sum) pursuant to Section 3(d) hereof until the Termination Date.
Termination Compensation shall not be awarded if the term of this Agreement
expires due to the passage of time.
(d) Death Benefit. Notwithstanding any other
provision of this Agreement, this Agreement shall terminate on the date of
Employee's death. In such event, Employee's estate shall be paid (A) at such
times that Employer otherwise would have paid Employee his Base Compensation had
Employee remained employed by Employer, his Base Compensation for the remainder
of the Employment Term, and (B) at the time that incentive compensation payments
are made to other comparable executive personnel of Employer with respect to
periods encompassed within the Employment Term, the amount of Incentive
Compensation to which Employee otherwise would have been entitled to receive
(taking into account length of service during the applicable year, assuming for
this purpose continuous service during the Employment Term) had Employee
remained employed by Employer for the remainder of the Employment Term (assuming
for this purpose only that performance criteria unique to Employee that would
entitle Employee to $90,000 of Incentive Compensation have been satisfied), and
(C) any applicable employee benefits (or, as soon as practicable after the date
of Employee's death, the after-tax cash equivalent in a lump sum) pursuant to
Section 3(d) until the Termination Date and Stock Options pursuant to Section
3(c) hereof.
5. Noncompetition Agreement.
Employee shall comply in all respects with the terms and
conditions of that certain Noncompetition and Nonsolicitation Agreement of even
date herewith by and among Employer and Employee (the "Noncompetition
Agreement"), a copy of which is attached hereto as Exhibit A.
6. Miscellaneous.
(a) Integration; Amendment. This Agreement
constitutes the entire agreement among the parties hereto with respect to the
matters set forth herein and supersedes and renders of no force and effect all
prior understandings and agreements among the parties with respect to the
matters set forth herein. No amendments or additions to this Agreement shall be
binding unless in writing and signed by Employee and Employer.
4
<PAGE>
(b) Assignment. Employer may assign this Agreement to
any successor or purchaser of all or substantially all of the assets of
Employer. Employee may not assign this Agreement or any right or interest
therein, whether by operation of law or otherwise, without the prior written
consent of Employer.
(c) Severability. If any part of this Agreement is
contrary to, prohibited by, or deemed invalid under applicable law or
regulations, such provision shall be inapplicable and deemed omitted to the
extent so contrary, prohibited, or invalid, but the remainder of this Agreement
shall not be invalid and shall be given full force and effect so far as
possible.
(d) Waivers. The failure or delay of any party at any
time to require performance by any other party of any provision of this
Agreement, even if known, shall not affect the right of such party to require
performance of that provision or to exercise any right, power, or remedy
hereunder, and any waiver by any party of any breach of any provision of this
Agreement shall not be construed as a waiver of any continuing or succeeding
breach of such provision, a waiver of the provision itself, or a waiver of any
right, power, or remedy under this Agreement. No notice to or demand on any
party in any case shall, of itself, entitle such party to any other or further
notice or demand in similar or other circumstances.
(e) Power and Authority. Employer represents and
warrants to Employee that it has the requisite corporate power to enter into
this Agreement and perform the terms hereof; and that the execution, delivery
and performance of this Agreement by it has been duly authorized by all
appropriate corporate action.
(f) Burden and Benefit. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, executors, personal and legal representatives, successors and, subject to
Section 6(b) above, assigns. Any provision of this Agreement which by its terms
requires performance beyond the term of this Agreement shall survive the term of
this Agreement in accordance with the terms of such provision.
(g) Time is of the Essence. Time is of the essence
for all purposes of this Agreement.
(h) Arbitration. Any dispute or controversy arising
out of or relating to this Agreement shall be settled finally and exclusively by
arbitration in accordance with the rules of the American Arbitration Association
then in effect. Such arbitration shall be conducted by an arbitrator(s)
appointed by the American Arbitration Association in accordance with its rules
and any finding by such arbitrator(s) shall be final and binding upon the
parties. Judgment upon any award rendered by the arbitrator(s) may be entered in
any court having jurisdiction thereof, and the parties consent to the
jurisdiction of the courts of the State of Georgia for this purpose. Nothing
contained in this Section 6(h) shall be construed to preclude Employer from
obtaining injunctive or other equitable relief to secure specific performance or
to otherwise prevent a breach or contemplated breach of this Agreement or the
Noncompetition Agreement.
(i) Governing Law; Headings. This Agreement and its
construction, performance, and enforceability shall be governed by, and
construed in accordance with, the laws of the State of Georgia. Headings and
titles herein are included solely for convenience and shall not affect, or be
used in connection with, the interpretation of this Agreement.
(j) Notices. All notices called for under this
Agreement shall be in writing and shall be deemed given upon receipt if
delivered personally or by facsimile transmission and followed promptly by mail,
or mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice; provided that notices of a change
of address shall be effective only upon receipt thereof):
If to Employee:
Robert E. Peterson
Suite 700
2849 Paces Ferry Road
Atlanta, Georgia 30339-3769
Facsimile: 770/431-0782
5
<PAGE>
If to Employer:
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: Thomas A. Carr, President
Facsimile: 202/638-0102
or to any other address or addressee as any party entitled to receive notice
under this Agreement shall designate, from time to time, to others in the manner
provided in this Section 6(j) for the service of notices.
Any notice delivered to the party hereto to whom it is
addressed shall be deemed to have been given and received on the day it was
received; provided, however, that if such day is not a business day then the
notice shall be deemed to have been given and received on the business day next
following such day. Any notice sent by telex or facsimile transmission shall be
deemed to have been given and received on the business day next following the
day of transmission.
(k) Counterparts. This Agreement may be executed in one or
more counterparts, each of which counterparts shall be deemed to be an original,
and all such counterparts shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, or
caused this Agreement to be duly executed on their behalf, as of the date first
above written.
CARRAMERICA REALTY CORPORATION
By: /s/ Joseph D. Wallace
--------------------------
Name: Joseph D. Wallace
Title: Vice President
/s/ Robert E. Peterson
-----------------------------
Robert E. Peterson
6
EXHIBIT 21.1
SUBSIDIARIES
Carr Real Estate Services, Inc.
Carr Development & Construction, Inc.
Carr Redmond Corporation
CarrAmerica Realty Services, Inc.
Carr Parkway North I Corporation
CarrAmerica Realty GP Holdings, Inc.
CarrAmerica Realty LP Holdings, Inc.
Carr Realty, L.P.
CarrAmerica Realty, L.P.
Carr Real Estate Services Partnership
Willard Associates
1747 Pennsylvania Avenue Associates, L.P.
Square 24 Associates
Phase I 7th & F Associates
The Greystone Square 127 Associates
Bond Texas Limited Partnership
Bond Building Limited Partnership
Carr Square 225 Associates
1575 Eye Street Associates
Phase I 456 Associates
Capital 50 Associates
Square 50 Associates
CC-JM II Associates
1717 Pennsylvania Avenue, L.L.C.
ACCOUNTANT'S CONSENT
The Board of Directors
CarrAmerica Realty Corporation:
We consent to incorporation by reference in the registration statement on Form
S-3 of CarrAmerica Realty Corporation of our report dated February 6, 1997,
relating to the consolidated balance sheets of CarrAmerica Realty Corporation
and subsidiaries as of December 31, 1996 and 1995 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1996 and our report dated
February 6, 1997 on the related schedule, which reports appear in the December
31, 1996, annual report on Form 10-K of CarrAmerica Realty Corporation.
KPMG Peat Marwick LLP
Washington, D.C.
March 26, 1997
<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
DECEMBER 31, 1996 AND FROM CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 35,866
<SECURITIES> 0
<RECEIVABLES> 11,899
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,475,998
<DEPRECIATION> 119,657
<TOTAL-ASSETS> 1,536,564
<CURRENT-LIABILITIES> 0
<BONDS> 655,449
0
17
<COMMON> 438
<OTHER-SE> 787,032
<TOTAL-LIABILITY-AND-EQUITY> 1,536,564
<SALES> 0
<TOTAL-REVENUES> 166,677
<CGS> 0
<TOTAL-COSTS> 137,049
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 29,534
<INCOME-TAX> 0
<INCOME-CONTINUING> 29,534
<DISCONTINUED> 0
<EXTRAORDINARY> 484
<CHANGES> 0
<NET-INCOME> 24,318
<EPS-PRIMARY> .88
<EPS-DILUTED> 0
<FN>
<F1>
Notes & accounts receivable are presented net of allowance for doubtful
accounts as the allowance is immaterial.
</FN>
</TABLE>
