SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by a Party other than the Registrant /_/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CarrAmerica Realty Corporation
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/_/ Check box if any part of the fee is offset as provided by
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filing by registration statement number, or the form or schedule
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CARRAMERICA REALTY CORPORATION
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 7, 1998
To our Stockholders:
The 1998 Annual Meeting of Stockholders of CarrAmerica Realty
Corporation will be held on Thursday, May 7, 1998, beginning at 10:30 a.m.,
Eastern Daylight Savings Time, at the Willard Inter-Continental Hotel, 1401
Pennsylvania Avenue, N.W., Washington, D.C. 20004. At the meeting, stockholders
will act on the following matters:
1. Election of three directors to serve three-year terms and of two
directors to serve two-year terms;
2. Approval of increases in the numbers of authorized shares of Common
Stock and Preferred Stock of the Company;
3. Approval of an increase in the number of shares authorized for
issuance under the Company's 1997 Stock Option and Incentive Plan;
4. Approval of an increase in the number of shares authorized for
issuance under the Company's 1995 Non-Employee Director Stock
Option Plan;
5. Approval of an amendment to the Company's Articles of Incorporation
to modify the definition of the term "Special Shareholder"; and
6. Any other business that properly comes before the meeting or any
adjournments thereof.
Only stockholders of record at the close of business on March 10, 1998
will be entitled to vote at the meeting or any adjournments thereof.
IF YOU PLAN TO ATTEND:
Please note that space limitations make it necessary to limit
attendance to stockholders only. Registration will begin at 9:30 a.m., and
seating will be available at approximately 10:00 a.m. Cameras and recording
devices will not be permitted at the meeting. "Street name" holders will need to
bring a copy of a brokerage statement reflecting stock ownership as of the
record date.
WHETHER OR NOT YOU EXPECT TO ATTEND:
Whether or not you expect to attend the Annual Meeting, you are urged
to sign and date the enclosed proxy, which is being solicited on behalf of the
Board of Directors, and return it promptly in the enclosed envelope.
By Order of the Board of Directors,
Debra A. Volpicelli
Assistant Corporate Secretary
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CARRAMERICA REALTY CORPORATION
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
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PROXY STATEMENT
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This Proxy Statement contains information related to the solicitation
of proxies for use at the 1998 Annual Meeting of Stockholders of CarrAmerica
Realty Corporation, a Maryland corporation (the "Company"), to be held on
Thursday, May 7, 1998, at 10:30 a.m., Eastern Daylight Savings Time, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.
This solicitation is made on behalf of the Board of Directors of the Company.
This Proxy Statement, the enclosed form of proxy, and the 1997 Annual Report to
Shareholders are being mailed to stockholders beginning on or about March 31,
1998. The principal executive offices of the Company are located at 1700
Pennsylvania Avenue, N.W., Washington, D.C. 20006.
Stockholders Entitled to Vote. Only holders of record of Common Stock
of the Company at the close of business on March 10, 1998 are entitled to
receive notice of the Annual Meeting and to vote the shares of Common Stock held
by them on that date at the meeting. The outstanding Common Stock constitutes
the only class of securities entitled to vote at the meeting. Each share of
Common Stock entitles its holder to cast one vote on each matter to be voted on.
At the close of business on March 10, 1998, there were 59,997,486 shares of
Common Stock outstanding.
Quorum. The presence at the meeting, in person or by proxy, of the
holders of a majority of the shares of Common Stock outstanding on March 10,
1998 will constitute a quorum, permitting the stockholders to conduct business
at the meeting. Abstentions and broker non-votes (i.e., shares held by a broker
or nominee which are represented at the meeting, but with respect to which the
broker or nominee is not voting on a particular proposal) will be included in
the calculation of the number of shares considered to be present at the meeting.
Voting. If the accompanying proxy card is properly signed, returned to
the Company and not revoked, it will be voted as directed by the stockholder.
Unless contrary instructions are given, the persons designated as proxy holders
on the proxy card will vote FOR the election of all nominees for the Board of
Directors named herein, FOR approval of increases in the numbers of authorized
shares of Common Stock and Preferred Stock of the Company, FOR approval of an
increase in the number of shares authorized for issuance under the Company's
1997 Stock Option and Incentive Plan, FOR approval of an increase in the number
of shares authorized for issuance under the Company's 1995 Non-Employee Director
Stock Option plan, FOR approval of an amendment to the Company's Articles of
Incorporation to modify the definition of the term "Special Shareholder," and as
recommended by the Board of Directors with regard to any other matters, or, if
no recommendation is given, in their own discretion.
Revocation of a Proxy. Each stockholder may revoke a previously granted
proxy at any time before it is exercised by filing with the Assistant Corporate
Secretary a notice of revocation or a duly-executed proxy bearing a later date.
The powers of the proxy holders will be suspended if the person who executed the
proxy attends the meeting in person and so requests. Attendance at the meeting
will not, in itself, constitute revocation of a previously granted proxy.
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ELECTION OF DIRECTORS
(Item 1)
Board of Directors
The directors of the Company are divided into three classes, with
approximately one-third of the directors elected by the stockholders annually.
Thomas A. Carr, Caroline S. McBride and Wesley S. Williams, Jr., whose terms of
office will expire at the Annual Meeting, have been nominated for election at
the meeting as directors for three-year terms, to hold office until the 2001
Annual Meeting of Stockholders and until their successors are elected and
qualified. A. James Clark and Todd W. Mansfield, whose terms of office also will
expire at the Annual Meeting, have been nominated for election at the meeting as
directors for two-year terms, to hold office until the 2000 Annual Meeting of
Stockholders and until their successors are elected and qualified. Mr. Clark has
been nominated for a two-year term so as to more nearly equalize the number of
directors in each class. Mr. Mansfield was elected as a director in November
1997 by the other directors to fill a vacancy on the Board. His term expires at
the Annual Meeting by law.
The Board of Directors of the Company recommends a vote FOR Mr. Thomas
Carr, Mr. Clark, Mr. Mansfield, Mrs. McBride and Mr. Williams as directors to
hold office until the expiration of the terms for which they have been nominated
and until their successors are elected and qualified. Should any one or more of
these nominees become unable to serve for any reason before the Annual Meeting,
the Board of Directors may designate a substitute nominee or nominees, in which
event the persons designated as proxy holders on the enclosed proxy will vote
for the election of such substitute nominee or nominees, or may reduce the
number of members of the Board of Directors.
Nominees for Election to Term Expiring 2001
Thomas A. Carr, 39, has been President and a director of the Company
since February 1993. In May 1997, Mr. Carr was appointed Chief Executive Officer
of the Company, at which time he resigned as Chief Operating Officer of the
Company and as the Company's Chief Financial Officer, positions he had held
since May 1995 and February 1993, respectively. Mr. Carr was President of Carr
Partners, Inc., a financial services affiliate of The Oliver Carr Company, the
Company's predecessor, from 1991 until February 1993, when Carr Partners, Inc.
ceased operations. Mr. Carr is a director of The Oliver Carr Company. Mr. Carr
holds a Masters in Business Administration degree 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 Investments, Inc. Mr. Carr is the son of Oliver T.
Carr, Jr. Mr. Carr is a member of the Executive Committee and the Investment
Committee of the Board of Directors.
Caroline S. McBride, 44, has been a director of the Company since July
1996. Mrs. McBride was nominated to the Board of Directors as a designee of
Security Capital U.S. Realty S.A. ("SC-USREALTY"), a major stockholder of the
Company. Mrs. McBride is a Managing Director of Security Capital Investment
Research Incorporated, an affiliate of SC-USREALTY. 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. Before 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 degree
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.
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Wesley S. Williams, Jr., 55, has been a director of the Company since
February 1993. Mr. Williams has been a partner of the law firm of Covington &
Burling, Washington, D.C., since 1975. He was adjunct professor of real estate
finance law at 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 on the Editorial Advisory Board of the District
of Columbia Real Estate Reporter. Mr. Williams serves as a director 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, Virginia. Mr. Williams is Chairman of the Board of
Directors of Broadcast Capital, Inc. and of Broadcast Capital Fund, Inc. and is
Vice Chairman of the Board of Directors 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 B.A. and
J.D. degrees from Harvard University, an M.A. degree 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.
Nominees for Election to Terms Expiring 2000
A. James Clark, 70, has been a director of the Company since February
1993. 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 Executive Committee, the Investment
Committee, the Executive Compensation Committee, and the Nominating Committee of
the Board of Directors.
Todd W. Mansfield, 40, has been a director of the Company since
November 1997. Mr. Mansfield was nominated to the Board as a designee of
SC-USREALTY. Mr. Mansfield has been Managing Director of Security Capital Global
Strategic Group Incorporated since May 1997. Before that time, Mr. Mansfield had
been with The Walt Disney Company since May 1986, where he was executive Vice
President/General Manager of Disney Development Company and President of The
Celebration Company. Mr. Mansfield is a director of OmniOffices, Inc. and
Parking Services International and a trustee of Urban Growth Property Trust. Mr.
Mansfield received his Masters in Business Administration degree from Harvard
University and his Bachelor of Arts degree from Claremont McKenna College. Mr.
Mansfield is a member of the Executive Compensation Committee.
Incumbent Directors--Terms Expiring 1999
Andrew F. Brimmer, 71, has been a director of the Company since
February 1993. He has been President of Brimmer & Company, Inc., an economic and
financial consulting firm, since 1976. Since 1995, Dr. Brimmer has served as
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.I. du Pont de Nemours & Company, Navistar
International Corporation, Gannett Company and Airborne Express. Dr. Brimmer
received a B.A. degree and a masters degree in economics from the University of
Washington and a Ph.D. in economics from Harvard University. Dr. Brimmer is a
member of the Audit Committee of the Board of Directors.
Oliver T. Carr, Jr., 72, has been Chairman of the Board of Directors of
the Company since February 1993. In May 1997, Mr. Carr resigned as Chief
Executive Officer of the Company, a position he had held since 1993. Mr. Carr
founded The Oliver Carr Company 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 The Oliver Carr Company since February 1993. 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. Mr. Carr is a member of the Executive Committee
and the Investment Committee of the Board of Directors.
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William D. Sanders, 56, has been a director of the Company since May
1996. Mr. Sanders was nominated to the Board as a designee of SC-USREALTY. He is
the founder and Chairman of Security Capital Group, an affiliate of SC-USREALTY.
Mr. Sanders retired on January 1, 1990 as Chief Executive Officer of LaSalle
Partners Limited, a firm he founded in 1968. Mr. Sanders is on the Board of
Directors of R.R. Donnelley & Sons Company, SC-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 degree from
Cornell University. Mr. Sanders is a member of the Nominating Committee of the
Board of Directors.
Committees of the Board of Directors; Meetings
In accordance with the By-laws of the Company, the Board of Directors
has established a standing Executive Committee, Investment Committee, Audit
Committee, Executive Compensation Committee and Nominating Committee. The
membership of these committees is set forth in the preceding section of this
Proxy Statement.
Executive Committee. The Executive Committee has the authority, subject
to the Company's conflict of interest policies, to acquire and dispose of real
property and the power to authorize, on behalf of the full Board of Directors,
the execution of certain contracts and agreements, including those related to
the borrowing of money by the Company. The Executive Committee met three times
in 1997.
Investment Committee. The Investment Committee has the authority to
approve agreements and other actions contemplated by and within the amounts
established in the budget for the Company approved by the Board of Directors and
to approve the acquisition of assets and the incurrence of indebtedness and
other matters treated as capital items that involve less than $50 million for
any single transaction or series of related transactions and, in the aggregate,
represent not more than 10% of the Company's total assets during any fiscal
quarter or that do not represent a material change from the Company's business
plan. The Investment Committee does not have authority to approve any
expenditure to or agreement with any member of the Investment Committee, any
member of the immediate family of a member of the Investment Committee, or any
entity in which any such person has a direct or indirect financial interest. The
Investment Committee met eleven times in 1997.
Audit Committee. The Audit Committee, which consists of two independent
directors, was established to make recommendations concerning the engagement of
independent public accountants, review with the independent public accountants
the plans and results of the audit engagement, approve professional services
provided by the independent public accountants, review the independence of the
independent public accountants, consider the range of audit and non-audit fees
and review the adequacy of the Company's internal accounting controls. The Audit
Committee met twice in 1997.
Executive Compensation Committee. The Executive Compensation Committee
was established to determine compensation for the Company's executive officers
and to administer the Company's stock option plans. The Executive Compensation
Committee met twice in 1997 and took action by unanimous written consent twice.
Nominating Committee. The Nominating Committee was established to
consider and make recommendations to the Board of Directors regarding the size
of the Board and nominees for election as members of the Board of Directors. The
Committee is willing to consider nominees recommended by stockholders.
Stockholders who wish to suggest qualified candidates must comply with the
advance notice provisions and other requirements of Section 3.11 of the
Company's By-laws, which are on file with the Securities and Exchange Commission
and may be obtained from the Secretary of the Company upon request. Inasmuch as
the full board acted directly on all nomination issues that arose during 1997,
the Nominating Committee did not meet during the year.
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The Board of Directors held eight meetings during 1997 and took action
by unanimous written consent nine times. None of the directors attended fewer
than 75% of the aggregate of the number of meetings of the Board of Directors
held during the period he or she served on the Board and the number of meetings
of committees of the Board of Directors on which he or she served during the
period of service.
Compensation of Directors
The Company pays fees to directors who are not employees of the Company
for their services as directors. Such directors receive annual compensation of
$12,000 plus a fees (plus out-of-pocket expenses) for attendance (in person or
by telephone) at each meeting of the Board of Directors and committee meeting
held on a non-Board meeting day. The Board of Directors meeting fee is $1,000
and the committee meeting fee is $500.
The Company also compensates its non-employee directors through its
1995 Non-Employee Director Stock Option Plan. The plan provides for the grant of
3,000 options to purchase shares of Common Stock of the Company upon a
non-employee director's initial election or appointment to the Board, and for
the grant of options to purchase 5,000 shares of the Company's Common Stock to
each continuing director immediately following the election of directors at the
Company's Annual Meeting of Stockholders. Additional information on the plan is
available under Item 4 of this Proxy Statement.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file reports of ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission and the New York Stock Exchange. Executive officers,
directors and greater than ten percent stockholders are required by the SEC to
furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based on the Company's review of the copies of such forms it has received and on
written representations from certain reporting persons that they were not
required to file a Form 5 for the fiscal year, except as noted below, the
Company believes that its executive officers, directors and greater than ten
percent stockholders complied with all Section 16(a) filing requirements
applicable to them with respect to transactions during 1997. Certain of the
Company's executive officers and directors failed to report on a timely basis
certain transactions, as follows: Dr. Brimmer purchased 100 shares on July 19,
1996 and such purchase was reported on June 10, 1997, and Mr. Thomas Carr
received 2,179 shares in September 1996 as deferred compensation from The Oliver
Carr Company and such receipt was reported on January 10, 1997. These
transactions were reported on Forms 4 filed during 1997 after the reporting
deadline. In addition, the Forms 3 for Kent C. Gregory, an executive officer of
the Company, and Mr. Mansfield were not filed on a timely basis.
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APPROVAL OF INCREASES IN NUMBERS
OF AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK
(Item 2)
The Board of Directors of the Company has adopted a resolution setting
forth a proposed amendment to the Company's Articles of Incorporation increasing
the number of authorized shares of Common Stock of the Company from 90,000,000
to 180,000,000 and the number of authorized shares of Preferred Stock from
15,000,000 to 35,000,000. The resolution declares that the amendment is
advisable and directs that it be submitted to the Company's stockholders for
approval. The stockholders will consider the amendment at the Annual Meeting.
As of March 15, 1998 the Company had 59,997,486 shares of Common Stock
issued and outstanding. In addition, the Company had reserved a total of
11,757,752 shares of Common Stock for future issuances, leaving only 18,244,762
shares of Common Stock available to meet future business needs. The reserved
shares consist of the following: (i) 6,560,852 shares reserved for possible
issuance upon redemption of currently outstanding units of limited partnership
interest in Carr Realty, L.P. and CarrAmerica Realty, L.P., (ii) 1,266,900
shares reserved for possible redemption of units of partnership interest in Carr
Realty, L.P. that may be issued upon exercise of options under a unit option
plan, (iii) 150,000 shares reserved for issuance under the Company's 1995
Non-Employee Director Stock Option Plan, and (iv) 3,000,000 shares that may be
issued, either upon redemption of units of limited partnership interest proposed
to be issued or otherwise, under existing agreements with third parties. As of
March 15, 1998, the Company had a total of 9,580,000 shares of its Preferred
Stock outstanding, leaving only 5,420,000 shares available to meet future
business needs.
The Board of Directors believes that it is in the Company's best
interests to increase the numbers of authorized shares of its Common Stock and
Preferred Stock in order to have additional authorized but unissued shares
available for issuance to meet business needs as they arise. The Board of
Directors believes that the availability of such additional shares is consistent
not only with the authorized capitalization of many other large real estate
investment trusts ("REITs"), but also with the Company's national expansion
strategy, and that it will provide the Company with the flexibility to issue
Common Stock and Preferred Stock for possible financings and acquisitions, and
for other proper corporate purposes that may be identified in the future by the
Board of Directors, without the expense and delay of a special stockholders'
meeting. The issuance of additional shares of Common Stock and certain kinds of
Preferred Stock, such as convertible and participating preferred stock, may have
a dilutive effect on the Company's earnings per share and, for persons who do
not purchase additional shares to maintain their pro rata interest in the
Company, on such stockholders' percentage voting power. Authorized but unissued
shares of Common Stock and Preferred Stock will be available for issuance at
such times and for such corporate purposes as the Board of Directors may deem
advisable without further action by the Company's stockholders, except as may be
required by applicable law or by the rules of any stock exchange on which the
Company's securities are traded, such as the New York Stock Exchange.
The Board of Directors recommends a vote FOR approval of the proposed
increases in numbers of authorized shares of Common Stock and Preferred Stock.
Proxies solicited by the Board will be so voted in the absence of instructions
to the contrary.
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APPROVAL OF INCREASE IN NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE UNDER 1997
STOCK OPTION AND INCENTIVE PLAN
(Item 3)
Introduction
The Company's stockholders approved its 1997 Stock Option and Incentive
Plan (the "1997 Stock Option Plan") at last year's Annual Meeting. The plan
provides for the award of stock options, restricted stock and restricted stock
units to selected officers and employees in order to provide them with stronger
incentives to serve the Company and to expend maximum effort to improve the
business results and earnings of the Company.
The plan originally authorized the issuance of 3,000,000 shares of the
Company's Common Stock pursuant to awards. As of March 15, 1998, the Company had
awarded grants for 2,644,203 of these shares, leaving only 355,797 shares
available for future grants. The Board of Directors has adopted an amendment of
the plan, subject to stockholder approval, increasing the number of shares
authorized for awards from 3,000,000 to 7,200,000. The amendment is based on a
recommendation in the report of an independent compensation consultant retained
by the Executive Compensation Committee dated January 1998. The consultant
concluded that, without the 4,200,000 share increase, the Company would not have
sufficient shares available beyond 1998 and over the next five years to make
competitive stock option grants. The number of options or shares received by or
allocated to any person or group of persons will not necessarily change as a
result of adoption of the proposed amendment.
Features of the 1997 Stock Option Plan
Types of Awards; Eligibility. The 1997 Stock Option Plan provides for
the issuance of options to purchase shares of Common Stock of the Company,
restricted stock and restricted stock units to any of the approximately 800
employees of the Company and its subsidiaries, including Carr Realty, L.P.,
CarrAmerica Realty, L.P., CarrAmerica Development, Inc., Carr Real Estate
Services, Inc., CarrAmerica Realty Services, Inc. and OmniOffices, Inc., as
determined by the Executive Compensation Committee, which administers the plan.
In practice, the Company has awarded grants under the plan to key employees
only, a group that includes approximately 135 persons. Each stock option awarded
under the plan may be exercised for one share of Common Stock. Options may be
nonqualified stock options or incentive stock options within the meaning of
Section 422 of the Internal Revenue Code. Restricted stock is stock subject to
restrictions and a risk of forfeiture. Restricted stock units are units that
represent a conditional right to receive a share of Common Stock in the future.
The maximum number of shares of Common Stock available for award to any
individual employee in any year is 500,000.
Vesting; Exercise; Price. Under the 1997 Stock Option Plan, the
Executive Compensation Committee has authority to determine the number of stock
options, shares of restricted stock or restricted stock units to be granted to
an eligible employee and the terms and conditions of each grant, including the
exercise price of any stock option and the nature and duration of any
restriction or condition relating to the vesting, exercise, transfer or
forfeiture of a stock option or grant of restricted stock or restricted stock
units. Stock options granted under the plan generally expire on the tenth
anniversary of the date of grant. Under the plan, stock options must be
exercised within 365 days of the termination of employment of the option holder
for reasons other than death or disability.
Amendments; Termination. The Board of Directors has the right to amend,
terminate or suspend the 1997 Stock Option Plan. The Board may not amend the
plan in a way that causes it to not comply with the Internal Revenue Code
without the approval of the Company's stockholders.
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Proposed Increase in the Number of Shares Authorized for Issuance Under
the Plan
The Board of Directors has adopted an amendment to the 1997 Stock
Option Plan, subject to stockholder approval, to increase the number of shares
authorized for issuance under the plan from 3,000,000 to 7,200,000. The Board
believes that such an increase will promote the interests of the Company and its
stockholders and enable the Company to continue to attract, retain and reward
talented employees important to the Company's success. Accordingly, the Board of
Directors recommends a vote FOR approval of the amendment. Proxies solicited by
the Board will be so voted in the absence of instructions to the contrary.
APPROVAL OF INCREASE IN NUMBER OF SHARES AUTHORIZED
FOR ISSUANCE UNDER 1995 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN
(Item 4)
Introduction
The Company maintains its 1995 Non-Employee Director Stock Option Plan
(the "Non-Employee Director Plan") to enhance its ability to attract and retain
well-qualified and dedicated members to its Board of Directors. The Non-Employee
Director Plan is intended to provide non-employee directors with an opportunity
to acquire or increase a direct proprietary interest in the operations and
future success of the Company. The Non-Employee Director Plan originally
authorized the issuance of options to acquire 150,000 shares of Common Stock of
the Company. As of March 15, 1998, grants of 104,000 of these shares had been
made, leaving only 46,000 shares available for future grants. The Board of
Directors is therefore recommending that the stockholders approve an amendment
of the plan to increase the number of shares authorized for issuance from
150,000 to 270,000. Approval of the amendment will permit the plan to continue
to operate and provide incentives to non-employee directors. Without the
amendment, and with the expected number of non-employee directors of the
Company, the plan could not operate fully beyond 1998.
Features of the Non-Employee Director Plan
Eligibility. The Non-Employee Director Plan provides for the issuance
of options to purchase shares of Common Stock of the Company to members of its
Board of Directors who are not officers or employees of the Company or any of
its subsidiaries. Assuming election of the four non-employee directors nominated
by the Board at the 1998 Annual Meeting, six non-employee directors will be
eligible for grants under the plan immediately after the meeting. Options
granted under the plan do not constitute "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code.
Awards. Any non-employee director appointed or elected to the Board
receives options to purchase 3,000 shares of Common Stock of the Company upon
his or her appointment or election. Immediately following the election of
directors at each Annual Meeting of Stockholders, each non-employee director
then serving as a director, other than a director first elected at that Annual
Meeting, receives options to purchase 5,000 shares of Common Stock under the
plan.
Vesting; Exercise; Price. Options granted under the Non-Employee
Director Plan vest over a three-year period, 33-1/3% per year, on the
anniversaries of the grant (subject to immediate vesting upon the occurrence of
certain events). Options granted under the plan expire on the tenth anniversary
of the grant, but must be exercised within 90 days of the removal or resignation
from the Board of the holder or the failure of the holder to be re-elected to
the Board. The exercise price of options granted under the plan is the fair
market value of the Company's Common Stock on the date of grant.
9
<PAGE>
Amendments; Termination. The Board of Directors has the right to
terminate or suspend the Non-Employee Director Plan, but the following
amendments require approval of the Company's stockholders: (i) an increase in
the benefits accruing to participants of the plan (for example, an increase in
the number of options that may be granted to any non-employee director); (ii) an
increase in the number of shares of Common Stock authorized for issuance under
the plan; or (iii) a material modification of the eligibility requirements for
the plan.
Proposed Increase in the Number of Shares Authorized for Issuance Under
the Plan
The Board of Directors has approved, and recommends that the
stockholders approve, the proposed amendment to the Non-Employee Director Plan
to increase the number of shares authorized for issuance under the plan from
150,000 to 270,000. The number of options received by or allocated to any
director or class of directors under the Non-Employee Director Plan will not
change merely because the increase is approved. The table below shows the number
of stock options granted to each newly appointed or elected non-employee
director and annually to each continuing non-employee director under the
Non-Employee Director Plan. No dollar value has been assigned to the grants
because the exercise price of the option equals the fair market value of the
Company's Common Stock on the date of grant.
Plan Benefits
Number of Options Granted
Under Non-Employee
Position Director Plan
-------- -------------
Each New Non-Employee Director....................... 3,000
Each Continuing Non-Employee Director................ 5,000
1998 Continuing Non-Employee Director Group.......... 30,000
The Board believes that the proposed increase in the number of shares
authorized for issuance under the Non-Employee Director Plan will promote the
interests of the Company and its stockholders and enable the Company to continue
to retain and reward well-qualified directors important to the Company's
success. Accordingly, the Board of Directors recommends a vote FOR approval of
the proposed amendment. Proxies solicited by the Board will be so voted in the
absence of instructions to the contrary.
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO MODIFY
DEFINITION OF TERM "SPECIAL SHAREHOLDER"
(Item 5)
Introduction
For the Company to continue to qualify as a REIT under the Internal
Revenue Code, no more than 50% in value of its outstanding capital stock may be
owned, directly or indirectly, by five or fewer "individuals" (as defined in the
Internal Revenue Code to include certain entities) during the last half of a
taxable year (other than the first year) or during a proportionate part of a
shorter taxable year. The capital stock also must be beneficially owned by 100
or more persons during at least 335 days of a taxable year or during a
proportionate part of a shorter taxable year.
Because the Company intends to maintain its qualification as a REIT,
its Articles of Incorporation contain restrictions on capital stock ownership
designed to assure satisfaction of these provisions of the Internal Revenue
Code. Subject to certain exceptions specified in the Articles of Incorporation,
no holder of the Company's Capital Stock may own, or be deemed to own by virtue
of certain attribution provisions of the Code, more than 5% of the issued and
outstanding shares of Common Stock and/or more than 5% of any class or series of
Preferred Stock. "Special Shareholders" are exempted from the capital stock
ownership limits, however, and instead are subject to a special ownership limit
of 45% of the outstanding shares of Common Stock of the Company and 45% of the
outstanding shares of each class or series of Preferred Stock.
10
<PAGE>
The "Special Shareholder" provision was added to the Company's Articles
of Incorporation in 1996, at the time of SC-USREALTY's initial investment in the
Company. The purpose of the provision is to permit SC-USREALTY and its
affiliates to maintain a substantial position in the Company's securities
without running afoul of the REIT capital stock ownership limits of the Internal
Revenue Code. The term "Special Shareholder" currently includes SC-USREALTY, its
affiliates and persons who acquire capital stock of the Company from SC-USREALTY
or its affiliates in accordance with the provisions of the agreements entered
into at the time of SC-USREALTY's initial investment in the Company.
Proposed Amendment to Modify the Definition of the Term "Special
Shareholder"
The Board of Directors has adopted a resolution setting forth a
proposal to amend the Company's Articles of Incorporation to expand the
definition of the term "Special Shareholder." The resolution declares that the
amendment is advisable and directs that it be submitted to the Company's
stockholders for approval. The stockholders will consider the amendment at the
Annual Meeting.
Under the proposed expanded definition, the term "Special Shareholder"
would include a bona fide financial institution that acquires capital stock of
the Company as a result of its exercise of rights as a pledgee or otherwise in
connection with bona fide indebtedness of any of the persons previously included
within the definition or as a result of such a person's default under bona fide
indebtedness. Safeguards would be included within the definition to assure that
the holdings of any financial institution that becomes a "Special Shareholder"
under the expanded definition would not cause the Company to be in violation of
the REIT capital stock ownership limitations of the Internal Revenue Code. The
full text of the proposed expanded definition of the term "Special Shareholder"
is included as Appendix A to this Proxy Statement.
The proposed expanded definition would accommodate the desires of a
person who currently or in the future qualifies as a "Special Shareholder" to
use its capital stock in the Company to secure indebtedness. The proposed
definition is consistent with the definition of the term in the Stockholders
Agreement executed and delivered by SC-USREALTY when it initially invested in
the Company. The recommendation to expand the definition to include financial
institutions carries out an agreement made by the Company to SC-USREALTY at the
time of the closing of SC-USREALTY's initial investment in the Company.
The Board of Directors believes that adoption of the amendment
expanding the definition of the term "Special Shareholder" in the Company's
Articles of Incorporation will promote the interests of the Company and its
stockholders by providing SC-USREALTY with greater financing flexibility without
adversely affecting the interests of the Company. Accordingly, the Board of
Directors recommends a vote FOR approval of the amendment. Proxies solicited by
the Board will be so voted in the absence of instructions to the contrary.
11
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
annual and long-term compensation for all individuals who served as Chief
Executive Officer of the Company during the last fiscal year and for the four
most highly compensated other executive officers of the Company (the "Named
Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------- --------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options (#)(2) Compensation
- --------------------------- ---- ------ ----- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Oliver T. Carr, Jr............ 1997 $ 250,000(3) $ 0 0 0 $8,932(4)
Chairman of the Board 1996 $ 225,000(3) $ 0 0 50,000 $8,728(4)
1995 $ 152,885(3) $ 67,500 0 0 $8,695(4)
Thomas A. Carr................ 1997 $ 250,000 $ 300,000 0 150,000 $8,932(5)
President and Chief 1996 $ 225,000 $ 225,000 0 60,000 $8,728(5)
Executive Officer 1995 $ 225,000 $ 67,500 0 0 $8,782(5)
Brian K. Fields.............. 1997 $ 185,000 $ 185,000 0 75,000 $8,932(6)
Chief Financial Office 1996 $ 185,000 $ 185,000 0 35,000 $8,728(6)
1995 $ 150,000 $ 60,000 0 0 $8,782(6)
Philip L. Hawkins............. 1997 $ 210,000 $ 250,000 $ 87,422(7) 100,000 $8,932(8)
Managing Director--Asset 1996 $ 116,731(1) $ 210,000 $ 91,868(7) 70,000 $ 921(8)
Management
Robert E. Peterson............ 1997 $ 190,000 $ 215,000 0 85,000 $8,932(9)
Managing Director-- 1996 $ 26,308(1) $ 15,000 0 70,000 $ 921(9)
Development
Robert G. Stuckey............. 1997 $ 210,000 $ 250,000 0 100,000 $8,932(10)
Chief Investment Officer 1996 $ 116,731(1) $ 185,000 $ 47,055(7) 70,000 $ 921(10)
</TABLE>
(1) Mr. Hawkins, Mr. Peterson and Mr. Stuckey began their employment with the
Company in 1996. The amounts set forth as "Salary" for them for 1996
represent actual salary paid to such officers for work performed from their
respective hire dates to December 31, 1996. Their annualized salaries for
1996 were: Mr. Hawkins, $210,000; Mr. Peterson, $190,000; and Mr. Stuckey,
$185,000.
(2) All option grants were made under the Company's 1997 Stock Option Plan
other than the 1996 grants to Mr. Hawkins and Mr. Stuckey. The 1996 grants
to Mr. Hawkins and Mr. Stuckey were made under the 1993 Carr Realty Option
Plan at the time they were hired by the Company, which was before the 1997
plan was approved by the Company's stockholders. The 1993 plan provided for
the grant of options to acquire Class A Units of Carr Realty, L.P., a
limited partnership through which the Company conducted most of its
business before 1996. Holders of such Class A Units have the right to
redeem them for cash or Common Stock of the Company, at the option of the
Company.
(3) Mr. Oliver Carr served as Chief Executive Officer of the Company until May
1997. His employment contract was amended by the Board of Directors
as of May 22, 1996, to increase his salary to $250,000 on an annualized
basis effective as of October 1995. Mr. Carr's employment contract was also
amended by the Board of Directors as of May 22, 1996 to permit him to
receive additional compensation in such amounts and at such times as the
Board of Directors determined.
(4) Mr. Oliver Carr's "All Other Compensation" for 1997, 1996 and 1995 consists
of employer contributions to the CarrAmerica Realty Retirement Plan and
Trust in the amounts of $7,800, $7,500, and $8,250, respectively, and life,
AD&D and long-term disability insurance premiums in the amounts of $1,132,
$1,228 and $445, respectively.
(5) Mr. Thomas Carr's "All Other Compensation" for 1997, 1996 and 1995 consists
of employer contributions to the CarrAmerica Realty Retirement Plan and
Trust in the amounts of $7,800, $7,500 and $8,250, respectively, and life,
AD&D and long-term disability insurance premiums in the amounts of $1,132,
$1,228 and $532, respectively.
(6) Mr. Fields' "All Other Compensation" for 1997, 1996 and 1995 consists of
employer contributions to the CarrAmerica Realty Retirement Plan and Trust
in the amounts of $7,800, $7,500, and $8,250, respectively, and life, AD&D
and long-term disability insurance premiums in the amounts of $1,132,
$1,228 and $445, respectively.
(7) Reimbursement for employment-related expenses.
(8) Mr. Hawkins' "All Other Compensation" consists of a $7,800 contribution to
the Carr Realty Retirement Plan and Trust for 1997 and contributions for
life, AD&D and long-term disability insurance premiums in the amounts of
$1,132 and $921 for 1997 and 1996, respectively.
(9) Mr. Peterson's "All Other Compensation" consists of a $7,800 contribution
to the CarrAmerica Realty Retirement Plan and Trust for 1997, and
contributions for life, AD&D and long-term disability insurance premiums in
the amounts of $1,132 and $921 for 1997 and 1996, respectively.
(10) Mr. Stuckey's "All Other Compensation" consists of a $7,800 contribution to
the CarrAmerica Realty Retirement Plan and Trust for 1997 and contributions
for life, AD&D and long-term disability insurance premiums in the amounts
of $1,132 and $921 for 1997 and 1996, respectively.
12
<PAGE>
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Rates of Stock Price
Individual Grants Appreciation for Option Team
- ------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Percent of
Total
Number of Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Base Price Expiration
Name (1) Granted Year(1) ($/Share) Date 5% ($) 10% ($)
-------- ------- ------------ ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Oliver T. Carr, Jr. 50,000 5% $29.25 02/06/07 $ 919,758 $2,330,848
Thomas A. Carr
1st Grant 60,000 $29.25 02/06/07 1,103,710 2,797,018
2nd Grant 16,814 (Total of 8%} $28.25 08/14/07 298,722 57,020
Brian K. Fields
1st Grant 35,000 $29.25 02/06/07 643,831 1,631,594
2nd Grant 8,850 (Total of 5%} $28.25 08/14/07 157,232 398,456
Robert G.Stuckey 50,000 $29.25 02/06/07 919,758 2,330,848
1st Grant 12,389 (Total of 7%} $28.25 08/14/07 220,106 557,793
2nd Grant
Philip L. Hawkins
1st Grant 50,000 $29.25 02/06/07 919,758 2,330,848
2nd Grant 12,389 (Total of 7%} $28.25 08/14/07 220,106 557,793
Robert E. Peterson
1st Grant 50,000 $29.25 02/06/07 919,758 2,330,848
2nd Grant 12,389 (Total of 7%} $28.25 08/14/07 220,106 557,793
</TABLE>
- ----------
(1) Each other executive officer of the Company was granted options to acquire
42,389 shares of the Company's Common Stock during 1997.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Securities Values of Unexercised
Underlying Unexercised In-the-Money
Shares Options at FY End(l) Options at FY End(2)
Acquired Value ----------------------------- --------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Oliver T. Carr, Jr. . 0 0 120,000 0 $1,091,188 $0
Thomas A. Carr ...... 0 0 132,000 64,814 $1,120,438 $222,798
Brian K. Fields ..... 0 0 67,000 36,850 $562,641 $98,672
Philip L. Hawkins ... 0 0 18,000 64,389 $83,875 $229,337
Robert G. Stuckey ... 0 0 18,000 64,389 $79,875 $223,337
Robert E. Peterson... 0 0 14,000 68,389 $50,625 $245,087
</TABLE>
- ----------
(1) Number of shares of Common Stock underlying options granted under the
Company's 1997 Stock Option Plan or shares of Common Stock for which Class
A Units of Carr Realty, L.P. underlying options granted under the 1993 Carr
Realty Option Plan would have been redeemable.
(2) Based on the last reported sale price of the Common Stock on the NYSE on
December 31, 1997 of $31.6875.
Employment Contracts
None of the Named Executive Officers currently has an employment
contract with the Company.
13
<PAGE>
Notwithstanding anything to the contrary set forth in any of the
Company's filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate SEC filings,
in whole or in part, the following Performance Graph and the Report on Executive
Compensation shall not be incorporated by reference into any such filings:
PERFORMANCE GRAPH
Comparison of 58-Month Cumulative Total Return*
Among CarrAmerica Realty Corporation, the S&P 500 Index
and the NAREIT Equity Index
[GRAPHIC OMITTED]
* Assumes $100 invested on February 9, 1993 in Common Stock of CarrAmerica
Realty Corporation Common Stock or on January 31, 1993 in the securities
comprising the S&P 500 index or the NAREIT Equity index, assuming
reinvestment of dividends.
The points on the graph represent the following numbers:
Last Trading Day of CarrAmerica S&P 500 NAREIT Equity
- ------------------- ----------- ------- -------------
1997 ..................... $204 $250 $218
1996 ..................... $178 $187 $181
1995 ..................... $138 $152 $134
1994 ..................... $ 93 $111 $116
1993 ..................... $109 $109 $112
14
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee of the Board of Directors (the
"Committee") is comprised entirely of non-employee directors and is responsible
for recommending to the Board of Directors compensation policies applicable to
the Company's executive officers and monitoring compliance with such policies.
The Compensation Committee determines the Chief Executive Officer's compensation
and approves compensation recommendations for the Named Executive Officers and
the other executive officers of the Company as submitted by the Chief Executive
Officer. The Committee retained the services of an independent compensation
consultant to assist its members in evaluating the key elements of the Company's
compensation program. The compensation consultant provided advice to the
Committee with respect to competitive practices and the reasonableness of
compensation paid to the executives of the Company. The Committee reviewed
surveys and other data supplied by the consultant in the course of its
deliberations relating to compensation proposals. This report addresses the
Company's compensation policies for 1997 and 1998 as they affected the Chief
Executive Officer, the Named Executive Officers and the other executive officers
of the Company.
Compensation Philosophy
The Committee's executive compensation policies are designed to
underscore the importance of total stockholder return, to provide competitive
compensation opportunities, to reward executives commensurate with the Company's
performance, to recognize individual performance and responsibility, and to
assist the Company in attracting and retaining a highly motivated,
performance-oriented executive management team. The Committee is committed to a
compensation philosophy which rewards employees primarily on the basis of the
Company's success in attaining both short-term and long-term corporate financial
objectives and total return to shareholders and, secondarily, on the basis of
the employees' success in attaining departmental and individual financial and
qualitative performance objectives. This philosophy is based on the premise that
achievement of the Company's goals results from the coordinated efforts of all
individuals working toward common objectives. The Company strives to achieve
those objectives through teamwork that is focused on meeting the expectations of
stockholders and customers. In 1997, the Committee made awards based on
quantitative and qualitative criteria. The quantitative component was awarded
upon the attainment of specific financial targets. The qualitative component was
based upon the recommendation of the Chief Executive Officer. For 1998, the
quantitative components will be determined in the same manner. However, the 1998
qualitative component will be based on the achievement of specific Company and
departmental performance goals presented to the Committee by the Chief Executive
Officer in February 1998. The Committee adopted the goals as the basis for the
1998 qualitative component and will make awards based on the achievement of such
goals.
The components of the Company's executive compensation program for 1997
were (i) an annual component consisting of base salaries and cash bonuses and
(ii) long-term incentives. Central to the Company's executive compensation
program is the definition of specific financial targets and performance goals.
In determining executive compensation, the Committee considers compensation
packages for executives of comparable position and responsibility in the
industry.
Section 162(m) of the Internal Revenue Code denies a deduction for
compensation in excess of $1 million paid to certain executive officers, unless
certain performance, disclosure, and stockholder approval requirements are met.
Option grants under the 1997 CarrAmerica Realty Corporation Stock Option and
Incentive Plan and the 1993 Carr Realty Option Plan are intended to qualify as
"performance-based" compensation not subject to the Section 162(m) deduction
limitation. In addition, the Committee believes that a substantial portion of
compensation awarded under the Company's compensation program would be exempted
from the $1 million deduction limitation. The Committee's present intention is
to qualify, to the extent reasonable, a substantial portion of each executive
officer's compensation for deductibility under applicable tax laws.
15
<PAGE>
Annual Component
Base salaries for all Named Executive Officers, including the Chief
Executive Officer, are reviewed by the Committee on an annual basis. In
determining appropriate base salaries, the Committee considers external
competitiveness in the context of the Company's financial condition and capital
resources, the roles and responsibilities of the individual, the contributions
of the individual to the Company's business, an analysis of job requirements and
the individual's prior experience and accomplishments.
To provide additional incentive to achieve outstanding performance, the
Committee also makes cash bonus awards based on corporate and individual
performance. The compensation plan adopted by the Committee in 1997 establishes
target cash bonuses based on achievement of financial and operational goals for
the Company and, where appropriate, those activities of the Company managed by
the executive officer. The Committee has the discretion to increase the annual
bonus in any given year to take into account what it deems to be extraordinary
performance or events.
Long-Term Incentives
The Committee attempts to align the financial interests of executive
officers closely with those of stockholders through equity ownership and the use
of long-term incentive compensation. The Company currently uses the 1997
CarrAmerica Realty Corporation Stock Option and Incentive Plan (the "1997 Stock
Option Plan") for this purpose. Executive officers and other key employees of
the Company have been granted common stock options under the 1997 Stock Option
Plan. Certain executive officers and other key employees of the Company were
granted options to acquire Class A Units in Carr Realty, L.P. under an earlier
plan, the 1993 Carr Realty Option Plan. Class A Units of Carr Realty, L.P. are
redeemable for cash equal to the value of an equal number of shares of common
stock of the Company or, at the Company's election, share of common stock of the
Company and, therefore, are believed to have a value equal to that of the common
stock of the Company. To encourage the Company's employees to seek long-term
appreciation in the value of the Common Stock, stock options and unit options
vest over a specified period of time, and then only if the employee remains with
the Company. Accordingly, an employee generally must remain with the Company for
a period of five years to enjoy the full economic benefit of a stock option or
unit option.
The Committee expects that future grants of long-term incentives to the
Company's executives will be made under the 1997 Stock Option Plan. In
anticipation of future needs, the Board of Directors adopted, subject to
stockholder approval, an amendment of the 1997 Stock Option Plan that increases
the authorized shares of common stock from 3,000,000 shares to 7,200,000 shares.
Accordingly, the amendment of the 1997 Stock Option Plan is being presented to
the Company's stockholders for approval at this year's Annual Meeting and,
accordingly, is described in detail in Item 2 above. The Committee urges
stockholders to approve the amendment of the 1997 Stock Option Plan.
Chief Executive Officer Compensation
The salary and long-term incentive awards of the Company's Chief
Executive Officer, Mr. Thomas Carr, are determined substantially in conformity
with the policies described above for all other executive officers of the
Company. The base salary of Mr. Thomas Carr for 1997 was $250,000. Mr. Carr was
also granted 150,000 stock options and received a cash bonus of $300,000 for
1997.
A. James Clark
Todd W. Mansfield
Wesley S. Williams, Jr.
16
<PAGE>
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
A. James Clark, Todd W. Mansfield and Wesley S. Williams, Jr. served on
the Executive Compensation Committee of the Board of Directors during fiscal
year 1997. None of these individuals was or ever has been an employee of the
Company.
Mr. Clark owns interests in certain entities that were parties to
certain transactions involving the Company during the year. Partnerships in
which Mr. Clark and/or Clark Enterprises, Inc., an entity of which Mr. Clark is
the majority stockholder, have interests paid $400,000 to Carr Real Estate
Services, Inc., a wholly owned subsidiary of the Company, for management and
leasing services in 1997. In addition, wholly owned subsidiaries of Clark
Enterprises, Inc. provided construction services to the Company for which they
were paid $1.5 million for 1997. This amount covered amounts paid by the
subsidiaries for materials and to sub-contractors.
Mr. Mansfield is a Managing Director of Security Capital Investment
Research Incorporated, which was a party to certain transactions involving the
Company in 1997. The Company paid Security Capital Investment Research
approximately $70,000 for research rendered in connection with the Company's
acquisition of operating and development properties in 1997.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock of the Company as of March 15, 1998 for (1)
each person known by the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock, (2) each director of the Company and each Named
Executive Officer, and (3) the directors and executive officers of the Company
as a group. Unless otherwise indicated in the footnotes, all such interests are
owned directly, and the person or entity identified as the beneficial owner has
sole voting and investment power. The number of shares reported as beneficially
owned by a person represents the number of shares of Common Stock the person
holds (including shares of Common Stock that may be issued upon exercise of
options that are exercisable within 60 days of March 15, 1998) plus the number
of shares into which Class A Units of Carr Realty, L.P. held by the person
(including Class A Units of Carr Realty, L.P. that may be issued upon the
exercise of options that are exercisable within 60 days of March 15, 1998) are
redeemable (if the Company elects to issue shares rather than pay cash upon such
redemption). For purposes of the following table, the number of shares of Common
Stock and Class A Units deemed outstanding includes 59,997,486 shares of Common
Stock, 4,783,265 Class A Units of Carr Realty, L.P., 1,777,587 Units of
CarrAmerica Realty, L.P. and 743,540 Class A Units and 24,998 shares of Common
Stock issuable upon exercise of options exercisable within 60 days of March 15,
1998. The extent to which a person holds shares of Common Stock, as opposed to
Class A Units of Carr Realty, L.P. or CarrAmerica Realty, L.P. or options to
purchase Common Stock or Class A Units of Carr Realty, L.P. which are
exercisable within 60 days of March 15, 1998 is set forth in the footnotes.
<TABLE>
<CAPTION>
Percent Percent of
Number and Address Number of Shares/Units of All All Shares &
of Beneficial Owner Beneficially Owned Shares(1) Units(2)
------------------- ------------------ --------- --------
<S> <C> <C> <C>
Security Capital U.S. Realty
Security Capital Holdings S. A. (3) ...................... 26,456,583 44.1% 39.3%
69, route d'Esch
L-2953 Luxembourg
Oliver T. Carr, Jr. (4)................................... 1,605,303 2.7% 2.4%
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, NW
Washington, DC 20006
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Number and Address Number of Shares/Units of All All Shares &
of Beneficial Owner Beneficially Owned Shares(1) Units(2)
------------------- ------------------ --------- --------
<S> <C> <C> <C>
A. James Clark (5) ....................................... 934,908 * *
Clark Enterprises, Inc.
7500 Old Georgetown Road
Bethesda, MD 20814
Thomas A. Carr (6) ....................................... 178,329 * *
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, NW
Washington, DC 20006
Andrew F. Brimmer (7)..................................... 6,433 * *
Brimmer & Company
4400 MacArthur Boulevard, NW
Washington, DC 20007
William D. Sanders (8) ................................... 5,333 * *
Security Capital Group
7777 Market Center Avenue
E1 Paso, TX 79122
Philip L. Hawkins (9) .................................... 35,389 * *
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, NW
Washington, DC 20006
Todd W. Mansfield (10) ................................... 0 * *
Security Capital Global Realty
86 Jermyn Street
London, England SW1Y6JD
Brian K. Fields (11) ..................................... 85,384 * *
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, NW
Washington, DC 20006
Robert E. Peterson (12) .................................. 26,389 * *
CarrAmerica Realty Corporation
1600 Parkwood Circle
Suite 150
Atlanta, GA 30339
Robert G. Stuckey (13) ................................... 30,389 * *
CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, NW
Washington, DC 20007
Wesley S. Williams, Jr. (14) ............................. 6,833 * *
Covington & Burling
1201 Pennsylvania Avenue, NW
Washington, DC 20044
Caroline S. McBride (15) ................................. 2,666 * *
Security Capital Investment Research Incorporated
399 Park Avenue, 23rd Floor
New York, NY 10022
Kent C. Gregory (16)...................................... 12,389 * *
CarrAmerica Realty Corporation
1600 Parkwood Circle
Suite 150
Atlanta, GA 30339
All executive officers and directors as a group (13 persons) 2,929,745 4.9% 4.3%
</TABLE>
- --------------
* Less than 1%.
18
<PAGE>
(1) Assumes that all Class A Units of Carr Realty, L.P. held by the person,
if any (including Class A Units of Carr Realty, L.P. issuable to such
person upon exercise of options which are exercisable within 60 days of
March 15, 1998), are redeemed for shares of Common Stock. The total
number of shares outstanding used in calculating this percentage includes
all currently issued and outstanding shares of Common Stock plus shares
of Common Stock issuable upon redemption of all Class A Units
beneficially owned by the person (including Class A Units issuable to
such person upon exercise of options which are exercisable within 60 days
of March 15, 1998), but assumes that none of the Class A Units held by
other persons are redeemed for shares of Common Stock.
(2) Intended to show fully diluted beneficial ownership. Assumes that all
Class A Units held by the person (including Class A Units issuable to
such person upon exercise of options which are exercisable within 60 days
of March 15, 1998) are redeemed for shares of Common Stock. The total
number of shares outstanding used in calculating this percentage includes
all currently issued and outstanding shares of Common Stock and assumes
that all of the Class A Units held by other persons (including Class A
Units issuable to such person upon exercise of options which are
exercisable within 60 days of March 15, 1998) are redeemed for shares of
Common Stock.
(3) Security Capital Holdings S.A., a wholly owned subsidiary of SC-USREALTY,
holds all of its interest in shares of Common Stock.
(4) The aggregate amount of shares of Common Stock beneficially owned by Mr.
Oliver Carr consists of 69,005 shares of Common Stock and 284,672 Class A
Units owned directly by him, and 10,000 shares of Common Stock and
150,000 Class A Units owned by his spouse, 7,565 shares of Common Stock
owned by Mr. and Mrs. Carr as joint tenants, 2,040 shares held by their
children, 954,061 shares of Common Stock and Class A Units owned by The
Oliver Carr Company, of which Mr. Carr is a director, chairman of the
board, president and trustee of the majority stockholder, and Mr. Carr's
options to purchase 120,000 Class A Units and options to purchase 10,000
shares of common stock which are exercisable within 60 days of March 15,
1998. Of the amount shown, Mr. Carr and The Oliver Carr Company hold
978,010 Class A Units and 497,293 shares of Common Stock. Mr. Carr
disclaims beneficial ownership of the 2,040 shares held in an irrevocable
trust for the benefit of his minor children.
(5) The aggregate amount of shares of Common Stock beneficially owned by Mr.
Clark consists of 3,667 shares of Common Stock and 358,596 Class A Units
owned directly by him and 569,979 Class A Units owned by Clark
Enterprises, Inc., of which Mr. Clark is chairman, president, a director
and the majority stockholder.
(6) Mr. Thomas Carr is a director of The Oliver Carr Company. Mr. Carr
disclaims beneficial ownership of the shares of Common Stock and Class A
Units held by The Oliver Carr Company. Mr. Carr holds 16,814 shares of
Common Stock, 29,515 Class A Units directly and 2,907 Class A Units are
held by his children. Mr. Carr has options to purchase 120,000 Class A
Units and 12,000 shares of Common Stock which are exercisable within 60
days of March 15, 1998.
(7) Dr. Brimmer owns 1,100 shares of common stock and options to purchase
5,333 shares of Common Stock which are exercisable within 60 days of
March 15, 1998.
(8) Mr. Sanders is a director of Security Capital Group, an affiliate of
Security Capital Holdings S.A., a wholly-owned subsidiary of SC-USREALTY,
but disclaims beneficial ownership of the shares held by Security Capital
Holdings, S.A. Mr. Sanders has options to purchase 5,333 shares of Common
Stock of the Company which are exercisable within 60 days of March 15,
1998.
<PAGE>
(9) Mr. Hawkins owns 17,389 shares of Common Stock and options to purchase
10,000 shares of Common Stock and 8,000 Class A Units which are
exercisable within 60 days of March 15, 1998.
(10) Mr. Mansfield is an officer of Security Capital Investment Research
Incorporated, an affiliate of Security Capital Holdings, S.A., a
wholly-owned subsidiary of SC-USREALTY, but disclaims beneficial
ownership of the shares held by Security Capital Holdings, S.A.
(11) Mr. Fields owns 18,384 shares of Common Stock and options to purchase
7,000 shares of Common Stock and 60,000 Class A Units which are
exercisable within 60 days of March 15, 1998.
(12) Mr. Peterson owns 12,389 shares of Common Stock and 62,696 shares of
Common Stock held by his spouse. Mr. Peterson disclaims beneficial
ownership of shares held by his spouse. Mr. Peterson also has options to
purchase 14,000 shares of Common Stock which are exercisable within 60
days of March 15, 1998.
(13) Mr. Stuckey owns 12,389 shares of Common Stock and options to purchase
10,000 shares of common stock and 8,000 Class A Units which are
exercisable within 60 days of March 15, 1998.
(14) Mr. Williams owns 200 shares of Common Stock and options to purchase
6,633 shares of Common Stock which are exercisable within 60 days of
March 15, 1998.
(15) Mrs. McBride is an officer of Security Capital Investment Research
Incorporated, an affiliate of Security Capital Holdings, S.A., a wholly
owned subsidiary of SC-USREALTY, but disclaims beneficial ownership of
the shares held by Security Capital Holdings, S.A. Mrs. McBride owns
options to purchase 2,666 shares of Common Stock which are exerciseable
within 60 days of March 15, 1998.
(16) Mr. Gregory owns 12,389 shares of Common Stock.
19
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Oliver Carr Company and Oliver T. Carr, Jr.
Parking Services International, Inc. is a joint venture of The Oliver
Carr Company and SC-USREALTY. Mr. Oliver T. Carr, Jr., the Chairman of the Board
of the Company, is the majority stockholder of The Oliver Carr Company.
SC-USREALTY is the Company's largest stockholder. Mr. Oliver Carr also is
chairman, president and trustee of the majority stockholder of Parking Services
International. Parking Services International manages certain of the parking
garages in the Company's properties for fees ranging from 24% to 62% of gross
receipts from garage operations. Parking Services International is responsible
for payment of all garage operating expenses. Fees paid by the Company to
Parking Services International for 1997 totaled $4.5 million.
The Company leases office space from a partnership affiliated with The
Oliver Carr Company. Rent expense amounted to $1.2 million in 1997 under the
lease. Future minimum payments under the lease are $400,000 in 1998.
Carr Real Estate Services, Inc., a wholly owned subsidiary of the
Company, provides management and leasing services to properties owned by
partnerships in which The Oliver Carr Company and/or Mr. Oliver Carr (as well as
A. James Clark, a director of the Company, in some circumstances) have
interests. Management fees generally are equal to 2% to 3% of collected revenue
from the managed property, and leasing fees are generally equal to 1.5% to 2% of
the rent payable over the life of the lease. Carr Real Estate Services, Inc.
received revenue from these affiliated partnerships of $7.4 million for 1997.
Clark Enterprises, Inc. and A. James Clark
A wholly-owned subsidiary of Clark Enterprises, Inc., a unitholder of
Carr Realty, L.P., a subsidiary of the Company, and of which A. James Clark, a
director of the Company, is majority stockholder, has provided construction
management services to the Company. In connection with these services, the
Company paid $1.5 million in 1997.
The Equitable Life Assurance Society of the United States
The Equitable Life Assurance Society of the United States ("ELAS") is
an affiliate of a person who served as a director of the Company in 1997, but
who has since resigned. ELAS leases approximately 10,000 square feet of office
space from the Company. The Company received rent of $300,000 from ELAS in 1997.
Carr Real Estate Services, Inc. provides management and leasing
services to properties owned by partnerships in which ELAS has interests. In
addition to revenue received from partnerships in which The Oliver Carr Company
also has an interest (as described above), Carr Real Estate Services, Inc.
received revenue of $300,000 for 1997 from partnerships in which ELAS had an
interest.
20
<PAGE>
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, who has served as independent auditors of the
Company for the fiscal year ended December 31, 1997, will have representatives
present at the Annual Meeting, will have the opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
OTHER MATTERS
The Company's management knows of no other matters which may be
presented for consideration at the Annual Meeting. If any other matters properly
come before the meeting, however, the persons named in the enclosed proxy
intend to vote such proxy in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders to be presented at the 1999 Annual Meeting
must be received by the Secretary of the Company before December 1, 1998 to be
considered for inclusion in the proxy material. In addition, any stockholder who
wishes to propose a nominee to the Board of Directors or submit any other matter
to a vote at a meeting of stockholders (other than a stockholder proposal
included in the Company's proxy materials pursuant to Rule 14a-8 of the rules
promulgated under the Securities Exchange Act of 1934, as amended), must comply
with the advance notice provisions and other requirements of Section 3.11 of the
Company's By-laws, which are on file with the Securities and Exchange Commission
and may be obtained from the Secretary of the Company upon request.
VOTING PROCEDURES AND
COSTS OF PROXY SOLICITATION
The affirmative vote of a plurality of the votes cast at the Annual
Meeting will be required for the election of directors. A properly executed
proxy marked "Withhold Authority" with respect to the election of one or more
directors will not be voted with respect to the director or directors indicated,
although it will be counted for purposes of determining whether there is a
quorum. Accordingly, abstentions or broker non-votes as to the election of
directors will not affect the election of the candidates receiving the most
votes. For each other item to be acted upon, the affirmative vote of the holders
of a majority of the shares represented in person or by proxy and entitled to
vote on the item will be required for approval. A properly executed proxy marked
"Abstain" with respect to any such matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum. Accordingly, an
abstention on such other proposals will have the effect of a vote against the
matter in question. Broker non-votes, however, will be treated as unvoted for
purposes of determining approval of such proposals and will not be counted as
votes for or against such proposal.
The Company pays for preparing, assembling, and mailing the proxy
materials. The Company will, upon request, reimburse brokerage firms and others
for their reasonable expenses in forwarding proxy materials to the beneficial
owners of the Company's Common Stock.
Your vote is important. Please complete the enclosed proxy card and
mail it in the enclosed postage-paid envelope as soon as possible.
21
<PAGE>
Appendix A
Proposed Expanded Definition of Term "Special Shareholder"
----------------------------------------------------------
As proposed by the Board to Directors, the definition of the term
"Special Shareholder" in Section 5.1(v) of the Company's Articles of
Incorporation would be amended to read as follows:
"(v) "Special Shareholder" shall mean (i) Security Capital
U.S. Realty S.A., Security Capital Holdings S.A. and any affiliate of
either such Person who shall acquire any shares of Stock either
directly pursuant to the Stock Purchase Agreement or from either such
Person (or another affiliate thereof) in accordance with the provisions
of such Stock Purchase Agreement or the Stockholders Agreement, (ii)
any Person who is considered a Beneficial Owner of shares of Stock as a
result of the actual ownership of shares of Stock by any of the Persons
identified in clause (i) above, and (iii) any bona fide financial
institution that Acquires Beneficial Ownership of shares of Stock
either (x) as a result of an exercise of rights as a pledgee or
otherwise in connection with bona fide indebtedness of any of the
Persons identified in clause (i) above or (y) as a result of any such
Person's default under any such bona fide indebtedness (it being
understood that no pledge or other assignment of such shares of Stock
as collateral for bona fide indebtedness shall in and of itself result
in the pledgee or assignee being deemed to have Beneficial Ownership of
the pledged or assigned shares of Stock unless and until a default with
respect to such indebtedness shall have occurred and the lender
therefore has a current right to exercise its rights as pledgee or
assignee with respect to such shares of Stock), subject in each case to
the condition that such bona fide financial institution's Beneficial
Ownership of Stock would not result in the Special Shareholders as a
group exceeding the Special Shareholder Limit; provided, that, as a
condition to a bona fide financial institution's qualifying under
clause (iii) above, (p) each of Security Capital U.S. Realty S.A. and
Security Capital Holdings S.A. shall agree in writing (and each such
agreement shall be reasonably acceptable to the Corporation) that each
such bona fide financial institution shall be deemed a Special
Shareholder and the shares of Stock owned by each such financial
institution shall be included with the shares of Stock owned by persons
otherwise deemed Special Shareholders in determining the Special
Shareholder Limit, and (q) such bona fide financial institution shall
agree in writing (and such agreement shall be reasonably acceptable to
the Corporation), in advance or promptly following acquisition of
Beneficial Ownership of any shares of Stock as described in clause
(iii) above, to be bound by the Stockholders Agreement (including,
without limitation, the provisions to the effect that shares of Stock
cannot be transferred if the transfer would violate the restrictions
set forth in Section 5.2 of the Charter)."
A-1
<PAGE>
THIS PROXY IS SOLICITED BY AND ON
BEHALF OF THE BOARD OF
DIRECTORS
CARRAMERICA REALTY CORPORATION
R
O REVOCABLE PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
X MAY 7, 1998
Y
The undersigned hereby appoints Thomas A. Carr, Brian K. Fields and Debra
A. Volpicelli, or any of them, proxies, with full power of substitution, to act
for and to vote the shares of the Common Stock of CarrAmerica Realty Corporation
that the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of said Company to be held on May 7, 1998, and at
any and all adjournments thereof.
Receipt of the Company's Notice of Annual Meeting of Stockholders and
Proxy Statement is acknowledged.
IMPORTANT -- THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
DETACH HERE
|X| Please mark votes as in this example.
This Proxy when properly executed will be voted as directed hereon, or if no
direction is indicated, will be voted FOR the election of the Board of
Directors' nominees for director, FOR Item 2, FOR Item 3, FOR Item 4 and FOR
Item 5.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
1. Election of Directors: 2. Increases in numbers of |_| |_| |_|
authorized shares of
Nominees for terms expiring 2001: Common Stock and Preferred
Thomas A. Carr, Caroline S. Stock
McBride, Wesley S. Williams, Jr.
3. Increase in number of |_| |_| |_|
Nominees for terms expiring 2000: shares authorized for
A. James Clark, Todd W.Mansfield issuance under 1997
Stock Option and
Incentive Plan
|_| FOR ALL NOMINEES 4. Increase in number of |_| |_| |_|
shares authorized for
|_| WITHHOLD FROM ALL issuance under 1995
NOMINEES Non-Employee Director
Stock Option Plan
|_| FOR ALL NOMINEES 5. Amendment to Articles of |_| |_| |_|
EXCEPT THE Incorporation to Modify
FOLLOWING: Definition of Term
______________________ "Special Shareholder"
______________________
______________________
</TABLE>
In their discretion, the proxies are authorized
to vote upon such other business as may
properly come before the meeting.
MARK HERE
FOR ADDRESS |_|
CHANGE AND
NOTE AT LEFT
(Please date and sign exactly as name
appears on this proxy card. Joint
owners should each sign. When signing
as attorney, executor, administrator,
trustee, guardian, etc., give full
title as well)
SIGNATURE: ______________ DATE: ________ SIGNATURE:______________ DATE: ________
